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Economic and Technical Efficiency of the Biomass Industry in China: A Network Data Envelopment Analysis Model Involving Externalities

Qingyou Yan (), Youwei Wan (), Jingye Yuan (), Jieting Yin (), Tomas Baležentis () and Dalia Streimikiene ()
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Qingyou Yan: School of Economics and Management, North China Electric Power University, 2 Beinong Road, Beijing 102206, China
Youwei Wan: School of Economics and Management, North China Electric Power University, 2 Beinong Road, Beijing 102206, China
Jingye Yuan: Department of Technological Economics and Management, Guangxi University, 100 University Road, Nanning 530004, Guangxi, China
Jieting Yin: School of Economics and Management, North China Electric Power University, 2 Beinong Road, Beijing 102206, China
Dalia Streimikiene: Lithuanian Institute of Agrarian Economics, Kudirkos Str. 18-2, LT-03105 Vilnius, Lithuania

Energies, 2017, vol. 10, issue 9, 1-19

Abstract: This paper proposes the network data envelopment analysis (DEA) model accounting for negative externalities and applies it for decomposition of profit inefficiency in the biomass-agriculture circular system (Bio-AG system). A circular structure of the Bio-AG system which is different from the previously applied network structures is assumed. Since the negative externalities (i.e., pollutant emissions from the biomass industry) occur in the Bio-AG system, the property rights are taken into consideration to model the externalities-adjusted profits. Therefore, the changes in profits due to changes in the property rights (assuming no property rights, allocating property rights to agricultural sector, and allocating property rights to biomass power generation sector) are quantified. Further, the decomposition shows that the biomass power generation sector is less affected by technical inefficiency if contrasted to allocative inefficiency in terms of the profit loss. The findings suggest that the biomass power generation technology influences the profits of the biomass industry. What is more, the inefficient allocation of resources is now the key factor undermining performance of the biomass industry. Therefore, the government should adopt measures to improve the allocation of resources and prevent excessive investments or development of less efficient technologies.

Keywords: data envelopment analysis; biomass industry; negative externalities; efficiency decomposition (search for similar items in EconPapers)
JEL-codes: Q Q0 Q4 Q40 Q41 Q42 Q43 Q47 Q48 Q49 (search for similar items in EconPapers)
Date: 2017
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