Energy efficiency performance of the industrial sector: From the perspective of technological gap in different regions in China

Abstract

The traditional estimation methods tend to result in biased energy efficiency estimates due to the exclusion of heterogeneous production technology. Taking this factor into account, this study uses the metafrontier method combined with the stochastic frontier analysis (SFA) to analyze energy efficiency performance of the industrial sectors in China’s 30 provinces during 1997–2016. This study measures energy efficiency by considering the technological gap that can be regarded as a discrete source of energy inefficiency. Different from the traditional classification of different regions in China, we divide regions into three groups by using the cluster analysis based on the indicator of energy intensity. The empirical results are summarized as follows: first, the traditional pooled estimation method, which ignores the technological gap of the industrial sectors among different regions, tends to overestimate energy efficiency performance; second, energy efficiency and technological gap ratios (TGRs) of the industrial sectors are distinct among China’s regions; and the industrial sectors of the eastern region maintained higher energy efficiency and TGRs due to more advanced production technology; third, in general, the average score of industrial energy efficiency of China was only 0.4396, implying that there’s still plenty of room for energy efficiency improvement.