Following the failure in 2010 to pass a comprehensive cap-and-trade bill in the United States, analysts and policymakers have called for new or more stringent policies to curb GHG emissions in the electric power sector. In his 2011 State of the Union address, President Obama announced the goal of producing 80 percent of electricity from “clean” energy sources by 2035. The idea of a federal clean energy standard (CES) has been garnering bi-partisan support in Washington, D.C., and at latest count, thirty-six states (plus the District of Columbia) already employ renewable energy standards (RES) or CES programs, most of them mandating that 15 to 25 percent of total electricity production by 2020 has to come from renewable or “clean” sources (DSIRE, 2011). Energy standards in existing and proposed regulation differ with regard to the list of fuel sources included. Unlike a RES program, most CES proposals would credit not only renewable sources, like wind, solar, bio-power, hydropower and geothermal, but would also credit non-emitting non-renewable sources like nuclear energy, and would give partial crediting to certain other technologies, such as gas and coal technologies with carbon capture and storage (CCS), and natural gas combined cycle plants.

This paper examines the efficiency and distributional implications of RES and CES regulation in the U.S. electric power sector employing a numerical general equilibrium model that is uniquely well suited to assessing both economy-wide and electric sector impacts. We investigate the impacts of introducing a federal energy standard, formulated with and without a particular emphasis on incentivizing renewable energy, on economy-wide costs and emissions reductions, relating these impacts to changes in electricity capacity and generation (shifts to low carbon fuels and renewable sources), and changes in general equilibrium products and factor prices.