How does digital industry agglomeration affect the environmental efficiency of power systems in China

Existing research has largely overlooked the impact of fixed-sum outputs in power system efficiency assessment, whereas studies on digital industry agglomeration (DIA) have focused almost exclusively on geographical agglomeration and have neglected the role of virtual agglomeration. To address these gaps, this study develops a novel two-stage fixed-sum output DEA model, decomposes DIA into digital industrial geographical agglomeration (DIGA) and digital industrial virtual agglomeration (DIVA). The results suggest the following: (1) The total environmental efficiency of power system (PSEE) and the environmental efficiency of electricity generation (EGEE) exhibit a downward trend, while the environmental efficiency of T&D (TDEE) is on a slight upward trend. (2) DIGA significantly improves PSEE and TDEE. DIVA significantly enhances PSEE, EGEE and TDEE. (3) The effects of DIGA and DIVA on PSEE exhibit significant regional heterogeneity. These results offer valuable insights for policymakers to devise differentiated strategies for leveraging DIA to enhance PSEE.