Policies & action
Policies and action rating
According to our analysis, the US will need to implement additional policies to reach its targets. We project GHG emissions will reach between 4.9 and 5.4 GtCO2e in 2030 (excl. LULUCF). This is equivalent to 28%–34% reduction from 2005 levels (excl. LULUCF), which is insufficient to meet the NDC target (44%–49% excl. LULUCF).
The Inflation Reduction Act (IRA), passed a year ago, represents a significant milestone in US climate policy. While its full impact is still unfolding due to the nature of its 10-year plan, the first year has shown promise. The IRA is mobilising historic investments in clean energy, driving clean projects, creating jobs, and attracting private sector funding.
However, the government needs to complement these advancements with equally bold sector-specific policies and a shift away from fossil fuels in order to achieve its domestic emissions reduction target, let alone reach a 1.5°C-compatible emissions level.
The projected emissions trajectory range in this update is narrower than the previous one, thanks to more refined baseline projections that better capture the implications of the IRA.. The range of policy projections for the US falls into the “Insufficient” category.
The “Insufficient” rating indicates that the US’ climate policies and action in 2030 need substantial improvements to be consistent with the 1.5°C temperature limit. If all countries were to follow the US approach, warming would reach over 2°C and up to 3°C. The Biden administration has set the goal to decarbonise the power sector by 2035, which is consistent with a Paris Agreement pathway.
Further information on how the CAT rates countries (against Modelled domestic pathways and fair share) can be found here.
According to our analysis, the US will need to implement additional policies to reach its targets. If no further policies are implemented, the CAT projects that, after an increase in GHG emissions in 2021-2022, US emissions will decline and reach between 4.9 and 5.4 GtCO2e/year by 2030 (28%–34% below 2005 levels; and 17%–24% below 1990), excl. LULUCF.
Our projections of US policies and action include policy provisions of the USD 369bn Inflation Reduction Act (IRA), enacted in August 2022 and the USD 1.2tn Bipartisan Infrastructure Law (BIL), also known as the Infrastructure Investment and Jobs Act, enacted in November 2021.
Compared to CAT projections in August 2022, the US emissions projections range, based on existing policies, got narrower in 2030. The upper bound decreased by 5% and the lower bound increased by 5%. The main drivers of this change are:
- Refined baseline projections of the impact the IRA on energy-related CO2 emissions (using latest Energy Information Administration’s (EIA) Annual Energy Outlook).
- Quantification of the IRA on non-CO2 emissions across all sectors
- Potential impact of the IRA on carbon capture and storage
- Updated quantification of the phase down in hydrofluorocarbons (HFCs) production and consumption over the next 15 years (per the Aim Act).
By 2022, the US had already achieved roughly one third of the GHG emissions reduction needed to meet its 2030 target, relative to 2005 levels. This trend has largely been a consequence of market forces that have displaced carbon-intensive coal with cheaper fossil gas and renewables.
The CAT estimates the IRA will contribute an additional 30%–44% toward closing the gap, in contrast to a gap of 21%–23% before its implementation, thereby illustrating the importance of this ambitious climate policy.
Despite current policies projections show that emissions will continue declining until 2030, the CAT estimates that the US would only achieve 63%–77% of its total emissions reduction target. This indicates that a significant gap of 23%–37% would still need to be addressed with additional climate action and policies to reach its climate target. The US needs to implement additional policies as policy gap projections to 2035 continue to widen. It should also be noted that this target is not 1.5˚C compatible.
Inflation Reduction Act
The IRA marks a substantial shift in U.S. climate policy and may give the world's largest historical emitter credibility in global climate diplomacy and leadership for the first time, although this credibility is undermined by its rising oil and gas production – as discussed in the energy section below.
The ambitious legislation injects USD 370bn in the form of tax credits, grants and loans directed to develop and deploy the clean energy technologies and investments that will be essential to decarbonisation of the economy (The White House, 2023b). At the same time, it sends a long-term signal to the industry that might slow the pace of emissions reductions over the next decade.
While the full impact of this 10-year plan is not yet apparent, its first year of implementation has shown promising outcomes. The IRA is facilitating historic investments in clean energy, spurring a surge in clean projects nationwide, leading to the creation of numerous new jobs, and attracting private sector investment. It is also accelerating climate action at the state and local levels.
In its first year of IRA, the EPA made USD 250m available for climate action plan development, with participation from states and major cities. The IRA also empowered the EPA to establish the Greenhouse Gas Reduction Fund, a USD 27bn initiative aimed at mobilising private capital to combat climate change and enhance the clean financing market.
The EPA has initiated three grant competitions under this fund (USD 7bn for Solar for All, USD 14bn for National Clean Investment Fund, and USD 6bn for the Clean Communities Investment Accelerator). Additionally, the IRA introduced the Environmental and Climate Justice Program, set to launch this fall, offering over USD 2bn in grants and USD 200m in technical assistance to community-based organisations addressing climate-related priorities (U.S. Environmental Protection Agency, 2023h).
Largely driven by key legislation such as the BIL and the IRA, the US has witnessed a significant surge in public and private investments in the last couple of years. These initiatives have mobilised substantial funding towards infrastructure and clean energy projects: USD 302.4bn towards public infrastructure and clean energy investments, including electric vehicle (EV) charging infrastructure, clean energy deployment, climate resilience, and clean manufacturing (The White House, 2023e). Notably, within six months of the passage of the IRA, over 75 large-scale manufacturing investments were announced in the US, totalling billions in investment (Financial Times, 2023).
The BIL and IRA have also set the stage for historic levels of private sector investments in the US, leading to record-high spending on manufacturing and industrial construction, adjusted for inflation (U.S. Department of the Treasury, 2023b). Clean energy manufacturing investments have exceeded USD 110bn in the last year, with a focus on the EV supply chain and solar manufacturing. Project developers have also planned investments worth over USD 122bn across more than 800 clean power generation projects — totalling over 80 GW (The White House, 2023c). Given the scale of the public investment, some studies suggest that the IRA alone will spur USD 3tn in private investments over the next decade (Goldman Sachs, 2023).
These investments are translating into job creation, with estimates showing the IRA provisions have already generated over 170,000 clean energy jobs. These job opportunities span various sectors, including wind, solar, batteries, electric vehicles, and storage projects (Climate Power, 2023). Furthermore, the investments are aimed at promoting justice by targeting disadvantaged communities and rural areas. Many of the clean energy and electric vehicle investments that have been announced are concentrated in these communities, contributing to job creation and economic development (U.S. Department of the Treasury, 2023a).
Interestingly, the majority of new clean energy projects, investments, and jobs are concentrated in Republican-represented districts, underscoring the bipartisan nature of these initiatives. The so-called 'Red states’ and Republican congressional districts are benefiting the most from the IRA, with a substantial portion of projects and investments located in these areas. About 72% of all jobs and 86% of investments announced were in Republican districts. This highlights the broad geographic impact and political reach of these transformative investments (Climate Power, 2023; E2, 2023).
Spurred by the IRA and the midterm election results, some Democratic states have recently introduced or passed stronger climate policies. For instance, Massachusetts, Michigan, and Minnesota are all slated to introduce strong clean energy policies and targets (Joselow & Montalbano, 2023).
By offering incentives and unlocking financial avenues through tax credits and innovative financing, the IRA has instilled confidence within the private sector to embark on this transformative transition. The IRA has not only charted the course for decarbonisation but has firmly embedded this momentum into the market. Its enduring impact is unlikely to waver, as the implementation of ambitious policies such as the IRA and the response of the public and private sectors are ensuring that the market will remain a powerful force propelling the transformation.
Although the IRA is a step in the right direction, the US will need to implement additional policies and actions to achieve the pace and scale of decarbonisation needed to meet its domestic emissions reduction target. The Act should be the first solid building block for a leap towards more ambitious action among different actors to further close the gap to meet the US NDC.
Other policy advancements
Alongside the IRA, the Biden administration has begun updating several outdated energy efficiency standards. These positive developments add to the EPA’s recent proposals to update and make stricter emission standards for vehicles and emissions limits on some fossil fuel-fired power plants. Although these proposals could be more ambitious, there is also the risk that the regulations will not pass due to opposition from Congress. Their enactment would help contribute to closing the US’ remaining ambition gap.
Counterproductive fossil fuel concessions
Despite the remarkable provisions of the IRA to support clean energy and tackle climate change, the Act also includes several concessions for the fossil fuel industry. President Biden could leverage his power better to minimise the negative impact of the concessions.
In March 2023 the Biden Administration approved the Willow Project, a significant oil drilling project in Alaska’s National Petroleum Reserve. In the same month, the Department of the Interior announced an auction on 73 million acres in the Gulf of Mexico due to a provision required by the IRA. However, the scale and scope of the leased land could have been less (U.S. Bureau of Land Management, 2023a; U.S. Bureau of Ocean Energy Management, 2023a). In July, the Supreme Court authorised the construction of the Mountain Valley Pipeline – a 500-km-long project to transport gas from West Virginia to Virginia (AP News, 2023; U.S. Department of Agriculture, 2023).
Glasgow sectoral initiatives
Several sectoral initiatives were launched in Glasgow to accelerate climate action on methane, the coal exit, 100% EVs and forests. At most, these initiatives may close the 2030 emissions gap by around 9% — or 2.2 GtCO2e, though assessing what is new and what is already covered by existing NDC targets is challenging.
For methane, signatories agreed to cut emissions in all sectors by 30% globally over the next decade. The coal exit initiative seeks to transition away from unabated coal power by the 2030s or 2040s and to cease building new coal plants. Signatories of the 100% EVs declaration agreed that 100% of new car and van sales in 2040 should be electric vehicles, 2035 for leading markets, and on forests, leaders agreed “to halt and reverse forest loss and land degradation by 2030”.
NDCs should be updated to include these sectoral initiatives, if they aren’t already covered by existing NDC targets. As with all targets, implementation of the necessary policies and measures is critical to ensuring that these sectoral objectives are actually achieved.
|Included in NDC?
|Taking action to achieve?
|No, but two states are members
|No, but three states and some subnational governments are members
|Beyond oil and gas
|No, but two states are members
- Methane pledge: The US spearheaded launch of the Global Methane Pledge, along with the EU. The Biden Administration released its Methane Emissions Reduction Action Plan in 2021. The plan seeks to reduce emissions from all major sources through regulations, financial incentives and public-private partnerships, and includes USD 20bn in new investments targeted at reducing methane emissions (The White House, 2022a). The IRA provided USD 1.5bn for the Methane Emissions Reduction Fund, which aims to monitor and reduce emissions from petroleum and natural gas systems through financial and technical assistance. It also established a ‘waste emissions charge’ per ton of methane emissions to oil and gas facilities that exceed emissions thresholds (The White House, 2023b). Methane is an important source of GHGs emissions in the country, representing 13% of total GHGs in 2021 — split between the oil and gas industry (~38%), agriculture (~35%) and waste (~18%) sectors (U.S. Environmental Protection Agency, 2023b).
- Coal Exit: The US did not adopt the coal phase-out statement. Although coal was the main source of electricity in the US less than a decade ago, its share in the energy mix has been decreasing due to market forces that have increased the extent of cheaper renewables and gas in the mix. The EIA's long-term energy projections show that the US will have no new coal-fired power plant capacity additions in the future (U.S. Energy Information Administration, 2023c).
- 100% EV: The US did not adopt the EV target during COP26, but the US is co-leading the Glasgow Breakthrough agenda on road transport (Race to Zero, 2021). The transport sector accounts for around 28% of total national emissions and represents the largest emissions source by sector.
Despite the absence of the federal government, US non-state actors signed the declaration including states, cities, and automakers (UK COP 26 Presidency, 2021a). President Biden set a goal to make 50% of all new vehicles sold in 2030 zero-emissions vehicles (The White House, 2021d). The IRA includes several provisions and funding streams to support the transition to electric mobility, and the EPA has recently proposed new vehicle emissions standards aimed to accelerate EV uptake. However, the current US target for EV sales is less ambitious than the Glasgow pledge.
- Forestry: The US signed the forestry pledge at COP26. The US is also a signatory of the New York Declaration of Forests, which aims at halting natural forest loss by 2030, improving governance, increasing forest finance, and reducing emissions from deforestation and forest degradation as part of a post-2020 global climate agreement (Forest Declaration Platform, 2022).
- Beyond oil and gas: The US has not joined the ‘Beyond Oil & Gas’ initiative to end oil and gas exploration and production. On the contrary, it is currently increasing both oil and gas production and exports. On the state-level, California is a founding, associate member of the Beyond Oil and Gas Alliance (BOGA), while Washington state joined the Alliance at COP27 in 2022 (Beyond Oil and Gas Alliance, 2021, 2022).
In addition to these initiatives, the US, together with 25 other countries and financial institutions, pledged to end international public support for the unabated fossil fuel energy sector by the end of 2022 and instead prioritise support for the clean energy transition (UK COP 26 Presidency, 2021b). However, the Biden Administration is now contradicting this pledge (Copley, 2023) – more detailed information on US climate finance can be found in rating of targets.
Electricity supply contributed to 25% of total US GHG emissions in 2021 (excl. LULUCF) (U.S. Environmental Protection Agency, 2023b). Total annual emissions in the power sector have declined steadily since 2010, mainly driven by a shift from coal to lower or non-emitting sources of generation, such as fossil gas and renewables. Electricity production from renewables overtook coal and nuclear power for the first time in 2022, making it the second largest source of electricity generation after fossil gas (U.S. Energy Information Administration, 2023h).
Following a dip in emissions during the COVID-19 pandemic, CO2 emissions in the power sector bounced back to pre-pandemic levels as the economy recovered. In 2021, electricity generation and emissions from coal-fired power plants increased for the first time since 2014 by 16% and 15%, respectively. Emissions in the power sector rose because of increased electricity generation and the higher carbon intensity of electricity generation (U.S. Environmental Protection Agency, 2023b). The marked increase in coal-fired generation in 2021, and its high levels sustained in 2022, are mainly attributable to the significantly higher and more volatile prices of fossil gas as a consequence of the energy crisis, which made coal more competitive (U.S. Energy Information Administration, 2021b, 2023n).
2035 power sector decarbonisation target
The Biden Administration has announced a target of a carbon-free electricity system no later than 2035. CAT estimates that full decarbonisation of the power sector by 2035 would reduce emissions by about 25% below 2005 levels by 2030. The goal of carbon-free power supply by 2035 is aligned with the Paris Agreement, based on the benchmarks defined by the CAT (CAT, 2023). If accompanied by ambitious electrification targets in other sectors, such as 100% EV sales by 2030 or the full electrification of building heating, it would put the US on track to meet the target of 50%–52% below 2005 levels (Climate Action Tracker, 2021b).
However, emissions in the power sector must rapidly reduce to reach this target. The stimulus provided with the IRA is instrumental to achieving this target, but it needs to be complemented with equally ambitious policies, such as passing the proposed rule to limit emissions from power plants or establishing a federal level Renewable Portfolio Standards (RPS) (see discussion below).
The emissions intensity of total electricity generation in the US has decreased over the past 15 years, from 636 gCO2/kWh in 2001 to 447 gCO2/kWh in 2016. Including the impact of the IRA in the sector, the CAT projects that the emissions intensity of electricity generation would be 153 gCO2/kWh in 2035, a long way from the goal of 0 gCO2/kWh.
The Bipartisan Infrastructure Law (BIL), adopted in 2021, includes investments to modernise the nation’s electricity grid, deploy energy storage systems, and develop infrastructure to facilitate the integration of higher shares of renewables. The Infrastructure Law has enabled the US government to launch several programmes aimed at decarbonising the power sector, such as reinforcement of the grid, energy efficiency, support for distributed energy resources and the rescue of nuclear power plants.
The Inflation Reduction Act, building on the BIL, establishes further programmes and financial incentives to advance the manufacturing and deployment of renewable energy, increase energy security and affordability, and reduce GHG emissions (Steinberg et al., 2023). Framed with President Biden’s goal of 100% clean electricity by 2035 and a zero emissions economy by 2050, some of the supported or newly established programmes include:
- Clean energy production and investment tax credits: Driving most recent wind and solar deployment, the Biden Administration has modified and extended current production and tax credits through 2024, at which point they transition towards technology-neutral, emissions-based credits in the form of the Clean Electricity Production Tax Credits. Both credits incentivise investment in disadvantaged communities and provide additional bonuses to wind and solar projects in low-income neighbourhoods (The White House, 2023b).
- Greenhouse Gas Reduction Fund: The IRA has provided the EPA with USD 27bn in funding to finance clean energy and climate projects, which established the National Clean Investment Fund (USD 14bn), the Clean Communities Investment Accelerator (USD 6bn), and the Solar For All (USD 7bn) grant programmes to facilitate access to capital and technical assistance for installing clean technologies (U.S. Environmental Protection Agency, 2023f).
- Efficient permitting of energy infrastructure: The IRA includes funding to support the Permitting Action Plan, released in May 2022, which seeks to accelerate the federal permitting and environmental review process for transmission lines and clean energy productions.
- Support the maintenance of the existing nuclear power fleet: The IRA includes the Zero-Emission Nuclear Power Production Credit for electricity produced at nuclear power facilities, building on the Civil Nuclear Credit programme established in the BIL (The White House, 2023b). Although nuclear electricity generation does not emit CO2, the CAT does not see nuclear as a solution to the climate crisis due to its inherent risks (accidents, proliferation, etc), high and increasing costs compared to renewable energy alternatives, long construction times, incompatibility with intermittent RE generation, and its vulnerability to environmental and climate extreme events.
In May 2023, the EPA proposed new regulations titled Greenhouse Gas Standards and Guidelines for Fossil-Fuel Fired Power Plants. The proposal aims to set the tightest carbon emissions limits ever for coal-fired power plants as well as new and existing large fossil gas plants, meaning that almost all coal and gas-fired power plants would have to cut or capture nearly all of their carbon dioxide emissions by 2040 (U.S. Environmental Protection Agency, 2023d).
The current proposal exempts coal-fired plants set to retire before 2035, while those retiring between 2035 and 2040 would need to reduce emissions by 16% through measures like co-firing with 40% fossil gas. Coal plants expected to operate beyond 2040 are required to use carbon capture and storage (CCS) with 90% capture of CO2 by 2030 to reduce their emissions intensity. These requirements are expected to accelerate coal plants retirements before the 2040 deadline, resulting in an additional 22 GW of coal-fired capacity going offline between 2023 and 2035 (U.S. Environmental Protection Agency, 2023e).
The proposed emissions standards for fossil gas distinguish between baseload and peak power plants (only applying to baseload plants larger than 300MW), and between newly built and existing facilities. Plants have the option to capture 90% of emitted carbon using CCS by 2035 or transition to 96% hydrogen fuel use by 2038. If implemented, these standards could reduce fossil gas power emissions by around a cumulative 200–400 MtCO2e in the mid-2040s. The combined cumulative reductions for both coal and fossil gas are over 600 MtCO2e by 2050. (U.S. Environmental Protection Agency, 2023e). While setting emissions limits for power plants is a step in the right direction, the majority of fossil gas plants will not be covered under the new proposal due to the baseload power requirements.
While the proposed regulations do allow for the possibility of CCS solutions, it is worth noting that CCS is currently not a viable option for implementation at scale by 2040. Hence, if this proposal is enacted, our estimation is that the majority of fossil-fueled power plants subject to the proposed regulations will be required to cease operations by 2040.
To enhance its impact, the regulation could cover a wider proportion of existing fossil gas facilities and establish more ambitious timelines. However, the proposal is not finalised and is expected to face legal challenges. It has already faced criticism from Republican members of Congress, making its outcome highly dependent on the outcome of the 2024 elections (Guillén, 2023).
The EPA has encountered numerous challenges in regulating GHG emissions from power plants in the past, including two failed attempts during the Obama and Trump administrations. Most recently, the US Supreme Court ruled to limit the EPA’s ability to regulate carbon emissions from power plants in June 2022 (West Virginia v. EPA, 2022). The decision sets a worrying precedent for future climate action.
In parallel, the US passed stricter standards for power plants where pollution crosses states lines (U.S. Environmental Protection Agency, 2023a). The US EPA has also proposed stronger limits for mercury and water pollution from coal-fired power plants. These rules do not target global warming gases directly but limit the operation of coal power plants and could indirectly accelerate their phase out (U.S. Environmental Protection Agency, 2023c, 2023i).
Renewable energy status and outlook
In 2022, electricity generation from renewable sources overtook coal and nuclear power for the first time, making it the second largest source of electricity generation after fossil gas (U.S. Energy Information Administration, 2023i). Market forces and the IRA are expected to continue to drive the growth of renewables in the electricity sector in the future, displacing coal and gas-fired power plants.
In 2022, approximately 22% of total US electricity generation came from renewables, with wind (10%), hydropower (6%) and solar (3%) generation leading. Electricity generation from wind and solar continued growing in 2021 by 29% and 12% compared to 2020, respectively. In 2022, solar and wind capacity increased to more than 238 GW, up 13 GW or 5% from 2021. Nearly three quarters of total new capacity additions in 2022 were renewable technologies.
Through Executive Orders, the Biden Administration is using government purchase power to stimulate renewable energy development and has set a target to double clean energy permits on public lands to reach 25 GW of renewable power generated by 2025. In pursuit of this goal, the Bureau of Land Management aims to approve a cumulative 6 GW of renewable energy development on public lands by the end of FY 2023 (U.S. Department of the Interior, 2023a). The EIA estimates in its baseline scenario, which is used for CAT projections, that cumulative renewable power generation capacity additions through 2025 will amount to 67 GW, for which the 25 GW on public lands would be critical. However, these additions are still far from reaching the 2035 power sector decarbonisation target (U.S. Energy Information Administration, 2023c).
The US Department of Interior announced a plan to deploy 30 GW of offshore wind by 2030 and gave access to USD 3bn in federal loans for offshore wind and transmission projects. By the end of FY 2023, the Bureau of Ocean Energy Management aims to approve a cumulative 14.8 GW in offshore wind energy capacity to support the 2030 target (U.S. Department of the Interior, 2023a).
At the subnational level, 32 states and the District of Columbia have enacted legislation or set forth by state-level executive branch entities mandatory renewable portfolio standards (RPS). Of these, 11 states and D.C. have enacted 100% clean electricity goals into legislation and seven states have done it through state-level executive orders (U.S. Energy Information Administration, 2023b).
The IRA includes numerous provisions to support the development of renewables, which is reflected in a significant increase in the projected share of renewables and an accelerated decarbonisation of the sector. The EIA’s Annual Energy Outlook 2023, used as the reference scenario for the current policy projections, shows that the implementation of the IRA leads to a 36% reduction in projected emissions in the sector by 2030 (U.S. Energy Information Administration, 2023c). The EIA projects that the share of renewables in total electricity generation will increase significantly in the future, reaching 47% in 2030 and 62% in 2050. However, these penetration levels are not enough to meet President Biden’s goal of a carbon-free power sector by 2035. In order to be aligned with the Paris Agreement, CAT estimates that 68%-86% of the electricity generated in the US by 2030 should come from renewable sources (CAT, 2023).
Coal status and outlook
In 2022, 20% of total US electricity generation came from coal, which made up 19% of US energy sector GHG emissions. Coal-fired power generation has generally declined year on year over the last decade, while fossil gas and renewable energy sources increased their share in the generation mix. In 2016, fossil gas became the main source of power generation, which was previously dominated by coal.
In 2023, 8.9 GW of coal-fired power plants are expected to retire, corresponding to 4.5% of current coal-fired capacity at the start of the year. Annual coal retirements averaged 11 GW between 2015 to 2020, but declined to 5.6 GW in 2021 due to increased coal-fired electricity generation from high fossil gas prices. Coal retirements rebounded to 11.5 GW in 2022 despite even higher fossil gas prices, although this may have been influenced by other factors, such as an aging coal fleet, environmental regulations, and competition from renewable energy sources (U.S. Energy Information Administration, 2023d).
Although high fossil gas prices resulted in more coal-fired generation in 2021, this is not expected to affect the trend of lower coal use in the future. Nearly 30% of the coal-fired generating capacity has been retired since 2010, no new coal-fired capacity has been installed since 2013, and more coal power plants are due to be decommissioned in the near future (U.S. Energy Information Administration, 2021a, 2023d, 2023j).
The EIA’s Annual Energy Outlook 2023, used as the reference scenario for the current policy projections, shows that there will be no new capacity additions of coal-fired power plants in the US. In the reference case, coal-fired capacity is projected to decline by 64% to 73 GW by 2050 (U.S. Energy Information Administration, 2023e). This means that while market forces are pushing away coal from the mix, as evidenced in the last decade, a full phase out of coal power require policy action to achieve the target of fully decarbonising the power sector by 2035. Contrary to many of its peers, the US has not signed the past coal alliance to accelerating the transition from coal to clean energy (Powering Past Coal Alliance, 2019). According to the CAT, the US needs to phase out all coal-fired power generation by 2030 to be aligned with the Paris Agreement (CAT, 2023).
Oil and gas
The US is the world’s top oil and fossil gas producer
In 2018, the US became the world’s largest producer of crude oil (U.S. Energy Information Administration, 2018). While this trend was temporarily interrupted by the COVID-19 pandemic, in 2022 the US continued to reach record highs in oil and gas production and exports. US crude oil exports hit a record 3.6 million barrels per day in 2022, corresponding to a 22% increase compared to 2021. This was driven by increased crude oil production, several releases from the US Strategic Petroleum Reserve (SPR) and the increased demand as an alternative to Russia’s crude oil (U.S. Energy Information Administration, 2023k). Similar trends followed in exports of petroleum products, which hit a record of almost 6 million barrels per day in 2022, a 7% increase compared to 2021 values (U.S. Energy Information Administration, 2023l).
The US is already the largest producer of fossil gas, and liquified natural gas (LNG) exports continue to set record highs year after year. In the first half of 2022, the US became the world’s largest LNG exporter. This trend is expected to continue in the near future as the US is planning to increase its LNG export capacity by more than 40% by 2026, compared to 2022 (U.S. Energy Information Administration, 2023m). While LNG exports increased by 51% in 2021 relative to 2020 levels and almost doubled compared to 2019 levels, 2022 exports only increased by 9% relative to 2021 levels. The recent boost in exports is mainly due to strong LNG demand from Europe, high international fossil gas prices, and expanded LNG capacity. US LNG exports to Europe increased by 141% compared to 2021 levels (U.S. Energy Information Administration, 2023g).
The EIA’s Annual Energy Outlook 2023, used as the reference for our current policy scenario projections, projects US fossil gas production to increase by 15% and LNG exports to increase by 152% between 2022 and 2050. This is due to the expected increase in demand for fossil gas and a continued increase in LNG capacity (U.S. Energy Information Administration, 2023m).
Analysis suggests that the US is among the countries with the biggest expansion plans of oil and gas projects and gives some of the world’s largest subsidies for all fossil fuels per capita. With 22 mega-project plans in place, the US accounts for more than a fifth of potential emissions from major carbon emitting energy projects in the world. Together these mega-projects have the potential to emit 140 GtCO2e in their lifetime, almost four times more than the entire world emits each year (Kühne et al., 2022). Further compounding the issues is that potential that methane emissions from the sector are significantly underreported (Climate Trace, 2023; Lu et al., 2023).
Recent reports state that we must halve GHG emissions globally by 2030 and no new oil and gas should be developed if we want to keep global warming to 1.5°C within reach (IEA, 2023b; IPCC, 2022). Investments and developments in new oil and gas infrastructure would prevent the US from meeting its 2030 climate target and net-zero emissions by 2050, let alone meeting the global temperature target, and will lead to significant stranded assets in a Paris Agreement-compatible future.
New auctions and project approvals
Despite the clean energy production and investments bolstered by the IRA, the Act also provides notable concessions to the fossil fuel industry under the pretence of allowing domestic oil and gas companies to transition away from fossil fuels at a reasonable pace.
The Act requires the federal government to offer an annual minimum area of specified public lands for drilling. While it does increase the royalty rates paid by companies for extracting fossil fuels on public lands, it also requires prioritisation of oil and gas auctions over renewable energy ones on federal lands and offshore developments. These provisions not only contradict President Biden’s promise to end new federal fossil fuel leasing of public lands but also increases the risk of locking in fossil fuels, creating stranded assets amid the energy transition. Roughly 20% of US oil and gas production comes from public lands, which lessens the impact of these provisions. However, it still sends a long-term signal to the industry that might slow the pace of emissions reductions over the next decade.
In March 2023, the Department of the Interior gave its formal approval for the ConocoPhillips Willow project, a substantial oil drilling project in Alaska’s National Petroleum Reserve. Although the Department of the Interior significantly reduced the scope of the project, by denying two of the five requested drill sites, this is one of the few oil projects that Biden approved on his own accord without a congressional or court mandate (U.S. Department of the Interior, 2023b).
This development not only further breaks Biden’s promise to stop new oil drilling on federal land, but would result in significant environmental and biodiversity impacts, and GHG emissions. The project has the potential to produce over 600 million barrels of crude oil over the next 30 years and release nearly 280 MtCO2e in emissions when consumed (U.S. Bureau of Land Management, 2023b).
Only weeks after the Willow project was approved, the Biden Administration started auctioning off 73 million acres in the Gulf of Mexico, more than double the size of the Willow Project, for offshore oil and gas drilling. While this was a mandatory provision of the IRA, the size and scope of the sale could have been minimised (U.S. Bureau of Ocean Energy Management, 2023b).
In July 2023, the Supreme Court cleared the way for the construction of the Mountain Valley Pipeline to proceed. The pipeline is a 500-km-long project that would transport fossil gas from West Virginia to Virginia. The pipeline would cross waterways and federal national forest lands, which is why it went through a complex environmental permitting process and led to multiple lawsuits. The decision came after a bipartisan group of lawmakers, including Senator Joe Manchin, filed an emergency request in support of the project to include it in the debt ceiling negotiations – which removes any ability to challenge the pipelines in Court (AP News, 2023; U.S. Department of Agriculture, 2023).
The Biden Administration is expected to announce new, stricter rules on offshore oil and gas leasing as part of the next iteration of the offshore leasing program for 2023–2028, but this has been delayed, in part, by litigation from conservative states and oil and gas companies. The draft plan ranges from no sales to ten sales over the next five years (U.S. Bureau of Ocean Energy Management, 2022).
State-level action to end fossil fuel production
The state of California is the only oil and gas producing state that has moved to end production. It has banned new fracking permits from 2024 and is aiming to phase out oil production by 2045. California is a founding, associate member of the Beyond Oil and Gas Alliance (BOGA). The state of Washington joined the Alliance at COP27 in 2022 and has put in place measures to ban new fossil infrastructure, including oil refineries, but the state does not produce any oil and gas (Beyond Oil and Gas Alliance, 2021, 2022).
Abandoned coal mines and oil and gas wells: a lasting legacy of carbon pollution
The USD 1.2tn Bipartisan Infrastructure Law (BIL) included a USD 21bn investment to plug and clean up abandoned coal mines and oil and gas wells, which continue to emit significant amounts of methane and other pollutants long after they are no longer active (U.S. Senate, 2021). This was one of the few components that increased compared to the original investment plan proposed by the Biden Administration before its negotiation in the US Congress (USD 16bn).
In August 2022, the Department of the Interior awarded USD 560mn to 24 states to begin work on monitoring and capping methane emissions from orphaned oil and gas wells (U.S. Department of the Interior, 2022). This initiative is further supported under the IRA’s Methane Emissions Reductions Program, under which the Biden Administration announced an additional USD 350m in grant funding, the first of a series, for states to monitor and reduce methane emissions from the oil and gas sector, in part through plugging and cleaning up abandoned well sites (U.S. Department of Energy, 2022b).
In 2021, the transport sector accounted for about 29% of total US GHG emissions and, since 2017, has been the largest contributor. Total sector emissions increased by 19% between 1990–2021 due to the increased demand, where the average number of vehicle miles travelled (VMT) per passenger cars and light-duty trucks increased by 47.5% in the same period (U.S. Environmental Protection Agency, 2023b).
The 2021 Bipartisan Infrastructure Law (BIL) includes some components relevant to the decarbonisation of the transport sector, such as investments to modernise roads and public transit and to boost the EV market (U.S. Senate, 2021). The Act includes measures related to developing EV charging stations (USD 7.5 bn), boosting the country’s battery supply chain (USD 7bn), modernising public transit (USD 39bn), ‘climate-friendly’ passenger and freight railways (USD 66bn), investing in roads and bridges and other transportation projects (USD 110bn), and clean busses and ferries (USD 7.5bn).
In addition to significant investments in electrifying light- and heavy-duty vehicles (see below), the IRA provides considerable financial support for EV manufacturing and supply chains. This includes USD 2bn for the Domestic Manufacturing Conversion Grant program, which will fund the retooling of production lines for EVs, and USD 3bn for the Advanced Technology Vehicle Manufacturing Loan Program, which has expanded coverage to heavy-duty vehicles, locomotives, maritime vessels and aviation. The IRA also extends the Advanced Manufacturing Production Credit to spur the domestic production and sale of clean energy components such as batteries and critical minerals (The White House, 2023b).
The Act has also introduced the Commercial Clean Vehicles Credit, which defers 30% of the costs of replacing diesel or gas-powered commercial vehicles, ranging from cars to long-haul trucks, with electric vehicles. A credit of up to 15% is also available when replacing a vehicle with a partly electric alternative. In addition, the IRA allocates USD 3bn for electrifying the United States Postal Service fleet (The White House, 2023b).
In January 2023, the Biden administration released its National Blueprint for Transportation Decarbonisation to support the 2050 net zero target. Its three key strategies consist of improving community design and land-use planning, increasing options to travel more efficiently via public and private transport, and support the transition to zero emission vehicles and fuels (U.S. Department of Energy et al., 2023).
In 2021, President Biden set a goal to make 50% of all new vehicles sold in 2030 zero-emissions vehicles, including battery electric, plug-in hybrid electric, or fuel cell electric vehicles (The White House, 2021d).
This goal is not aligned with the Paris Agreement. To be Paris compatible, 95–100% of sales of new LDVs in the US should be zero-emissions by 2030 (Climate Action Tracker, 2020). While estimates vary, the government estimates that LDV EV sales will only reach 22% (including the effects of IRA support), which is insufficient to meet Biden’s goal, let alone to meet the 1.5°C compatible benchmark (U.S. Energy Information Administration, 2023c). The latest IEA global EV outlook assumes that the US will achieve the EV sales target of 50% by 2030 under the STEPS scenario. This is substantially different than US EIA calculations that project 13-29% sales in 2050 (IEA, 2023a; U.S. Energy Information Administration, 2023f).
At the state level, California has established a 100% EV sales objective for 2035. This goal, along with other robust transport sector policies in California, has inspired other states to follow suit. The IEA estimates that approximately 20%–25% of the nation's LDV sales could potentially be encompassed by these policies (California Air Resources Board, 2021, 2022, 2023; IEA, 2023a).
California has a 100% EV sales target by 2035. This taget and other ambitious policies in the transport sector in California has spurred other states to follow suit. According to the IEA, about 20%–25% of the national LDV sales could potentially be covered by these policies.
Electric vehicles represented 5.6% of new car sales in the US in 2022, compared to 4% in previous year, due to a larger selection of electric vehicle (EV) options, growing consumer interest and an initial boost from IRA incentives. In January 2023, that share grew to 7.1% (Inside EVs, 2023).
The IRA will accelerate the uptake of electric light-duty vehicles by extending and expanding tax credits for both new and used EVs. The Clean Vehicle Credit provides up to USD 7,500 for battery electric, plug-in hybrid, or fuel cell EVs. However, the vehicle and its components (incl. critical materials) must meet certain requirements for Northern American assembly and sourcing from the US or trusted trade partners. The Previously-Owned Clean Vehicles Credit provides up to USD 4,000 to used vehicle buyers (The White House, 2023b).
Fuel economy & emission standards
Following his promises to take climate action in the sector responsible for the highest emissions, the Biden Administration reversed the single most detrimental rollback of the previous administration, the Trump-era SAFE rule, that significantly weakened GHG emissions and fuel economy standards. In 2020, the Trump Administration finalised the Safer Affordable Fuel-Efficient (SAFE) Vehicles Rule, which amended and relaxed Obama era Corporate Average Fuel Economy (CAFE) and tailpipe carbon dioxide emissions standards. The rule significantly lowered required fuel economy and CO2 improvements to 1.5% each year through 2026, compared to the 5% annual increase under the Obama Administration. The Biden Administration not only reversed the CAFE standards, but also proposed the strongest-ever pollution standards for cars and trucks.
In July 2022, the Biden Administration finalised two rules that establish federal standards to regulate GHG emissions and fuel economy of new passenger cars and light trucks. These two rules combined are the primary process through which GHG emissions of light-duty vehicles (LDV) are regulated at the federal level. The new standards will increase fuel efficiency 8% annually for model years 2024–2025 and 10% for model year 2026, requiring a fleet average of 49 mpg by 2026 (National Highway Traffic Safety Administration, 2022).
In April 2023, the EPA proposed a stricter set of vehicle emissions standards for light and medium-duty vehicles for model years 2027 through 2032, which could considerably aid in the transition to EVs. The proposed rule boosts current CAFE requirements by 2% per year for passenger cars and 4% per year for light trucks, aiming a fleet-wide average of 58 mpg by 2032. This proposal is expected to avoid 7.3 GtCO2e from light- and medium-duty activity through 2055 and deliver significant health benefits from reduced air pollution (U.S. Environmental Protection Agency, 2023g).
The IRA has resulted in further investments to reduce GHG emissions from the heavy-duty sector. The EPA received USD 1bn for the Clean Heavy-Duty Vehicle Program to provide grants to offset the costs of replacing heavy-duty vehicles with zero-emissions ones and related infrastructure. An additional USD 3bn was allocated to provide grants to local governments, port authorities, and other relevant actors to purchase and install zero-emission port equipment and technology (The White House, 2023b).
The IRA also includes provisions to spur the aviation industry to develop and adopt sustainable fuel technologies. The Sustainable Aviation Fuel Credit incentivises the sale or use of aviation fuel that reduces lifecycle GHG emissions by at least 50% compared to petroleum-based jet fuel. The Act also provides almost USD 300m in grants to develop and deploy projects related to sustainable aviation fuel and low-emission aviation technologies (The White House, 2023b).
In April 2023, the EPA proposed a set of vehicle emissions standards for heavy-duty trucks, transit and vocational vehicles past model year 2027. This proposal is expected to avoid 1.8 GtCO2e from heavy-duty activity through 2055 (U.S. Environmental Protection Agency, 2023g).
Direct GHG emissions from industry accounted for 24% of total US emissions in 2021, making it the third largest contributor to US GHG emissions after the transport and electricity sectors (U.S. Environmental Protection Agency, 2023b). In 2020, emissions from the US industrial sector decreased by 1%, due to the economic impacts of the pandemic, followed by an increase of almost 4% in 2021 as a result of the economic recovery.
Industrial emissions have generally declined over the past decade a result of the transition from a manufacturing to a service-based economy, fuel switching, and efficiency improvements (U.S. Environmental Protection Agency, 2023b). However, this downward trend is not expected to continue. Emissions from the industrial sector are projected to increase under current policies due to rising industrial energy consumption from continued growth in domestic manufacturing (U.S. Energy Information Administration, 2023a).
The IRA has funded extensive measures to decarbonise the industrial sector. The Act provides USD 5.8bn in funding for the new Advanced Industrial Facilities Deployment Program. This programme provides financial assistance to emissions-intensive industrial facilities (e.g. iron, steel, concrete sectors) to demonstrate and deploy advanced technologies that reduce GHG emissions. The IRA also expands tax credits for carbon capture, utilisation and sequestration (CCUS), building on the BIL’s investments in CCS demonstrations and industrial applications (The White House, 2023b; U.S. Department of Energy, 2022a).
The Act also includes the Advanced Energy Project Credit, which provides industrial and manufacturing facilities with tax credits for investments in advanced energy projects. Eligible projects consist of re-tooling facilities with equipment designed to reduce GHG emissions by at least 20%, or re-equipping, expanding, or establishing facilities for producing and recycling clean energy equipment or for processing, refining, and recycling critical materials (The White House, 2023b).
In March 2023, the EPA finalised its Good Neighbour Plan, which requires industrial facilities and power plants in 23 states to cut NOx emissions to prevent pollution across state lines. By 2026, the EPA plans to set enforceable NOx emissions control requirements, which will primarily reduce emissions from harmful air pollutants, but would also result in 16 MtCO2e/year in carbon dioxide emissions reductions (U.S. Environmental Protection Agency, 2023a).
In December 2020, the US Congress enacted legislation to tackle HFCs under the American Innovation and Manufacturing (AIM) Act, which directs the US Environmental Protection Agency (EPA) to phase down the production and imports of HFCs by 85% over the following 15 years after its implementation (2021–2036). It is expected to reduce emissions by 4.7 GtCO2e by 2050 by minimising HFCs released from equipment through sector-based restrictions and requirements to use climate-friendlier alternatives and transition to next-generation technologies (U.S. Environmental Protection Agency, 2021b). The IRA provides an additional USD 38.5m to the EPA to implement the AIM Act (The White House, 2023b). We incorporate the IRA's effects on reducing non-CO2 emissions into our current policy projections through a review of studies that quantify this impact (see Assumptions section).
Hydrogen plays a big role in the Biden Administration’s industrial decarbonisation roadmap by decarbonising some industrial processes (so-called ‘hard-to-abate' sectors) and replacing fossil fuel-based feedstock with cleaner alternatives. The IRA established the Hydrogen Production Tax Credit to incentivise domestic production of clean hydrogen and to meet the goals of Biden’s ‘Hydrogen Shot’ (The White House, 2023b). The Hydrogen Shot aims to reduce the cost of clean hydrogen by 80% to $1 per kilogram in one decade to considerably reduce industry emissions (U.S. Department of Energy, n.d.).
In 2021, direct GHG emissions from buildings accounted for 13% percent of total US GHG emissions, with 7% from commercial buildings and 6% from residential. When accounting for electricity-related emissions, the buildings sector makes up almost a third of total GHG emissions. Emissions have decreased by 4.9% since 1990 in the residential sector and 1.9% in the commercial sector (U.S. Environmental Protection Agency, 2023b).
The 2021 Bipartisan Infrastructure Law (BIL) included USD 225 million for state and local implementation of energy codes. With these resources, the Department of Energy (DOE) released a new building energy code for federal buildings that aims to improve energy efficiency and launched the Resilient and Efficient Codes Implementation program to support energy code adoption, enforcement, training, and technical assistance in June 2022 (The White House, 2022b).
The 2022 IRA provided USD 1bn in grants for state and local governments to adopt the latest building codes and energy efficiency standards under the Biden Administration’s National Initiative to Advance Building Codes. The initiative aims to provide technical and financial support to state and local governments to modernize building codes in underserved communities to build resilience to severe weather impacts, enable households to save on utility bills and in turn, further reduce residential GHG emissions. The updated building codes do not appear to include provisions for net zero buildings.
The US does not have a general national target for constructing net zero energy buildings (nZEBs), although California and Massachusetts have set state-level targets and the federal government has an internal target (see below) (Massachusetts State, 2022; State of California Public Utilities Commission, 2021). This is in contrast to the EU, for example, which requires all new buildings to be “near” nZEBs starting in 2021 (European Commission, 2020). For 1.5°C-compatibility, all new buildings globally should be nZEBs starting in 2020, and renovation rates should increase to 3%–5% per year (Climate Action Tracker, 2016). The CAT estimates that to be 1.5°C compatible, emissions from US buildings should be around 60% lower in residential buildings and 70% lower in commercial buildings by 2030 compared to 2015 levels (Climate Action Tracker, 2021b, 2021a).
Support for energy efficiency and RE measures
USD 3bn was allocated to support energy efficiency and electrification upgrades in homes in BIL (U.S. Department of Energy, 2022c). The 2022 IRA built on the BIL by including several incentives for homeowners to save on energy costs and reduce residential building emissions. For instance, the government has established tax credits for energy efficiency upgrades (e.g., heat pumps, insulation, efficient doors and windows) and installing residential clean energy, including rooftop solar, wind, geothermal and battery storage. In addition, almost USD 9bn has been allocated to states and Tribes for consumer home energy rebate programs related to retrofitting and purchasing high-efficiency electronic appliances in low-income communities (The White House, 2023b).
In addition, the IRA covers energy use in commercial buildings by providing tax deductions for buildings that increase their energy efficiency by at least 25% (The White House, 2023b).
Energy efficiency standards
In 2022, the Biden Administration took over 110 actions to strengthen energy efficiency standards – ranging from household products and appliances to commercial and industrial equipment. These updated standards will reduced GHG emissions by an estimated 2.4 GtCO2e over the next 30 years, or around 80 MtCO2e/year (The White House, 2022c). In February 2023, the Department of Energy proposed new standards for refrigerators and clothes washers, which account for 8% of residential energy use in the US. The two new rules are expected to reduce emissions by 233 MtCO2e over the next 30 years (U.S. Department of Energy, 2023b). In March 2023, the Biden Administration proposed new energy efficiency standards, including energy conservation standards for room air conditioners (U.S. Department of Energy, 2023a).
Federal Building Targets
In 2021, President Biden established numerous targets for federal operations and procurement, including reaching net-zero emissions in the federal buildings portfolio by 2045 and reducing federal buildings emissions by 50% by 2032, by Executive Order (The White House, 2021c). In August 2022, the Biden Administration issued implementing instructions on the Executive Order, which detailed the agency planning, reporting requirements, and accountability mechanism to achieve such targets (The White House Council on Environmental Quality, 2022).
Greenhouse gas emissions from the agriculture sector made up 9% of US emissions in 2021 and increased by about 9% percent between 1990–2021. Nitrous oxide emissions from agricultural soils made up half of agricultural emissions, with enteric fermentation and manure management being the other large sources (U.S. Environmental Protection Agency, 2023b).
The IRA plans to provide USD 19.5bn for mitigation activities in the agricultural sector, boosting the funding of existing conservation programs such as the Environmental Quality Incentives Program (EQIP) and the Conservation Stewardship Program (CSP) (Monke et al., 2022). These programs offer financial and technical support to farmers to implement climate-smart practices, including nutrient management. The IRA has also funded a few programmes to support renewable energy use in the agricultural sector, such as loan financing and grant funding to farmers for energy efficient equipment or underutilised renewable energy technologies (The White House, 2023b).
The adopt of the next iteration of the Farm Bill, a policy which heavily influences farmers’ decisions on which crops to grow and how to produce them, is still outstanding as of mid-October 2023. The Biden Administration has stressed that IRA funds are to be spent on supporting climate-smart agriculture programs and should not be reallocated to the Farm Bill and spent on non-climate related measures (i.e. crop subsidies), as suggested by some members of Congress (Douglas, 2023).
In 2021, the net CO2 removed from the atmosphere from the LULUCF sector represented 13% of total US GHG emissions. Between 1990 and 2021, total carbon sequestration in the LULUCF sector decreased by 11% due to a decrease in the rate of net carbon accumulation in forests and on cropland, as well as an increase in CO2 emissions from urbanisation (U.S. Environmental Protection Agency, 2023b).
In 2020, Trump reversed a long-standing rule that limited logging in the largest national forest, Alaska’s Tongass National Forest. The Biden Administration reinstated the protections on the forest in January 2023 by banning road-building and logging on the majority of the forest’s 16 million acres (Friedman, 2023). Considering that the Tongass makes up over a fifth of the nation’s forest carbon stocks, its protection is critical to preserving the US’ considerable carbon sink (Dellasala et al., 2022).
The IRA has led to further investments (USD 5bn) in the National Forest Service and programmes that support the preservation of carbon sinks and nature-based climate mitigation actions, including grants for urban and community tree planting efforts, technical and financial assistance for landowners to boost carbon sequestration on forestland, as well as funding for the Forest Legacy program for states to acquire and permanently conserve private forestland (The White House, 2023b).
The waste sector made up only 2.7% of national emissions in 2021 but contributed to 17% of anthropogenic methane emissions (U.S. Environmental Protection Agency, 2023b). Addressing methane emissions from landfills is thus a key pillar of the US Methane Emissions Reduction Action Plan. In 2021, the Biden Administration finalised emissions standards to ensure that large municipal landfills significantly reduce their methane emissions, and the EPA has developed a Landfill Methane Outreach Program to support methane collection and distribution at smaller, unregulated landfills (The White House, 2021b). The IRA has not led to significant policies or programmes in the waste sector besides some funding to improve methane monitoring and to develop a better method to measure fugitive methane sources (e.g. landfills) (The White House, 2023b).
Recently, the EPA has been sued by environmental groups for failing to update its landfill emissions accounting methodology, which has not been revised since 1998. The current emissions factors reportedly underestimate the emissions released from landfills from several pollutants, including nitrogen oxide, by as much as 25%. As a result of the lawsuit, the EPA has agreed to evaluate whether or not updates are needed to the estimation methods, and to suggest new emissions factors in case of the latter by early 2024 (Quinn, 2023).