Measuring the environmental efficiency of the Chinese industrial sector: A directional distance function approach

This paper presents a directional distance function approach to measure two technical efficiencies with respect to the two technologies characterized by strong and weak disposability of pollutants. The environmental efficiency index, defined as the ratio of the two technical efficiencies, reflects the opportunity cost to transform the strong disposability of pollutants into a weak one. The proposed approach is applied to measure the environmental efficiency index of the Chinese industrial sector, with the input and output data of the sector in 284 cities at the prefecture level and above in China from 2003 to 2009, including the emissions of wastewater, sulfur dioxide, and soot. Several factors of environmental efficiency are also investigated by using a panel Tobit model.