Environmental efficiency of transportation sectors in China and Korea

Abstract

This article analyzes the carbon efficiency of the transportation sectors in China and Korea. It also investigates the effect of environmental regulations on efficiency and the opportunity costs of complying with these regulations. The main methodology employed is the Slacks-Based Measure Data Envelopment Analysis (SBM-DEA). The results show that Korea has improved its environmental efficiency in the transportation sector in recent years and it seems to have been relatively less affected by environmental regulations, whereas China has slightly deteriorated in its environmental efficiency for the same period and it has been relatively more affected by environmental regulations. The average opportunity cost of China’s provincial transportation industry, in complying with environmental regulations, tripled from US$590 million in 2004 to $1.8 billion in 2009. The unit loss per ton of Carbon dioxide (CO2) emission doubled from $64 in 2004 to $115 in 2009. In contrast, the average opportunity cost in Korea’s provincial transportation industry slightly increased for the same period. Similarly, the unit loss per ton of CO2 emission in Korea increased from $44 in 2004 to $57 in 2007, but then gradually dropped to $48 in 2009. In implementing its visionary low-carbon economy, the Chinese government needs to consider not only ways to improve overall environmental efficiency at a national level, but also the opportunity costs of complying with environmental regulations at a provincial level.