State renewable energy mandates are an inefficient way to reduce carbon dioxide emissions from electric generation, according to a new working paper from the Energy Policy Institute at the University of Chicago (EPIC). The paper – “Do Renewable Portfolio Standards Deliver?” – argues that state-level renewable electricity mandates in 29 states and the District of Columbia have increased electricity prices by as much as 17 percent over twelve years, making the cost of reducing carbon emissions with these policies more expensive than current benefit estimates.
Axios energy columnist Amy Harder first reported on the study. She is a journalism fellow at EPIC. In her column, she wrote, “I had no involvement in writing or reviewing the study.”
Lead author Michael Greenstone, head of EPIC and Milton Friedman Distinguished Service Professor in Economics, said in a press release, “This study joins a growing body of evidence that demonstrates that when climate policies favor particular technologies or target something other than the real enemy—carbon emissions—the result is less effective and more expensive than is necessary. In contrast, the global experiences from carbon markets and taxes make clear that much less expensive ways to reduce CO2 are available right now.” He was chief economist for President Obama’s council of economic advisors.
The EPIC study finds that the renewables standards do reduce carbon dioxide emissions, but at a high cost. The paper concludes that the cost of the emissions reduced by state RPS policies ranges from more than $130/metric ton of CO2 to as much as $460/metric ton. This is several times the current estimates of the “social cost of carbon,” a calculation that Greenstone worked on in the Obama administration.
Renewable mandates raise prices compared to prices in states without the mandates because of costs that are largely ignored: needed backup capacity, additional transmission requirements, and prematurely displacing baseload generation. Greenstone says, “We think the next frontier in making renewables an important part of the grid globally is to focus on policies and technology mechanisms that facilitate the integration of these intermittent sources onto the grid, such as advanced storage.” The paper also advocates carbon markets and taxes, which are “much less expensive ways to reduce CO2….”
The EPIC study comes as there is a pushback on carbon pricing as the key to getting greenhouse gas reductions. Severin Borenstein, faculty director at the Energy Institute at the Haas School of Business, argues, “The idea that we can ratchet up the tax until we hit the desired emissions doesn’t recognize that most of the global emissions are now coming from relatively poor countries. Politically, they are even less likely than the developed world to accept a large carbon tax. And economically, a big tax, given current technologies, would significantly slow their climb out of poverty.”
In a related matter, Monday (Earth Day), new Nevada Gov. Steve Sisolak signed a new law raising the state’s RPS to 50% by 2030, up from 25% by 2025 in previous law. Sisolak, a Democrat, defeated Republican Attorney General Adam Laxalt in November’s election. At the signing, Sisolak said the new RPS sends the message “that the Silver State is open for business as a renewable leader….” Nevada enacted its first RPS in 1997, the second state to commit to a target for renewable energy.
–Kennedy Maize