Determinants of Environmental Efficiency: The Case of CEFTA 2006 Signatories

Abstract

This study analyzes 1) the environmental efficiency of CEFTA 2006 signatory countries using the DEA method and 2) the factors affecting environmental efficiency through a panel analysis for the period from 2010 to 2021. The balanced panel data used includes key variables such as the number of employees, energy consumption, production and emissions of carbon dioxide (CO2) and sulfur dioxide (SO2). The DEA method enables the evaluation of the efficiency of different decision making units (DMUs), taking into account both desirable and undesirable outcomes. The results show that Albania, Serbia and Montenegro achieved the highest average environmental efficiency, while Bosnia and Herzegovina had the lowest. The data obtained with the DEA method were later used as the dependent variable of environmental efficiency in the panel analysis. The panel analysis shows that freight transport by road and rail has a positive influence on environmental efficiency, while passenger transport by road has a negative but statistically insignificant influence. The results indicate a positive impact of income per person and a negative impact of three variables (trade, industrial production, and renewable energy sources) on environmental efficiency. Dummy variables for the years 2010 and 2020 provide information on the impact of global economic events, with the economic crisis of 2009 having a positive effect on eco-efficiency. These results emphasize the importance of efficient transport, economic development and careful policy planning to improve environmental efficiency.