An Analysis of Eco-Efficiency in Korean Fossil-Fueled Power Plants Using DEA

Abstract

The joint production of goods and undesirable outputs such as pollutants which may not be disposable without cost makes it difficult to evaluate the environmental management of firms. In this paper, eco-efficiency is analyzed in the Korean power industry by focusing on information pertaining to power plants for the year 2007. This paper presents Data Envelopment Analysis (DEA) as a valuation model, and evaluates the relative eco-efficiency of fossil-fueled power plants. The dataset consists of total 26 fossil-fueled power plants operated by five different subsidiary power companies of KEPCO (Korean Electric Power Corporation) which are observed as Decision Making Units (DMU). Labor, capacity, and the amount of greenhouse gas emissions are used as inputs while power generation and sales are considered as outputs. In our analysis, six DMUs are found to be on the frontier with associated efficiencies designated as one. On the other hand, one DMU (#19) is found to be the least efficient. Results indicate that DMU 19 has the potential to reduce 74.7% of input and increase 76.3% of output. Efficient power plants can be used as a benchmark for inefficient power plants in efforts to confront climate change. © Springer 2010.