This study proposes a decomposition approach based upon data envelopment analysis that identifies various sources of CO2 emission. In addition to the previously identified seven sources, we propose three new ones. As an empirical application, this study applies the proposed approach to examine ten sources of CO2 emission across Chinese provinces from 2008 to 2015. In the empirical study, we overcome methodological difficulties related to (a) what methodological merits of technology change indexes are and how to measure them in a separated manner and (b) how to separate effects of various sources and how to identify the annual shift of those sources of CO2 emission changes. This study finds three empirical implications. First, three sources may increase the amount of CO2 emission. They include an economic activity, a technology change on a desirable output and a potential energy intensity change. Second, two sources are important in reducing the amount of CO2 emission. They are an operational efficiency change on a desirable output and a change in energy saving technology. Finally, conflicting results exist in some sources in the manner that they increase CO2 emission in some provinces but decrease it in the other provinces.

Introduction

China has experienced rapid economic growth and consequently it has drastically increased the Carbon Dioxide (CO2) emission. According to National Bureau of Statistics of China (2018), China’s Gross Domestic Product (GDP) reached 82,712.17 billion RMB (i.e. China’s currency unit) in 2017, which was 1.67 times higher than 2010 and 4.54 times of the amount in 2000. The average annual economic growth rates were 10.34% from 2000 to 2009 and 7.95% from 2010 to 2017. Along with the rapid economic growth, China has increased the amount of CO2 emission. For example, British Petroleum (BP, 2018) has reported that China’s CO2 emission has increased from 3352.7 million tons in 2000 to 9123.0 million tons in 2016. The share of China’s CO2 emission has also increased in the world total. For example, the share increased from 13.97% in 2000 to 27.29% in 2016. Under such a situation, it has attracted great policy attention on how to reduce the emission amount. Along with the increase, China faces a growing international pressure to reduce the amount of CO2 emission. The Chinese government has pledged to control the amount. According to State Council (2015), the target was to reduce the CO2 emission by 2030. Under the policy direction, a top priority for the Chinese government is to set the target on CO2 emission. In following the direction, this study is concerned with identifying potential sources which influence China’s CO2 emission changes at a provincial level.