CO2 emissions and energy intensity reduction allocation over provincial industrial sectors in China

High energy consumption by the industry of developing countries has led to the problems of increasing emission of greenhouse gases (GHG) (primarily CO2) and worsening energy shortages. To address these problems, many mitigation measures have been utilized. One major measure is to mandate fixed reductions of GHG emission and energy consumption. Therefore, it is important for each developing country to disaggregate their national reduction targets into targets for various geographical parts of the country. In this paper, we propose a DEA-based approach to allocate China's national CO2 emissions and energy intensity reduction targets over Chinese provincial industrial sectors. We firstly evaluate the energy and environmental efficiency of Chinese industry considering energy consumption and GHG emissions. Then, considering the necessity of mitigating GHG emission and energy consumption, we develop a context-dependent DEA technique which can better characterize the changeable production with reductions of CO2 emission and energy intensity, to help allocate the national reduction targets over provincial industrial sectors. Our empirical study of 30 Chinese regions for the period 2005-2010 shows that the industry of China had poor energy and environmental efficiency. Considering three major geographical areas, eastern China's industrial sector had the highest efficiency scores while in this aspect central and western China were similar to each other at a lower level. Our study shows that the most effective allocation of the national reduction target requires most of the 30 regional industrial to reduce CO2 emission and energy intensity, while a few can increase or maintain their 2010 levels.