An empirical analysis of energy efficiency in China's iron and steel sector

Using Malmquist Index Decomposition, this paper investigates energy efficiency of China's iron and steel sector during the period 1994-2003. Provincial panel data is employed, allowing various energy inputs and product outputs. The energy efficiency improvement is decomposed into two components: technical change (production frontier shifting effect) and technical efficiency change (catching up effect) over time. Our empirical results indicate that the energy efficiency in China's iron and steel sector increased by 60% between 1994 and 2003, which is mainly attributable to technical progress rather than technical efficiency improvement. The energy efficiency gaps among provincial iron and steel sectors during this period have widened. However, energy efficiency of iron and steel plants owned by the state has slowly improved in some regions, such as Shanghai, Liaoning, Beijing and Hubei. Nevertheless, technical efficiency in these four regions has decreased considerably. Energy efficiency in China's two largest private-own iron and steel bases (Heibei and Jiangsu) improved significantly.