Abstract
This paper proposes a centralized data envelopment analysis (DEA) model for industrial optimization based on several different production technologies among several regions. We developed this model based on improved Kuosmanen environmental DEA technology, which avoids positive shadow price on undesirable outputs. We also designed a dual model for our centralized DEA model, and used it to analyze shadow prices on CO2 emissions. We further employed the proposed model to determine the optimal path for controlling CO2 emissions at the sector level for each province in China. At sectoral level, manufacturing showed the highest potential emissions reduction, and transportation was the largest accepter of emission quotas. At regional level, western and northeastern areas faced the largest adjustments in allowable emissions, while central and eastern areas required the least amount of adjustment. Because our model represents increase or decrease in emissions bidirectionally in terms of shadow price analysis, this setting makes the shadow price on CO2 emissions lower than strong regulation (decreasing CO2 emissions along with increasing value added) used by directional distance function (DDF).
Highlights
Climate change caused by greenhouse gas (GHG) emitted by human activity is one of the most urgent global issues of our time
Many previous studies have explored the data envelopment analysis (DEA) approach to allocate emissions allowances at different levels, but in this study, we developed a new environmental DEA technology based on Kuosmanen environmental DEA technology which changes weak disposability to strong disposability on undesirable outputs, and ensures non-positive shadow price on undesirable outputs
We proposed a centralized DEA model based on multi-sector and multi-region data over time to explore efficiency maximization in China
Summary
Climate change caused by greenhouse gas (GHG) emitted by human activity is one of the most urgent global issues of our time. According to Stern [1], if no action is taken to reduce GHG emissions, the overall cost of climate change will be equivalent to the loss of at least 5% of the world’s GDP per year. Numerous countries have taken action to reduce their greenhouse gas emissions by enforcing market-oriented or administration-oriented regulations, including energy/carbon taxation, cap and trade systems, energy efficiency standards, and subsidies for new and renewable energy. The world’s largest developing country and possessor currently of the most dynamic economy, has seen a dramatic increase in energy consumption and CO2 emissions over the past three decades. Controlling CO2 emissions in the production sector and enforcing dramatic, but proven-feasible, adjustments to industrial structure is highly necessary to ensure rational distribution of CO2 emissions among transport, consumption, production, and processing industries, and to decrease China’s overall carbon footprint
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