3.1.2. Inputs Energy input should be considered as important as capital and labor. In the light of the majority of literature, this paper takes the number of employees every year as labor input and the energy consumption as energy input in subindustries, both of which can be inquired product info from NBSC [18]. Capital stock is one of the most important inputs, but NBSC does not provide details of the capital stock data; therefore, capital stock data need to be estimated. This paper estimates industry capital stock data with the method of perpetual inventory. Obviously, the calculation of capital stock of each year should be based on the capital stock of base year, depreciation rate, and constant price of investment. Following Chen’s method [15], this study gets capital stock of 1980 as capital stock of the base year.

The depreciation rates of subindustry are estimated with the data of depreciation value and fixed assets value from Chinese Statistical Yearbook and Chinese Industry Economy Statistical Yearbook published by NBSC [23]. This paper constructs the investment sequence data based on the difference of fixed assets and then converts them to constant price of 1990 by the investment price index of each year. After that, with the perpetual inventory method, capital stock data of various subindustries are calculated over the period from 1999 to 2009. 3.2. Environmental Efficiency and Its Components Based on SBM directional distance function and Luenberger productivity index, this paper measures the environmental efficiency and environmental TFP by the software package Excel Solver Prem Platform V5.

5 which is widely used in the present study. Environmental inefficiency values of every subindustry under the assumption of CRS and VRS are Drug_discovery measured, respectively, and the results are given in Table 1.Table 1Environmental inefficiency and its components of China’s industry. Since the environmental efficiency value under VRS assumption does not consider scale efficiency, the value under VRS assumption must be lower than CRS assumption, which is confirmed in Table 1. Under CRS assumption industrial production is in the conditions of optimal scale. However, many factors such as imperfect competition and externality may lead to nonoptimal scale. Therefore, when the value under CRS assumption is different from that under VRS assumption, the task is to analyze the efficiency under VRS assumption [24]. This study will focus on the analysis of environmental efficiency and its components under VRS assumption. The total value of environmental inefficiency of China’s industry is 60.8%. The main source of environmental inefficiency is the inefficiency of gross industrial output value (14.