Evaluating the sustainability impact of consolidation policy in China's coal mining industry: a data envelopment analysis

Abstract

The highly fragmented coal industry in China has experienced a consolidation process since late 2008. Major coal-rich provinces have adopted nationalization and market-oriented approaches to reduce the number of small coal mines, leading to a marked increase in the proportion of the total output produced by large and medium-sized coal mines. Relying on a Range-Adjusted Measure model of the Data Envelopment Analysis, this article constructs three indicators, namely operational efficiency, environmental efficiency, and unified efficiency, to reflect sustainability impact of this consolidation policy. By comparing two representative provinces – Shanxi and Inner Mongolia over the period 2005–2012, this paper assesses the policy effectiveness on the transition of coal mining industry to sustainable development. The results suggest that the consolidation reform in China has a negative impact on coal productivity, but significantly it improves the environmental performance of the coal industry. However, the nationalization approach does not prove to outweigh market-oriented approach, because the inefficiency in the capital factor offsets efficiency-improving outcome. The market-driven regulation can reduce the negative impact of the market restructuring on the operational efficiency and thus achieve a higher unified efficiency from both operational and environmental perspectives.