| The contradiction between energy, environment and economy has increased with the rapid rise of China’s economy. Chinese government has formulated a series of requirements for energy conservation and pollution reduction in main industries and areas. Therefore, industrial businesses have to make change to be resource-saving and environment-friendly. Sugar manufacturing industry is an agro-industry with high energy consumption and heavy pollution. Subject to the supply of raw material, most sugar firms are located nearby the sugarcane plantation area in underdeveloped regions in China. In order to solve the environmental problems in sugar manufacturing industry, Chinese government and main sugar-producing provinces have put forward strict emission standards for sugar manufacturing industry, which will influence the development of sugar industry.The production process of a firm is an open system, with significant externalities. Therefore, it is very important to build a framework covering energy, environment and production to re-assess the economic efficiency of firms. In this paper, we firstly measure the energy efficiency of sugar firms to analyze the energy-saving space in China’s sugar manufacturing industry. Secondly, we estimate the economic efficiency of sugar firms considering energy consumption and pollution emission by internalizing external costs. The result verifies the differences between environmental efficiency and traditional efficiency. Thirdly, we calculate the shadow prices of three water pollutants of sugar firms and make a comparison with the existing charge fee. Finally, we analyze the impact of environmental regulation on the competitiveness of China’s sugar industry. Besides, we explore the determinants of economic efficiency and abatement cost from the perspective of firms’internal factors. The study is based on the data of sugar firms in Guangxi Zhuang Autonomous Regions from 2002/2003 crushing season to 2012/2013 crushing season by using Data Envelop Analysis, Heteroskedastic Fractional Probit Estimation, Directional Distance Function and Panel Data Threshold model. The main conclusions are as follows.First, the energy efficiency of sugar manufacturing industry has increased. And the energy efficiency shows different trends in different areas, ownership structures and sizes. Besides, private ownership, large size, increase of raw material and total recovery rate can improve energy efficiency significantly. Second, emission reduction is still the main task for the sustainable development of sugar manufacturing industry. The excessive discharge of chemical oxygen demand (COD), five-day biochemical oxygen demand (BOD5) and suspended solids (SS) are the main sources of environmental inefficiency in sugar manufacturing industry. When considering the pollutant emission, we find that the environmental technical efficiency and environmental total-factor productivity (TFP) in sugar manufacturing industry are smaller than traditional technical efficiency and traditional TFP. The decrease of environmental TFP is mainly due to the decline in technological scale change rate and technical regress. From the perspective of ownership, state-owned sugar firms perform better than non-state-owned sugar firms in environmental TFP. The environmental TFP of state-owned and non-state-owned sugar firms are approaching their steady state. And the gap between state-owned and non-state-owned sugar firms will last for a long time.Third, the average marginal abatement costs of COD, BOD5 and SS in sugar manufacturing industry are 53,090 Yuan/ton,72710 Yuan/ton and 5980 Yuan/ton respectively, which are distinctly higher than the price of existing discharge fee. In addition, there are quite different abatement costs of three pollutants in northern, southern and central area. Large size and strict environmental regulation will help reduce the marginal abatement cost of sugar mills. However, when environmental regulation becomes more stringent, the marginal abatement costs of COD and SS will increase, while the marginal abatement cost of BOD5 is constant.Fourth, there are obvious threshold effect between environmental regulation and the economic efficiency of sugar manufacturing industry. We choose environmental technical efficiency as the index of economic efficiency, regulation index and water conservation index as the indices of environmental regulation. The result shows that as the decrease of regulation index, indicating the increase of environmental compliance, the environmental technical efficiency declines. There is no "win-win" relationship between regulation index and environmental technical efficiency. The relationship between water conservation index and environmental technical efficiency is inverted U-shaped. When water conservation index decreases from 3.125 to 0.2323, environmental technical efficiency will increase. This is a "win-win" situation. However, if water conservation index is less than 0.2323, the environmental technical efficiency will decline with the decrease of water conservation index. Moreover, improving sugar firm’s endowment structure (capital-labor ratio) and sucrose content of sugarcane can enhance environmental technical efficiency significantly. Compared with non-state-owned sugar firms, state-owned ownership can improve environmental technical efficiency.
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