CO2 Reduction Potential from Efficiency Improvements in China's Coal-Fired Thermal Power Generation: A Combined Approach of Metafrontier DEA and LMDI

Among the G20 countries, China is the only country to experience an increase in electricity generation from coal-fired thermal power plants from 2019 to 2020. This study aims to develop an analytical framework combining metafrontier data envelopment analysis with the logarithmic mean Divisia index for a detailed decomposition analysis of 'mass-based' energy-related CO2 reduction potential through efficiency improvements in coal-fired thermal power plants in China. The results show that inefficiency in power generation can be largely attributed to differences in the location of power plants and the production scale. Moreover, the impact of regional heterogeneity on the changes in power generation efficiency is more notable for the small-medium power plants in the northeast region than the large power plants in the western region in China. However, when focusing on the mass-based CO2 reduction potential associated with the regional heterogeneity, its positive effects in the western region for the large power plants are 6.2 times larger than that in the northeast region for the small-medium power plants. These results imply that an analysis that focuses only on the efficiency score would ignore the production scale of coal-fired thermal power plants and thus would fail to properly evaluate the environmental impacts associated with efficiency changes.

Automated summary

China is the only G20 country that experienced an increase in coal-fired thermal power generation. This study finds that the inefficiency of power generation can be attributed to the location and production scale of power plants. The regional heterogeneity has a greater impact on the efficiency of small-medium power plants in the northeast region compared to large power plants in the western region. However, when considering the mass-based CO2 reduction potential, the positive effects in the western region for large power plants are 6.2 times larger than that in the northeast region for small-medium power plants. Therefore, an analysis focusing only on efficiency score would overlook the production scale and fail to properly evaluate the environmental impacts associated with efficiency changes.