Environmental Performance of Electricity Generation Systems in OECD Countries: A DEA-Based Assessment

Climate change and greenhouse gas emissions are among the most pressing global challenges of the twenty-first century, with the electricity generation sector being a major contributor due to its reliance on fossil fuel-based energy sources. This study assesses the relative environmental efficiency of OECD countries in 2024 by examining their electricity generation mix. Data Envelopment Analysis (DEA) is employed to compare countries against best-performing peers. OECD countries are selected as decision-making units (DMUs). The input variables consist of coal, natural gas, and oil shares in total electricity generation, representing major fossil-fuel sources associated with greenhouse gas emissions. Since these shares form part of the electricity generation mix together with renewable sources, they are interpreted as structural indicators of fossil-fuel dependence rather than statistically independent inputs. Renewable sources are not included as inputs because the analysis focuses on fossil-fuel dependence. Gross Domestic Product (GDP) per capita is considered the desirable output, while greenhouse gas emissions per capita are incorporated as the undesirable output. Fossil-fuel generation shares characterize the generation structure, whereas GHG emissions represent the associated undesirable environmental outcome.

Environmental efficiency is evaluated using two DEA-based measures: the Pure Environmental Performance Index (PEI) and the Mixed Environmental Performance Index (MEI). The PEI, proposed by Tyteca (1996), modifies only the undesirable output under a Constant Returns to Scale (CRS) framework. The MEI, developed by Zhou et al. (2008), modifies both desirable and undesirable output constraints under a Variable Returns to Scale (VRS) framework. The VRS framework allows increasing, constant, and decreasing returns to scale across OECD countries.

The PEI results indicate that Costa Rica, France, Iceland, Ireland, Latvia, Norway, Sweden, and Switzerland form the environmental efficiency frontier. Under the MEI, Costa Rica, France, Iceland, Sweden, and Switzerland remain efficient. Ireland, Latvia, and Norway lose efficiency under the MEI. The MEI model provides greater discrimination among OECD countries than the PEI model. The study contributes to the literature by assessing OECD countries based on electricity generation structures, environmental outcomes, and economic performance, supporting the transition toward cleaner systems.