Industrial energy efficiency with CO2 emissions in China: A nonparametric analysis

Global awareness on energy security and climate change has created much interest in assessing economy‐wide energy efficiency performance. A number of previous studies have contributed to evaluate energy efficiency performance using different analytical techniques among which data envelopment analysis (DEA) has recently received increasing attention. Most of DEA‐related energy efficiency studies do not consider undesirable outputs such as CO2 emissions in their modeling framework, which may lead to biased energy efficiency values. Within a joint production framework of desirable and undesirable outputs, in this paper we construct both static and dynamic energy efficiency performance indexes for measuring industrial energy efficiency performance by using several environmental DEA models with CO2 emissions. The dynamic energy efficiency performance indexes have further been decomposed into two contributing components. We finally apply the indexes proposed to assess the industrial energy efficiency performance of different provinces in China over time. Our empirical study shows that the energy efficiency improvement in China's industrial sector was mainly driven by technological improvement.