The Cost of Climate Policy to Capital: Evidence from Renewable Portfolio Standards

Harrison Hong, Jeffrey D. Kubik and Edward P. Shore

No 31960, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Many US states have set ambitious renewable portfolio standards (RPS) that require utilities to switch from fossil fuels toward renewables. RPS increases the renewables capacity, bond issuance, maturity, and yield spreads of investor-owned utilities compared to municipal producers that are exempted from this climate policy. Contrary to stranded-asset concerns, the hit to overall firm financial health is moderate. Falling cost of renewables and passthrough of these costs to consumers mitigate the burden of RPS on firms. Using a Tobin’s q model, we show that, absent these mitigating factors, the impact of RPS on firm valuations would have been severe.

JEL-codes: G0 G18 G31 G35 H0 H23 H25 H41 Q42 Q50 Q54 Q56 Q58 (search for similar items in EconPapers)
Date: 2023-12
New Economics Papers: this item is included in nep-cfn, nep-ene, nep-env and nep-reg
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