Greenhouse Gas Emissions and Productivity Growth

Productivity growth estimates for electricity generators can change significantly when allowance is made for greenhouse gas emissions.

This is the main finding of a staff research paper - Greenhouse Gas Emissions and the Productivity Growth of Electricity Generators - released by the Productivity Commission, which analyses electricity generation in four Australian states and the Northern Territory in the late 1990s.

The paper develops an innovative statistical technique for incorporating environmental impacts in productivity estimates. It shows that accounting for greenhouse gas emissions reduces estimated productivity growth when emission intensity is rising and increases it when emission intensity is falling.

In the late 1990s, changes in emission intensity (and hence the impact of emissions on estimated productivity growth) appear to have been largely driven by movements in thermal efficiency (electricity supplied per unit of fuel).

The paper also found that there are regional differences in the cost (in terms of foregone output of electricity) of abating emissions.