The effect of size-control policy on unified energy and carbon efficiency for Chinese fossil fuel power plants

Abstract

This paper examines the effect of size control policy on the energy and carbon efficiency for Chinese fossil fuel power industry. For this purpose, we propose two non-radial directional distance functions for energy/carbon efficiency analysis of fossil fuel electricity generation. One is named a total-factor directional distance function that incorporates the inefficiency of all input and output factors to measure the unified (operational and environmental) efficiency of fossil fuel power plants, and the other is called an energy–environmental directional distance function that can be used to measure the energy–environmental performance of fossil fuel electric power plants. Several standardized indicators for measuring unified efficiency and energy–environmental performance are derived from the two directional distance functions. An empirical study of 252 fossil fuel power plants in China is conducted by using the proposed approach. Our empirical results show that there exists a significant positive relationship between the plant size and unified efficiency, the five state-owned companies show lower unified efficiency and energy–environmental performance than other companies. It is suggested that Chinese government might need to consider private incentives and deregulation for its state-owned enterprises to improve their performance proactively.