Managing undesirable outputs in the Australian construction industry using Data Envelopment Analysis models

Abstract Carbon reduction has become one of the most significant challenges for economic growth. This paper presents the preliminary analysis of undesirable output reduction targets and emission schedules in temporal–spatial comparisons based on Data Envelopment Analysis. The reduction targets of undesirable outputs are investigated, including the maximum, input, technical and ideal reduction targets. Four Data Envelopment Analysis models that are based on a sequential benchmark technology and variable returns to scale are introduced to measure these reduction percentages. In order to formulate the optimal emission schedule of undesirable outputs, an optimal model is provided without inflation. Data from the Australian construction industry from 2000 to 2010 are employed to develop the models. The results of the analysis indicate that the Australian Government could achieve its promised carbon reduction targets in the construction industry. Most Australian regions' construction industries possess carbon mitigation potential and some of them could increase their desirable outputs if carbon were decreased. This paper suggests that policymakers can benefit from formulating various suitable undesirable output reduction objectives and schedules through the models developed. The research method can be replicated for other sectors and regions focussing on undesirable output reduction.