Energy Efficiency and Energy Saving Potential in China: A Directional Meta-Frontier DEA Approach

Increasing energy efficiency and exploiting energy saving potential are two important practices that can help to ensure future energy security in China. This paper proposes a new total factor energy efficiency indicator, based on the directional meta-frontier data envelopment analysis (DEA) approach, to account for the heterogeneity of production technology among provinces in China. This indicator considers both energy savings and economic development, and can also decompose the energy saving potential. An empirical research study conducted on 29 Chinese provinces indicates that the differences in energy efficiency and production technology among the Chinese regions are quite significant. Most eastern coastal provinces maintain high-energy efficiency and advanced production technology, while energy efficiency in the west is typically lower. As a rule, improvements in technical and management factors are needed to exploit energy saving potentials. However, the emphasis on these two factors in each province should differ. China’s general energy efficiency is relatively low; the absolute amount of nationwide energy saving potential is on the rise.