Renewable portfolio standards (RPSs) are state-level policies that require in-state electricity providers to procure a minimum percentage of electricity sales from renewable sources. Using theoretical and empirical models, we show how RPSs induce out-of-state emissions reductions through interstate trade of credits used for RPS compliance. When one state passes an RPS, it increases demand for credits sold by firms in other (potentially non-RPS) states. We find that increasing a state’s RPS decreases coal generation and increases wind generation in outside states through this tradable credit channel. We perform a welfare simulation to evaluate the aggregate avoided damage from RPS-induced reductions in local coal-fired pollutants. Our estimates suggest that a 1 percentage point increase in a state’s RPS results in up to $100 million in avoided damages over the United States from reduced pollution. We also find substantial heterogeneity in aggregate avoided damages caused by increases in different states’ RPSs.
External Impacts of Local Energy Policy: The Case of Renewable Portfolio Standards
Published 2019 in Journal of the Association of Environmental and Resource Economists
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- Publication year
2019
- Venue
Journal of the Association of Environmental and Resource Economists
- Publication date
2019-01-01
- Fields of study
Business, Economics, Environmental Science
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Semantic Scholar
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