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Will Pollution Taxes Improve Joint Ecological and Economic Efficiency of Thermal Power Industry in China?: A DEA‐Based Materials Balance Approach

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  • Ke Wang
  • Zhifu Mi
  • Yi‐Ming Wei

Abstract

Previous studies of the efficiency of Chinese electricity industry have been limited in providing insights regarding policy implications of inherent trade‐offs of economic and environmental outcomes. This study proposes a modified data envelopment analysis method combined with materials balance principle to estimate ecological and cost efficiency in the Chinese electricity industry. The economic cost and ecological impact of energy input reallocation strategies for improving efficiency are identified. The possible impacts of pollution taxes upon the levels of sulfur dioxide (SO2) emissions are assessed. Estimation results show that (1) both energy input costs and SO2 could be reduced through increasing technical efficiency. (2) It is possible to adjust energy input mix to attain ecological efficiency, and, correspondingly, SO2 would be reduced by 15%. (3) The Chinese electricity industry would reduce its unit cost by 9% if optimal ecological efficiency is attained and reduce its unit pollution by 13% if optimal cost efficiency is attained, implying that there are positive ecological synergy effects associated with energy cost savings and positive economic synergy effects associated with SO2 pollution reductions. (4) Estimated shadow costs of SO2 reduction are very high, suggesting that, in the short term, the Chinese electricity industry should pursue cost efficiency instead of ecological efficiency, since alternative abatement activities are less costly and some of the abatement cost could be further offset by energy input cost savings. (5) There would be no significant difference between the impacts of pollution discharge fees and pollution taxes on SO2 emissions levels because of the relatively low pollution tax rate.

Suggested Citation

  • Ke Wang & Zhifu Mi & Yi‐Ming Wei, 2019. "Will Pollution Taxes Improve Joint Ecological and Economic Efficiency of Thermal Power Industry in China?: A DEA‐Based Materials Balance Approach," Journal of Industrial Ecology, Yale University, vol. 23(2), pages 389-401, April.
  • Handle: RePEc:bla:inecol:v:23:y:2019:i:2:p:389-401
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    1. repec:eee:streco:v:47:y:2018:i:c:p:180-193 is not listed on IDEAS
    2. repec:eee:appene:v:231:y:2018:i:c:p:1259-1267 is not listed on IDEAS
    3. Yujiao Xian & Ke Wang & Yi-Ming Wei & Zhimin Huang, 2018. "Would China¡¯s power industry benefit from nationwide carbon emission permit trading? An optimization model-based ex post analysis on abatement cost savings," CEEP-BIT Working Papers 121, Center for Energy and Environmental Policy Research (CEEP), Beijing Institute of Technology.
    4. Wang, Ke & Wang, Jiayu & Wei, Yi-Ming & Zhang, Chi, 2018. "A novel dataset of emission abatement sector extended input-output table for environmental policy analysis," Applied Energy, Elsevier, vol. 231(C), pages 1259-1267.
    5. repec:eee:appene:v:235:y:2019:i:c:p:978-986 is not listed on IDEAS

    More about this item

    JEL classification:

    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General

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