Energy consumption and carbon dioxide environmental efficiency for former Soviet Union economies. evidence from DEA window analysis

The main source of convertible energy—fossil-fuel combustion—generates desirable means for production of national output (GDP) along with an undesirable by-product—carbon dioxide (CO2) emissions. This paper investigates the effect of this supply process for environmental quality. By introducing energy and non-energy production factors, we estimate economic and CO2 efficiency. We build an alternative environmental efficiency indicator with respect to CO2 emissions by applying non-parametric data-envelopment analysis (DEA)—window analysis under variable returns to scale (VRS)—to 15 former Soviet Union (FSU) economies for the period 1992–2008. There is a clear distinction between three FSU economies—Estonia, Latvia, and Lithuania (now EU member states)—and the rest of the sample in that they display better environmental performance. In these three countries, economic efficiency directly influences the environmental performance. Results also show that over time FSU economies improve their CO2 environmental efficiency and comply with the Kyoto Protocol directives. However, this positive gain comes with costs; it seems there is a tradeoff between positive output production (GDP) and controlling for carbon emission. On average, we observe a 15.9-percent drop in producing GDP, while there is a 1.59 -percent rise in positive environmental CO2 efficiency.