Cost-environment efficiency analysis of construction industry in China: A materials balance approach

This study utilizes the data envelopment analysis technique with materials balance condition to evaluate the inherent trade-offs between environmental and cost outcomes among different types of energy consumptions in China's construction industry. Environmental and cost efficiency that is decomposed into technical efficiency and allocative efficiency are estimated, and the possible environmental impact and economic cost of reallocating energy inputs for improving efficiency are obtained. The estimation results show that: i) China's construction industry has the ability to produce its current level of industrial added value with fewer CO ₂ emissions and fewer energy input cost through removing technical inefficiency and adjusting energy consumption structure. ii) There are 31.9% and 6.1% reduction potentials on CO ₂ emissions if this industry attained the most environmentally efficient and the most costly efficient situation, respectively. iii) The average shadow cost of CO ₂ emissions reduction in this industry is very low, suggesting that it should control CO ₂ emissions through optimizing energy consumption structure and improving energy efficiency, instead of relying on end-of-pipe emission abatement technologies or emission trading systems.