Provincial production and pollution treatment performance in China based on a two-stage eco-inefficiency approach with undesirable intermediate outputs

In general, production systems always contain a two-stage process of product production and pollution treatment, where undesirable byproducts generated in the former stage will be treated as inputs in the latter stage. How to evaluate the performance of such production systems is very important both from academic research and practical application. In this paper, we will propose a new data envelopment analysis (DEA) approach for measuring the eco-inefficiency of two-stage structures with undesirable intermediate measures, and then apply the approach to 30 Chinese provincial regions with production and pollution treatment activities. The results show that: (1) China does well in overall performance, with an average inefficiency score of 0.3214. (2) Hunan, Hainan, Chongqing, Ningxia and Hebei are the top five least inefficient regions, while Xinjiang, Yunnan, Guizhou, Liaoning and Heilongjiang are the top five most inefficient regions. (3) Most regions have a higher pollution treatment inefficiency than the production inefficiency. (4) The eastern area has a better overall performance than central and western areas, and coastal economic developed regions perform better than inland remote regions. Further, (5) the eastern area is consistently better than the western area in both production and pollution treatment, while the central area is similar to the western area in production and is superior to the eastern area in pollution treatment. In addition, we provide some insights on policy suggestions for improving Chinese provincial industrial production and pollution treatment performance.