Returns to damage under undesirable congestion and damages to return under desirable congestion measured by DEA environmental assessment with multiplier restriction: Economic and energy planning for social sustainability in China

Abstract

This study discusses the concept of natural and managerial disposability from their economic and methodological implications on social sustainability development. Then, it explores their analytical linkages to a concept on “congestion.” The concept is classified into Undesirable Congestion (UC) under natural disposability and Desirable Congestion (DC) under managerial disposability. Considering the two disposability concepts, this study compares between Returns to Damage (RTD) under UC and Damages to Return (DTR) under DC. Conceptually, UC and DC are conceptually different from RTD and DTR although they are closely related to each other group. An occurrence of the former measures is identified by a single negative multiplier (i.e. dual variable). In contrast, the latter measures are associated with multiple negative multipliers and an intercept of a supporting hyperplane on a production and pollution possibility set. Thus, an occurrence of UC and DC is a necessary condition, but not a sufficient condition on RTD and DTR, respectively, in terms of the number of negative multipliers on production factors. To document the practicality of the proposed approach, this study applies it to Chinese economic and environmental assessment for its economic and energy planning for social sustainability development. This study identifies four important findings: First, the Chinese government has historically paid attention to the economic prosperity, but not paying serious attention on the environmental pollution (e.g., air pollution). Second, there was an increasing trend in improving the two components (i.e., economic and environmental performance measures) regarding social sustainability. Third, China's economic and energy policy concerns have been focused upon well-developed municipalities (e.g., Beijing and Shanghai) and large provinces. Therefore, it is an important strategy for the government to allocate economic and energy resources to other provinces so that China can reduce the industrial and regional imbalances. As a result, China can enhance the level of social sustainability. Finally, the municipalities need strict regulation on traffic control in these metropolitan areas and a fuel mix shift from coal combustion to natural gas and renewable energies (e.g., solar, water, and nuclear generations). The fuel mix strategy, along with the structure change (e.g., from manufacturing to service and from public to private energy firms), will be a major industrial policy issue for China in near future.