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Greenhouse Gas Emissions and the Productivity Growth of Electricity Generators

Staff research paper

This paper by Greg Murtough, David Appels, Anna Matysek, and C. A. Knox Lovell was released on 18 December 2001. This paper develops and applies a measure of productivity growth that can incorporate unpriced environmental impacts. The methodology builds on the established technique of data envelopment analysis and is applied to one of the more significant environmental issues facing Australia - greenhouse gas emissions from electricity generation.

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  • Key points
  • Contents

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.

Background information

Greg Murtough (Assistant Commissioner) 03 9653 2163

Leonora Nicol (Media, Publications and Web) 02 6240 3239 / 0417 665 443

Cover, Copyright, Contents, Acknowledgements, Abbreviations, Glossary, Key Messages, Overview

1 Introduction

2 The greenhouse effect and electricity generation
2.1 Greenhouse gas emissions from electricity generation

3 Productivity measurement and the environment
3.1 Index number studies
3.2 Production frontier studies

4 Methodology and data
4.1 Methodology
4.2 Data
4.3 Descriptive analysis of emissions

5 Quantitative Results
5.1 Decomposition of emission intensity growth
5.2 Abatement elasticities
5.3 Abatement costs

6 Concluding comments

A Production frontier analysis

B Decomposition of emission intensity growth

C Carbon dioxide emissions