Private Equity and Gas Emissions: Evidence from Electric Power Plants
45 Pages Posted: 27 Feb 2023
Date Written: February 21, 2023
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
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