Emissions Reductions or Green Booms? General Equilibrium Effects of a Renewable Portfolio Standard

51 Pages Posted: 3 Jun 2018

See all articles by Antonio Bento

Antonio Bento

University of Southern California - Sol Price School of Public Policy

Teevrat Garg

School of Global Policy and Strategy, UCSD

Daniel Kaffine

Colorado School of Mines - Division of Economics and Business

Date Written: May 10, 2018

Abstract

Renewable portfolio standards (RPS) are commonly promoted as a policy tool to reduce emissions associated with fossil generation, while also stimulating development of local renewable resource endowments. We develop a general equilibrium model of an RPS policy that captures key features such as a fixed factor renewable endowment, substitution across sectors of the economy, and endogenous price responses. We analytically decompose the effects of an RPS into a) a substitution effect, b) an output-tax effect, and c) an output effect. We show that an increase in the RPS can either deliver large resource booms or large emissions savings but not both. Our framework can translate different renewable resource endowments and pre-existing standards across states into economic and environmental impacts to inform current renewable energy and climate policies.

Keywords: Renewable Portfolio Standards, Emissions, Resource Booms, General Equilibrium

JEL Classification: Q58, D58, Q42, Q33, Q48

Suggested Citation

Bento, Antonio and Garg, Teevrat and Kaffine, Daniel, Emissions Reductions or Green Booms? General Equilibrium Effects of a Renewable Portfolio Standard (May 10, 2018). Available at SSRN: https://ssrn.com/abstract=3176833 or http://dx.doi.org/10.2139/ssrn.3176833

Antonio Bento

University of Southern California - Sol Price School of Public Policy ( email )

Los Angeles, CA 90089-0626
United States

Teevrat Garg (Contact Author)

School of Global Policy and Strategy, UCSD ( email )

9500 Gilman Drive
La Jolla, CA 92093-0519
United States

Daniel Kaffine

Colorado School of Mines - Division of Economics and Business ( email )

1500 Illinois Street
Golden, CO 80401
United States

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