Agricultural Economics Department


Date of this Version



Cornhusker Economics, August 23, 2017,


Copyright 2017 University of Nebraska.


Rising energy prices, dependence on foreign oil supplies, and alarming consequences of global warming have prompted governments worldwide to initiate green energy policies that can motivate a shift away from fossil fuels and toward renewables for electricity generation. Recognizing the fact that around 40 percent of carbon dioxide (CO2) emissions in the United States come from fossil fuel combustion in the electricity sector, several policies have been adopted across states for reducing carbon emissions and stimulating renewable energy development. One of the innovative policy instruments that stands out due to widespread adoption by states since the late 1990s is the Renewable Portfolio Standard (RPS). According to this policy, the electricity providers serving the end users in a state are required to procure green energy (such as wind, solar, biomass, or geothermal energy) for a portion of their electricity supplies.