Due to stringent regulations on carbon emissions, green manufacturing has become a critical issue in manufacturers’ strategic planning. Manufacturers are greening production through carbon abatement activities. The purpose of this paper is to investigate the factors that influence the effects of carbon abatement on environmental productivity growth.
Using data envelopment analysis with directional distance function, this study examines productivity growth associated with carbon abatement under regulated and unregulated production technologies. A pollution abatement index (PAI) is constructed for determining the effects of carbon abatement on environmental productivity growth. Panel data of 18 European countries in paper and pulp and coke sectors are collected for the analysis.
The empirical findings reveal that carbon abatement may positively or negatively affect environmental productivity growth which is dependent on the nature of technology in a sector, the innovation capabilities of a country and environmental regulations.
Conventional approaches in measuring productivity changes do not normally take undesired outputs (e.g. carbon emissions) into consideration. This study contributes to literature by constructing a PAI that considers productivity changes under a joint production technology (where both desired and undesired outputs are considered). The findings enhance current understandings on the effectiveness of carbon abatement activities and help managers establish corporate environmental strategies to adopt green manufacturing.
