State Climate Policy: What Research Shows About State-Level Action and Its Effects

State-level climate policy has taken on heightened importance as federal climate policy has experienced significant swings depending on the administration in power. Research on the effectiveness of state-level climate policies, including renewable energy standards, carbon pricing programs, vehicle emissions standards, and energy efficiency regulations, has grown alongside the expansion of these policies and provides evidence on what approaches reduce emissions, what their economic effects are, and whether state-level action can meaningfully contribute to national and global climate goals. California's climate policies represent the most extensively studied state climate program, reflecting both the scale of California's economy, which would rank among the top ten economies in the world if it were a country, and the state's history as a policy innovator. Research on California's cap-and-trade program, which covers about 85 percent of the state's greenhouse gas emissions and has operated since 2013, finds that it has contributed to emission reductions without significant negative economic effects. Studies find that California's economy grew faster than the national average during years when cap-and-trade was in operation, providing evidence against claims that carbon pricing inevitably harms economic growth. Renewable portfolio standards, which require utilities to generate specified proportions of their electricity from renewable sources, have been adopted in most states and have been studied extensively. Research on renewable portfolio standards finds that they have been effective in expanding renewable electricity generation beyond what market forces alone would have produced, and that the costs to ratepayers have been modest relative to the environmental benefits. Research on the effects of RPS policies on electricity prices finds small increases in some states and no significant effects in others, with the magnitude depending on the stringency of the standard and the availability of low-cost renewable resources. The Regional Greenhouse Gas Initiative, a cap-and-trade system covering the electricity sector in northeastern states including Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Rhode Island, and Vermont, has been studied in several rigorous evaluations. Research finds that RGGI has reduced emissions from covered sources without the economic harms that critics predicted. Studies find employment effects that are neutral or modestly positive, reflecting both job losses in fossil fuel-heavy industries and job gains in energy efficiency and renewable energy sectors. Revenue from RGGI allowance auctions has been invested in energy efficiency and clean energy programs in participating states. California's vehicle emissions standards, which set stricter emissions limits than federal standards and have been adopted by many other states under the Clean Air Act's waiver provision, have been influential both directly and as a driver of national vehicle technology. Research on the economic and environmental effects of stricter vehicle standards finds significant reductions in emissions and fuel costs for consumers, partially offsetting higher vehicle purchase prices. The expansion of electric vehicle adoption in California, which is the largest EV market in the United States, reflects both regulatory standards and substantial state incentive programs. The economic case for state climate policy has been made on multiple grounds. Research on the job creation associated with clean energy investment finds that renewable energy and energy efficiency generate more jobs per unit of energy produced than fossil fuels, and that states with stronger clean energy policies have experienced larger gains in clean energy employment. Research on the avoided costs of climate change, including reduced extreme weather damages, lower healthcare costs from air quality improvement, and avoided infrastructure costs, finds substantial economic benefits from emissions reductions that support the case for climate policy investment. Challenges to state-level climate policy include the risk of carbon leakage, in which emissions-intensive economic activity shifts to states with weaker regulations, the small scale of individual state actions relative to the global emissions that drive climate change, and the potential for state policies to be preempted by federal action. Research on carbon leakage from state policies finds that it occurs to some degree but is generally less than critics of state climate policy predict. Research on the aggregate potential of state climate policies finds that if all states adopted policies similar to the most ambitious current state programs, national emissions reductions would be substantial, though still insufficient to meet global climate goals without federal and international action.