Although the relative cost of individual policies in achieving reductions depends on parameter values and the emissions target, in a numerical application to the US electricity sector, Fischer and Newell state that the ranking (by decreasing efficiencies) is roughly as follows: 1) emissions price, 2) emissions performance standards, 3) fossil power tax, 4) renewables share requirement, 5) renewables subsidy, and 6) R&D subsidy. The presence of knowledge spillovers means that separate policy instruments are necessary to optimally correct the climate externality and the externalities for both learning and R&D. In fact, we find that an optimal portfolio of policies can achieve emissions reductions at a significantly lower cost than any single policy, although the emissions reductions continue to be attributed primarily with the emissions price. The model has two periods. There is a knowledge stock, which increases in period 2 as a function of both R&D expenditures and output of RE technologies in period 1.