Private Equity and Gas Emissions: Evidence from Electric Power Plants

Abstract

Private equity firms’ acquisitions of brown assets are often viewed as an environmental threat. Using data from U.S. fossil fuel power plants, we find that private equity-backed buyouts on average reduce output-scaled CO2 and NOx emissions by 4.2% and 9.0%, respectively. The declines in emission intensities following buyouts backed by non-ESG private equity are almost entirely due to cost-saving improvements in production efficiency. Buyouts backed by pro-ESG private equity not only generate more significant efficiency increases but also reduce input-scaled NOx emissions. Our results show both the strengths and limitations of private equity as a force for sustainability.

Keywords: G11, G20, G23 Private equity, carbon emission, electricity sector, ESG, climate finance

JEL Classification: G11, G20, G23