Aggregate eco-efficiency indices for New Zealand – a Principal Components Analysis

Eco-efficiency has emerged as a management response to waste issues associated with current production processes. Despite the popularity of the term in both business and government circles, limited attention has been paid to measuring and reporting eco-efficiency to government policy makers. Aggregate measures of eco-efficiency are needed, to complement existing measures and to help highlight important patterns in eco-efficiency data. This paper aims to develop aggregate measures of eco-efficiency for use by policy makers. Specifically, this paper provides a unique analysis by applying principal components analysis (PCA) to eco-efficiency indicators in New Zealand. This study reveals that New Zealand's overall eco-efficiency improved for two out of the five aggregate measures over the period 1994/95 to 1997/98. The worsening of the other aggregate measures reflects, among other things, the relatively poor performance of the primary production and related processing sectors. These results show PCA is an effective approach for aggregating eco-efficiency indicators and assisting decision makers by reducing redundancy in an eco-efficiency indicators matrix.