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Why Do States Adopt Renewable Portfolio Standards?: An Empirical Investigation

Renewable portfolio standards (RPSs) for electricity generation are politically popular in many U.S. states although economic analysis suggests they are not first-best policies. We present an empirical analysis of the political and economic factors that drive state governments to adopt an RPS, and the factors that lead to the inclusion of in-state requirements given the adoption of an RPS. Although advocates claim an RPS will stimulate job growth, we find that states with high unemployment rates are slower to adopt an RPS. Local environmental conditions and preferences have no significant effect on the timing of adoption. Overall, RPS adoption seems to be driven more by political ideology and private interests than by local environmental and employment benefits, raising questions as to when environmental federalism serves the public interest.

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Energy Specializations: Renewables – R&D and Emerging Technologies; Renewables – Policy and Regulation

JEL Codes:
O32 - Management of Technological Innovation and R&D
Q52 - Pollution Control Adoption and Costs; Distributional Effects; Employment Effects

Keywords: Renewable Portfolio Standards, Renewable Energy, Regulation

DOI: 10.5547/ISSN0195-6574-EJ-Vol31-No3-7

Published in Volume 31, Number 3 of The Quarterly Journal of the IAEE's Energy Economics Education Foundation.