A coin has two sides: Which one is driving China’s green TFP growth?

Abstract We investigate the components of China’s green total factor productivity (TFP) growth from two different perspectives—that of technology contribution and that of factors contribution—using a non-parametric production frontier approach. For this purpose, we develop a biennial non-radial directional distance function measure (BNDDM) by combining biennial environmental technology and the non-radial directional distance function. This new approach can overcome the well-known infeasibility problem and incorporate the total slacks of variables. We further extend BNDDM in a dynamic perspective to propose a BNDDM-based Luenberger productivity indicator that is capable of measuring green TFP growth. Then, we explore the drivers of China’s green TFP based on the proposed methodology from 1999 to 2012. The empirical results are as follows: first, China’s green TFP improves by 2.02% annually, although this improvement has recently slowed. Second, technological progress is the main driver of green TFP from the technology-contribution view; reductions in COD and SO 2 , as well as labor saving, are the main drivers from the factor-contribution view. Third, China suffers from two kinds of “double deterioration”: the deterioration of efficiency and the scale effect as well as that of harmony in both traditional and green TFP among the three regions.