Sustainability, Vol. 11, Pages 461: Measuring Environmental Efficiency through the Lens of Technology Heterogeneity: A Comparative Study between China and the G20 (Sustainability)

Drawing on a perspective of technology heterogeneity, this study advances the analytical framework for evaluation of environmental efficiency (EE) across diverse economies. To improve the continuity and robustness of efficiency estimation, we construct a Hybrid Malmquist–Luenberger index under the meta-frontier (MHML) technique to allow a dynamic evaluation of environmental efficiency and to probe the underlying sources of inefficiency. Decomposition of the MHML index into component factors of efficiency change (EC), Best Practice Change (BPC) and Technological Gap Change (TPC) allows an improved understanding of causality and enhanced guidance for decision-making units (DMUs). Empirical tests based on panel data of the Group 20 countries spanning 2000–2014 reveal an upward improving trend in environmental efficiency but is also characterized by notable evidence of technological heterogeneity. Whereas technical progress was the main cause of environmental efficiency improvements in the G20 countries, for the BRICS (i.e., Brazil, Russia, India, China, South Africa), economic growth rates played a more significant in contrast to the role of technical change and allocation efficiency. The lagging growth rates of environmental efficiency for the G20 countries compared to the BRICS is a reflection of the fact that room for optimization in G20 countries was not as high as it was for BRICS and, China, in particular. China has been catching up with frontier technology whereas developing countries were shifting away from benchmark technology frontier. The developed economies remain the best performers and leaders in environmental technology. However, the BRICS countries, represented by China, remain on an upward trajectory of improvements’ in EE with gains from managerial sufficiency and technological advancement. The MHML index developed here provides a robust quantitative measure for policy interventions to support overall national environmental performance. Context-specific suggestions are proposed to foster efficiency gains and green transition for Chinese development scenarios against best performing economies.