Renewable portfolio standards, energy efficiency and air quality in an energy transitioning economy: The case of Iowa

Abstract

This study examines the short-run and long-term relationship between solar energy consumption, energy efficiency, economic growth, human capital, and carbon emissions from fossil fuel sources in Iowa, as the state transitions to a low-carbon economy. Employing the Autoregressive Distributed Lag (ARDL) model along with Fully Modified Ordinary Least Squares (FMOLS) and Canonical Cointegration Regression (CCR) for robustness checks, the analysis provides important findings. The results show that increased solar energy consumption, used as a proxy for Renewable Portfolio Standards (RPS), significantly cuts carbon emissions, consistent with the Porter Hypothesis, which contends that​ environmental regulations can foster innovation and economic competitiveness. Furthermore, improvements in energy efficiency also contribute to lower carbon emissions, supporting the Energy Ladder Hypothesis which posits a climb to less polluting energy alternatives as an economy transitions. However, the effects of economic growth and human capital on carbon emissions are mixed, highlighting the complex dynamics between economic development and environmental sustainability. This study stresses the critical role of integrating renewable energy policies with broader economic strategies to attain sustainable​ environmental outcomes in Iowa.