Renewable portfolio standards, electricity prices, emissions, and distributive effects

RPS (renewable portfolio standards) are important state-level environmental policies that require utilities to generate a certain percentage of electricity from renewable sources. RPS in general increase electricity prices and improve environmental quality. This paper integrates the two effects into the utility function to study the distributive effects of RPS. Higher electricity prices decrease the utility of households while higher environmental quality increases the utility, and the overall utility effects of RPS depend on income and preferences. The analysis shows that RPS can be regressive or progressive, depending on the shape of the utility function. Some states have still considered the adoption of RPS, and most of those states that already adopted RPS have also planned to modify them. Since the distributive consequences have an implication for support for RPS, the analysis in the paper may help in making the decisions to adopt or modify them.