Essays on State Renewable Portfolio Standard

Chapter 1 explores the linkage between state-level Renewable Portfolio Standards (RPSs) and electricity firms' stock market performance. RPSs experienced a gradual expansion across the United States over the past two decades. These laws require electric utilities to generate a specified percentage of their electricity from renewable sources. We conduct the first empirical analysis of the impact of a state's adoption of an RPS on the stock returns of electricity firms operating in that state, by utilizing comprehensive data from CRSP and COMPUSTAT, as well as the information we collected on the enactment date that each state adopts an RPS and firms' electricity sales in each state. We then identify which firms are affected by which states' RPS laws, as well as providing a sense of how big an impact each state's law would have on the firm, based on the share of the firm's sales deriving from that state. By performing an event study, we find that RPS has a significant negative impact on firms' stock returns on the day RPS is enacted. The impact is bigger for firms with a large sales share in an RPS state and firms in deregulated electricity markets. The event study results can also be used as an RPS stringency measure. Recognizing the potential difficulties in identifying the exact timing of the "news" that a state is likely to adopt an RPS, we also consider a panel data approach from 1995 to 2014. A negative impact of RPS enactment on utilities' stock returns is identified, and the impact is bigger for early adopted RPSs.;Chapter 2 utilizes plant-level Census data during 1992-2012 to examine the impact of RPSs on manufacturing firms' allocation of production across states. We look at 6 industries and focus on the Cement Industry and Reconstituted Wood Products Industry. Using a conditional logit model, we test three RPS measures and control for other state characteristics. We find firms produce less in states with higher RPS requirement and compliance rate, and the tendency is stronger for early adopted RPSs. A positive relationship is found between production shares and electricity deregulation. Also, the results for Reconstituted Wood Products are stronger than the results for Cements, because Cement shipments do not travel as far as reconstituted wood product shipments, and thus have a relatively more local market.