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Environmental and Energy Efficiency Analysis of EU Electricity Industry: An Almost Spatial Two Stages DEA Approach

The relationship between the environmental and energy efficiency and the stringency of environmental and market regulation in the electricity sectors has been analyzed. Using 19 EU countries (2006-2014), the EU environmental index, the OECD regulatory indicators and the total factor productivity (TFP) growth have been decomposed to highlight the complexity of the relations between electricity sector and regulatory policies. In the first stage we compute the three disaggregated TFP components. These components are used in the second stage to assess the impact of the regulatory policies on the TFP also controlling for spatial effect. Results suggest that market and environmental regulation have not unidirectional impacts on TFP components. Pure and scale efficiency index are negatively affected by sectorial regulation that positively affect the shift of technological frontier. Environmental policy negatively affects the pure efficiency and the shift of the efficient frontier, but has a positive effect on the scale efficiency.