Environmental Efficiency Evaluation in China: Application of 'Undesirable' Data Envelopment Analysis

Total carbon dioxide (CO2) emission and energy consumption by mainland China in recent years has been second only to the U.S. China’s environmental pollution causes about 3.5% to 8% loss of GDP every year, indicating that its domestic environmental problem has become one of the most urgent issues the government must face. Current studies in the literature that employ data envelopment analysis (DEA) to study China’s environmental issues do not consider both desirable and undesirable output or input (e.g., wastewater, CO2) in production. Therefore, this study uses the undesirable measure DEA model to correctly calculate the impact of undesirable output and input on energy efficiency. The research herein sets up two models to analyze 27 provinces and cities in China from 2000 to 2003, and obtains various energy consumptions and pollutant reduction rates.