Research / BFI Working PaperNov 03, 2020

Do Renewable Portfolio Standards Deliver Cost-Effective Carbon Abatement?

Michael Greenstone, Ishan Nath

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.

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