The low-carbon technology characteristics of China's ferrous metal industry

The ferrous metal industry is the largest energy-consuming industrial sector in China. This paper examines the low-carbon production characteristics of this industry during the period 1980-2013. We employ the duality theory of the Weighted Russell Directional Distance Function to propose a general procedure for modeling production characteristics with carbon emissions being considered the undesirable output. Using the Weighted Russell Directional Distance Function model, we measure the carbon-adjusted technical efficiency and environmental regulatory costs for this industry. To investigate policy effects, we test the Porter hypothesis using the Granger causality between regulatory cost and technical efficiency. By using the dual model of Weighted Russell Directional Distance Function, we estimate the carbon shadow pricing and inter-factor substitution possibilities. Results show that the carbon-adjusted technical efficiency and environmental regulation costs of the Chinese ferrous metal industry have significantly increased in recent decades. However, the latter does not significantly cause the improvement of former. The indirect Morishima elasticities of substitution reflect that the increase of fixed assets will effectively improve the carbon emissions performance of the Chinese ferrous metal industry. Finally, some policy implications are suggested.