Modeling Undesirable Factors in the Measurement of Energy Efficiency in China

In this paper, a non-parametric method based on data envelopment analysis (DEA) is proposed to measure the energy efficiency. Majority of the previous studies did not consider the pollution when measuring energy efficiency, and hence the results are partially distorted on the perspective of environment. However, this paper takes into account the undesirable factors such as waste water, waste gas and solid wastes under the DEA technology that exhibits constant returns to scale (CRS) and variable returns to scale (VRS) respectively. The result indicates that the DEA model with the undesirable output as byproduct is more appropriate in energy efficiency measuring. Moreover, comparing to DEA model based on CRS, the model supported by VRS is more preferable, since in real cases, production process of VRS is more likely to be observed. Finally, an empirical study on measuring the energy efficiency of 30 provinces in China is presented.