Thursday, December 20, 2012

Where are U.S. CO2 Emissions Headed?

What’s been happening recently with respect to U.S. greenhouse gas emissions, and more importantly, what’s likely to happen in the future? 
Those who follow this issue closely probably already know that U.S. emissions from fossil fuel sources (principally carbon dioxide) have been declining recently.  This is due to a combination of a slowing economy, large new supplies of natural gas, tighter regulation of coal-based power plants, and individual efforts throughout the country to use energy more efficiently.   The accompanying chart shows U.S. CO2 emissions from 2000 through the first eight months of 2012, where the 2012 number is extrapolated to a full year.  Since 2007 the trend generally has been downwards, though the total briefly rose in 2010.  
Reasonably good news for the present, but where are things headed?  Obviously this will depend greatly on policy, which is far from settled.  However, a couple of recent projections of aggregate U.S. energy use shed some light.  First, the Energy Information Administration (EIA), the statistical arm of the Department of Energy, makes an annual forecast of long range U.S. energy demand.  The latest forecast, AEO2013, shows 5.69 billion tons of CO2 emissions in 2040.  That’s a decline from the peak shown in 2007, but an increase of about 1.5 percent over the 2010 number.  According to the EIA forecast, U.S. energy demand will rise by about 5 percent through 2040 but substitution of renewables for fossil fuels will ameliorate the gain in CO2. 
A different projection, however, comes from ExxonMobil Corporation.  That company also publishes an annual long range forecast of U.S. energy demand and supply (ExxonMobil).  In its 2012 forecast, U.S. energy demand actually declines by 9 percent between 2010 and 2040, while energy production shifts towards lower carbon fuels.  Consequently, according to this forecast, U.S. CO2 emissions will decline by 25 percent from 2010 to 2040. 
Of course independently made forecasts are not likely to wholly agree with one another.  But the difference between EIA and ExxonMobil is striking.  On the one hand an increase in energy demand and emissions, on the other a decrease in both.  What might account for such differences?
Most likely, the two forecasts differ substantially in their assumptions about future energy prices.  EIA lays out its assumptions, but ExxonMobil, as a private company, does not.  It seems safe to infer, though, that ExxonMobil thinks the price of fossil fuels will be higher than does EIA.  Such higher prices are not necessarily good news for consumers, but they do portend a different path for CO2 emissions. 
The reality is that future energy prices are impossible to predict, so it’s hard to say whether EIA or ExxonMobil’s CO2 projections are the more likely.  Nevertheless, the company’s forecast for U.S. CO2 emissions is more consistent with recent trends than is EIA’s.   In that respect, at least, we can hope that it is closer to the truth.   

1 comment:

  1. Mike,

    Thanks for the useful summary of these contrasting views. If I remember correctly, EIA specifically included the assumption of no new policies beyond those on the books. Exxon is now calling for a price on carbon in the form of a tax. So some of the difference in pricing assumptions may be explained by that. If so, Exxon is making a silent case for the likely success of a carbon tax.