Do Renewable Portfolio Standards Deliver Cost-Effective Carbon Abatement?

Abstract

The most prevalent and perhaps most popular climate policies in the U.S. are Renewable Portfolio
Standards (RPS) that mandate that renewables (e.g., wind and solar) produce a specified
share of electricity, yet little is known about their efficiency. Using the most comprehensive
data set ever compiled and a difference-in-differences style research design, we find that electricity
prices are 11% higher seven years after RPS passage, largely due to indirect grid integration
costs (e.g., transmission and intermittency). On the benefit side, carbon emissions
are 10-25% lower. The cost per ton of CO2 abatement ranges from $58-$298 and is generally
above $100.

Keywords: Energy, Environment, Renewable Energy, Carbon Emissions, Carbon Abatement, Climate Change, Electricity

JEL Classification: Q2, Q28, Q5, Q52, Q4, Q42