Modified Distance Friction Minimization Model with Undesirable Output: An Application to the Environmental Efficiency of China’s Regional Industry

China’s economy has experienced rapid development in the last several decades. However, environmental problems emerge along with the fast economic growth. Industrial pollutions and wastes have attracted much concern from the government and the public. In this paper, we propose a modified distance friction minimization model with undesirable outputs to evaluate the environmental efficiency of China’s regional industry from 2011 to 2015. We then provide benchmarking targets for inefficient regions. Our approach can not only analyze the internal factors of the poorly performing regions but also set the benchmarking targets in which the inefficient regions need the least effort to be efficient. The analysis results indicate that the developed regions perform better than the developing ones. In particular, the regions that have always been efficient from 2011 to 2015 are all developed ones to our knowledge. Moreover, the gap in environmental performance tends to extend between developed and developing areas every year. We suggest that the Chinese government should formulate and perfect relative regulations and laws on environmental protection and take measures to reduce the unbalanced trend of its regional industry.