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While states believed Renewable Portfolio Standards would yield both environmental benefits and resource booms, researchers find that it’s one or the other

States working within our nation’s patchwork of Renewable Portfolio Standards (RPS) apparently can’t have their cake and eat it too, according to a recent study co-authored by a University of Colorado Boulder economics professor. 

The study found that enacting such standards can generate either lots of renewable infrastructure or reductions in greenhouse-gas emissions, but not both. Many states have adopted Renewable Portfolio Standards to support alternative energy and mitigate climate change. 

Daniel Kaffine

“We spent some time looking at what exactly people were saying in the (state) legislatures when they passed these (RPS),” said Professor Daniel Kaffine, co-author of the research, which was  in the Journal of Environmental Economics and Management.

“We saw them talking in terms of both environmental benefits and resource booms.”

RPS polices typically require that a certain percentage of a state’s power be produced by renewable energy such as wind and solar. Colorado’s RPS has a target of 30 percent renewables by 2020.   

It turns out that if there is a patchwork of roughly 30 different states adopting different rules for each RPS, the different standards can result in either big resource booms—lots of renewable infrastructure—or big benefits in pollution reduction, but not both, the study states. 

“And that’s a consequence of having this patchwork of RPS across different states with different resource bases and different RPS stringencies,” Kaffine said.

Some of that is by design, the study notes, as when Iowa developed its RPS in 1983, emphasizing the use of corn for ethanol, thus resulting in a resource boom that didn’t produce much in the way of emission reduction, but did provide economic relief during a farming crisis. New Jersey, which went for stringent renewable standards, though it doesn’t really have the sun or the wind to make it work, has seen great emission reduction, but not much in the way of a resource boom.

But the paper was not based on case studies; rather it created a general equilibrium model of an RPS policy that captures key features of the economic features that come into play. The idea, Kaffine said, was to create a model that state legislatures could use to predict the effects of their RPS.

“Essentially the question we wanted to answer is how a state’s economy would respond to an increase in RPS standards,” Kaffine said. “Given that, we set up a sort of toy model of the economy that’s all self-contained and consistent: accounting for demands of consumers and decisions made by producers.”

“You can look at an RPS like a ratio, with a numerator and denominator,” Kaffine continued. “If the RPS increases, one way to approach that is to make the numerator bigger, increasing renewable production, but that means there will be less emissions reduction in the denominator.”

That’s similar to what has transpired in Colorado. The state created new renewable resources in both solar and wind, but that resource boom hasn’t necessarily meant huge emissions reduction, as much of the power finds its way to other places on the grid or making new power available here.

That’s exactly the opposite of what has occurred in New Jersey, Kaffine said. The state ratcheted up its standards to require a certain percentage of (costly to generate) solar; a move that decreased the amount of total power produced in the state, suppliers finding other resources or consumers cutting back usage.

The paper was co-authored by economists Antonio M. Bento, a professor at the University of Southern California, and Teevrat Garg, an assistant professor at the University of California San Diego. 

Kaffine said the paper went on hold for a time as the Obama Administration was working on a federal clean energy plan, but its timing today can still help states attempting to create a clean energy route of their own.