Impact of State Renewable Energy Financial Incentives on Carbon Dioxide Emissions in the United States

     In August 2015, President Obama and the Environmental Protection Agency (EPA) announced the Clean Power Plan to cut carbon emissions from existing power plants by 30% (from 2005 levels) by 2030. Under this proposal,... [ view full abstract ]

     In August 2015, President Obama and the Environmental Protection Agency (EPA) announced the Clean Power Plan to cut carbon emissions from existing power plants by 30% (from 2005 levels) by 2030. Under this proposal, states have been increasingly active in devising renewables and energy efficiency policies to reduce the climate impact from the electricity sector. Using a cross-state panel data set from 1990 to 2015, my paper evaluates the effectiveness of state financial incentives for renewable energy development on carbon dioxide (CO₂) emissions across 50 U.S. states, controlling for renewable portfolio standards and other state-specific factors. The paper also compares the effect of different financial support mechanisms to estimate which policies have been more successful in reducing CO₂ emissions. Estimation results suggest that: (1) there is strong evidence on a negative relationship between CO₂ emissions and renewable energy monetary incentives; and (2) this relationship is not as economically significant as other explanatory variables, such as renewable portfolio standards policy and real gross domestic product per capita. Furthermore, certain financial incentives such as feed-in tariffs and performance-based incentives seem to have greater success in reducing CO₂ emissions, compared to tax incentives and loan program.