This paper proposes a centralized data envelopment analysis (DEA) model for industrial optimization based on several different production technologies among several regions. We developed this model based on improved Kuosmanen environmental DEA technology, which avoids positive shadow price on undesirable outputs. We also designed a dual model for our centralized DEA model, and used it to analyze shadow prices on CO₂ emissions. We further employed the proposed model to determine the optimal path for controlling CO₂ emissions at the sector level for each province in China. At sectoral level, manufacturing showed the highest potential emissions reduction, and transportation was the largest accepter of emission quotas. At regional level, western and northeastern areas faced the largest adjustments in allowable emissions, while central and eastern areas required the least amount of adjustment. Because our model represents increase or decrease in emissions bidirectionally in terms of shadow price analysis, this setting makes the shadow price on CO₂ emissions lower than strong regulation (decreasing CO₂ emissions along with increasing value added) used by directional distance function (DDF).

This paper examines how local firm entry affects air pollution and whether the Air Pollution Prevention and Control Action Plan (APPCAP) changes this relationship. Using a county–month panel for 2010–2020, we match the Chinese Industrial and Commercial Enterprise Registration Database with county-level monthly PM2.5 data to measure new firm entry and its sectoral composition. To address the potential endogeneity of firm entry, we use the opening of high-speed rail as an instrumental variable. The results show that firm entry significantly increases county-level PM2.5 concentrations. This effect is highly heterogeneous across industries, with stronger pollution effects in sectors such as wholesale and retail, manufacturing, and accommodation and catering. We further find that the APPCAP significantly weakens the positive effect of firm entry on air pollution. Additional evidence suggests that the policy improves air quality not only by tightening environmental constraints, but also by shifting firm entry toward relatively cleaner industries. This paper explains the environmental consequences of local economic expansion from the perspective of incremental firm entry and provides new evidence on the joint role of environmental regulation and industrial restructuring in air pollution control.