Environmental Efficiency analysis of China industry sector: a directional distance function approach

The issue of environment has become a main hurdle to sustainable development in China. In this paper we apply the directional distance function approach to construct an Environmental Efficiency (EE) index within a Data Envelopment Analysis (DEA) framework considering both desirable and undesirable outputs. The proposed approach has been applied to study the EE of the Chinese industry at the provincial level from 1995 to 2005. It is found that Shanghai, Fujian and Guangxi have always been environmentally efficient during the period. We also investigate the factors, including energy efficiency, population density, opening degree and other aspects, that may influence the changes of industry EE.