Yes it effect your chaos however if you kill them without alerting them or anyone else it greatly helps with trying to clear levels if you are trying to "ghost" the level. If an enemy or civilian find a body they are immediately fully alerted thus killing any chance of ghosting the level.
I don't think killing actually affects chaos... I have managed to kill most guards in missions using ghost kills and rewiring those towers and still got low chaos in the end. I think it's ok as long as you are not detected.
Despite having the ability to make guards turn to ashes it still rises chaos because you are in fact murdering people, and it worsens your ending.
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