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Economic Transition under Carbon Emission Constraints in China: An Evaluation at the City Level

ABSTRACT This study evaluates economic efficiency under carbon emissions constraints from 2002 to 2011 at the prefectural-city level in China. Based on a dynamic slacks-based measure (SBM) mechanism incorporating undesirable outputs, this study builds a dynamic efficiency indicator to evaluate economic transition in 256 cities in China. By design, the dynamic efficiency indicators are comparable across time and region, allowing us to group 256 cities into 3 transition-stage groups using a linear-trend regression. Specifically, the study identifies 29 cities that are improving and 106 cities that are deteriorating; the rest are stagnating. Further, the study examines the impact of technical progress, institutional change, industrial structure, and energy consumption structure on transition stages in each city with several panel-data estimation methods. Our results reveal that government intervention and heavy industrialization are the major obstacles to a transition to low-carbon energy use; technological progress and greater openness are the main driving forces behind a successful transition. The results are robust to different specifications.