State Renewable Portfolio Standards: Is There a 'Race' and Is It 'To the Top'?

Abstract

Why do states adopt renewable portfolio standards (“RPSs”)? Many have suggested that RPSs mark a “race to the top,” where states adopt more and more stringent regimes in an effort to compete for clean energy jobs. This article challenges that presumption. It shows, by examining empirical evidence on RPS enactments, that state RPSs do not constitute a race to the top because they are not a race to stringency. There are some indicia of a race to the top in RPSs. More and more states are adopting these laws. Many RPS targets also have become more stringent, coalescing around a 20 percent national average. But a more granular look at the data reveals a more complicated picture. This article unpacks that data to explore what is really going on beneath the surface of RPS enactments. It demonstrates that the predominant trend in RPSs is not movement toward stringency but persistent policy diversity. This undermines the idea of a race to the top in renewable energy promotion, in part because inconsistent, changing RPSs deprive investors of consistency and predictability. It also means that there is no need for a federal ceiling on state RPSs and, more critically, that federal action may be necessary to promote renewables if the nation is to move to a more sustainable energy future.

Keywords: Renewable Energy, Renewable Portfolio Standard, RPS, Prisoners’ Dilemma, Federalism, Green Jobs

JEL Classification: K10, K20, K23, K29, K32, Q20, Q28, Q38, Q40, Q41, Q42, Q48, Q49, L94, O31, O32, L52, L94, L97, K20