The Evaluation and Measurement of Green Economic Efficiency for Less Developed Countries

Abstract

Environmental degradation and climate change have redirected the conventional development models towards green development. This shift is mandatory while achieving 1.5^oC target set under the Paris Agreement. Green economic efficiency emerged as an important tool to assess and evaluate the level of sustainability as it simultaneously considers desirable and undesirable output levels with resource input efficiency. The existing literature is mainly focused on developed countries with limited evidence from developing countries that are vulnerable to climate risk and in pressing need of efficient utilization of resources. Using a Slack-Based Measure Data Envelopment Analysis, this study measures green economic efficiency for 74 less developed countries for the period of 1996 to 2022. The study incorporates gross domestic product as a desirable output and CO₂ emissions as undesirable output. The results indicate a substantial regional heterogeneity with a positive trend for the overall sample. Country-specific analysis highlight that Iran (0.80), India (0.63), Mongolia (0.62), Bolivia (0.73), Ukraine (0.89), Angola (0.79), Nigeria (0.86) and Algeria (0.85) show relatively higher levels of average GEE among countries. Regional heterogeneity requires region-specific policies with a focus on renewable energy utilization, resource efficiency improvement, gradual transition of technologies and shifting of financial resources towards green products. The results suggest a three-tier policy for rapid transition encompassing smart financial incentives, improvement in governance quality and implementation of carbon audits, and embracing technological innovations with provision of market-oriented data-driven solutions.