Renewable energy electricity state level policies in the WRAP region: What, why and maybe how

Traditional fossil fuel production of electricity has serious externality issues that influence air quality, public health and viewscapes. In order to limit these influences, public policy aims at increasing the production of electricity using renewable fuels. For a variety of reasons, including market cost barriers, antiquated government policy and the overall lack of knowledge by energy consumers, renewable energy has had a tough time finding a niche in the energy marketplace. In this article we explain the theoretical question of treating air quality as a private externality or a public good, and propose various policy implements that will allow states to increase production of electricity from renewable sources. The set of policies currently developed for Arizona are used as a baseline for recommendations for more advanced policies. However, fossil-fueled electric generation contributes to regional haze and other environmental problems, the public cost of which is not reflected in electricity prices. States have generally rejected mechanisms such as taxation that would raise the price of fossil-fueled generation to reflect the cost of environmental "externalities." The alternative is to adopt policies that offset the cost differential of renewable generation and ensure that an appropriate fraction of states' electrical supplies are generated from environmentally-preferable renewable resources. (APS, 2002b).