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Cost-effectiveness of renewable electricity policies

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  • Palmer, Karen
  • Burtraw, Dallas

Abstract

We analyze policies to promote renewable sources of electricity. A renewable portfolio standard raises electricity prices and primarily reduces gas-fired generation. A “knee” of the cost curve exists between 15% and 20% goals for 2020 in our central case, and higher natural gas prices lower the cost of greater reliance on renewables. A renewable energy production tax credit lowers electricity price at the expense of taxpayers and thus limits its effectiveness in reducing carbon emissions; it also is less costeffective at increasing renewables than a portfolio standard. Neither policy is as cost-effective as a capand-trade policy for achieving carbon emissions reductions.
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Suggested Citation

  • Palmer, Karen & Burtraw, Dallas, 2005. "Cost-effectiveness of renewable electricity policies," Energy Economics, Elsevier, vol. 27(6), pages 873-894, November.
  • Handle: RePEc:eee:eneeco:v:27:y:2005:i:6:p:873-894
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    References listed on IDEAS

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    1. Burtraw, Dallas & Palmer, Karen & Darmstadter, Joel & McVeigh, James, 1999. "Winner, Loser, or Innocent Victim? Has Renewable Energy Performed As Expected?," Discussion Papers dp-99-28, Resources For the Future.
    2. Darmstadter, Joel, 2003. "The Economic and Policy Setting of Renewable Energy: Where Do Things Stand?," Discussion Papers dp-03-64, Resources For the Future.
    3. Bernow, Stephen & Dougherty, William & Duckworth, Max, 1997. "Quantifying the impacts of a national, tradable renewables portfolio standard," The Electricity Journal, Elsevier, vol. 10(4), pages 42-52, May.
    4. McDonald, Alan & Schrattenholzer, Leo, 2001. "Learning rates for energy technologies," Energy Policy, Elsevier, vol. 29(4), pages 255-261, March.
    5. Fischer, Carolyn & Newell, Richard G., 2008. "Environmental and technology policies for climate mitigation," Journal of Environmental Economics and Management, Elsevier, vol. 55(2), pages 142-162, March.
    6. Kenneth J. Arrow, 1962. "The Economic Implications of Learning by Doing," Review of Economic Studies, Oxford University Press, vol. 29(3), pages 155-173.
    7. Spencer Banzhaf, H. & Burtraw, Dallas & Palmer, Karen, 2004. "Efficient emission fees in the US electricity sector," Resource and Energy Economics, Elsevier, vol. 26(3), pages 317-341, September.
    8. Newell, Richard & Wilson, Nathan, 2005. "Technology Prizes for Climate Change Mitigation," Discussion Papers dp-05-33, Resources For the Future.
    9. Burtraw, Dallas & Palmer, Karen & Bharvirkar, Ranjit & Paul, Anthony, 2001. "The Effect of Allowance Allocation on the Cost of Carbon Emission Trading," Discussion Papers dp-01-30-, Resources For the Future.
    10. Sterner, Thomas & Hoglund, Lena, 2000. "Output-Based Refunding of Emission Payments: Theory, Distribution of Costs, and International Experience," Discussion Papers dp-00-29, Resources For the Future.
    11. Loschel, Andreas, 2002. "Technological change in economic models of environmental policy: a survey," Ecological Economics, Elsevier, vol. 43(2-3), pages 105-126, December.
    12. Langniss, Ole & Wiser, Ryan, 2003. "The renewables portfolio standard in Texas: an early assessment," Energy Policy, Elsevier, vol. 31(6), pages 527-535, May.
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    More about this item

    JEL classification:

    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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