Greenhouse Gas Emission Reduction Potentials in Europe: A Nonparametric Efficiency Analysis Approach Using Sectoral Data

The contribution of efficiency improvements to the reduction of greenhouse gas emissions is not much investigated. We provide an environmental efficiency analysis with nonparametric methods to quantitatively assess the emission reductions originating from possible efficiency improvements in 16 EU countries. Therefore we apply nonparametric methods with a special focus on correctly including undesirable output such as emissions. A special feature is that the analysis is based on sectoral data and therefore accounts for sectoral differences. This leads to more realistic estimates of potential emission reductions than using macroeconomic data. We find sizable emission reductions which could be potentially realized by efficiency improvements and which could be a substantial contribution to the targets of EU climate policy.