Why Do States Adopt Renewable Portfolio Standards? An Empirical Investigation

Abstract

We present the first empirical analysis of the factors that drive state governments to adopt a Renewable Portfolio Standard (RPS), and the factors that lead to the inclusion of in-state requirements given the adoption of an RPS. We find that states with poor air quality, strong democratic presence in the state legislature and organized renewable developers are more likely to adopt an RPS. Economic benefits do not seem to be an important driver for RPS adoption although they have been widely touted in the legislative process. In-state requirements are more likely in states with poor air quality, rich renewable energy resources, and low amounts of existing renewable electricity generation. In-state requirements are also positively correlated with the percentage of congressional seats occupied by Democrats and negatively correlated with the presence of a Republican governor.

Keywords: Renewable Portfolio Standards, Renewable Energy, Regulation

JEL Classification: Q58