The economic costs of reducing greenhouse gas emissions under a U.S. national renewable electricity mandate

http://dx.doi.org/10.1016/j.enpol.2011.02.042
 Abstract: The electricity sector is the largest source of greenhouse gas emissions (GHGs) in the U.S. Many states have passed and Congress has considered Renewable Portfolio Standards (RPS), mandates that specific percentages of electricity be generated from renewable resources. We perform a technical and economic assessment and estimate the economic costs and net GHG reductions from a national 25 percent RPS by 2025 relative to coal-based electricity. This policy would reduce GHG emissions by about 670 million metric tons per year, 11 percent of 2008 U.S. emissions. The first 100 million metric tons could be abated for less than $36/metric ton. However, marginal costs climb to $50 for 300 million metric tons and to as much as $70/metric ton to fulfill the RPS. The total economic costs of such a policy are about $35 billion annually. We also examine the cost sensitivity to favorable and unfavorable technology development assumptions. We find that a 25 percent RPS would likely be an economically efficient method for utilities to substantially reduce GHG emissions only under the favorable scenario. These estimates can be compared with other approaches, including increased R&D funding for renewables or deployment of efficiency and/or other low-carbon generation technologies.

Research highlights
...

► Depending on technological development, economic costs are $13-$45 billion per year.
► Lower costs depend on favorable technological progress.

Article Outline

1. Introduction

2. Methods

2.1. Estimating costs and quantities

2.2. Estimating potential net reductions of GHG emissions

2.3. Scenarios

3. Costs and GHG emissions of renewable sources of electricity

3.1. Hydropower: technologies, quantities and prices, and net GHG emissions

3.2. Electricity from wind

3.2.1. Technologies and barriers to deployment

3.2.2. Quantities and costs of wind

3.2.3. Potential net reductions in GHG emissions with wind power

3.3. Electricity from biomass

3.3.1. Technologies and barriers to deployment

3.3.2. Quantities and costs of biomass

3.3.3. Potential net reductions in GHG emissions with biomass

3.4. Electricity from geothermal

3.4.1. Technologies and barriers to deployment

3.4.2. Quantities and prices of geothermal electricity

3.4.3. Potential net reductions in GHG emissions

3.5. Solar: technologies, quantities and prices, and net GHG emissions

4. Calculating aggregate costs and reductions in GHG emissions

4.1. Economic costs of substituting renewables for coal

4.2. Uncertainties

5. Results and discussion

5.1. Additional costs of electricity generated by renewable sources of energy

5.2. Reductions in GHG emissions

5.3. Other estimates

5.4. Meeting proposed mandates in recent legislation

5.5. Policy implications

by Keith Crane^a, , Aimee E. Curtright^b, David S. Ortiz^b, Constantine Samaras^b and Nicholas Burger^a

^a RAND Corporation, 1200 South Hayes Street, Arlington, VA 22202, USA Tel.: +1 703 413 1100; fax: +1 703 413 8111.
^b RAND Corporation, 4570 Fifth Avenue, Pittsburgh, PA 15213, USA

Energy Policy via Elsevier Science Direct www.ScienceDirect.com 
Article in Press, Corrected Proof -

Received 28 July 2010; 

accepted 4 February 2011. 

Available online 23 March 2011

Keywords: Renewable portfolio standards; Greenhouse gas emissions; Technology development