As an environmental economist who studies the design of environmental policies, I believe that doing something about climate change is important, but I don’t consider this new solar mandate to be the best way to achieve that goal. I’m also concerned that it could exacerbate problems with California’s housing market.
More than two sides
On the other hand, those who question whether the costs of addressing climate change are worth itmight hate the solar mandate, since they either see no benefits or think the benefits aren’t worth the costs.
But there are more than two sides.
Environmental economics 101
Many renewable energy experts, including economists like me, want governments to do something to address climate change but question the mandate.
Above all, what we economists call “command-and-control policies” like this mandate – inflexible requirements that apply to everyone – often don’t make sense. For example, going solar is less economical in some cases. Even in sunny California, builders can construct housing in shady areas, and not all homeowners use enough electricity for the investment to pay off before they move away.
Good examples of these policies include a tax on pollution, like British Columbia’s carbon tax, or a cap-and-trade market, like the European Union’s Emissions Trading System. Instead of restricting the right to pollute, these approaches make people and businesses pay to pollute, either through taxation or by buying mandatory permits.
The flexibility of market-based policies can make meeting pollution reduction goals cost-effective. When people – or businesses – have to factor the costs of pollution into their decision-making, they have a financial incentive to pollute less and will find ways to do so. By reducing pollution as cheaply as possible, more money is left over to spend on other pressing needs like housing, health care and education.
Many economists also fear that the mandate will worsen California’s housing unaffordability. This crisis has many causes, such as restrictive zoning regulations that curtail construction. But the solar-panel requirement, which could increase the cost of a new home by more than $10,000, probably won’t help, even though supporters of the policy argue that the solar panels will pay for themselves in terms of lower monthly electricity costs.
The solar mandate’s fans
The other argument I find reasonable is that by drumming up more demand, the solar mandate will expand the solar panel market – thereby driving solar costs down, perhaps more quickly than a carbon tax would. There’s some evidence supporting the theory that these mandates can spur innovation in renewable electricity technologies.
To be sure, the cost of residential solar panels has plummeted in recent years, although generating solar energy through rooftop panels remains less cost-effective than power from utility-scale solar farms.
A practical policy
After mulling all the various arguments made by these different camps, I don’t think that whether California’s rooftop solar mandate is the perfect policy for the climate or the state’s homebuyers is the question.
The answer to that question is a resounding no – but that is beside the point because no policy is perfect. The key question is whether this policy – given its imperfections and given the difficulty in passing more cost-effective policies – is a winner overall. That question is harder to answer.
Ultimately, I believe the mandate will yield some environmental benefits, though they could be more cost-effectively achieved through other means.