The waste treatment and recycling efficiency of industrial waste processing based on two-stage data envelopment analysis with undesirable inputs

Highlights

• We propose a new two-stage data envelopment analysis model with undesirable input.

• Three reuse and recycle related economic development modes are identified.

• Environmental policy should follow regional/national economic development mode.

• Industrial waste processing integrated efficiency is low.

• The efficiency of PDS is higher and contribute more than RRS.

Abstract

Achieving a resource-conserving and environment friendly supply chain while pursuing economic development has always been the goal of countries across the world. As an emerging industrial nation, China is battling serious environmental problems. While there have been efforts to address waste processing, researchers are now interested in gauging the efficiency of waste treatment policies. We built a two-stage data envelopment analysis model with undesirable input to assess the efficiency of recycle treating and industrial waste reuse, including wastewater, waste gas and solid wastes in China. Our model is based on a circular economy structure that proposed by Environmental Protection Institute of China. The proposed method can serve as evaluation tool for the government policy in China as well as other emerging economy. We collected the data during the critical environmental policy enforcement period: the 11th five-year plan (from 2006 to 2010). We also analyze the waste treatment efficacy for the solid waste in the 11th and 12th five-year plan period (from 2011 to 2015). In contrast to earlier studies that have mainly focused on pollution disposal efficiency, this work takes both pollution and resource attributes of waste into consideration. The results revealed that integrated efficiency of industrial waste processing system was stable over five years. It also showed that efficiency at the pollution disposal stage was higher than that at the resources reuse stage, and contributed more to overall efficiency. We also find that the efficiency of the pollution and disposal of the solid waste improved during the 11th and 12th five-year plan. Further, the study reveal that the pollution disposal stage shows a similar trend as the integrated system, while the resources reuse stage does not. Finally, it also displays that there are three efficient development modes, namely, balanced, ecosystem, and coordinate development modes. In discussion, we provide benchmarks from developed countries for different development mode. We also point out other emerging countries that can benefit from our research by identifying their development mode and formulating their environmental policy based on these benchmarks in the future.

Introduction

Environmental problems have been a critical issue for governments worldwide, as both developed and emerging countries are facing severe pollution disposal and resources conservation problems caused by industrialization, growing population, and limited resources, among others. International regulations and laws such as the Kyoto Protocol (1997) on Carbon Emission was enacted at 1997 and scheduled to be due at 2012, is now replaced by the Paris Agreement, which was enacted to address carbon emissions, resource conservation, and other environmental problems (Du et al., 2016). The Paris Agreement, passed in the United Nations Climate Change Conference in 2015 will be due in 2020, focusing on the environmental problems of developing countries and governmental policies addressing these environmental problems. As a result, countries followed and designed their own environmental policies based on the concept of a circular economy, such as the carbon tax scheme in New Zealand and the 11th five-year plan on the facility construction of urban waste harmless disposal in China. However, emerging industrial countries, for example China, are still striving to control their environmental problems, such as heavily polluted air (Xinhua news, 2018) and carbon emissions (Xinhua news, 2017). One of the reasons is that the government lacks a proper method to evaluate the efficiency of environmental policies. In this study, we aim to address how to evaluate environmental performance. To this end, we implement a two-stage data development analysis (DEA) and integrate the undesired input to construct a new model for evaluating the efficiencies of both waste disposal and resource-reuse stages.

Over the past decades, China has achieved remarkable economic and social development. However, the rapid industrialization caused problems such as climate change (e.g., greenhouse gas emissions from landfills), disturbed ecosystems (e.g., biodiversity loss caused by heavy metal and poisonous material), and natural resource shortage (Albores et al., 2016). To accommodate the need for industrialization, as well as address the increasing environmental pollution problems, the Chinese government integrated the concept of circular economy (Pearce and Turner, 1990) in designing its national development strategy (Li et al., 2010). From the perspective of the circular economy, resource utilization efficiency and pollution disposal are two interdependent factors. At the production stage, environmental efficiency is set to achieve maximum resource utilization with minimum pollution (Mardani et al., 2016; Chen et al., 2017). The recycle and reuse process, a key feature of the circular economy, solves both pollution and resource conservation problems through reutilizing industrial waste (Shi et al., 2010; Tambo et al., 2016).

In research filed of environmental protection, there is another popular research field complementing the circular economy: the sustainable supply chains, which aim at maximizing resource utilization and reducing the negative impact of production activities on the environment in the long run. Sustainable supply chains are included in two main research streams: multi-level supply chain for resource conservation and the supply chain incorporating the idea of industrial symbiosis for environmental protection. Most studies on multi-level supply chains focus on maximizing the efficiency of the production process and minimizing waste by optimizing stockpile and period length (Gharaei and Pasandideh, 2017a), replenishments period and quantities (Gharaei et al., 2019), and/or order quantity with shortage conditions (Gharaei et al., 2017b), among others. By contrast, industrial symbiosis (Chertow, 2000), aiming at zero waste, is defined as the physical exchange of materials, energy, water, and/or by-products, providing knowledge on innovation and networks to share among the entities in a supply chain. Over the past two decades, industrial symbiosis developed from a curiosity to a practical business strategy with application in various fields, such as eco-industrial parks, industrial recycling networks, and industrial ecosystems (Zhe et al., 2016). Under the framework of industrial symbiosis, byproducts (wastes) are completely recovered and/or repurposed, thus industrial wastes are excluded from the system. Because of the restrictions on advanced technologies, facilities, and management skills, wastes could not be completely exchanged in reality. As such, our study focuses on industrial waste processing management to achieve a circular economy, which is the central development goal of China (Hu et al., 2018).

Regarding the circular economy, the literature had extensively dealt with the evaluation of production efficiency, while the evaluation of recycle and reuse process efficiency is still in its early stages. Giving the increasing concerns over waste processing management, the government and scholars are still working on developing a system to measure the performance of waste processing (Awasthi and Li, 2017). A well-designed measure to monitor waste processing efficiency should not only evaluate the performance of different regions and set appropriate targets for them, but also provide reference to the government to formulate better regulations and policies. Environmental laws and regulations (e.g., taxes, subsidy, and emission standards) in China mainly aim at pollution, waste, and resources concerns from the perspective of the circular economy (McDowall et al., 2017). Facing rapidly increasing environmental pollution, the government of China specifically addresses these environmental issues in the 11th five-year plan (Sun, 2012). During its period, ecological civilization was issued as a national strategy to replace the industrial capital-oriented economic mode since 2007 (Wen et al., 2014). The Circular Economy Promotion Law (CEPL) of the People's Republic of China, enacted in 2008, was the first national-level law on environmental issues worldwide (Hu et al., 2018). Specifically, article 3 in CEPL is the law of prevention and control of environmental pollution by solid wastes. There are also regulations, for example, on the recovery and disposal of electrical and electronic waste, including waste treatment funds, a government development plan, and centralized disposal fields (Li and Yu, 2011).

While efforts have been made, it is still difficult to evaluate the efficiency of those solutions enforced by governments because of the imperfect method (Sueyoshi and Goto, 2019), short implementation period, and lack of instant data, among others. Even if resource utilization efficiency is maximized and pollution minimized, pollution (i.e., industrial wastes) disposal is inevitable. Different from most studies only evaluating waste disposal efficiency or the reverse chain as a whole without exploring the inner-structure, the proposed method aims to assess the efficiency of industrial waste processing system, as well as the decomposition efficiency of the pollution disposal sub-system and the recycle and reuse sub-system.

First proposed by Charnes et al. (1978), DEA is a popular method for evaluating the efficacy of environmental-related systems (Li et al., 2019; Rogge and De Jaeger, 2012). As a non-parametric statistical method, it can analyze the efficiency of multi-input and multi-output systems. One of the most important features of DEA model is obtaining data efficiency objectively from a real system and identifying managerial insights. However, the traditional DEA model mainly evaluates the production process, while the efficiency of waste disposal and resource reuse stages are not considered. After around 40 years of development (Emrouznejad and Yang, 2018), an important two-stage DEA model that addresses efficiency evaluation for a system, as well as its inner-structure, was introduced by Seiford and Zhu (1999). The aforementioned waste processing system is unique, having undesired input: industrial wastes. Industrial wastes represent a variable with a negative effect on the total output value of the process (Färe and Grosskopf, 2004). Recently, Wu et al. (2015b) and Sasao (2016) studied the evaluation methods of pollution disposal systems. Wu et al. (2014) evaluated the efficiency of the circular economy concerning resource utilization, environment, and pollution disposal. There are few papers on efficiency pertaining to reusing waste after the pollution disposal process (Wu et al., 2015a; Wen, 2017). In most previous studies, the authors mainly consider pollution as an undesirable or intermediate output of the manufacturing stage. In the waste processing system, or the reverse manufacturing stage, we consider the waste treatment system, the resource reuse system, and industrial wastes are undesirable inputs. In our two-stage DEA model, the performances of both the integrated and decomposition efficiencies of industrial wastes processing system are evaluated.

Considering the attributes (pollution and resources) of wastes, we evaluated the efficiency of industrial waste processing across 30 regions in Mainland China during the 11th five-year plan (2006–2010). The 11th five-year plan is a Chinese government economic development plan, with various policies enforced to reduce pollution and increase resource conservation. Thus, by studying the waste treatment efficiency of China over the period of the 11th five-year plan, we were able to obtain valuable information on how the government's environmental policies impact the waste processing system in China. We evaluated the efficiency of the overall waste processing management, and decomposed efficiencies into the pollution disposal stage (PDS) and resource reuse stage (RRS) using the two-stage DEA model. Based on efficiency analysis and local industrial development, we found three types of development modes within China namely, coordinated, balanced, and ecological. The balanced development mode represents the region whose economic development is more even among regions; thus, the environmental goal should be similar within the region. Coordinated development represents the case that several PRs with distinct competitive advantage and/or natural resource work together. As such, the environmental goal of each provincial region should be different. The ecological development mode has its own set of environmental goal and related policies. Therefore, a regionalized target and/or environment policy might further improve recycle and reuse efficiency. We believe that the three development modes in China can serve as benchmarks for other emerging countries in implementing their national or regional environmental policies to address their waste treatment problems accordingly. For example, Thailand's economy mainly consists of small and medium enterprises and natural resources are more evenly distributed across the country. Therefore, when the government of Thailand designs their environmental policy, they can first examine the waste treatment development in the balanced development mode.

To the best of our knowledge, this paper is the one of the few that focuses on the efficiency evaluation of waste disposal and resource reuse stages simultaneously. Our results can help other emerging economies in identifying their development modes and selecting suitable environmental policy benchmarks. From the theoretical modeling aspect, we contribute to the literature by developing a two-stage DEA model that considers undesired inputs and applying it to the industrial waste processing performance evaluation of the 11th five-year plan period (2006–2010) and the solid waste treatment during both the 11th and 12th five-year plans (2011–2015) in China.

The structure of the rest of the paper is as follows. In Section 2, a two-stage DEA model with undesirable inputs is built based on the proposed framework and methodology. In Section 3, data and variables are presented, based on the official National Bureau of Statistics of China, from which the overall efficiency, pollution disposal efficiency, and resources reuse efficiency are measured using the proposed model. Section 3 also presents a detailed discussion of the measured efficiency scores, research limitations, and future research directions. In the final section, we highlight our contributions and policy implications.