*5.2. An Analysis of Trends in Energy Use E*ffi*ciency*

Table 6 gives the yearly mean of provincial energy use efficiency for the three models. The results show that, according to the time-variant Model 1, energy use efficiency decreased during the study period. But Models 2 and 3 show increasing energy use efficiency. However, the changes over time are extremely small.


**Table 6.** Development of mean energy efficiency over time (2010–2017).

Table 6 shows that the trends of national mean energy use efficiency over 2010–2017 were practically constant over time. Although energy demand increased constantly, there was a technological revolution and policies for improving energy efficiency were introduced continuously, there were no significant improvements in energy use efficiency throughout the country. The possible small improvements in energy use efficiency are eliminated by increased consumption of energy due to economic growth in energy intensive industries.

#### *5.3. Regional Heterogeneity in Energy E*ffi*ciency*

For investigating the performance of different provinces and their positions as compared to the best performing province, energy use efficiency was compared across provinces and major regions in China. In the latter case, the provinces were divided into East (Beijing, Fujian, Guangdong, Henan, Hebei, Jiangsu, Shandong, Shanghai, Tianjin, and Zhejiang), Center (Anhui, Hubei, Henan, Hunan, Jiangxi, and Shanxi), West (Chongqing, Gansu, Guangxi, Guizhou, Inner Mongolia, Ningxia, Qinghai, Shaanxi, Sichuan, Xinjiang, and Yunnan), and Northeast (Heilongjiang, Jilin, and Liaoning).

Table 7 gives the summary of average energy use efficiency values by provinces for the period 2010–2017. Different models' estimated measures of efficiency show that there were differences between provinces in terms of energy use efficiency.


**Table 7.** Average energy use efficiency by provinces (2010–2017).

According to the models' results reported in Table 7, most of provinces in East China had relatively higher energy use efficiency as compared to provinces in the Center, West, and Northeast of the country. Provinces in the East such as Beijing, Chongqing, and Shanxi had high efficiency above 80 percent. Conversely, an energy use efficiency of less than 40 percent was observed in Gansu, Xinjiang, Shandong, and Liaoning provinces.

It can be seen in Table 7 that there is very obvious regional heterogeneity of energy use efficiency. Beijing, as the main energy efficiency policy implementation region, has always maintained high energy efficiency. Because of hosting a large proportion of secondary and tertiary industries, Changsha and Chongqing have also maintained high values in terms of energy efficiency.

Industrial cities such as Gansu, Shandong, and Liaoning have a very high proportion of production using coal. It can be speculated that the use of nonclean energy and the level of technology are the reasons for the low energy efficiency in these cities. As Xinjiang is a minority autonomous region that lacks resources, it has low technological levels, and slow implementation of energy efficiency policies which could have contributed to its low energy efficiency levels.

In looking at average energy use efficiency by provinces it is noted that Models 1 and 3 have similar trend calculation results, while Model 2 shows higher results that are similar to the results of residual efficiency in Model 3, which cannot reflect regional heterogeneity well. What we are concerned with is why the cities/provinces of Fujian, Guangdong, Shandong, Zhejiang, Hubei, Gansu, Shaanxi, Heilongjiang, and Liaoning have different efficiency results across different models. The reason could be that the energy structures in these provinces are basically dominated by energy-intensive secondary industries and there is congestion in resource inputs for achieving economic growth.

Figure 1 shows the average value of energy use efficiency by regions in the three models. It can be seen in the figure that the central region has higher energy efficiency, which has much to do with the good implementation of energy efficiency policies and human resource allocation structures in this region.

**Figure 1.** Estimated energy use efficiency by regions (2010–2017).

## Notes:


A table giving the full results (not reported here but available on request) shows all 30 provinces' yearly energy use efficiency for the three models. From this table, we can compare the trends of energy efficiency between provinces and regions more comprehensively, and we can also see that energy efficiency showed slow and steady growth.

Energy efficiency in the central region before 2010 was low, and its energy efficiency in 2005–2010 was lower than that in the eastern and western regions, indicating that the central region had a weak capacity to absorb production capacity, and the industrial market had not been fully developed. After 2010, as the country's 'Central Rise' policy entered the implementation phase, the central region's industrial structure was adjusted, its capacity to absorb production was continuously enhanced, and energy resource utilization technology was improved, leading to continuous improvements in energy efficiency year by year.

Energy efficiency in the western region declined steadily. The reason for this declining pattern is that the western region has abundant energy endowments and the gradual implementation of the western development policy enhanced its economic development, expanded its market capacity, and helped achieve improved energy efficiency. However, with the country's excessive dependence on the western region's policies, this region's market could not absorb too much capacity, and energy productivity and energy consumption capacity did not match, resulting in serious overcapacity which led to energy efficiency falling for several years.

Affected by the world financial crisis in 2008, China's economic development, in particular the development of energy intensive secondary industries, was hit hard. Therefore, after experiencing a decline in energy efficiency, the Chinese government adopted a large-scale investment stimulus package to protect its high rate of economic growth. Vigorous development of infrastructural investments and construction drove the development of the secondary industries. As a result, from 2010 to 2017, energy efficiency in the eastern and central regions increased significantly and steadily. However, the improvements were far below the optimal level required by health and environmental standards.

#### **6. Conclusions and Implications**

This study estimated three different models accounting for the panel nature of the data and determined separate province-specific energy use inefficiency effects. It also explained the degree of inefficiency in the use of energy using its possible determinants including those related to the public energy policy and environmental regulations. This research supplements existing research from the perspective of energy policy and regional heterogeneity. We observed a large potential for improving energy use efficiency, particularly in the western and northeastern regions. This study provides new empirical evidence for evaluating China's energy efficiency and transitioning to cleaner energy sources.

Energy use efficiency in most provinces of China improved slowly after 2010 as did the trend of steady regional economic growth, but the magnitude of energy efficiency improvements was small compared to investments in technological innovations. A comparison of the results of the three stochastic frontier models shows that there was provincial and regional heterogeneity in energy use and its efficiency. The models complement each other and being based on different distributional assumptions and estimation methods together provide a picture of energy consumption in China at the province level for the period 2010–2017.

We can also see that the impact of the government's policies on energy efficiency were significant. As the country's 'Central Rise' policy entered the formal implementation phase, the central region showed improvements in energy efficiency. This also means that there is potential for improving energy efficiency in the western and northeastern regions. With the 'coal to gas' and 'coal to electricity' policy, energy efficiency in Beijing-Tianjin-Hebei, Yangtze River Delta, and Pearl River Delta showed relatively high levels of progress.

With the country's excessive dependence on policies for the western region, this region's market could not absorb as much capacity and energy productivity and energy consumption capacity did not result in production capacity, which led to decreased energy efficiency. The results of the western region's policy imply that the government's energy policy should be adjusted considering regional heterogeneity. But the low level of energy efficiency in the northeastern region still needs more empirical analysis to find out why this is the case. The 'Central Rise' policy could be modified to account for specific characteristics of the western and northeastern regions, such as resource endowments, production capacity adjustments, and infrastructure to increase their energy use efficiency. Further, the determinants of energy use (in) efficiency can be identified and the models be specified such that each model can explain possible outcomes of energy use and environmental protection.

A possible and interesting extension of this study is expanding the data period to include the period before the 2008 global economic crisis and disaggregating the province level data to the industry level. This will help control for energy intensity and targeted energy saving policies and an evaluation of their impact.

**Author Contributions:** Conceptualization, X.Z. and A.H.; Methodology, A.H.; Data collection, formal analysis, X.Z.; Writing—original draft preparation, X.Z., Writing—Review and Editing, X.Z. and A.H. All authors have read and agreed to the published version of the manuscript.

**Funding:** This research received no external funding.

**Acknowledgments:** The authors are grateful to an editor of the journal and three anonymous referees for their comments and suggestions on an earlier version of this paper.

**Conflicts of Interest:** All authors declare that they have no conflict of interest.
