U.S. Carbon Dioxide Emissions in the Electricity Sector: Factors, Trends, and Projections
Released: 2019-01-07T00:00:00

Introduction

The primary greenhouse gas (GHG) emitted by human activities is carbon dioxide (CO 2 ). The majority of CO 2 emitted by human activities is generated through the combustion of fossil fuels. Although fossil fuels have facilitated economic growth in the United States and around the world, CO 2 emissions from fossil fuel combustion has contributed to an increase in the atmospheric concentration of CO 2 by about 40% over the past 150 years. According to the Intergovernmental Panel on Climate Change's (IPCC) Fifth Assessment Report:

Continued emission of greenhouse gases will cause further warming and long-lasting changes in all components of the climate system, increasing the likelihood of severe, pervasive and irreversible impacts for people and ecosystems.

U.S. GHG emissions levels, particularly from CO 2 , remain a topic of interest among policymakers and stakeholders. A variety of efforts that seek to reduce these emissions are currently underway or being developed on the international and sub-national level (e.g., individual state actions or regional partnerships).

Recent international negotiations and domestic policy developments have generated attention to current and projected U.S. GHG emission levels. In particular, delegations from 195 nations, including the United States, adopted the Paris Agreement in 2015, creating an international structure for nations to pledge to abate their GHG emissions, adapt to climate change, and cooperate to achieve these ends, including financial and other support. Pursuant to the Paris Agreement, the United States pledged (in 2015) to reduce GHG emissions by 26%-28% by 2025 compared to 2005 levels. In addition, pursuant to the Copenhagen Accord, the United States pledged (in 2009) to reduce GHG by 17% below 2005 levels by 2020.

In 2017, President Trump announced his intention to withdraw from the Paris Agreement. Under the provisions of the Paris Agreement, this cannot be completed before November 4, 2020.

Whether the United States ultimately achieves the GHG emission targets will likely depend, to some degree, on CO 2 emissions from electric power plants—one of the largest sources of U.S. GHG emissions. During the Obama Administration, the U.S. Environmental Protection Agency (EPA) promulgated a final rule for CO 2 emissions from existing fossil-fuel-fired electric power plants. The rule, known as the Clean Power Plan (CPP), appeared in the Federal Register on October 23, 2015.

The CPP is the subject of ongoing litigation, and in 2016, the Supreme Court stayed the rule for the duration of the litigation. In March 2017, President Trump issued an executive order that directed EPA to review the CPP (and other rulemakings) and "as soon as practicable, suspend, revise, or rescind the guidance, or publish for notice and comment proposed rules suspending, revising, or rescinding those rules." Pursuant to that order, EPA proposed to repeal the CPP in October 2017.

In a separate rulemaking, published in August 2018, EPA proposed to replace the CPP with the "Affordable Clean Energy" (ACE) rule. In this proposal, EPA determined that the agency had exceeded its authority with the Obama Administration's CPP. In the ACE rulemaking, EPA proposed a more narrow interpretation of best system of emission reduction , directing states (in contrast to EPA under the CPP) to establish performance standards for existing coal-fired electric generating units based on EPA-identified technologies (i.e., heat rate improvements) and other considerations (e.g., useful life of the unit). Many of the legal questions raised in the CPP proceedings will likely be central to any future legal challenges to the repeal of the CPP or the ACE rule if finalized.

An understanding of GHG emission source data and the underlying factors that affect emission levels might help inform the discussion among policymakers regarding GHG emission mitigation. A question for policymakers is whether U.S. GHG emissions will remain at current levels, decrease to meet 2025 targets, or increase toward former (or even higher) levels. Multiple factors—including economics, technology, and climate policies—will likely play a role in future GHG emission levels.

This report examines recent trends in CO 2 emissions from electricity generation and the factors that impact emission levels in that sector. The first section provides an overview of various sources of GHG emissions in the United States. The second section discusses CO 2 emissions from the electricity sector. The third section examines projections of CO 2 emissions in the electric power sector, with a particular focus on the role of the 2015 CPP final rule and other factors. The final section provides some concluding observations.

U.S. GHG Emissions

Figure 1 illustrates U.S. GHG between 1990 and 2016. As the figure indicates, U.S. GHG emissions increased 20% between 1990 and 2007 and then decreased by 10% over the next two years. Between 2010 and 2016, emissions decreased by 7%. Emissions in 2016 were roughly equivalent to 1994 emission levels.

In addition, Figure 1 compares recent U.S. GHG emission levels to the 2020 and 2025 emissions goals made pursuant to the 2009 Copenhagen Accord and 2015 Paris Agreement, respectively. As the figure indicates, 2016 U.S. GHG emission levels were 12% less than 2005 emissions levels.

GHG Emission Sources

GHG emissions are generated throughout the United States from millions of discrete sources: power plants, industrial facilities, vehicles, households, commercial buildings, and agricultural activities (e.g., soils and livestock). Figure 2 illustrates the breakdown of U.S. GHG emissions by gas and type of source. The figure indicates that CO 2 from the combustion of fossil fuels—petroleum, coal, and natural gas—accounted for 76% of total U.S. GHG emissions in 2016. Recent legislative proposals that would address climate change have focused primarily on CO 2 emissions from fossil fuel combustion.

Another method of reporting GHG emissions is by sector. Figure 3 illustrates the GHG emissions by sector between 1990 and 2016. As the figure indicates, GHG emissions in the electric power sector have historically accounted for the largest percentage of total U.S. GHG emissions. In the last decade, however, electric power emissions have decreased significantly (as discussed below). Whether that trend continues will likely play a large role in determining whether the United States meets its 2020 and 2025 emission targets.

CO2 Emissions from Fossil Fuel Combustion

Figure 4 illustrates the 2017 U.S. CO 2 emission contributions by sector from the combustion of fossil fuels. The electric power sector contributes the second-largest percentage (35%) of CO 2 emissions from fossil fuel combustion (2 percentage points behind the transportation sector). Within the electricity sector, the residential and commercial sectors each account for 13% of fossil fuel combustion CO 2 emissions, and the industrial sector accounts for 9% of fossil fuel combustion CO 2 emissions ( Figure 4 ).

Many GHG emission reduction programs (e.g., the Regional Greenhouse Gas Initiative) and legislative proposals have often focused on CO 2 emissions from the electricity generation sector due to the sector's GHG emission contribution and the relatively limited number of emission sources. In addition, electric power plants have been measuring and reporting CO 2 emissions to the EPA for multiple decades.

CO2 Emissions in the Electricity Sector

Figure 5 compares U.S. electricity generation with CO 2 emissions from the electricity sector between 1975 and 2017. As the figure illustrates, U.S. electricity generation generally increased between 1975 and 2007 and then decreased in 2008 and 2009. Historically, CO 2 emissions from electricity generation followed a similar course. However, in 2010, these trends decoupled. While electricity generation remained flat after 2010, CO 2 emissions continued a general trend of reduction. Thus in 2017, electricity generation was essentially equivalent to generation in 2005, while CO 2 emissions were 27% below 2005 levels.

The decrease in CO 2 emissions in the electricity sector in recent years was likely a result of several factors, including overall economic conditions and electricity market developments. Historically, annual U.S. GDP decreases are a relatively uncommon occurrence: The United States has seen an annual decrease in GDP seven times over the past 50 years. The 2.9% GDP decrease in 2009 was the largest GDP decrease during that time frame. The economic downturn in 2008 and 2009 resulted in a decrease of energy consumption (including electricity) across all economic sectors. The decline in electricity generation likely played a key role in the sharp decline in emission levels between 2007 and 2009.

Another factor contributing to the recent decrease in CO 2 emissions from electricity generation was the change in the electricity generation portfolio. Electricity is generated from a variety of sources in the United States. Some sources—nuclear, hydropower, and some renewables—directly produce no CO 2 emissions with their electricity generation. Fossil fuels generate different amounts of CO 2 emissions per unit of electricity generated (often described as carbon intensity). Figure 6 illustrates the relative comparison of CO 2 emissions between electricity produced from coal, petroleum, and natural gas. As the figure indicates, petroleum-fired electricity yields approximately 80% of the CO 2 emission of coal-fired electricity per kilowatt-hour of electricity. Natural-gas-fired electricity from a steam generation unit yields approximately 60% of the CO 2 emissions of coal-fired electricity per kilowatt-hour of electricity. Natural-gas-fired electricity from a combined cycle unit yields approximately 43% of the CO 2 emissions of coal-fired electricity per kilowatt-hour of electricity.

Therefore, a shift in the carbon intensity of the U.S. electricity generation portfolio would likely have (all else being equal) an impact on emissions from the electricity sector, which in turn, would have an impact on total U.S. GHG emissions.

Figure 7 illustrates the percentage of electricity generated by source between 2005 and 2017. As the figure indicates, the U.S. electricity generation portfolio has changed considerably in recent years. Highlights include the following:

Coal: Between 2005 and 2017, coal-fired generation decreased by 40%. Its contribution to total electricity generation decreased from 50% to 30%. Natural gas: Between 2005 and 2017, natural-gas-fired generation increased by 67%. Its contribution to total electricity generation increased from 19% to 32%. In 2016, natural gas surpassed coal in terms of percentage of total generation. Renewable energy: Between 2005 and 2017, non-hydro renewable energy generation increased by 343%. Its contribution to total electricity generation increased from 2% to 10%.

Several factors likely played a role in these recent changes. Due in large part to technological advances—particularly directional drilling and hydraulic fracturing —U.S. natural gas production increased dramatically (by 50%) between 2005 and 2015. In 2016, production declined by 2% compared to 2015 levels but increased slightly in 2017 (about 1% higher than 2016). Relatedly, the weighted average annual price of natural gas dropped by about 60% between 2005 and 2015. By comparison, the weighted average annual coal price increased by about 40% during that time frame. This change in relative fuel prices has played a key role in altering the economics of power generation (i.e., order of dispatch), leading to some natural gas displacement of coal in particular regions of the country. These market forces have played a role in the retirement of coal-fired electric power plants: Between 2006 and 2016, the number of coal-fired power plants decreased from 353 to 230.

Figure 8 provides a more detailed breakdown of the changes in generation from non-hydro renewable energy sources. The majority of the increased generation from renewable energy over the past 12 years is due to wind power, which increased 14-fold between 2005 and 2017. Although solar increased 96-fold over that time frame, the magnitude of wind generation exceeds solar generation: 254 Terawatt-hours of wind versus 53 Terawatt-hours of solar in 2017. Energy from wood fuels has remained relatively constant during this time frame. The increase in "other" renewable sources is due to increased use of landfill gas, which more than doubled between 2005 and 2017.

CO2 Emission Projections in the Electricity Sector

As the electricity sector contributes a large percentage (35%) of CO 2 emissions from fossil fuel combustion, policymakers and stakeholders are paying attention to both recent trends and future projections of CO 2 emissions in the electricity generation sector.

Multiple factors will likely impact CO 2 emission levels from the electricity sector. Some of these factors, which are identified below, are interrelated:

Electricity generation portfolio (e.g., whether recent trends in coal, natural gas, and renewable energy use continue); Prices of fossil fuels—particularly natural gas—and renewable energy sources; Federal and/or state policy developments; Economic impacts (e.g., level of GDP growth); and Improvements in demand-side energy efficiency (e.g., commercial and residential electricity use).

In recent years, several groups, including EPA and EIA, have prepared projections of CO 2 emission levels in the electricity sector. The results of these emission projections are compared in Table 1 . Many of the projections compare reference case scenarios with scenarios that assume implementation of the 2015 CPP final rule. All of the modeling scenarios below (except for EPA's 2015 projection) included the December 2015 renewable energy tax extensions.

When comparing a reference case to a CPP scenario in the same model, the results generally indicate that the 2015 CPP final rule would have an impact on 2030 CO 2 emission levels from electricity generation. The difference between the two scenarios (CPP versus non-CPP) appears to be greater in the earlier studies, because the reference case scenarios in more recent studies project lower emissions by 2030 when compared to earlier studies. For example, the 2017 EIA reference case estimate was a 22% reduction below 2005 levels by 2030; the 2018 EIA reference case estimate was 28% below 2005 levels by 2030. The 2017 Rhodium Group reference case estimate was a 26% reduction below 2005 levels by 2030; the 2018 Rhodium Group estimate was 35% below 2005 levels by 2030.

In EPA's August 2018 ACE rulemaking, the agency proposed, among other things, to replace the CPP. In the ACE rule, EPA proposed a more narrow interpretation of the "best system of emission reduction" than in the CPP, identifying a list of "candidate technologies" of heat rate improvement (HRI) measures at existing coal-fired units. Based on this list and other unit-specific consideration, states would establish unit-specific performance standards, in contrast to the numeric performance standards (and state targets) EPA prepared for the CPP.

Table 1 includes emission projections from the ACE proposal comparing CPP and non-CPP scenarios, as well as the HRI scenarios proposed in the rule. In the projections from the 2018 ACE rule, the CPP and non-CPP scenarios differ by 2% (4% with the CPP demand-side efficiency scenario). The estimated percentage emission reductions between the ACE proposal HRI scenarios to replace the CPP and the non-CPP scenarios range between 0% and 1%.

Figure 9 provides a comparison between the actual CO 2 emissions in the electricity sector (1990-2017) and the CPP and non-CPP scenario projections from the 2018 analyses prepared by EIA and EPA. The figure also includes the ACE proposal scenarios that would replace the CPP.

Concluding Observations

International negotiations and domestic policy developments continue to generate congressional interest in current and projected U.S. GHG emission levels. U.S. GHG emission levels will likely depend, to some degree, on CO 2 emissions from power plants. Historically, CO 2 emissions from electricity generation have followed an upward course similar to electricity generation levels. However, in 2010, their courses diverged. While electricity generation has remained flat in recent years, CO 2 emissions have continued a trend of reduction. In 2017, electricity generation was essentially equivalent to generation in 2005, while CO 2 emissions were 27% below 2005 levels.

Multiple factors generally impact CO 2 emission levels from the electric power sector. Recent changes in the U.S. electricity generation portfolio between 2005 and 2017 played a key role:

Coal's contribution to total electricity generation decreased from 50% to 30%; Natural gas's contribution to total electricity generation increased from 19% to 32%; and Non-hydro renewable energy (wind and solar) generation increased from 2% to 10%.

If these recent changes in the electricity generation portfolio continue, CO 2 emissions in the electricity sector will likely continue to decrease (assuming electricity consumption remains flat). Total U.S. GHG emissions should continue to decline as well, assuming the emission levels in other economic sectors remain flat.

Accurately forecasting future emission levels is a complex and challenging endeavor. Consequently, analysts often provide a range of emissions based on different scenarios or assumptions. The EIA provides annual forecasts of CO 2 emissions in its Annual Energy Outlook (AEO) publications. Regarding its various estimates, EIA states the following:

Projections in the Annual Energy Outlook 2018 (AEO2018) are not predictions of what will happen, but rather modeled projections of what may happen given certain assumptions and methodologies.... Projections in the AEO should be interpreted with a clear understanding of the assumptions that inform them and the limitations inherent in any modeling effort.

Figure 10 compares actual CO 2 emissions between 1990 and 2017 with selected EIA emission projections made in past years. In general, actual emissions have remained well below projections. For example, the AEO from 2006 projected that CO 2 emissions would be almost 6.9 billion metric tons in 2017, about 33% higher than observed emissions. By comparison, the more recent projections (AEO 2015 and AEO 2018) indicated that CO 2 emissions would remain relatively flat or experience modest declines through 2025.