Private Equity and Gas Emissions: Evidence from Electric Power Plants

45 Pages Posted: 27 Feb 2023

See all articles by Xuanyu Bai

Xuanyu Bai

University of Oregon - Lundquist College of Business

Youchang Wu

University of Oregon - Lundquist College of Business

Date Written: February 21, 2023

Abstract

How does private equity ownership affect firms' environmental performance? Using electricity generating unit level data from U.S. fossil fuel power plants, we find that private equity-backed buyouts reduce output-scaled CO2 and NOx emissions by 5.5% and 8.1%, respectively. The declines are mainly due to lower heat input per unit of output instead of lower input emission rates. The effects are concentrated in non-add-on deals, and are stronger for small plants and corporate divestiture deals. Our results suggest that private equity improves environmental performance by increasing production efficiency, but their effect on the non-efficiency component of environmental performance is generally insignificant.

Keywords: private equity, carbon emission, electricity sector, ESG, climate finance

JEL Classification: G11, G20, G23

Suggested Citation

Bai, Xuanyu and Wu, Youchang, Private Equity and Gas Emissions: Evidence from Electric Power Plants (February 21, 2023). Available at SSRN: https://ssrn.com/abstract=4364437 or http://dx.doi.org/10.2139/ssrn.4364437

Xuanyu Bai

University of Oregon - Lundquist College of Business ( email )

Lundquist College of Business
1208 University of Oregon
Eugene, OR 97403
United States

Youchang Wu (Contact Author)

University of Oregon - Lundquist College of Business ( email )

1280 University of Oregon
Eugene, OR 97403
United States

HOME PAGE: http://www.youchangwu.com

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