Government Policies to Promote Production and Consumption of Renewable Electricity in the US

Various types of renewable electricity policies exist both at the federal and state levels. They are designed to directly or indirectly incentivize producers and consumers of renewable electricity. The existence of renewable electricity policies can be explained by the market failure theory. Without proper government intervention, renewable electricity would be underprovided due to positive externalities associated with environmental pollution and energy independence. Also, in terms of pollution control, encouraging green renewable electricity is more politically palatable than discouraging brown electricity generated from fossil fuels, such as coal and oil. This chapter reviews the primary functions of various policy instruments at the federal and state levels and discusses their effectiveness to the extent possible.