U.S. Carbon Dioxide Emissions Trends and Projections: Role of the Clean Power Plan and Other Factors 
Released: 2017-05-31T00:00:00

Introduction

U.S. greenhouse gas (GHG) emission levels, particularly from carbon dioxide (CO 2 ), remain a topic of interest among policymakers and stakeholders. Recent international negotiations and domestic policy developments have generated attention to current and projected U.S. GHG emission levels. 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.

In December 2015, delegations from 195 nations, including the United States, adopted an agreement in Paris that creates 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 that agreement, the United States pledged (in 2015) to reduce GHG emissions by 26%-28% by 2025 compared to 2005 levels. This pledge supplemented a previous Obama Administration commitment to reduce U.S. GHG emissions by 17% below 2005 levels by 2020.

At the date of this report, U.S. involvement in the Paris Agreement remains uncertain. However, some recent reports indicate that President Trump is expected to withdraw from the agreement.

Whether the United States ultimately achieves the 2020 and 2025 targets will likely depend, to some degree, on GHG emission levels, particularly CO 2 emissions, from electric power plants—one of the largest sources of U.S. emissions. During the Obama Administration, the Environmental Protection Agency (EPA) promulgated standards for CO 2 emissions from existing fossil-fuel-fired electric power plants. EPA cited Section 111(d) of the Clean Air Act (CAA) as the authority to issue its final rule. The rule, known as the Clean Power Plan (CPP), appeared in the Federal Register on October 23, 2015.

The fate of the CPP is uncertain. First, the rule is the subject of ongoing litigation. A number of states and other entities have challenged the rule, while other states and entities have intervened in support of the rule. On February 9, 2016, the Supreme Court stayed the rule for the duration of the litigation. The rule therefore currently lacks enforceability or legal effect, and if the rule is ultimately upheld, at least some of the deadlines would likely be delayed.

Second, President Trump issued an Executive Order on March 28, 2017, that directs 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." In April, EPA began its review of the CPP and related power plant rules and may consider various options to revise or repeal the rules.

A question for policymakers is whether U.S. GHG emissions will remain at current levels, decrease to meet the 2020 and 2025 goals, 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 U.S. GHG emissions, particularly CO 2 emissions from electricity generation, and the factors that impact emission levels in that sector. In addition, this report examines the degree to which CPP implementation (or lack thereof) may impact CO 2 emission levels from electric power plants.

The first section provides an overview of various sources of GHG emissions in the United States. This includes an overview of CO 2 emissions from fossil fuel combustion and a closer look at CO 2 emissions from electricity generation, which account for the second-largest percentage of CO 2 emission from fossil fuel combustion (1 percentage point behind the transportation sector). The second section examines projections of CO 2 emissions in the electric power sector, with a particular focus on the role of the CPP and other factors. The final section highlights the challenges in making CO 2 emission projections with a comparison of actual CO 2 emissions with prior emission forecasts.

U.S. GHG Emissions

Figure 1 illustrates U.S. GHG between 1990 and 2015. As the figure indicates, U.S. GHG emissions increased during most of the years between 1990 and 2007. GHG emissions decreased substantially in 2008 and 2009 as a result of a variety of factors—some economic, some the effect of government policies at all levels. Over the last five years, emissions have fluctuated but have not surpassed 2009 levels. Emissions in 2015 were roughly equivalent to 1994 emission levels.

Figure 1 compares recent U.S. GHG emission levels to the 2020 and 2025 emission goals. Based on 2015 GHG emission levels, the United States is more than halfway to reaching the Administration's 2020 goal (17% below 2005 levels). U.S. GHG levels in 2015 were 11% below 2005 levels.

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 Energy Information Administration (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 2017 (AEO2017) are not predictions of what will happen, but rather modeled projections of what may happen given certain assumptions and methodologies.... The Reference case projection assumes trend improvement in known technologies, along with a view of economic and demographic trends reflecting the current central views of leading economic forecasters and demographers. It generally assumes that current laws and regulations affecting the energy sector, including sunset dates for laws that have them, are unchanged throughout the projection period.

Figure 2 compares actual CO 2 emissions between 1990 and 2016 with selected EIA emission projections made in past years. In general, actual emissions have remained well below projections. For example, the AEO from 2002 projected that CO 2 emissions would be almost 6.9 billion metric tons in 2015, about 33% higher than observed emissions. By comparison, the more recent projections (AEO 2014 and AEO 2017) indicated that CO 2 emissions would remain relatively flat or experience modest declines over the next decade.

GHG Emission Sources

GHG emissions are generated throughout the United States from millions of discrete sources: power plants, vehicles, households, commercial buildings, agricultural activities (e.g., soils and livestock), and industrial facilities. Figure 3 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 77% of total U.S. GHG emissions in 2015. Recent legislative proposals that would address climate change have primarily focused on CO 2 emissions from fossil fuel combustion.

CO2 Emissions from Fossil Fuel Combustion

Figure 4 illustrates the 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 (1 percentage point behind the transportation sector). Within the electricity sector, the residential and commercial sectors account for 14% and 13%, respectively, 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 from Electricity Generation

Figure 5 compares U.S. electricity generation with CO 2 emissions from the electricity sector between 1976 and 2016. As the figure illustrates, U.S. electricity generation generally increased between 1976 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 2016, electricity generation was essentially equivalent to generation in 2005, while CO 2 emissions were 25% below 2005 levels.

The decrease in CO 2 emissions in the electricity sector in recent years was likely a result of several factors. The economic downturn in 2008 and 2009 likely played a substantial role in both generation and emission levels. The U.S. gross domestic product (GDP) decreased in both of those years. Historically, annual GDP decreases are a relatively uncommon occurrence: The United States has seen an annual decrease in GDP 7 times over the last 50 years. The 2.9% GDP decrease in 2009 was the largest GDP decrease during that time frame.

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. 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, altering the U.S. electricity generation portfolio would likely have (all else being equal) a considerable impact on emissions from the electricity sector, which in turn, would have a meaningful impact on total U.S. GHG emissions.

Figure 7 illustrates the percentage of electricity generated by source between 2005 and 2016. As the figure indicates, the U.S. electricity generation portfolio has changed considerably in recent years. Highlights include the following:

Coal: Between 2005 and 2016, coal-fired generation decreased by 38%. Its contribution to total electricity generation decreased from 50% to 30%. Natural gas: Between 2005 and 2016, natural-gas-fired generation increased by 81%. Its contribution to total electricity generation increased from 19% to 34%. In 2016, natural gas surpassed coal in terms of percentage of total generation. Renewable energy: Between 2005 and 2016, non-hydro renewable energy generation increased by 254%. Its contribution to total electricity generation increased from 2% to 8%. Petroleum: Between 2005 and 2016, petroleum-fired generation decreased by 87%. Its contribution to total electricity generation decreased from 2% to less than 1%.

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 46%) between 2005 and 2016. Natural gas production levels reached record levels in 2011 and have increased further each year until declining in 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.

Figure 8 provides a more detailed breakdown of the changes in generation from non-hydro renewable energy sources. The vast majority of the increased generation from renewable energy over the past 11 years is due to wind power, which increased 13-fold between 2005 and 2016. Although solar increased 67-fold over that time frame, the magnitude of wind generation dwarfs solar generation (227 Terawatt-hours of wind in 2016 versus 37 Terawatt-hours of solar). 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 2016.

Electricity CO2 Emission Projections and the CPP

As previously discussed, CO 2 emissions from fossil fuel combustion account for the vast majority (77%) of total U.S. GHG emissions, and the electric power sector contributes a large percentage (35%) of CO 2 emissions from fossil fuel combustion. Therefore, 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, identified below in no particular order, are interrelated:

economic impacts (e.g., level of GDP growth); prices of fossil fuels—particularly natural gas—and renewable energy sources; electricity generation portfolio (e.g., whether recent trends in coal, natural gas, and renewable energy use continue); federal and/or state policy developments (e.g., CPP implementation, state renewable energy requirements); and improvements in demand-side energy efficiency (e.g., commercial and residential electricity use).

Most, if not all, of these factors are difficult to forecast with precision. In particular, the fate of the CPP is unknown, which raises a question: What impact would the CPP have on CO 2 emissions in the electricity sector?

Although it has been widely reported that the rule would require a 32% reduction in CO 2 emissions from the electricity sector by 2030 compared to 2005 levels, this percentage reduction comes from EPA's modeling of the effects of the rule in conjunction with other factors. The rule would establish uniform national CO 2 emission performance rates—measured in pounds of CO 2 per megawatt-hour of electricity generation—and state-specific CO 2 emission rate and emission targets. Each state would determine which measure to use to be in compliance.

Figure 9 compares EPA's projections of CO 2 emissions in the electricity sector resulting from the final rule with historical CO 2 emissions (1990-2015) from the electricity sector and projected emissions under EPA's baseline scenario. This scenario does not include the 2015 renewable energy tax extensions, discussed below. The figure indicates that the final rule would reduce CO 2 emissions in the electricity sector by 32% in 2030 compared to 2005 levels. Under the baseline scenario (i.e., without the CPP), EPA projects a 16% reduction by 2030 compared to 2005 levels. In terms of metric tons, EPA's CPP scenario would reduce an additional 377 million metric tons (or 15 percentage points) of CO 2 , compared to EPA's baseline scenario.

Based on EPA's Regulatory Impact Analysis , several factors may explain the emission results in 2030 between the baseline and CPP scenarios:

Demand-side energy efficiency (DSEE) improvements: States may employ DSEE improvement activities as part of their plans to meet their targets. In its analysis, EPA assumed that DSEE efforts would decrease total electricity generation by 8% in 2030 compared to its baseline projection. Coal generation decreases: EPA projected coal generation to decrease by 22%-23% in 2030 compared to its 2030 baseline projection. Natural gas generation increases: EPA projected natural gas generation to increase by 5%-18% in 2030 compared to its 2030 baseline projection. Renewable energy generation increases: EPA projected non-hydro renewable energy generation is expected to increase by 8%-9% in 2030 compared to its 2030 baseline projection.

Other organizations used models to compare baseline scenarios with various CPP scenarios. Table 1 lists the CO 2 emission projections from these groups and EPA. Some of these groups produced multiple projections, employing different assumptions of future activities: CPP implementation options (e.g., whether states engaged in emissions trading) and levels of energy efficiency improvements, among others.

All of the modeling scenarios below (except for EPA) included the December 2015 renewable energy tax extensions. On December 18, 2015, President Obama signed into law the Consolidated Appropriations Act, 2016 ( P.L. 114-113 ). The act, among other provisions, extended and modified the production tax credit (PTC) and the investment tax credit (ITC) for specific renewable energy technologies. Prior to the December 2015 development, the PTC had expired and the ITC was scheduled to expire at the end of 2016. The PTC will not be available to projects starting construction after December 31, 2019. However, PTC tax expenditures will continue after that date, because the PTC is available for the first 10 years of renewable electricity production. The ITC for solar is scheduled to decline from 30% to 26% in 2020, and 22% in 2021, before returning to the permanent rate of 10% after 2021.

In general, the modeling results in Table 1 indicate that the CPP would have a substantial impact on future CO 2 emission levels from electricity generation compared to scenarios that do not include the CPP.

Concluding Observations

Recent international negotiations and domestic policy developments have increased interest in current and projected U.S. GHG emission levels. In the context of international climate change negotiations, President Obama announced, on separate occasions, U.S. GHG emission reduction goals for both 2020 and 2025. Whether the United States ultimately achieves its goals would 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 remained flat after 2010, CO 2 emissions continued a trend of reduction. Thus in 2016, electricity generation was essentially equivalent to generation in 2005, while CO 2 emissions were 25% 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 2016 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 34%, surpassing coal in percentage of total generation in 2016; and renewable energy's contribution to total electricity generation increased from 2% to 8%.

If these recent trends in the electric power sector continue, CO 2 emissions in that sector may continue to decrease. Assuming this were to occur, some might question the importance of the CPP in terms of meeting U.S. GHG emission goals (e.g., 26%-28% below 2005 levels by 2025). However, modeling results cited above indicate that the CPP would have a substantial impact on future CO 2 emission levels from the electric power sector.