Environmental Assessment on Energy and Sustainability by Data Envelopment Analysis

20RETURNS TO SCALE AND DAMAGES TO SCALE

20.1 INTRODUCTION

The purpose of this chapter is to introduce an approach regarding how to measure returns to scale (RTS) and damages to scale (DTS) within a computational framework of DEA environmental assessment. Chapter 8 introduced concepts and methodologies regarding RTS within the conventional framework of DEA by assuming the non‐existence of undesirable outputs. As discussed in Chapter 15, an important feature of DEA environmental assessment is that it incorporates undesirable outputs in the computational framework. This chapter, as an extension of Chapter 8, discusses how to measure RTS under natural disposability and DTS under managerial disposability by considering both desirable and undesirable outputs in addition to inputs. This chapter provides a new computational aspect on environmental assessment which cannot be found in Chapter 8.

To discuss the practicality of the proposed approach, this chapter compares Japanese chemical and pharmaceutical firms by considering their energy utilization and environmental protection. This chapter will be further explored in Chapter 23.

The remainder of this chapter is organized as follows: Section 20.2 describes underlying concepts related to RTS and DTS. Section 20.3 discusses an approach on how to measure RTS and DTS by the non‐radial models. Section 20.4 extends it to the radial measurement. Section 20.5 applies the proposed DEA approach to compare between Japanese chemical and pharmaceutical ...