Taking Stock 2024: US Energy and Emissions Outlook

Every year, Rhodium Group provides an independent projection of future US greenhouse gas (GHG) emissions under current policy and expectations for economic growth, future fossil fuel prices, and clean energy cost and performance trends. In the ten years since we released our first Taking Stock report, the US has made progress on a path to decarbonization. In 2023, US GHG emissions were 18% lower than they were in 2005. In addition, policies enacted at all levels of government have never been stronger for achieving even deeper cuts to emissions, including the passage of the Inflation Reduction Act (IRA) and Infrastructure Investment and Jobs Act (IIJA), adoption of a suite of federal regulations aimed at driving down emissions, and ambitious state action.

With all federal and state policies on the books as of June 2024, we estimate the US is on track to reduce its GHG emissions by 38-56% below 2005 levels in 2035, representing at least a doubling—and potentially as much as a four-times increase—from the pace of annual emissions abatement from 2005 to 2023. On the way to 2035, we find the US could reduce its emissions by 32-43% below 2005 levels in 2030. These emissions reductions under current policy are a measurable acceleration in mitigation even compared to our Taking Stock 2022 edition from just before the passage of the IRA, in which we found the US on track for a 24-35% reduction below 2005 levels in 2030. But they are not enough for the US to achieve its 2030 climate commitment under the Paris Agreement of a 50-52% reduction by 2030, or deep decarbonization by mid-century.

This range of emissions outcomes represents the impacts of current policy under three potential economic and technological scenarios: a low emissions case in which cheap clean energy technologies and relatively more expensive fossil fuels continue to drive a rush of investment into decarbonization technologies which face little friction in deploying to their economic maximum in an economy growing slightly slower than Congressional Budget Office expectations; a high emissions case in which more expensive clean energy technologies and rock-bottom prices for fossil fuels combined with more headwinds like interconnection queue delays and supply chain constraints battering clean energy deployment, plus economic growth consistent with the latest Congressional Budget Office projections; and a mid emissions case which splits the difference between these two extremes.

This level of decarbonization results from several key trends within the major-emitting sectors. And as we’ve found in the past, there’s a reshuffling of the order of the largest emitting sectors in the US.

In the transportation sector—currently the highest-emitting sector—emissions decline by 22-34% below 2023 levels in 2035. This is enabled in large part by EPA’s GHG emissions standards for light (LDV), medium (MDV), and heavy-duty vehicles (HDV), resulting in 64-74% of LDV sales being electric in 2032 and zero-emitting vehicles comprising 30-45% of all MDV and HDV sales in 2035.

Emissions from the power sector decline by 42-83% below 2023 levels in 2035. Despite persistently accelerating demand for electricity, we estimate that generation from zero-emitting sources like wind, solar, and nuclear could account for 62-88% of total generation in 2035, with unabated coal generation falling to near zero that year, driven both by the IRA’s subsidies and EPA’s newly finalized GHG emissions limits for power plants.

Industry, inclusive of emissions from oil and gas operations, sees far more modest declines of 2-15% below 2023 levels in 2035, but becomes the highest-emitting sector in the US in 2033. Most of the decline is from oil and gas operations, where emissions drop by 12-28% below 2023 levels in 2035, despite flat to increasing domestic production of both oil and natural gas, as EPA regulations reduce methane emissions from production, processing, and transportation. Other sub-sectors of industry see little change.

Building emissions drop by 9-12% as congressional action and EPA rules phase out the consumption of hydrofluorocarbons (HFC).

Despite this cause for optimism, sizeable challenges loom for achieving these ambitious results. One area of increasing attention is the impacts of accelerating electricity demand from a range of sources, including accelerating vehicle electrification, new domestic manufacturing facilities for clean energy technologies spurred on by the IRA, and an AI-driven surge in electricity demand from data centers. We project these drivers to increase demand for electricity by 24-29% over 2023 levels in 2035. Nearly half of the overall growth comes from the electrification of transportation, while growing electricity demand from data centers makes up 22% of the total increase.

Alongside increasing demand, supply-side headwinds are hampering deployment of clean generation. These include slow transmission build-out, onerous siting and permitting processes, and lengthy interconnection waits. We examine the impacts of these supply headwinds alongside demand growth from data centers and find that if data center demand grows by nearly triple by 2035 and developers struggle to install new wind and solar, power sector emissions could be more than 275 million metric tons (or 56%) higher than our mid emissions case.

Taken together, these results illustrate the importance of resolving supply-side headwinds in the face of growing demand, lest the grid not fulfill its potential of contributing to meaningfully lower levels of economy-wide emissions, and they underscore the importance of minimizing the growth of data center demand on the grid through efficiency and other approaches.

In addition, there is judicial and political uncertainty on the horizon, which could affect these results. A substantial portion of the economy-wide emission reductions we project results from regulations, which are drawing the ire of a conservative majority on the Supreme Court highly skeptical of the administrative state. These same regulations are also susceptible to rollbacks by the next presidential administration should they be more hostile to climate action. And, in the same vein of elections having consequences, and if past is prologue, a Republican trifecta controlling the White House, Senate, and House could potentially try to weaken or remove key aspects of the Inflation Reduction Act. On the other hand, Democratic control of the White House or a Democratic trifecta could potentially usher in another round of ambitious climate action, but the US will still have a long way to go, with a lot of policy action required, to advance to even deeper levels of decarbonization.

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Technical appendix