Energy efficiency and productivity change of China's iron and steel industry: Accounting for undesirable outputs

This paper used data from 50 enterprises in China’s iron and steel industry to evaluate their energy efficiency and productivity change. The study first used a conventional data envelopment analysis model and the Malmquist Productivity Index (MPI) to measure the energy efficiency and productivity change over the period 2001–2008. The results indicated inefficiency in many of the plants: The average energy efficiency was only 61.1%. The annual growth rate of productivity was 7.96% over this period and technical change was the main contributor to this growth. The research then took undesirable outputs into consideration by using the Malmquist–Luenberger Productivity Index (MLPI) to explore the productivity change from 2006 to 2008. Omitting undesirable outputs would result in biased efficiency change and technical change. This paper also claimed that environmental regulation has a potentially positive impact on technical change.
Highlights
► The results indicated inefficiency in many of the plants. ► The average energy efficiency was only 61.1% over 2001–2008. ► Productivity growth was mainly due to technical shift and scale efficiency growth. ► The true TFP growth was underestimated if undesirable outputs were ignored. ► Environmental regulation has the potentially positive impact on technical change.