Environmentally Adjusted Productivity and Efficiency Measurement

Last week we hosted an international workshop here at the University of Sydney, which focused on theories and methods for measuring productivity and efficiency when environmental considerations are taken into account, and on including natural resources in economic accounting. The main aim of the workshop was to discuss some of the new ideas in this area of growing significance at the interface of environmental/resource economics and productivity analysis and national accounting.
The need to account for environmental impacts from various economic activities in human society is increasingly important as the environment and the ecosystem services it provides are significantly threatened by air pollution, land degradation, deterioration of water quality, and biodiversity losses. This raises a fundamental question of how to accommodate environmental effects into the standard practices for measuring productivity and efficiency, and in the accounting of overall economic activities.
One group of talks at the workshop focused on the treatment of negative environmental effects associated with productive activities, such as emissions of CO2, SO2, wastewater pollutants, and environmental degradation attributable to taking water from the environment. New approaches presented had to do with explicit treatment of an abatement technology, non-parametric estimation of abatement costs and shadow prices, and with the use of alternative reference frontiers when there is regional and technological heterogeneity among polluters. The point of considering the exposure to emissions when it comes to spatially-distributed pollutants, which has so far not been widely treated in this literature, was also made.
The other group of talks focused on accounting for natural resources, and on estimating productivity growth in agriculture under climate change. There were important new approaches presented in terms of deriving user costs for sub-soil assets (e.g. mineral resources), as well as making inroads in accounting for the contribution of natural resources (e.g. soil) to agricultural productivity.
Overall, it was an exciting workshop, and to be followed by an edited book based on presented papers, as well as on the work by colleagues who could not make it to the workshop. So, watch this space!

Author: Tiho Ancev

Tiho Ancev is a Professor of Agricultural and Resource Economics in the School of Economics, University of Sydney. His main research areas are agricultural, environmental, natural resource and energy economics. Tiho’s main contributions have been in water economics and policy, economics of energy, economics of air pollution and climate change policies, and economics of precision agriculture and agricultural input use. He has published widely on these topics in top international peer reviewed journals. Tiho has led and contributed to national and international research projects in these research areas. He is currently the Managing Editor-in-Chief of the Australian Journal of Agricultural and Resource Economics.