Preference Elicitation in Generalized Data Envelopment Analysis: In Search of a New Energy Balance in Japan

Abstract

The recent dramatic change in energy supply in Japan has prompted a search for a new energy-environment-economic (EEE) efficiency policy, in which the right balance has to be found between a sufficient supply of energy resources, the development of low carbon emission technology, and a continuation of economic growth. The prefectures in Japan – 47 in total – are regarded as the institutional agents or decision-making units (DMUs) which are responsible for the design of a new sustainable energy balance in these regions. The main challenge now is to design an efficient EEE system. The present chapter aims to develop a balanced decision-support tool for achieving an efficient energy supply in all Japanese prefectures. To that end, a new variant of data envelopment analysis (DEA) is presented, which is characterized by two integrated features: (i) the use of a general distance friction minimization (DFM) model to achieve the most appropriate movement toward the efficiency frontier surface (in contrast to the standard radial movement, leading to a uniform proportional input reduction – or a uniform proportional output increase), and (ii) the incorporation of preference-based (PB) adjustments in efficiency policy strategies regarding the input reduction allocation, or the output increase allocation, of DMUs in order to reconcile rigorous efficiency decisions with political priorities at the regional level. This chapter illustrates this new methodology by means of an application to prefectural energy efficiency strategies in Japan.