Industrial energy efficiency and driving forces behind efficiency improvement: Evidence from the Pearl River Delta urban agglomeration in China

Improving energy efficiency of industrial sectors is essential to achieve energy conservation in the Pearl River Delta urban agglomeration (PRDUA) in China. This study adopted stochastic frontier analysis (SFA) to evaluate the industrial total factor energy efficiency (TFEE) of nine cities in PRDUA during 2004–2016, and then to decompose the growth of TFEE into technical change (TC), technical efficiency change (TEC), and economies of scale (SC) effects. Results show that the TFEE of industrial sectors of PRDUA had an overall downward trend during the study period, and that technical change was the major driving force behind the growth of TFEE. The Tobit model was then adopted to further investigate the determinants of energy efficiency improvement and test the robustness of empirical results. The main contributions of this study to the existing literature lie in showing that (1) the degree of openness, local government spending, foreign direct investment, factor input structure, environmental regulation strength, and GDP per capita have positive impacts on the industrial TFEE; (2) enterprise scale and energy consumption structure have a negative impact on industrial energy efficiency. Finally, we address policy implications for energy management regarding their economic and environmental aspects in industrial sectors of the PRDUA.