The static and dynamic environmental efficiency of renewable energy: A Malmquist index analysis of OECD countries

Abstract

In recent years, renewable energy and environmental efficiency have been interesting issues for both academics and industry actors when discussing sustainable development. Against this background, the present study examines the environmental efficiency of renewable energy from the static and the dynamic perspective in 31 OECD countries, a study conducted to understand the impact of renewable energy across countries. As a non-parametric methodology, data envelopment analysis is used to measure environmental efficiency through multiple inputs and outputs. Labor, capital, and renewable energy supply are the three inputs, while GDP is the desirable output and carbon emissions are the undesirable output. To measure the dynamic environmental efficiency of renewable energy, the Malmquist productivity index is applied to estimate the average efficiency change from 2004 to 2011. The results demonstrate geographical differences in environmental efficiency across the OECD. Countries in OECD America have the highest average environmental efficiency and those in OECD Europe have the largest standard deviation. We also find that dynamic efficiency is influenced by the global financial crisis triggered in the United States. Further, we show that OECD countries implement both catch-up and frontier shift strategies to improve environmental efficiency.