Renewable Portfolio Standards and Their Effect on Regional Emissions Reduction
DOI:
https://doi.org/10.5281/zenodo.22810704Keywords:
renewable portfolio standards, staggered difference-in-differences, event-study design, electricity sector decarbonization, state climate policy, policy stringency, power-sector CO2 emissions, two-way fixed effects biasAbstract
Renewable portfolio standards (RPS) requiring regulated utilities to source a rising share of electricity from
qualifying renewable generation have been adopted, amended and in a few cases repealed by U.S. states in a
staggered sequence since the late 1990s, producing a natural quasi-experiment for evaluating whether these
mandates causally reduce power-sector carbon dioxide emissions or primarily reshuffle where already-planned
renewable capacity is sited. We assembled an annual state-level panel of power-sector CO2 emissions, generation
mix and RPS policy parameters for the 48 contiguous states over 2001-2021 and estimated the policy's dynamic
treatment effect using the Callaway and Sant'Anna (2021) group-time estimator, which avoids the
negative-weighting bias that afflicts conventional two-way fixed effects regressions under staggered adoption, and
compared the result directly against a naive two-way fixed effects specification and its Goodman-Bacon
decomposition. Relative to the group-time estimator, we find RPS adoption reduced power-sector CO2 emissions
intensity by an average of 4.3% five years post-adoption and 9.6% ten years post-adoption, with no detectable
pre-trend in the five years before adoption. The naive two-way fixed effects estimate understated the ten-year effect
by roughly 38%, consistent with contamination from already-treated states serving as forbidden comparison groups.
Effects were strongly concentrated among states with stringent targets (2020 target share above 25%), where
ten-year emissions intensity fell by 17.8%, versus a statistically indistinguishable-from-zero effect among
weak-target states (below 15%). Aggregating across all adopting states, we estimate RPS policies avoided
approximately 58 million metric tons of power-sector CO2 emissions in 2021 relative to the projected no-policy
counterfactual, equivalent to roughly 3% of that year's national power-sector total. These results indicate that RPS
policies have produced real, causally attributable emissions reductions, but that this effect is driven almost entirely
by a subset of high-stringency states, and that stringency and enforceability, not adoption per se, are the operative
policy levers.
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