Carbon Emissions Abatement (CEA) allocation and compensation schemes based on DEA

• Published in: Omega (Oxford) Vol. 53; pp. 78 - 89
• Main Authors: Feng, Chenpeng, Chu, Feng, Ding, Jingjing, Bi, Gongbing, Liang, Liang
• Format: Journal Article
• Language: English
• Published: Oxford Elsevier Ltd 01.06.2015; Pergamon Press Inc; Elsevier
• Subjects: Carbon Emissions Abatement (CEA) allocation; Compensation scheme; Computer Science; Data envelopment analysis; Data Envelopment Analysis (DEA); Decision making models; Decision making units; Economies of scale; Emissions control; Environmental economics; Gross Domestic Product (GDP); Operations Research; Studies; Two-step method; Two-step method; Gross Domestic Product (GDP); Carbon Emissions Abatement (CEA) allocation; Data Envelopment Analysis (DEA); Compensation scheme
• ISSN: 0305-0483; 1873-5274
• DOI: 10.1016/j.omega.2014.12.005

As environment constraints on economic growth are strengthening, Carbon Emissions Abatement (CEA) allocation becomes a significant issue that draws academia׳s attention. In the literature, the Data Envelopment Analysis (DEA) technique has been applied to obtain CEA allocation with centralized models. Nevertheless, a centralized allocation plan suffers from an implementation difficulty in persuading decision-making units (DMUs) into an agreement. In this paper, we propose a new two-step method to mitigate this side effect. In the first step, we provide improved DEA-based centralized allocation models under the assumptions of constant returns-to-scale (CRS) and variable returns-to-scale (VRS) respectively and in the second step, two compensation schemes are developed for centralized allocation plans. An empirical application to the countries in Organization for Economic Co-operation and Development (OECD) is presented to elaborate the main idea. •It is shown that the GDP of a country is concave with respect to its CEA level under both CRS and VRS assumptions.•A two-step method is proposed to alleviate the conflict between the overall and individual interests in CEA allocation.