Company efforts and environmental efficiency: evidence from European railways considering market-based emissions

Abstract

Railways play a leading role in the process of decarbonizing the transport sector. Therefore, it is crucial to better understand the environmental performance of this sector and the effect of recent incentives on cutting carbon emissions. An appropriate assessment of railway Environmental Efficiency is desirable as it assists in identifying the best practices in terms of targets and input–output optimization. However, the existing literature does not consider a company’s efforts to cut emissions through their electricity purchasing choices. This paper addresses this issue by assessing the environmental efficiency of a selected set of European rail operators through a slack-based Data Envelopment Analysis, and adjusting the measures for both market-based and location-based emissions. The distortion caused by this adjustment is used for the first time as a proxy for the efforts made to purchase electricity from suppliers with a low-emissions portfolio. Additionally, a new greenhouse gas emissions efficiency measure is estimated for each considered company in order to explain the greenhouse gas emissions. Our dataset comprises 56 observations from 14 railway operators spanning 2017–2020, with inputs encompassing length of lines, total and specific energy consumption, and outputs including passenger turnover, freight turnover, total and specific market-based emissions, and total and specific location-based emissions. Results indicate considerable room for improvement, as the scores are less than half of the ideal level. The energy purchasing choices of companies fail to distort the efficiency scores, and the level of distortion over time has been decreasing. The comparison between the passenger sector and the freight sector gives a further explanation for the low performance of individual companies. To the best of our knowledge, this is the first time that market-based emissions are considered in a transport efficiency assessment model.