The Effects of Renewable or Clean Electricity Standards

Federal lawmakers have recently considered several policies to alter the mix of fuels used to generate electricity in the United States. Those policies—referred to here as renewable or "clean" electricity standards—would lead to greater reliance on energy sources that produce few or no emissions of carbon dioxide (CO₂), the most prevalent greenhouse gas contributing to climate change. Renewable electricity standards would require a certain share of the nation’s electricity generation (say, 25 percent) to come from renewable sources, such as wind or solar power. Clean electricity standards would require a certain percentage of the nation’s electricity generation to come from renewable sources or from nonrenewable sources that reduce or eliminate CO₂ emissions, such as nuclear power, coal-fired plants that capture and store CO₂ emissions, and possibly natural-gas-fired plants. Many renewable and clean electricity standards already exist at the state level.

This CBO study—prepared at the request of the Chairman and Ranking Member of the Senate Committee on Energy and Natural Resources—examines how a federal renewable or clean electricity standard would change the mix of fuels used for electricity generation, the amount of CO₂ emissions, and the retail price of electricity in different parts of the United States. In particular, the study explores how some proposed features of such standards (such as various preferences, exemptions, and alternative compliance rules) would affect those outcomes and identifies underlying causes of uncertainty about such outcomes. The study also highlights key elements in designing a renewable or clean electricity standard that would help minimize its costs to U.S. households and businesses. In keeping with CBO’s mandate to provide objective, impartial analysis, this report makes no recommendations.