Private Equity and Gas Emissions: Evidence from Electric Power Plants

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 equitybacked 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.