Resources Issue 170, Fall 2008

Renewable energy sources – including geothermal, solar, wind, and hydropower – are a major component of most strategies for addressing climate change. However, according to RFF Senior Fellow Carolyn Fischer and Duke Professor and RFF University Fellow Richard Newell, not all policies that promote renewables are created equal. If the goal is to reduce greenhouse gas emissions, broad-based policies like emissions pricing are substantially more cost effective than more targeted approaches, such as R&D subsidies.

The reason? Putting a price on emissions provides incentives to fossil-fuel energy producers to reduce emissions intensity, for consumers to conserve, and for green power generators to expand production and invest to reduce their costs. Other policies – including tradable emissions performance standards, renewable portfolio standards, subsidies, and fossil energy taxes – offer different combinations of these incentives with correspondingly different consequences for the distribution and overall size of the burden of meeting an emissions reduction target.

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