Assessing Environmental Efficiency in High-Income Nations: A Panel Data Approach Using DEA and Sustainability Indicators

Abstract

This paper investigates the determinants of environmental efficiency in high-income countries from 1995 to 2022, focusing on the balance between economic development and environmental sustainability. It examines the relationships between GDP, energy consumption, and CO₂ emissions to identify key trade-offs for sustainable development. The study employs Data Envelopment Analysis (DEA) with CCR and BCC models on panel data from OECD countries (excluding Australia, Korea, and Turkey). The analysis uses three inputs—gross capital formation, population, and energy consumption—and two outputs—GDP and CO₂ emissions—to assess changes in relative environmental productivity. The findings show wide cross-country variation in converting investment and energy use into sustainable economic outcomes. Some countries achieve strong economic performance and lower emissions, while others are less efficient due to high energy use or weak emission control. The study highlights opportunities and ongoing challenges for sustainable growth. Policy implications stress the need to improve energy efficiency and lower carbon intensity, aligning national strategies with the United Nations Sustainable Development Goals (SDGs). The results offer useful benchmarks for low-income countries pursuing environmentally efficient development. The study contributes by applying an integrated DEA framework that captures economic, demographic, and environmental performance dimensions.