Impact of Renewable Portfolio Standard and Carbon Tax Policy on the Renewable Energy Investment

Purpose/Signficance This paper focuses on the impact of Renewable Portfolio Standard (RPS) and carbon tax policy on investment of renewable energy. Thus, this paper constructs an electricity supply chain model with an electricity retailer as the leader and an electricity generator as the follower to identify the impact of the two carbon policies on the investment of renewable energy considering the intermittence of renewable energy. Design/Methodology Based on the game theory framework, the effects of renewable energy proportion and investment cost coefficient on the equilibrium solution are identified, and the equilibrium solutions of the two carbon policies are compared. Finally, some suggestions are put forward. Findings/Conclusions When the proportion of renewable energy is small, RPS is more conducive to increasing the renewable energy investment and electricity demand; when the proportion of renewable energy is high, the carbon tax policy is more conducive to increasing the renewable energy investment and electricity demand. With the increase of the proportion of renewable energy, both renewable energy investment and electricity demand decrease. With the increase of the cost coefficient of renewable energy investment, both renewable energy investment and electricity demand decrease.