Technical Efficiency and CO2 Reduction Potentials: An Analysis of the German Electricity Generating Sector

In this paper, we analyze the technical efficiency of CO2 reduction potentials of German power and heat plants, using a non-parametric sequential Data Envelopment Analysis. We apply a metafrontier framework to evaluate plant-level efficiencies in the transformation of inputs into desirable (energy) and undesirable (CO2 emissions) outputs, taking into account different fossil fuel generation technologies. We dispose of a unique data set for coal-, lignite-, gas- and biomass-fired power plants from 2003 through 2010 that provides an unbalanced panel of 1459 observations. We find intra-group differences within energy generation technology, but natural gas fired power plants clearly have the highest efficiency. Furthermore, the analysis points to significant savings potentials for CO2 and fuel-input.