DEA decomposition of China’s environmental efficiency based on search algorithm

Abstract

Through a theoretical and empirical analysis, this study focuses on solutions to improve environmental efficiency across China, such as the acceleration of technological progress and establishment of rational environmental policy. After calculating China’s regional environmental efficiency for 1992, 1999, 2007, and 2012, the concept of DEA decomposition is proposed, with a search algorithm applied. The provincial environmental efficiency for three periods is then decomposed from the perspective of government regulation and technological progress. Because the resource endowment or economic level in each region varies, adopting the same technological progress or environmental regulations would generate different effects in different regions. Hence, we adopt the fixed effects model and the variable coefficient model to quantify the distinct effects of environmental regulations and technological progress in each province. The results show that the economies and the environment of certain eastern coastal regions are developing harmoniously and that government regulations are positively stimulating environmental efficiency in relatively developed provinces, while technological progress in those provinces is mostly related to production rather than energy saving or emissions reduction. Therefore, this approach will be an effective way in which to improve environmental efficiency in China by adopting measures that enhance government regulations on environmental issues in midwest provinces in order to push forward the exchange of advanced environmental protection technologies among eastern, central, and western regions.