Estimating the Efficiency of China’s Circular Economy Using an Entropy Approach

The literature predominantly employs traditional data envelopment analysis (DEA) models to measure circular economy efficiency (CEE), overlooking the fact that circular economy systems are complex structures comprised of interconnected subsystems, including production, environmental governance, and circulation processes. Such a conventional approach fails to capture the internal structural dynamics and stage-wise relationships within the system. Therefore, this research uses an improved entropy meta recycle parallel three-stage undesirable slack-based measure (SBM) model and develops a comprehensive indicator system to re-examine CEE of 30 provinces in China from 2016 to 2022. It delves into the stage efficiencies that constrain CEE improvement, including water use efficiency, energy efficiency, environmental governance efficiency, wastewater recycling efficiency, solid waste recycling efficiency and the efficiency of input–output indicators. The findings show that the overall efficiency of China’s circular economy system is relatively low at an average efficiency of only 0.721. All 30 provinces demonstrate varying degrees of potential for improvement in CEE, accompanied by significant regional polarization characteristics. Indeed, 56.6% of the provinces exhibit a fluctuating declining trend in CEE over the sample period. The stage efficiencies that lower CEE vary across provinces, but environmental governance efficiency significantly contributes to overall efficiency in all provinces. Regional disparities in stage efficiency are significant, with the east region maintaining a leading position. Although China has made great efforts in energy conservation and emission reduction, the indicators such as workforce input efficiency in the water and electricity sectors, investment efficiency in water and environmental governance, output efficiency in industrial water reuse, and output efficiency in the integrated utilization of industrial solid waste remain relatively low, resulting in no significant improvement in CEE or efficiency at each stage. The empirical results provide evidence to promote resource conservation and intensive recycling, ensure national resource security, and spur sustainable economic and social development.