| Abstract | This paper analyzes the effect of foreign trade on energy and environment efficiency using the case of China’s industrial sectors. For that purpose, two non-radial directional distance functions are adopted to measure the energy and environment efficiency indices. Each sector’s historical import and export trade data are built from the United Nations Commodity Trade Statistics. Simultaneous equations with Tobit models are constructed in order to avoid endogeneity problems and the influence mechanisms are further discussed. Our study finds that: (1) Overall, energy and environment efficiency of China’s industry is growing at a low level; (2) Foreign trade significantly impacts on energy and environment efficiency improvement via two mechanisms: technology spillover effect by importing and learning by exporting; (3) A mutual cause-effect relationship exists between trade and efficiency, i.e., industries with high energy and environment efficiency are more active in trade. The empirical results present robust after other control variables are considered, such as R&D investment, environmental regulation, structure of ownership, energy prices, and industrial heterogeneity. |