PIIE Blog | RealTime Economic Issues Watch
The Peterson Institute for International Economics is a private, nonprofit, nonpartisan
research institution devoted to the study of international economic policy. More › ›
Subscribe to RealTime Economic Issues Watch Search
RealTime Economic Issues Watch

US Power Sector Meets 2020 Climate Change Target—for a Month

by | May 11th, 2012 | 02:21 pm

At the United Nations climate change conference in Copenhagen in 2009, the United States committed to cut greenhouse gas emissions 17 percent below 2005 levels by 2020—a target included in cap-and-trade legislation that had passed the House of Representatives earlier that year. With the death of cap-and-trade in the Senate and the Republican takeover of the House, America’s ability to meet this emission reduction goal has been in doubt. In January of this year, however, US emissions came in 13 percent below 2005 levels, and power sector emissions were down by more than 17 percent—achieving the 2020 target eight years early.

US Emissions Turn the Corner

The official US Greenhouse Gas (GHG) emissions inventory is published annually by the Environmental Protection Agency (EPA). Last month the EPA released numbers for 2010, showing a 5 percent decline relative to 2005 levels, but a 3 percent increase over 2009. This raised concerns among environmentalists that any progress the US had made towards reaching its 2020 emission reduction commitment was just a byproduct of the recession and that US emissions will continue to rise as the economy recovers.

It takes a while to properly inventory all greenhouse gas emissions, but the Energy Information Administration (EIA) publishes monthly data on energy sector CO2 emissions, which account for 79 percent of the US GHG total. According to EIA’s most recent Monthly Energy Review, energy-sector CO2 emissions were 8.3 percent lower in January 2012 than in January 2010, and 12.9 percent lower than in January 2005. Power sector CO2 emissions were down by more than 18 percent from the same month in 2005, almost all of which occurred over the past two years. While this monthly series can be pretty volatile, US CO2 emissions now appear to be on a structural decline—and at a rate capable of achieving America’s 2020 climate change commitment.

What’s Driving the Decline

The US energy sector emitted 480 million tons of CO2 during January of this year, down from 552 million tons during the same month in 2005. Of this 72 million ton decline, 34 million tons came from lower energy demand (figure 1). In the residential sector, this is mostly due to warm weather. This January was the fourth warmest on record, which lowered demand for home heating (figure 2). The industrial sector decline is a holdover from the recession. Indeed, industrial CO2 emissions rose 5 percent between January 2010 and January 2012 as industrial output picked up. The drop in transportation energy demand, however, is on a more structural decline thanks to high oil prices and new fuel economy regulations.

Figure 1 Reduction in monthly CO2 emissions
Million metric tons, January 2012 vs. January 2005

Figure 2 January average temperatures and residential energy demand
Degrees Fahrenheit and quadrillion BTU

Overall energy demand was down 6 percent in January relative to 2005 levels, and I expect a bit of a rebound in the months ahead. The other 38 million tons of monthly CO2 emission reductions came from fuel switching, however, and that is likely here to stay. Most of this occurred in the power sector, thanks to cheap natural gas and state and federal renewable energy incentives. Coal fueled 38 percent of US power generation in January of this year, down from 52 percent during the same period in 2005. Natural gas stole most of that market share, accounting for 27 percent of generation this January, compared to 15 percent in 2005 (figure 3). And with oil prices above $100 per barrel, petroleum’s share of power generation has fallen to less than 1 percent, while wind’s has grown to more than 4 percent (figure 4). Increased natural gas and wind generation are each responsible for 11 million to 12 million tons of January’s overall emissions decline, with nuclear, biomass, and other renewables delivering an additional 5 million to 6 million tons in reductions (figure 5).

Figure 3 Share of power generation—coal vs. natural gas
January average, 2005–12

Figure 4 Share of power generation—oil vs. wind
January average, 2005–12

Figure 5 Emission reductions from power sector fuel switching
Million metric tons, January 2005 vs. January 2012

Sustaining the Momentum

Projected improvements in vehicle and building efficiency will help keep US energy demand in check as the economy recovers. But power sector emissions will need to continue falling for overall CO2 emissions to reach the 17 percent target by 2020. The rapid growth in wind power generation over the past three years is unlikely to continue absent new policy support from Washington or state governments. Solar power should post some impressive gains in the years ahead, but will make only a limited dent in coal-fired power between now and 2020. Further medium-term electricity sector emission reductions, therefore, depend on a continued switch from coal to natural gas-fired power. Currently forecast natural gas prices combined with EPA air pollution regulations are well positioned to make that happen, allowing the United States to achieve its 2020 climate commitments absent cap-and-trade or other economy-wide climate legislation.

The hard part comes after 2020. Stabilizing global concentrations of GHG emissions will require much more than a 17 percent reduction, and that in turn will require going beyond natural gas fired power. Nuclear, renewables, and carbon capture and sequestration (applied to either coal or natural gas) will need to account for a significantly larger share of US electricity generation. And it will take policy to make that happen.

Comments (0)

Leave a Comment