Effects of Vertical Unbundling on the Operational and Environmental Efficiency of Chinese Thermal Power Firms

Renjie Yu, Peng Yuan (), Fandi Yang and Gongxiong Jiang
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Renjie Yu: Institute of Western China Economic Research, Southwestern University of Finance and Economics, 555 Liutai Avenue, Chengdu 611130, China
Peng Yuan: Institute of Western China Economic Research, Southwestern University of Finance and Economics, 555 Liutai Avenue, Chengdu 611130, China
Fandi Yang: Institute of Western China Economic Research, Southwestern University of Finance and Economics, 555 Liutai Avenue, Chengdu 611130, China
Gongxiong Jiang: Institute of Western China Economic Research, Southwestern University of Finance and Economics, 555 Liutai Avenue, Chengdu 611130, China

Energies, 2023, vol. 16, issue 21, 1-22

Abstract: Since the 1980s, many electricity markets around the world have undergone restructuring aimed at improving efficiency. In 2002, the Chinese government also introduced a vertical unbundling reform to dismantle vertical monopolies and boost efficiency in the power sector. This study estimates the unified, operational, and environmental efficiency to comprehensively assess the impact of China’s vertical unbundling on the production performance of thermal power firms. A non-radial data envelopment analysis (DEA) approach is employed to measure these efficiencies. Subsequently, a difference-in-difference model is used to assess the reform’s effects. Empirical results show that the vertical unbundling improved the unified efficiency of firms. Further analysis indicates that the reform improved the operational efficiency of firms by increasing their capacity utilization and coal quality. Additionally, we find that the reform led to an increased utilization of source control technologies but resulted in a reduction in the use of end-of-pipe treatments. Due to the opposing effects on different pollution treatment stages, the reform did not have a significant impact on environmental efficiency.

Keywords: vertical unbundling; operational efficiency; environmental efficiency; non-radial data envelopment analysis (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: 2023
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