Winds of Change? The Impact of Renewable Portfolio Standards and Their Class Specifications on State Carbon Emissions

Abstract

Twenty-nine U.S. states and Washington D.C. have implemented renewable portfolio standards (RPS) with the goal of improving sustainability by maintaining or increasing the contribution of renewable energy to each state's electricity supply mix. This paper studies the impact of RPS on carbon emissions with consideration given to the distinction between the targets and the actual achievement, as well as the various classes of renewable energy specifications. All 50 U.S. States and Washington D.C. are examined during the period 2000-2014 using panel data methods. State and time fixed effects are employed, and control characteristics include heating and cooling degree days, the existence of renewable energy credit markets, and the sectoral composition of economic activity, among other factors. The results show that total RPS obligations and achievements have inconsistent and statistically insignificant effects on carbon emissions. The impact becomes significant, however, when specifically considering the various classes of renewable energy that are specified under some state RPS. A 1% increase in the achievement of Class I or Class II renewable energy specifications can lead to a .03% decrease in carbon emissions. These findings are important for future RPS implementation as they highlight that the impact of the policy depends significantly on the specification of the class of renewable energy within the RPS.