Impacts of Renewable Portfolio Standards

Abstract

Renewable Portfolio Standards (RPSs) are a key policy measure used by U.S. states to increase their production of renewable electricity. Economic theory shows that RPSs are not first-best policy measures for mitigating greenhouse gas emissions or solving other environmental problems. Nevertheless, they have been politically popular, in part because states hope they will help create new jobs in what they expect will be a growth industry. Research suggests that RPSs tend to be supported by Democratic legislatures in states with good solar and wind potential, are more likely in states with restructured electricity markets, and are less likely in states heavily dependent upon natural gas for electricity generation. Research also suggests RPSs have been successful at increasing renewable generation capacity, have increased the cost of electricity modestly where they have been implemented, and reduce carbon emissions at a cost roughly consistent with estimates of the social cost of carbon.