Assessing environmental efficiency of China’s industry system using two-stage range-adjusted measure model

Abstract

Purpose

The purpose of this paper is to examine the industrial production efficiency, pollution treatment efficiency, total factor energy efficiency and water efficiency in China with the consideration of technological innovation. This study also explores the distribution proportion of technological innovation between industrial production substage and pollution treatment substage.

Design/methodology/approach

A nonparametric method, data envelopment analysis (DEA), is used as the model foundation of this study. Specifically, a novel two-stage range-adjusted measure (RAM-DEA) with shared inputs is constructed to analyze the China’s industrial system. In this study, the panel data of 30 provinces from 2008 to 2015 are used.

Findings

This study found that although the current environmental regulation reduced the efficiency of industrial production, it could significantly improve the pollution treatment level. However, the lack of pollution treatment capacity was still an obstacle for development of China's industrial system. Compared with the total factor energy efficiency, the total factor water efficiency had more room for improvement. The optimal distribution of technological innovation in the two substages performed little change and the distribution roughly followed the “three-seven principle”.

Practical implications

More attention should be paid to improve the pollution treatment level and total factor water efficiency. And more R&D expenditure should be used in the industrial production substage in the eastern coastal areas, while in the inland areas, more R&D expenditure should be used in the pollution treatment substage.

Originality/value

This study proposed a model to environmental efficiency score with considering interval data under two-stage evaluation structure, which could strengthen the theory and expand the application scope of DEA approach.

Citation

Wang, M., Chen, Y. and Zhou, Z. (2021), "Assessing environmental efficiency of China’s industry system using two-stage range-adjusted measure model", Management of Environmental Quality, Vol. 32 No. 6, pp. 1401-1421. https://doi.org/10.1108/MEQ-12-2020-0282