Complementarity and substitutability: A review of state level renewable energy policy instrument interactions

Abstract

This paper provides an extensive review of two streams of literature: the first part of the review focuses on policy tools and their interrelationships and the second part focuses on the literature on the state renewable energy policy tools. Based on the reviews, this paper investigates how policymakers choose a set of interrelated renewable energy policy instruments and identify under what conditions policy instruments complement or substitute. We extend the political market framework by examining the influences of: (1) administrative agencies on the supply side; (2) interest groups on the demand side; and (3) the policy-induced problem situation changes on the adoption of state renewable energy policy tools, building upon reviews of both policy tools and policy diffusion theories. A set of hypotheses are advanced for state renewable energy policy interactions among public benefit fund (PBF), renewable portfolio standards (RPS) and corporate tax incentive (CTI). The hypotheses are tested by three Event History models, in which RPS, PBF and CTI serve as dependent variables separately. The complementary effects between previous use of RPS and adoption of PBF, between previous use of PBF and adoption of RPS, and between previous use of CTI and adoption of RPS are confirmed. We also find support for the policy substitutability between previous use of CTI and adoption of PBF.