In 2009, the United States pledged at the United Nations Climate Change Conference in Copenhagen to reduce overall greenhouse gas emissions by as much as 83% by 2050 and by 17% as early as 2020. This pledge was made in the context of a line of legislative and regulatory attempts at CO2 regulation in the U.S., culminating with the U.S. Environmental Protection Agency’s Clean Power Plan (CPP) in 2015. The CPP would have led to a 32% reduction (from the 2005 level) in CO2 emissions from fossil fuel power plants by 2030—a reduction intended to provide between one-third and one-half of the U.S.’s total intermediate-term Paris Agreement commitment.(1) But, as so often happens, the political winds blew differently, and the succeeding Trump administration began the process of undoing the CPP and withdrawing from the Paris Agreement.(2)
. . . Before considering the future, it is worth examining just how far we’ve already come without any federal CO2 regulation (for existing power plants) in the U.S. Figure 1 illustrates historical CO2 emissions and natural gas prices from 2005 through 2017 (estimated). During that period, emissions have declined from nearly 2.7 billion tons to approximately 1.9 billion tons (∼30%), while revealing a strong link to natural gas prices. To be sure, while other factors (such as renewable energy incentives) also had an impact, the clearest means by which to reduce CO2 emissions has been to reduce the cost of generating electricity with less CO2-emitting fuels (i.e., substituting natural gas for coal). So successful have market forces been under the existing regulatory framework to date that estimated 2017 CO2 emission levels are already at the CPP’s 2025 target (albeit without accounting for electricity demand growth between 2017 and 2025), well exceeding the AEO’s own Reference Case projections for 2025.
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