Technical efficiency, shadow price and substitutability of Chinese industrial SO2 emissions: a parametric approach
Abstract In China's transition process towards sustainable development, fighting against the rising SO2 emission has become a great and urgent challenge. Based on a parametric quadratic directional distance function, this paper investigates the inefficiency level, shadow price and substitution elasticity of Chinese industrial SO2 emission from 1998 to 2011. The results show a U shape for the technical inefficiency, indicating an efficiency improvement before 2005 but it getting worse since then, which is that the east area displays a declining trend while the west goes up and the middle follows the national pattern at the east middle west region level. As of the shadow price and Morishima elasticity, both the national and regional levels hold an increasing trajectory. The shadow price is continuously increased a lot during the whole period, implying to control additional SO2 emission become more costly. The positive Morishima substitution elasticity suggests there may exist the win win opportunities for SO2 regulation. Moreover, the large regional disparity highlights the needs to adopt a differentiated regional policy.