Efficiency and Environmental Protection's Effect: An Application to Italian Polluting Industries

The article compares economical and environmental performances of a sample of Italian firms operating in five different industrial sectors, where the same EU regulation is adopted to control emissions. The application of a relatively new methodology from productivity analysis allows to compute efficiency scores for each firm considering pollution as an undesirable output. The indicators are derived separately for each sector and they are analyzed using a regression model to test some hypothesis on the determinants of eco-efficiency performances. Good margins for increasing performances still remain, but they are more limited for very large firms. The impact of environmental regulation is significant and it is homogeneous among sectors. Finally, large firms seem to pay smaller costs due to emission control.