Conclusions

This study presents a set of scenarios describing three divergent paths for the United States from 2000 through 2035. Many different patterns of energy supply and use could emerge in the future. The scenarios presented here reveal important conclusions about the role of technology in determining future U.S. energy supply, energy demand, and carbon emissions. These scenarios are not predictions; taken together however, they can be used to help identify key technologies, important energy policy decisions, and strategic investment choices that can increase the likelihood of achieving U.S. energy security, environmental protection, and economic development goals across a range of possible futures. Taking these lessons into account can help decision-makers plan for the future, despite uncertainty about how the future will unfold.

This exercise takes three different base case scenarios and analyzes the implications of imposing the same portfolio of policies on each of them. This approach allows conclusions to be drawn about the relative difficulty of implementing a carbon-constraint policy under quite different conditions. External events and other driving forces vary widely among the scenarios, as do policy and investment decisions and the consequent paths of technology development. Some conditions, such as low fossil fuel prices, increase the difficulty of implementing a carbon constraint. In contrast, actions such as early and sustained investment in emerging energy technologies facilitate both domestic economic development and carbon emissions reductions. Taken together, the three policy overlay cases show that a portfolio of market-oriented policies and standards can lead to substantial reductions in U.S. CO₂ emissions by 2035, without major negative impacts on the overall level of U.S. economic activity. However, implementation of such policies could have significant costs for the energy and energy-intensive sectors of the economy.

Without a mandatory carbon constraint, the absolute level of emissions rises in each base case scenario, despite the fact that the carbon intensity of the economy declines considerably. In the Pew Center scenarios without a carbon emissions policy, CO₂ emissions in 2035 range from 1800 to 2400 MMTC, an increase of 15 to 50 percent over the U.S. year 2000 level. This result points to the need to develop climate change policy in order to stem these increases.

The scenario analysis identified several technologies as critical to the U.S. energy future in a carbon-constrained world. These technologies are beneficial across scenarios, though the relative importance of a particular technology may vary among the scenarios. Most of these technologies would have a place even in a world without a carbon constraint, as they assist the United States in achieving its policy objectives—including environmental and energy security goals—while growing the economy.

Natural gas is one of the most important contributors to the decline of the carbon intensity of the energy sector in both the base and policy overlay cases. The market for natural gas expands in all scenarios, with and without the policy overlays. Substituting natural gas for coal results in approximately half the carbon emissions per unit of energy supplied. Increased use of natural gas also has energy security benefits for the United States.

Energy efficiency improvements also play a key role in reducing carbon emissions. In response to the carbon constraint, the fuel economy of cars and light trucks dramatically improves in the policy cases, significantly reducing oil imports. In each of the scenarios, combined heat and power technology improves the efficiency of electric generation. When the carbon policy overlay is imposed, performance standards for electrical devices and for gas- and oil-fired equipment lead to improved energy efficiency in the residential, commercial, and industrial sectors.

Renewable energy and distributed generation technologies contribute to the reduction of carbon emissions in each of the scenarios and their policy overlay cases. While both renewable energy technologies and DG grow in the base case scenarios, they experience more substantial increases following the implementation of the policy overlay, which aids their commercialization by promoting investment and by breaking barriers to entry in U.S. energy markets.

Nuclear power plays a significant role in each of the scenarios and their associated policy cases. Nuclear power production remains close to the year 2000 level in each scenario, with and without the policy overlays. In the absence of nuclear power, carbon emissions would be significantly higher in 2035.

Geological sequestration emerges as a key technology in the policy overlay cases, allowing continued reliance on fossil fuels even in the face of a carbon constraint. Sequestration is particularly important in Turbulent World with Policy, a scenario in which hydrogen is produced primarily from coal. Geological sequestration allows hydrogen to be produced from fossil fuels without releasing carbon emissions, facilitating the transition to a hydrogen economy.

Hybrid-electric vehicles play an important role in the transportation sector for all cases, except the Awash in Oil base case, and act as a bridge technology for fuel cells in mobile applications. Toward the end of the scenario period, hydrogen and fuel cells become significant in Technology Triumphs with Policy and Turbulent World with Policy. As improvements in energy efficiency slow, the technology for hydrogen and fuel cells matures in these scenarios, accounting for an increasing share of economy-wide carbon reductions.

Many of these critical technologies, however, are not commercially viable in 2003. Public and private investment in these emerging energy technologies plays a key role in their successful commercialization in the Pew Center scenarios. Public policies at the state and federal level are necessary to lower barriers to commercialization of these technologies and to stimulate sustained investment during the course of these scenarios. Included among the policies that promote commercialization of these technologies are a carbon emissions allowance cap-and-trade program for some sectors and a set of equipment-efficiency credit trading programs, as well as renewable portfolio standards, fuel economy and air quality requirements, and electric power grid interconnection standards.

One key insight that emerged is that policy is necessary to address climate change. A second is that there are technologies—with supporting policies and investments—that could address climate change, accelerate capital stock turnover, and enhance the nation's energy security, no matter which direction the future takes. Finally, the scenarios indicate that energy policy and investment decisions made today affect the difficulty of implementing a climate policy tomorrow. If U.S. decision-makers can implement the necessary policies and encourage appropriate investments during the next thirty years, the United States could be better positioned to achieve its complementary economic, energy security, and environmental goals.