Environmental efficiency evaluation considering the maximization of desirable outputs and its application

Production processes often produce by-products which have harmful effects on the environment. However, traditional Data Envelopment Analysis (DEA) models cannot measure the efficiency evaluation of these undesirable outputs. This article aims to solve this problem. It gives an improved DEA-SBM model, named ISBM-DEA, and constructs an illustration to compare it with the Slacks-based measured DEA model. The results show that the new model's computing conclusions are highly related to the efficiency assessment of the DEA-SBM model, and it has a greater focus on the affects of undesirable outputs on production efficiency than the latter, which means that this new model has a greater extensive value for application and provides a better quantitative theoretical basis for environmental policy analysis. (C) 2012 Elsevier Ltd. All rights reserved.