Efficiency evolution of coal-fired electricity generation in China, 1999-2007 Han Tai Wu Department of Business Intelligence, HEC Montreal, Montreal, Canada, and Pierre-Olivier Pineau and Gilles Caporossi Department of Management Sciences, HEC Montre ´al, Montreal, Canada Abstract Purpose – The paper seeks to evaluate the changes in efficiency and productivity of coal-fired electricity generation of 30 Chinese administrative regions from 1999 to 2007. Design/methodology/approach – The paper incorporates data envelopment analysis with the Malmquist index to study the progress made in this sector. The model considers both economic and environmental factors by including the variables fuel consumption, labor, capital, sulfur dioxide emissions and electricity generated. A second model is constructed without the variable sulfur dioxide emissions to evaluate economic performances without taking environmental measures into consideration. Findings – By comparing the two models, the paper identified provinces that favored economic performance over environmental performance, or vice versa. Also, it showed that the more efficient provinces tend to manage both economic and environmental efficiencies equally well, while the reverse is true for the least efficient provinces. The average total factor productivity growth in coal-fired electricity generation of all provinces was 3.96 per cent for 1999-2007, and this growth is mainly attributed to technological change. In addition, it found that the Eastern provinces are the most efficient and productive of the group. Research limitations/implications – In the absence of provincial coal quality data, a key efficiency factor is missing from the analysis. Practical implications – Efficiency improvement efforts in the Chinese generation sector should target the least efficient provinces identified in this paper. Practices in the most efficient provinces should be further investigated to be replicated when possible. Originality/value – The paper provides a contemporary overview of Chinese provincial efficiency and productivity measures for policy makers and investors to improve China’s coal-fired electricity generation sector. Keywords Energy industry, Fossil fuels, Thermal efficiency, Emission, Coal, China Paper type Research paper 1. Introduction China’s demand for electricity can be expected to increase with its industrialization process, which grew at an unparalleled speed with approximately 10 per cent gross domestic product (GDP) growth for almost three decades. Coal-fired electricity generation, China’s primary energy source by a large margin, will likely continue to be the key to sustaining the Chinese economy (IEA, 2007). However, despite the benefits of coal-fired electricity generation, pollution from coal burning is a threat to both the environment and public health (IEA, 2009). Thus, both economic and environmental efficiencies of coal-fired electricity generation need to be taken seriously by China, as well as the world (Lin et al., 2008). The current issue and full text archive of this journal is available at www.emeraldinsight.com/1750-6220.htm IJESM 4,3 316 Received 10 August 2009 Revised 12 February 2010 Accepted 27 April 2010 International Journal of Energy Sector Management Vol. 4 No. 3, 2010 pp. 316-336 q Emerald Group Publishing Limited 1750-6220 DOI 10.1108/17506221011073824