The Effects of Efficiency and TFP Growth on Nitrogen and Sulphur Emissions in Europe: A Multistage Spatial Analysis

It is common in firm level environmental efficiency studies for pollution to form part of the production technology. We omit nitrogen and sulphur emissions from the spatial analysis of production in European countries (1995 - 2008) because we find they are not significant inputs. Efficiency and TFP growth from the production analysis are then used in second stage spatial models of nitrogen and sulphur emissions in European countries. We find that to cut European sulphur emissions by a certain percentage requires a decrease in a composite measure of a country’s efficiency and TFP growth which is more than double the decrease needed to reduce European nitrogen emissions by the same percentage.