Energy Efficiency and Emissions Reduction Potential of China's Industrial Sector

Based on the total-factor energy efficiency framework, this paper calculates China's industrial energy efficiency and CO2 emissions reduction potential from 2000 to 2009 by utilizing the directional distance function and data envelopment analysis. The empirical results show that: China's industrial overall energy efficiency is relatively lower while the emissions reduction potential is relatively greater, given the optimum production frontier. Significant indus-trial disparities of energy efficiency and emissions reduction potential exist. Energy efficiency and emis-sions reduction potential significantly show different tendencies of industrial dynamic variation. This paper suggests the Chinese government impose differential carbon taxes, flexibly utilize carbon market mechanism, strengthen energy-saving technological R& D, promote the utilization of renewable energy, and strengthen environmental supervision and regulation, so as to improve China's industrial energy efficiency and reduce CO2 emissions.