Environmental efficiency and market segmentation: An empirical analysis of China's thermal power industry

Dominated by state-owned administrative monopolistic enterprises, China's power industry faces a dilemma that is being provoked by market-oriented reforms. Regional protectionism makes it more difficult for those more efficient - but non-local - power generators to enter into the local market, thereby causing significant market segmentation (MS). In view of regional technology heterogeneity, a meta-frontier non-radial slacks-based measure model is used to evaluate the environmental efficiency (EE) of China's thermal power industry. Further, we utilize a panel-data Tobit model and apply counterfactual analysis to explore the impacts of MS on EE. The results show that: (1) Technology gaps exist between the group frontier and the meta-frontier, exhibiting greater potential for improvement. (2) The degree of MS in thermal power industry in most provinces fluctuates within a narrow range from 2006 to 2015, and peaks during the period from 2008 to 2010. (3) MS negatively affects EE performance both significantly and robustly, with up to a 15% loss of thermal power generation due to MS in 2009. (4) Significant regional technology heterogeneity exists, along with a widening technology gap ratio between developed and underdeveloped areas. This study provides insightful policy implications for the sustainable development of China's thermal power industry. (c) 2019 Elsevier Ltd. All rights reserved.