Regional differences of environmental efficiency of China’s energy utilization and environmental regulation cost based on provincial panel data and DEA method

Abstract

Recently, environmental pollution has attracted a lot of attention domestically and internationally. It is known that energy utilization is a major source of China’s environmental pollution. Measuring environmental efficiency of energy utilization in Chinese provinces first, the paper then offers decision supports for relevant departments in order to achieve sustainable development of energy and environment in China. This research chooses CO₂ emission as a substitute variable for environmental effects of energy utilization and puts it into the study framework based on total-factor production theory to measure the environmental efficiency of energy utilization of each province and three major regions. On the basis of the above results this research further measures the cost of environmental regulation for each province. Provincial panel data during the period of 2000–2007 are used to carry out empirical study. The analysis indicates that the environmental efficiency of energy utilization in Chinese provinces varies greatly from each other, meaning that both economic output and CO₂ emissions need considerable improvement. In addition, the results of empirical study also show that the environmental efficiency of energy utilization in China is quite low. Therefore, to ensure sustainable development of China’s energy, economy and environment, we should resort to advanced technology as the support to promote the efficient and clean utilization of energy resources. Besides, most Chinese provinces have spent quite a lot on environmental regulation, implying that in these provinces development of the economy and the environment are not in harmony. The contributions of this research are as follows: it constructs the models for measuring environmental efficiency of energy utilization in Chinese provinces; it introduces the idea of “environmental regulation” into research system and measures the environmental regulation cost of each Chinese province.