Greenhouse Gas Emissions and the Productivity Growth of Electricity Generators

Abstract

This paper analyses electricity generation in four Australian states and the Northern Territory in the late 1990s. It finds that productivity growth estimates for electricity generators can change significantly when allowance is made for greenhouse gas emissions. Using an innovative analytical technique for incorporating environmental impacts in productivity estimates, it shows that productivity growth is overestimated when emission intensity is rising and underestimated when emission intensity is falling. This is because emissions are undesirable and so if they fall (grow) per unit of output then this will tend to increase (decrease) estimated productivity.

Keywords: greenhouse gas emissions, productivity growth, electricity, abatement

JEL Classification: Q, R