The environmental cost of power outages: Evidence from Delhi

Abstract

This paper examines an overlooked consequence of an unstable electricity supply: air pollution. Using a unique dataset with high-frequency records of outage events and pollution, we find that outages lead to a 0.4% and 1.3% increase in hourly NO${}_2$ and NO concentrations and a 0.4% increase in PM10 levels. This is likely attributable to the widespread use of highly polluting backup diesel generators. The environmental cost of outages exceeds the private cost for users when backup generators are adopted. Welfare analysis using bunching estimation highlights the importance of incorporating environmental benefits in the evaluation of policies aimed at mitigating outages.