Annual Energy Outlook Released by Energy Information Administration

On June 25, the United States Energy Information Administration (EIA) released its most recent report on national energy topics, as well as projections of energy trends extending into 2035. The Annual Energy Outlook (AEO) tracks the changes in American energy production and consumption should “current laws and regulations [remain] unchanged” within the time frame of the study. The AEO also examines 29 other possible futures for U.S. energy issues, based upon various changes in the “markets, technologies, and policies” that affect the U.S. energy economy.

When predicting the future of U.S. carbon emissions, electricity prices, and renewable energy, the AEO breaks down into three distinct scenarios. The first of these, the “Reference” case, reveals how the United States would fare if Congress does not enact any changes to energy policy at all.

This includes allowing current policies, such as the tax credits for renewable energy production , to expire without reenactment. The second case, the “No Sunset” scenario, predicts what would happen if Congress makes no new policies, but prevents all existing legislation from expiring between now and 2035. Finally, the “Extended Policies” scenario includes all measures of the “No Sunset” case, but also anticipates new and ambitious efficiency standards for buildings, appliances, and vehicles that could be enacted by the Federal Government in the near future.

The effects of these policy scenarios on U.S. carbon emissions and average electricity prices are clear. In the “Reference” case, renewable energy prices would continue to fall, natural gas would continue to replace coal power, and energy efficiency would improve at a modest rate. However, the United States would miss President Obama’s proposed climate targets by a significant margin. The “No Sunset” case would speed up American investment in renewable energy and improve overall energy efficiency, but carbon emissions would still increase, albeit more slowly. The country would still not meet its climate goals. Finally, the “Extended Policies” scenario would see carbon emissions and electricity prices continue to fall over the next 20 years, because Americans would use less total energy and that energy would be from cleaner sources. Again, this scenario would not see the climate targets met, although the country would come very close.

Focusing on the “Reference” case, which required the least guesswork by the EIA about future U.S. energy policy, the AEO reports that the United States would shift towards a heavier reliance on natural gas and renewable energy sources in the coming decades. By 2035, natural gas would provide 28 percent of American electric power, up from 24 percent in 2010. Production from renewables, such as solar, wind, and geothermal installations, would rise from 10 to 15 percent over that same period of time. In contrast, coal’s share of electric power would fall from 48 percent to 38 percent. Carbon emissions from energy are predicted to remain relatively stable, even though the population will continue to increase. Without any new Federal regulations on greenhouse gases, carbon dioxide emissions are still projected to grow 2 percent by 2035, remaining below the 2005 level for the duration. This trend is largely due to the increased use of natural gas and renewable energy.

The AEO also details the specific energy effects of several proposed regulations, including the Corporate Average Fuel Economy (CAFE) standards for passenger vehicles and light trucks. Specifically, the EIA addressed the proposal of achieving 54.5 mpg for such vehicles by 2025. This standard would be slow to affect the country’s energy use, because of the time needed to change out old car and trucks for new, energy-efficient vehicles. However, by 2025 the CAFE standards could reduce carbon emissions from all light vehicles by 35 percent, according to EIA. These provisions are included in the AEO “Extended Policies” scenario only, and are a significant part of the energy efficiency differences between that case and the “No Sunset” scenario.

Overall, the AEO report shows positive environmental trends for the United States in the upcoming 25 years. The potential decrease in per-vehicle greenhouse gas emissions due to increased fuel economy standards is indicative of wider trends. In all cases studied by the EIA, the country is predicted to reduce the percent of energy generated by coal and oil, further reducing per-capita carbon emissions. Further, new renewable energy and energy efficient technologies are expected to curtail individual energy demand. However, these positive developments will likely not be enough to prevent the worst effects of climate change, which pose rising dangers to human and environmental health. Without implementing bold measures such as carbon pricing, cap and trade, stronger building/appliance/vehicle standards, or a national clean energy standard (all left out of the modest legislation examined in the “Extended Policies” scenario) U.S. emissions will continue to lead to a warmer planet.

Beyond the scope of the AEO report, important questions need to be addressed regarding the economic and global competitiveness impacts that would result if the clean energy tax credits were to expire without the implementation of additional policies to encourage clean energy development.