← Shift Key with Robinson Meyer
Shift Key with Robinson Meyer
Why America’s Climate Emissions Surged in 2025
00:40:31
Rob talks through Rhodium Groups’s latest emissions report with climate and energy director Ben King.
Loading summary
Transcript69 lines
- [00:01]
A
You are listening to Shift Key Heat Maps weekly podcast about decarbonization and the shift away from fossil fuels. On this week's show, we're looking at why US greenhouse gas emissions went up in 2025. It was a bit of a surprise. So what does it tell us about the AI boom, the US Economy, and the eventual impact of Trump's policies? Is it bad news? Is it really bad news?
- [00:20]
B
Can we find some good news here?
- [00:21]
A
Well, all that and more, it's all coming up on ShiftKey after this. This episode of ShiftKey is brought to you by Heatmap Pro. You already rely on Heatmap for daily reporting and on the energy transition. That's why you listen to this show. Well, Heat Map Pro brings all of our research, reporting and insights down to the local level. It's a software platform that tracks all local opposition to clean energy projects and data centers. It forecasts community sentiment and it guides data driven engagement campaigns. Go to heatmap News Pro to book a demo and see the premier intelligence platform for project permitting and community engagement. That's heatmap News Pro. Hi, I'm Robinson Meyer, the founding executive editor of Heat Map News, and you are listening to ShiftKey, Heatmap's weekly podcast about decarbonization and the shift away from fossil fuels. America's greenhouse gas emissions went up last year by 2.4%, which was a big change because they'd been stable or falling.
- [01:27]
B
For the past few years.
- [01:28]
A
They were basically flat in 2024 and they went down 3% in 2020 23. Emissions are still down 6% below pre pandemic levels. But what was really significant last year and kind of ominous is that US Emissions grew faster than the economy. We're still waiting on Q4 data, but estimates say the US economy grew by about 1.9% last year, or 2%, while emissions are up about 2.5%. It marks an end to this encouraging decoupling trend we've been watching for a few years where the US Economy grew while US Emissions declined. So why did that happen and what does it tell us about structure of the American economy? Are we starting to see the effects of Trump's policies or the AI boom show up in the emissions data on this week's show. We're posing those questions to Ben King. He's a director of the Climate and Energy Practice at the Rhodium Group, a research firm that prepares the best in class assessment of US Emissions and also, I should say, the earliest assessment. It comes out way earlier than anyone else's and it gives us the best view into what happened in the US.
- [02:29]
B
Climate economy last year.
- [02:31]
A
Ben is a former employee of the energy department and EPA. He's joining us from Washington, D.C. ben King, welcome to Shift Key.
- [02:38]
C
Thanks so much, Rob. Great to be here.
- [02:40]
B
So can you just start off by telling us US Emissions at this point we know went up last year according to rhodium. Why did US emissions go up?
- [02:49]
C
Yeah, there's two main drivers. So emissions up 2.4% year on year in 2025. Two main drivers behind that increase. One is increased combustion of fossil fuels for heating, buildings, both sort of like homes and commercial buildings.
- [03:05]
B
I thought you were going to say increased combustion of fossil fuels, period. And I was like, that would do it.
- [03:10]
C
That's sort of the whole thing, right?
- [03:11]
B
Yeah, it's kind of what we're all talking about.
- [03:15]
C
That's right. That's right. So buildings, the building sector, roughly just under half the increase. Roughly half the increase came from the power sector where there was a couple factors at play. Increasing demand paired with higher natural gas prices in 2025, leading to some interesting outcomes there. And then most of the rest of the sectors, transport, industry, oil and gas sector, roughly flat year on year. So those are the two big drivers were buildings and power.
- [03:43]
B
I want to get more into those drivers, but can I ask, like, was this surprising? Because over the past few years, certainly since the pandemic, I think US emissions have generally gone down every year since. I think they peaked in 2007. Is it surprising that they went up this year? Or was there a certain point last year? Maybe it was when we had a really cold winter or when AI data centers really started to come in hot that it was clear emissions were actually going to go up last year. Like, is there a physical point where you can call it?
- [04:17]
C
Sure. So to your point, emissions were down in 2023, down in 2024, after rebounding into post Covid recovery in 2021 and 2022. That's notable because in both of those years, in addition to emissions decreasing, GDP went up those years. Right. So we saw this decoupling between what's going on with emissions and what's going on with broader economic growth. Notable this year, the fact that yes, emissions went up, but also they went up faster than estimated GDP has shaken out for 2025. We don't have final GDP data yet. That's still a couple months out. But this is only the third time in the past 10 years that emissions growth has outrun GDP growth. So that's what makes it a little more notable, we expect to see bumpiness in emissions trajectories. So weather, economic flow, output, these things all have a pretty meaningful impact on year to year variation in emissions. A 2 1/2% increase like we saw this year isn't unprecedented in any way. The thing that's notable and interesting to us is, okay, we're going back to this world in which there's not this decoupling between economic growth and emissions.
- [05:28]
B
Were you surprised by the fact that there was this un Decoupling? Because I think for the past few years we've been excited about the decoupling. We've been talking about how GDP has been going up, but emissions haven't. Is it a surprise that this has ended? Or let's say by March, when it was a cold winter, were you kind of like, well, the people are going to be burning a lot of natural gas and other fuels for bunker fuel, for heat, and so we kind of know it's going to get. Emissions are going to go up this year?
- [05:56]
C
I think. I'm hesitant to say that this marks the end of the period of decoupling of GDP growth and emissions. Right. It would have been reasonably clear early in the year because we would have some data on fuels in the winter 2025 period and then we get reasonably good monthly data on what's going on the grid. So we would have had some sense for that as well. The exact way that this all shook out, I'm not shocked that we saw a modest increase this year. Again, it's in line with increases that we've seen in the past. The thing that's more interesting to us is what are the indicators here that could suggest this is not a one off, like all right, weather related outcome, but rather a leading indicator of something to come, a portender of worse emissions outcomes.
- [06:41]
B
So let's talk about that because I think the big headline there is the fact that power emissions went up seemingly driven by demand from data centers, right? From AI, data centers, from crypto. Is it now fair to say that AI and crypto are pushing US Emissions higher than they would be otherwise and slowing down decarbonization beyond the trajectory we would have thought we were on, let's say even during the first Trump administration?
- [07:09]
C
It's probably too early to make that claim with robust evidence. There were a couple of intersecting factors that led to the power sector emissions increase that we saw in 2025, to your point. Yes, absolutely. Faster wood growth than we've historically seen since the 1990s. Right. So the faster electricity demand growth. Yeah, faster electricity growth demand. So like in the 1990s, we were bumping along at maybe 2.3, 2.4% annual growth. And then that's declined in the 2000s and the 2010s. So that by the 2010s, we were less than half a percentage point growth a year in demand growth. Electricity demand increased by nearly two and a half percent this year. So that marks a change in, in that trajectory. Though, as with buildings emissions somewhat weather related. So we do see electricity demand also varying somewhat from year to year. So yes, faster demand growth. And most of that was actually met by clean sources. Right. We saw a record year for solar generation on the grid in 2025. Solar generation grew 34% year on year. Wind grew a little bit. But taken together, wind and solar made up something like 85% of the total new demand that it met. 85% of total new demand. And then looking at the bucket of fossil fuels, that also met some new demand. Right. So the other call it 15% of new demand was met by a combination of coal and gas. And here's where things are pretty interesting. And coal Generation increased by 13% after years of decline. We saw sort of a reversal here for coal. So coal generation increased, gas generation slightly decreased actually year on year. And that's all to do with the relative economics of coal versus gas on the grid. If gas had been cheaper, I think we would have seen less of an impact of that wood growth being met. So it's a multifaceted answer to your question.
- [09:12]
B
It does seem though, like a number of things that people were worried about at the tail end of the Biden administration are in fact all now hitting at the same time. So natural gas prices are going up because we're exporting more liquefied natural gas. That's driving a shift to coal. At the same time, there's more rapid load growth. Load growth in many ways could be a good thing if we were using that electricity. Hesitate to kind of criticize energy needs too broadly because one person's energy desire is another person's energy need. But to decarbonize the U.S. economy, we do need electricity demand to go up, period. In order to fuel electric vehicles, in order to power clean industrial processes, some of that is happening. The other big thing that's driving up electricity demand is more data center usage and more crypto mining. And that combined with this price effect in natural gas, is driving up emissions. It does seem like a lot of stuff folks worried about is in Fact now, all hitting at the same time.
- [10:14]
C
Sure. I mean, listen, natural gas prices were at inflation adjusted record lows in 2024. In one way, some rebound from that is not totally shocking. To your point, that rebound is amplified by increased LNG exports in 2025, I think LNG exports increased by about 25% in a single year, up by more than 3 billion cubic feet a day. That's not insubstantial. And as we look forward, there's a lot more export capacity slated to come online as well. So to what extent is that trend going to persist? But it is also the case that one of the reasons that gas prices were higher is because we needed it to heat buildings. And so all of these factors are somewhat connected. It's tough to point the finger squarely in the direction of like, well, if we just didn't have LNG exports as high, and if load growth from data centers was a little bit lower, we'd be in a wildly different world. You know, maybe. But these interconnected factors all play a role in what the eventual outcome is here.
- [11:13]
B
I realize you're not a natural gas markets analyst, but sometimes what you hear people talk about is that we extract a lot of gas at the same time we extract oil. And so when we're extracting a lot of oil, we get a lot of gas for free. And that kind of keeps natural gas prices down because oil is relatively cheap. We're getting less gas for free at the moment. Did natural gas prices rise in part because oil prices fell or is this really just LNG and like an LNG and demand story?
- [11:43]
C
I think it's largely an LNG and demand story. I haven't seen the latest metrics on like the amount of associated gas that we're getting compared to purpose drilled gas. We've been at relatively record highs in that department though recently. And so even if there was a little bit less oil drilling, there would still be a whole heck of a lot of quote unquote free gas out there to try to capture.
- [12:07]
B
So let's talk about the sectors that maybe didn't change as much. Transportation feels to me looking at your report, like it should be a success story. I think vehicle miles traveled road use was at a record high, but emissions really didn't go up. Why did that happen?
- [12:23]
C
So, you know, we saw increases in demand for jet fuel, increases in demand for diesel, but motor gasoline demand was down a bit, you know, year on year. There's two things at play there. To your point, meeting a higher level of service demand that is meeting more BMT but doing so with, on the one hand, more fuel efficient gasoline cars. So this is the long term success story of what things like the corporate average fuel economy standards have done for gas cars. And on the other hand, I think we're probably not going to see a record year for electric vehicle sales in 2025. We're probably in the ballpark of the record, which was 2024. So you do start to see an increasing portion of the light duty fleet in particular being electric vehicles. That in turn is driving down demand for gasoline. As a result, I think we're probably still 2 and a half, 3% of the fleet is electric at this point. So it's not huge, but every little bit helps there.
- [13:20]
B
At the same time, there's been rising total electrification of the vehicle fleet, there's also been rising hybrid and plug in hybrid sales. Do you have a sense of like how that breakdown is happening in terms of reduced carbon intensity of the transportation sector and really just like the light duty fleet?
- [13:39]
C
It's a good question. We haven't decided. Yeah, I mean when I say electric vehicles, I'm talking broadly about both full battery electric and then plug in hybrids. And then I think we say this in the paper, but I think there was pretty robust growth for gasoline hybrids as well last year, which relative to just a pure gas car is better from an emissions perspective. So, so, so that certainly helps.
- [13:59]
B
And it's funny because if you care about decarbonization and getting to net zero as soon as possible, you kind of poo poo hybrids. But if you're actually involved in the game to just keep as much emissions out of the sky as possible and you're looking to net those 2% declines every year. You know, hybrids are pretty important because they are basically a drop in replacement to gasoline car use that burns less gasoline.
- [14:24]
C
The other interesting thing that gasoline hybrids does for the sector is it finds interesting unanticipated uses for all this battery manufacturing capacity that we've built in the US or that we stand to build our forecast for pure EVs. So battery electrics plug in hybrids looks a little worse in the out years because of the tax credits going away because of the EPA tailpipe regulations going away at the same time that anticipated demand pull from those policies. Plus the advanced manufacturing tax credit, the 45x tax credit has really been wildly successful in standing up a battery manufacturing industry here in the US if you want that capacity to be around, one thing that you could do with those batteries is put them into Hybrids. Right. You might have to retool the line a little bit to accommodate different sizes, build the expertise, build the workforce, et cetera, such that when the floodgates open again for electric vehicle adoption, for instance, we've got substantial battery manufacturing capacity here.
- [15:23]
B
Domestically, it looks like the industrial sector and the agricultural sector were both pretty flat year over year. Is there any interesting story there of note that we should flag like any big changes to industry or agriculture this year that stick out in the emissions profile?
- [15:41]
C
Maybe the industry side was one thing that was maybe slightly surprising. Early in the year there were some pretty dour looking forecast for industrial output given sort of the tariff approach that the Trump administration has been taking. We didn't see a huge surge in industrial output, but industrial output grew a little bit year on year. That's what drove a very modest 1.3% increase in industrial emissions. So those worst case industrial outcomes maybe didn't or at least haven't yet come to fruition. That was maybe somewhat interesting, but the net result from an emission standpoint is about the same.
- [16:16]
B
Kind of boring when you look at the whole mix here. What are the signs to you that things could get better over the next few years, that the decoupling trend could continue? We could keep seeing a growing economy and falling emissions. And what are some signs to you that maybe we're in for a rough couple years and emissions are going to start rising in a sustained way faster than economic growth?
- [16:39]
C
Yeah, I think a lot of this hinges on what happens with the grid. Right. We saw just under 2.5% load growth in 2025. By all accounts, that's probably the low end of what we anticipate seeing over the next two years. I'm not going to get into the argument around how fast data center demand is going to grow, just how robust that is going to be. But odds are we're at least at where we've been, if not faster. So the question is, what comes in to meet that new demand? And like I said, something like 85% of that new demand this year was met by zero emitting sources by wind and solar. And I should caveat because your audience tends to be a little bit wheezier about this stuff. But when we say wind and solar, we mean wind, solar and the storage that enables that wind and solar to be more efficiently integrated onto the grid. We don't have a measure for battery storage on its own. So that 85% number is roughly aligned with what we've seen in terms of capacity additions over the past Few years on the grid. Right. Wind, solar, storage, those have made up the lion's share of new capacity that's been added to the grid over the past few years. Likely to be about the same for 2025. Waiting final numbers, but I think it's going to have been a record year for storage, close to a record year for utility scale solar. Wind struggling a little bit.
- [17:54]
B
Wind has basically been in a tough spot since 2021.
- [17:58]
C
That's kind of wind has been in a tough spot. And that's really before we start to see some of the worst outcomes for offshore wind, we'll say recently. But the question is, does that sustain? And there's a couple of things pulling in each direction. On the one hand, our modeling for the next few years suggests that renewable developers are going to be rushing to try to bring new clean stuff onto the grid because they see the looming expiration of the clean electricity tax credits that were modified as part of the OBBBA and are saying, well, holy crap, we gotta get this stuff in the ground because otherwise we're going to lose access to what are some fairly generous tax credits. So that's an argument that we'll see sustained growth coming out of these sectors and maybe potentially even acceleration over the next couple of years.
- [18:43]
B
Kind of in the same way that we saw this rush of consumers to take advantage of the tax credit at the end of Q3 last year, we're seeing developers now. I mean, we saw it as soon as the one big beautiful bill act passed is that developers immediately began targeting June 2026 as this key date, or July 2026 as this key moment that they had to get their ducks in a row to begin to take advantage of these tax credits. And I guess that means we'll have a sense of how these things are going to go maybe by August or September of this year. As developers start releasing counts of what they think they've lined up to begin finishing in time for, I think a final 2027 deadline.
- [19:22]
C
Yeah, I mean, it depends on how exactly they want to qualify. If you commence construction by 2027 and you come online, you meet all the safe harbor requirements, and your fiat ducks are in a row, then, okay, we may see potentially a high water mark for what's going to qualify as we get toward the end of this year. But we'll keep an eye on that. Just to say this response is not unprecedented in the power sector either. When we've seen lapses of the wind ptc, there's been this well understood boom and bust cycle as folks pull capacity installations ahead to try to qualify for those credits as well. Something that the authors of the clean electricity tax credits and the IRA were attempting to avoid by saying, okay, we're going to give this durable and did.
- [20:01]
B
Successfully avoid it for all the non wind and solar energy generation technologies. We should say they succeeded in getting these long term for incentives for next generation technologies, but unfortunately not for the kind of workhorses of the zero carbon electricity system. Anyway, though, you were telling a broader story here about why this trend may or may not continue in years to come. Sorry.
- [20:22]
C
You know, you send me down these like modeling wormholes and it's just like I can't help myself. So. Right. So on the one hand you could see really robust growth of clean on the grid taking advantage of the tax credits. And I don't think this is news to anybody but Speed to Power matters permitting this stuff. And right now it's way easier to, we think, put wind and solar on the grid than to wait for the gas turbine that you haven't ordered and is going to be coming your way in 2029, 2030, and it's going to come at 2x the price that you were anticipating a year and a half ago or something. So that's the optimistic case, is that that trend sustains and that's how we meet increasing load. The pessimistic case is the Trump administration has been pretty strongly investigating ways to tamp down that growth. Right. We saw, I think July this memo from Secretary Burgum saying wind and solar stuff that has any nexus with federal land or federal permitting needs to come through his office. We're still trying to unpack the signal from the noise on what that's done so far for like getting stuff permitted. But if successful, I could certainly put downward pressure on the amount that you could feasibly add over the next few years as this administration holds the reins for a bunch of the stuff that wind and solar developers need to need to interact with.
- [21:47]
B
It does sound broadly though, as we talk through 2025, the story we're telling about the US energy system and US emissions over the past year is largely one independent of the Trump administration. I think so far we're seeing probably emissions would have gone up in the first year of a Harris administration too. And it's starting in 2026, 2027 that we're going to begin to see the effects of Trump administration policies in terms of U.S. emissions. Is that right?
- [22:16]
C
Yeah, I think that's exactly right. And it's coming at a Time when we're seeing load growth ramp up and wood growth from the parts of the country and in the sectors where we know that data centers are growing the most robustly. That was something that we couldn't say a year ago, looking at data. You know, we do this report on an annual basis. Spoiler alert. And so we'll talk again next year about what this looked like. But in the 2024 report we said, eh, we're not really seeing a robust amount of growth coming from data centers here yet. That's changed this year. So that's, that's a meaningful weeding indicator for us to say, all right, so if this sustains, then to what extent is that going to be met by clean versus emitting generators on the grid?
- [22:55]
B
What other trends should we be aware of to anticipate whether emissions are going to go up or down in the near term?
- [23:02]
C
One thing we talked about the relatively unremarkable transportation sector outcomes this year. But we're seeing meaningful efforts by epa, by the Department of Transportation's NHTSA to walk back regulatory policy that has at least contributed to achieving these outcomes historically. Particularly again, thinking about the workhorse of transportation decarbonization policy, which is the fuel economy standards. Folks in the climate community get very excited when we talk about record electric vehicle sales. That's super cool. And you know, the fact is we've seen meaningful gains in the efficiency of these gasoline vehicles because of these fuel economy standards. To the extent that manufacturers take the signal from what the Trump administration is doing here and saying, ah, we're going to walk back some of this stuff, certainly we're seeing folks step away, right down electric vehicle production lines and step away from commitments to be mostly electric, all electric, whatever the case may be. But if that's paired with we don't need to worry as much about fuel economy, we're less concerned about this overall. That could subtly but importantly have an impact on the trajectory for those transportation sector emissions in the near term, but more importantly the long term. Because these are long lived assets. Right? You keep your car for the average age of a car on the road is like 12 years. The car sits around for longer than that usually. So getting that right matters a lot from a decarbonization perspective as well.
- [24:24]
B
You mentioned you release these reports every year. I've now been covering rhodium emissions. Out stock takes reports every year and I was thinking of two different things. So the first is that even during the Biden administration there's a chart that you guys put out every year which is US greenhouse gas emissions by sector. And about 10 years ago, transport crossed over power. So power was in this long term emissions decline because largely the coal to natural gas shift and then secondarily because of the rise of renewables and transportation became the most polluting part of the US economy. What we're seeing now is that power is going back up. And it used to be as recently as the Biden administration, the forecast was that transport was going to fall too, and industry would be the most polluting or the second most polluting part of the economy. Is that still where it looks like things are going? Like, are we still on track to see industry become a leading emitting sector of the US Economy? Or does the rise of data centers in the power sector and all this anti decarbonization policy from the Trump administration and the transportation sector mean that we're not really sure what the future looks like? And maybe power is going to come back up and maybe transportation's going to remain the most polluting sector of the US economy for much longer than we thought.
- [25:47]
C
Yeah, when we look at our long term forecasts, which look out to 2035 and 2040, that's where we would see, all right, by the early2030s, industry would take the crown as the most emitting sector. Now when we look out into the future, it's sort of a competition between industry and transport. It depends a lot on what you believe about the fundamentals of fossil fuel prices and the clean transition. So, you know, we try to do these long term projections with an amount of humility. We know that we don't know a lot. And so we try to produce these ranges that say, all right, if you believe the best case scenario, the best case atmospherics for decarbonization, which in our estimation is continued cost declines for clean stuff, solar, wind, electric vehicles, et cetera, paired with meaningfully higher natural gas prices, meaningfully higher oil prices. What does that imply for our path for decarbonization versus the inverse? Those sort of like worst case atmospheric for decarbonization, which is bargain basement fossil, and far less substantial declines in clean costs and a continued challenge to connect them to the grid, that kind of thing. So depending on what you believe for those fundamentals, either transport or industry is the biggest sector by 2035, 2040.
- [27:00]
B
But it sounds like there's far more question about that now than there was two or three years ago.
- [27:04]
C
Yep, even a year ago, frankly, when we produced our projection a year ago, it was pretty, pretty cut and dried that that was going to be the case. Notable thing about that is even in those cases we do still continue to project power sector emission declines on the back of just wind and solar are cheap, getting cheaper and easy to add to the grid. Relatively we can. You've done plenty of episodes on interconnection queues and other challenges on that front, so you know we won't delve back into that.
- [27:31]
B
But relative to more in the future, yes, good, good.
- [27:35]
C
But it's notable that this economic opportunity for decarbonization continues to persist in the power sector despite unfavorable federal policy in this space and with the understanding that likely some additional policy changes thinking here about permitting reform and the like are likely necessary to fully unlock that economic opportunity.
- [27:56]
B
The biggest driver of reduced US emissions since 2007 has been this coal to gas shift. How much juice is there left to squeeze in that orange? Are we coming to the end of the coal to gas transition and coal is now going to start fighting back against gas at the margin as we saw happen this year, or.
- [28:17]
A
If the.
- [28:17]
B
Trump administration weren't tinkering in power markets as it is right now, keeping coal plants open, would gas plants still be putting coal plants out of business and we'd see the coal share of the grid continue to decline? Obviously it's all tricky because energy departments ordering coal plants to stay open, but let's say that didn't happen or it was reversed by a future Congress.
- [28:37]
C
Yeah, I mean we should say first and foremost in 2025 at least the output from the one coal plant in fact that actually was ordered to be online in this window is like half a percent of overall coal generation or 5, 5% of the increase in coal generation year on year. Right. So the tua tusi order matters to the economics of that plant, but in general is not the main driver here. It is the economic competition that exists between coal and natural gas. At the same time, it's easy to keep a coal plant around for another year. It's more difficult to keep a coal plant around for the long term because you need to make continual costly investments just in operation and maintenance, keeping all the pollution control equipment up to date, et cetera. At some point the economic viability of those coal plants, even in a high natural gas price environment gets thornier. So you know, turning to are sort of like forward looking projections. We see in addition to a decent chunk, probably something like I better not speculate on live tv, but I'll say a decent chunk of the existing coal plants that are slated for retirement, we see a quantum of additional plants that retire because of the economic imperative to do so in all of the cases that we look at. So there is still, I think, this sort of like secular trajectory of coal decline that will persist into the future. Barring some more interventionist efforts in that space emergency 202 sea orders aren't going to do it on their own.
- [30:10]
B
Stepping back, you know, we pay a lot of attention to the U.S. emissions trajectory every year. It's important. The U.S. is the number two polluter. It's the number one cumulative polluter in climate change, though it's going to lose that title, I think, sooner than many people realize. And yet climate change is a problem that knows no territory. It doesn't matter where the emissions come from. All that matters is that the carbon moves from geological storage, releases into the sky and traps heat and produces global warming. Do national emissions trajectories matter? What value should we be attaching to these things? Because we've attached a lot of value to them in the past. But the fact is that if the U.S. if U.S. emissions went up because for some crazy reason we were producing, we were using robots to produce incredibly cheap electric vehicles and solar panels and were like China and then we were selling them all over the world and that would be good. That would mean that global emissions were going to decline. And so obviously that's a fantastic scenario. But like, why should we? What's the right value for us to attach to US and national emissions generally? Because it's not like the US is going to figure out a new way to make fertilizer or a new way to. It is not like the US is going to figure out these things in some divorced way from the rest of the world. If we made a big breakthrough, I think in some of these technologies, we'd see it everywhere.
- [31:50]
C
I mean, great, right? Like that's the, you know, that's the process. Yeah, I mean, if the US makes a breakthrough in fertilizer or fusion or even something that's maybe a little less nascent, if we really lead the way on enhanced geothermal or next gen nukes or whatever the case may be, the value of the global diffusion of those technological breakthroughs is quite substantial. And it depends on the technology, it depends on the sector that it falls in. But feasibly, to your point, more important than the US trajectory declining in and of itself. That said, I want to be clear, the US is still the second largest emitter in the world. Our emissions levels matter quite a bit and we'll continue to do so for the foreseeable future. And so I worked at the Department of energy back in 2015ish when the whole mission innovation debate was happening, which sustains to this day, much to my chagrin, this debate around deployment versus innovation, it's like, well, yeah, both. Right? Clearly the answer is both.
- [32:55]
B
In other words, should the marginal resource be spent on innovation or deploying existing zero carbon assets? Right, that's the kind of question.
- [33:02]
C
Yeah, that's what underlies. And it's like both are good and both have their own sort of like unique values. But as we think about a future policy environment here in a world in which we're sort of like re embracing industrial policy and not just the US but lots of places around the world are looking at industrial policy anew and saying, oh, we could do this and like build these new technologies and help our economy. There's a lot of interest in how do we support the stuff that we can be leaders on, the stuff that is less fully developed globally at this point. So there's exciting work underway there that I think will matter a lot. In addition to what the precise US emissions trajectory is into the future.
- [33:44]
B
Is there a degree to which decarbonization here is like pretty endogenous to the development of the US economy in that look, wind, solar, batteries, they're so competitive, they're going to keep diffusing. These are going to keep diffusing. Emissions are going to go down like 2% a year and sometimes they'll tick a little up and sometimes they'll tick a little faster down. But like it's been a pretty consistent decline since 2007 and it's going to keep happening. And yeah, sure we care about deployment, but what we really care about are like number one, making sure the technologies continue to exist to push down emissions. And number two, these various moonshot plans, like building a lot of nuclear say that could like wipe out a big chunk of grid emissions if they were successful, but that we should really think about making climate progress as like a long term technological problem, that we just need to keep this 2% rate going rather than one where it's like the Trump administration took off the fuel economy standards. Oh, the Shapiro or the Newsom or whoever administration put back on the technology standards. Oh no, they're off again, like just the continued flip flop. And meanwhile the emissions intensity of the marginal US vehicle miles traveled is like just declining pretty steadily every year.
- [34:59]
C
It is a big question. I think part of the answer is we will reach a point of diminishing marginal returns on this technological progress that we've made to date. You rightly point out that the power sector has been the driver of US emissions declines since our peak in 2007. And that's been a function of coal to gas switching, but also deployment of wind and solar at meaningful scale. The flip side to the answer that I gave you on how much coal to gas switching is left is there is a finite amount of that, right? We're not approaching it yet, but coal now makes up a smaller share of generation on the grid. Taking aside this sort of like year where we see it bouncing around a little bit, it's been in secular decline. And I think we were looking back to the like 1970s. I think in last year's note when we wrote this, it's going to bounce around a little bit, but there is only so much juice left to squeeze out the of. Of that particular.
- [35:51]
B
And I think the interesting is it's complicated for why it was high in the 70s, but it was high in the 70s because there was a policy push to bring back coal in the grid because it was a resource that the US had in secure supply. And during the oil crisis we really focused on that and then it just became an embedded part of the grid and there were continued pushes to expand or contract coal.
- [36:09]
C
But yeah, sure, I feel like I zoomed in too quickly on coal. But like in the decarbonization scenario for the power sector, you get rid of all the coal and then you're building increasing amounts of wind and solar and storage that are able to be fuel saving resources. So you're running your gas plants that you built a little bit less and then less and less and less and then you get power to some meaningfully low level of the emissions story. Likewise for transport Rivian or the next bolt or changes its tune and people love Tesla. Again, whatever the case may be, right, you reduce the share of emissions coming from light duty vehicles, but the case for the other sources of transportation emissions is far less challenging from an economics perspective. It's out there. There are companies doing great work to electrify medium and heavy duty vehicles, but none of that is going to be on its own self, executing, just like none of the wind and solar transition has been self. Executing. We benefited from early interventions in Germany and Spain and Japan and then China modularizing production of these technologies. And so we've really reaped the benefits of that from stuff that they were doing at NREL, whatever 50 years ago. But like then what? Right, so you sustained that 2% decline from now until 2035 or 2040. And then you hit the wall because then it's what the heck do you do about jet fuel? What the heck do you do about cement production? What the heck? And then like stuff that we haven't even really contemplated yet. What do you do about agricultural N2O emissions from soil? Right. I don't think that 2% decline is self perpetuating. I do think that there's still a role for policy to ensure that even that level of ambition is achievable. And then if you believe, like I believe, that every ton of CO2 emitted into the atmosphere is a worse outcome, all else equal, just on its face, not talking about 1.5 or 2 degrees C, not talking about tipping point, just saying like on the whole, one more ton of emissions in the atmosphere, bad, then you do care about what the heck you do about the rest of the economy that is still emitting a whole bunch of CO2, methane and other greenhouse gases.
- [38:17]
B
At that point it sounds like you're saying, no, it's not endogenous. You really do need policy. And we do need to in fact care about these gyrations in policy all the way down. Because ultimately, even though it's a technology story, if you're zoomed all the way out and you see the solar cost curve happening, in fact, the solar cost curve declines, for instance, were driven by the handoff from California to Japan, Germany. They were driven by these policy decisions.
- [38:46]
C
Yep, yep. And then, like we should be clear, a decision to make a robust investment in China to scale up production of this stuff. That is a critical part of the story as well, but started with these other policy interventions. So what would a robust answer be? Be part of the question here is what do you want the future economy to look like? Right. To what extent is this an opportunity for economic growth? My colleagues at Rhodium Group alongside folks from mit, do this clean investment monitor that tracks the level of investment in deploying solar and wind, but also the manufacturing of this stuff. And we saw like a huge response that happened after passage of ija, IRA chips and science, where I think by last year clean stuff was comprising something like 5% of total private investment in the US. That is a sustainable pathway. And if that's what you want, sustainable in the, not in the green sustainable, but like people would like that. Right. And if that's able to persist, there's an economic opportunity for doing this stuff and it gets unlocked. The more that you can say there are opportunities to do export of this technology to other countries as well, cool.
- [39:56]
B
We'll have to leave it there, but to be continued. And when does Taking Stock come out? That'll come out in this summer, right?
- [40:03]
C
It's like July usually. Yeah, it's July.
- [40:05]
B
Okay, well, we'll come back to Taking Stock. And until then, Ben King, thank you so much for joining us on Shift Key. This was great.
- [40:12]
C
Thanks so much, Rob. It was a lot of fun.
- [40:15]
B
Shift Key is a production of Heatmap News. Our editors are Jillian Gutman and Nico Lauricella. Multimedia editor. Editing and audio engineering is by Jacob Lambert and by Nick Woodberry. Our music is by Adam Kramalau. Thank you so much for listening and see you next week.