Coastal skyline blending urban development with marine ecosystem, symbolizing sustainable economic growth.

Is China's Coastal Economy Sustainable? Unveiling the Environmental Performance Index

Soraya Malik in Climate & Environment December 2025 • 5 min read.

"A deep dive into how China is balancing economic growth in its coastal regions with environmental protection, using the Environmental Performance Index (EPI) to measure progress."

As coastal resources become increasingly vital to economic growth, the rise in marine pollution poses a significant threat to the sustainable development of China's marine economy. Achieving a balance between quality and efficiency has become an essential requirement. Therefore, it is important to fine-tune the country's marine economy development strategy. This requires comprehensive evaluations of the economic efficiency of marine activities to identify the development level and existing issues in coastal areas. The goal is to provide a basis for informed decision-making and guide coastal economies toward a healthier growth trajectory.

The concept of "environmental performance" has gained traction in recent years, offering policymakers and analysts a way to condense complex information into an aggregated Environmental Performance Index (EPI). This approach helps in assessing the environmental impact of economic activities and guiding sustainable practices.

From an operations research perspective, existing techniques for constructing aggregated EPIs fall into two main categories: indirect and direct approaches. The indirect approach identifies key economic and environmental sub-indicators, normalizes them, and integrates them into an overall index using weighting and aggregation techniques. Conversely, the direct approach obtains an aggregated EPI directly from observed input and output quantities using Data Envelopment Analysis (DEA), a non-parametric method.

Decoding the Environmental Performance Index (EPI) for Marine Economies

Coastal skyline blending urban development with marine ecosystem, symbolizing sustainable economic growth.

To accurately guide decision-making, predictive models must be both precise and resilient to changes in distribution. In this study, we first employed the classical CCR model (output-oriented) in data envelopment analysis, focusing solely on desirable production outputs without considering the harmful effects on the environment.

Subsequently, we developed an alternative model where a decision-making unit is considered efficient when it maximizes desirable production while minimizing environmental damage. By-products generated alongside desirable outputs, such as sewage, are classified as undesirable outputs. It is imperative to recognize that desirable and undesirable outputs occur simultaneously, necessitating improvements in opposite directions: maximizing desirable outputs while minimizing undesirable ones. Although traditional DEA models have made strides in addressing different outputs, there remains ample room for improvement.

CCR Model: Focuses on maximizing desirable outputs without considering environmental impacts.
SBM Model: Incorporates both desirable and undesirable outputs to provide a more balanced assessment of efficiency.
UOM Model: An output-oriented model tailored for assessing undesirable outputs in the context of China's marine economy.

To better account for economic and environmental performance, this paper adopts a slack-based measure (SBM) of efficiency within data envelopment analysis. This constructs a comprehensive efficiency evaluation index by maximizing input and output slack variables. The SBM is an efficiency evaluation model grounded in DEA theory, introduced by Tone (2001), which considers undesirable outputs alongside desirable ones. Unlike traditional input-oriented or output-oriented DEA models, SBM integrates both orientations into a single model to improve all possible variables in the objective function, resulting in a value between 0 and 1 for efficiency measurement. The SBM efficiency value remains unaffected by the units of input and output, decreasing monotonically with each input and output slack. Consequently, larger slack variables indicate smaller SBM efficiency. Building on this foundation, an output-oriented model for undesirable outputs (UOM) was developed to suit China's marine economy.

Balancing Act: Economic Growth and Environmental Responsibility

The study underscores the intricate relationship between economic expansion and ecological stewardship in China's coastal regions. By employing models that account for both desirable and undesirable outputs, it becomes evident that true sustainability hinges on minimizing environmental harm while maximizing economic benefits. This research serves as a valuable tool for policymakers and stakeholders, guiding them toward more informed decisions that foster a healthier and more resilient marine economy. It emphasizes the importance of stringent waste water treatment standards, particularly in areas with lower economic efficiency, to achieve a harmonious balance between economic prosperity and environmental protection.

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This article is based on research published under:

DOI-LINK: https://doi.org/10.48550/arXiv.2408.05652,

Title: Evaluation To Chinese Marine Economy In The Coastal Areas

Subject: econ.gn q-fin.ec

Authors: Yi Zheng

Published: 10-08-2024

Everything You Need To Know

What is the Environmental Performance Index (EPI) and why is it important in assessing China's coastal economy?

The Environmental Performance Index (EPI) serves as a crucial tool for evaluating the environmental impact of economic activities, particularly in China's coastal regions. It condenses complex environmental data into an aggregated index, offering policymakers and analysts a simplified way to assess progress and guide sustainable practices. It's important because coastal resources are vital for economic growth, but they face threats from pollution. The EPI helps balance economic development with environmental protection by measuring and improving marine economic practices, ensuring a healthier growth trajectory for coastal economies.

How does the study use Data Envelopment Analysis (DEA) to assess the performance of China's marine economy, and what are the key models employed?

The study utilizes Data Envelopment Analysis (DEA), a non-parametric method, to evaluate the efficiency of China's marine economy. This approach helps assess how well economic activities perform while minimizing environmental damage. The study employs several models: the classical CCR model, which focuses on maximizing desirable outputs without considering environmental impacts; the SBM Model (Slack-Based Measure), which integrates both desirable and undesirable outputs, like sewage, to provide a balanced assessment; and the UOM Model (Output-Oriented Model), specifically designed for assessing undesirable outputs in the context of China's marine economy. These models help create a comprehensive efficiency evaluation index, providing valuable insights for policymakers.

What is the difference between the CCR and SBM models within the context of this analysis?

The CCR model, used in the initial stage of this study, focuses solely on maximizing desirable production outputs without accounting for environmental impacts. This means it does not consider any harmful effects on the environment. On the other hand, the SBM (Slack-Based Measure) model is designed to be more comprehensive. It incorporates both desirable outputs (like economic production) and undesirable outputs (like sewage), providing a more holistic assessment of efficiency. The SBM model, by considering both types of outputs, offers a more realistic and balanced view of the marine economy's performance.

In what ways does the study address the issue of 'undesirable outputs' within the framework of China's marine economy, and why is this important?

The study addresses 'undesirable outputs' by classifying by-products like sewage as environmental damage that should be minimized. The SBM and UOM models are particularly relevant here. The SBM model integrates undesirable outputs alongside desirable ones, providing a more comprehensive efficiency evaluation. The UOM model, an output-oriented model, is tailored to assessing these undesirable outputs in the context of China's marine economy. Recognizing and mitigating these undesirable outputs is crucial for true sustainability, as it ensures economic benefits are maximized while minimizing environmental harm. This approach guides decision-makers towards more informed choices that foster a healthier and more resilient marine economy.

What are the implications of the research findings for policymakers aiming to balance economic growth and environmental protection in China's coastal regions?

The research underscores the intricate relationship between economic expansion and ecological stewardship in China's coastal regions. It highlights that true sustainability depends on minimizing environmental harm while maximizing economic benefits. Policymakers are guided towards more informed decisions through the study's use of models that account for both desirable and undesirable outputs. The research emphasizes the need for stringent wastewater treatment standards, especially in areas with lower economic efficiency, to strike a balance between economic prosperity and environmental protection. The findings provide a basis for guiding coastal economies toward a healthier growth trajectory, ensuring both economic progress and environmental sustainability are achieved.