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

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 contendsthat 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 stressesthe critical role of integrating renewable energy policies with broader economic strategies to attainsustainable environmental outcomes in Iowa. • Examines RPS, energy efficiency, growth, and emissions using advanced econometric models. • Solar energy consumption reduces carbon emissions, supporting the Porter Hypothesis. • Energy efficiency improvements significantly lower emissions, per the Energy Ladder Hypothesis. • Economic growth shows a trade-off with higher carbon emissions in Iowa’s energy transition. • Highlights mixed human capital effects on emissions, stressing the need for targeted policies. • Recommends expanding incentives for renewables and integrating sustainability into growth.