Efficiency analysis of world cement industry in presence of undesirable output: Application of data envelopment analysis and directional distance function

CO2 emissions reduction and energy efficiency improvement are the targets of many environmental policies that aim at tackling climate change. The European Emission Trading is the best example of this engagement against climate change. Considering this framework, this paper studies the efficiency of the high energetic and CO2 emissions intensive cement production process in 21 world countries. Alternative formulations of standard data envelopment analysis models and a directional distance function approach are compared in order to detect the efficiency of the cement sector both in presence and in absence of carbon emissions. We first analyze the entire cement production process and we then concentrate on the production of clinker, a by-product of cement, that is the main responsible of CO2 emissions. Our results show that the inclusion or the exclusion of undesirable factors (CO2) influence efficiency levels as well as the investments in new technologies and the utilization of alternative fuels and raw materials in the cement and clinker production processes.

► The efficiency of clinker and cement production processes in 21 world countries is studied with a wide DEA analysis.
► Both desirable and undesirable production factors are considered.
► The relevance of including CO2 emissions in the study of industrial efficiency has been tested.
► Environmental and emission regulations raise efficiency levels.
► Investments in new technologies and the utilization of alternative fuels and raw materials increase efficiency.