United States: Governmental Policies, Corporate Involvement, And Utility Focus Will Play Critical Role In Overcoming Increase In CO2 Emissions

Last Updated: February 13 2019
Article by Erica E. Youngstrom and Eric A. Lauria-Banta
Most Read Contributor in United States, September 2019

A January 8, 2019, report released by the Rhodium Group, an energy-research firm, shows that the renewable energy industry still has not reached its full potential, as it reflected that carbon dioxide ("CO2") emissions in the U.S. increased 3.4 percent in 2018 after declining the three prior years. This rise in emissions is a setback for the U.S. goal under the Paris Agreement to reduce emissions by at least 26 percent from 2005 levels, by 2025. Despite President Trump's June 1, 2017, announcement that the U.S. is pulling out of the Paris Agreement, the U.S. is still technically subject to the treaty until next year. In order to achieve its emission reduction goal under the Paris Agreement, the U.S. will need to more than double the pace of its carbon emission reductions—an effort that will require "a fairly significant change in policy in the very near future and/or extremely favorable market and technological conditions."

There are signs, however, that the significant policy shifts required to meet the Paris goals are occurring. While the most high-profile policy initiative to take shape in recent months is the passage of California's SB100, which requires 100 percent carbon-free electricity by 2045, California is not alone in its ambitious efforts to reduce CO2 emissions. Indeed, New York Governor Andrew Cuomo recently announced a plan to transition New York to 100 percent carbon-free electricity by 2040. Moreover, governors-elect in Colorado, Connecticut, Illinois, Nevada, and Minnesota have all called for 100 percent renewable plans. In addition, high-profile freshman democrats in the U.S. House of Representatives have made the "Green New Deal" a cornerstone of their policy agenda. The Green New Deal is still loosely defined, but it refers to large-scale investments in clean energy and infrastructure by the federal government.

Consistent with these policy initiatives, energy sector participants are accelerating the pace of their plans to transition to clean energy, with U.S. clean energy investment hitting a record level of $64.2 billion in 2018, despite declines in other parts of the world. Xcel Energy, one of the largest U.S. utilities, recently became the first major U.S. utility to commit to going completely carbon free, with a target level of 80 percent carbon free by 2030 and 100 percent carbon free by 2050. In addition, more than 150 corporations have joined RE100, a global initiative uniting businesses committed to procuring 100 percent of their energy needs from renewable resources. The impact of this commitment is significant, as these companies combine for more than 188 terawatt hours of electricity demand per year—equivalent to the electricity demand of the 23rd largest country in the world—and have a total combined revenue of more than $4.5 trillion. This demand will help drive continued investments in renewables.

Transactional activity facilitating investments in zero-carbon technology is also on the rise in the traditionally fossil fuel-centered oil and gas sector. For example, last year, the first U.S. oil and gas companies joined the Oil and Gas Climate Initiative, a group aimed at mitigating the risks of climate change by investing in low-carbon technologies and encouraging operational improvements, such as reducing methane intensity. In addition, a number of major U.S.-based oil and gas companies have launched venture capital funds to invest in new carbon reduction technologies, such as carbon capture and algae biofuels. Others have begun to pivot completely away from fossil fuels into renewable energy projects, such as offshore wind farms.

Thus, to the extent that the recent U.S. CO2 emissions increase provides an impetus for further renewable energy development, these initiatives demonstrate that that the energy sector can expect to see a wide range of participants driving the transition to clean energy and the attendant reduction in CO2 emissions.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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