Eco-efficiency measurement and material balance principle: an application in power plants Malmquist Luenberger Index

Incorporating Material Balance Principle (MBP) in industrial and agricultural performance measurement systems with pollutant factors has been on the rise in recent years. Many conventional methods of performance measurement have proven incompatible with the material flow conditions. This study will address the issue of eco‐efficiency measurement adjusted for pollution, taking into account materials flow conditions and the MBP requirements, in order to provide ‘real’ measures of performance that can serve as guides when making policies. We develop a new approach by integrating slacks‐based measure to enhance the Malmquist Luenberger Index by a material balance condition that reflects the conservation of matter. This model is compared with a similar model, which incorporates MBP using the trade‐off approach to measure productivity and eco‐efficiency trends of power plants. Results reveal similar findings for both models substantiating robustness and applicability of the proposed model in this paper.