The impact of China's financial expenditure on energy and carbon emission efficiency: Applying a meta-dynamic non-radial directional distance function

Abstract

China is the world's largest energy consumer and carbon emitter, but despite unbalanced growth among the eastern, central, and western regions, local financial expenditure on energy conservation and environmental protection has increased from 255.1 billion yuan in 2011 to 582.5 billion yuan in 2018. This research thus introduces financial expenditure like a new input into a dynamic meta-frontier non-radial directional distance function to evaluate China's energy and carbon emission efficiency over that period of time. Different from previous studies, after considering financial expenditure we find that most provinces have narrowed their gap with the benchmark frontier, reflecting that increasing financial expenditure does help improve energy and carbon emission efficiency. The results highlight that most provinces should increase their financial expenditure on energy conservation and environmental protection, especially in the central and western regions, so as to narrow their technology gap with the eastern region.