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Incentivizing sustainable development: The impact of a recent policy reform on electricity production efficiency in China

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  • Fan Li
  • Jiajia Xie
  • Wenche Wang

Abstract

China's rapid economic growth has tremendously accelerated its energy use, calling for a more sustainable supply of scarce and nonrenewable energy. Using a firm‐level dataset of 30 major Chinese electricity utilities from 2010 to 2014, this paper applies a stochastic frontier analysis to determine the utilities' technical efficiency, incorporating their operational environments related to a recent policy reform to encourage sustainable development. Our main findings are (a) state ownership, consumer density, and a chief executive officer with a science and engineering background are factors that can improve technical efficiency; (b) asset‐related subsidy increases efficiency whereas income‐related subsidy lowers efficiency; and (c) the five largest regional electricity generation firms exhibit above‐average efficiency levels. These results provide evidence that supports the recent Chinese policy reform. The findings also suggest that electricity generation efficiency, which is essential to sustainable economic development, can be improved through performance‐based regulation and incentives.

Suggested Citation

  • Fan Li & Jiajia Xie & Wenche Wang, 2019. "Incentivizing sustainable development: The impact of a recent policy reform on electricity production efficiency in China," Sustainable Development, John Wiley & Sons, Ltd., vol. 27(4), pages 770-780, July.
    • Handle: RePEc:wly:sustdv:v:27:y:2019:i:4:p:770-780
    DOI: 10.1002/sd.1942
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    Cited by:

    1. Murat Kucukvar & Khalel Ahmed Alawi & Galal M. Abdella & Muhammet Enis Bulak & Nuri C. Onat & Melih Bulu & Murat Yalçıntaş, 2021. "A frontier‐based managerial approach for relative sustainability performance assessment of the world's airports," Sustainable Development, John Wiley & Sons, Ltd., vol. 29(1), pages 89-107, January.
    2. Zheng, Xuemei & Menezes, Flavio & Nepal, Rabindra, 2021. "In between the state and the market: An empirical assessment of the early achievements of China's 2015 electricity reform," Energy Economics, Elsevier, vol. 93(C).
    3. Rashid Maqbool & Xiaomei Deng & Saleha Ashfaq, 2020. "Success of renewable energy projects under the financial and non‐financial performance measures," Sustainable Development, John Wiley & Sons, Ltd., vol. 28(5), pages 1366-1375, September.
    4. Mark Agyei-Sakyi & Yunfei Shao & Oppong Amos & Armah Marymargaret, 2021. "Determinants of Electricity Consumption and Volatility-Driven Innovative Roadmaps to One Hundred Percent Renewables for Top Consuming Nations in Africa," Sustainability, MDPI, vol. 13(11), pages 1-22, June.

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