The US is facing a complex emissions landscape, with some sectors showing modest progress while others are set to become major contributors. While industry, including emissions from oil and gas operations, is projected to see a modest decline of 2-15% below 2023 levels by 2035, it is expected to become the highest-emitting sector in the US by 2033.
This reduction is largely attributed to a decrease in methane emissions from oil and gas operations. Despite flat to increasing domestic production of both oil and natural gas, EPA regulations are expected to lead to a 12-28% reduction in emissions from production, processing, and transportation by 2035. However, other sub-sectors within industry are anticipated to see minimal change in emissions.
There is a glimmer of hope in the building sector, where emissions are expected to drop by 9-12% due to congressional action and EPA rules phasing out the use of hydrofluorocarbons (HFCs).
Despite these positive developments, significant challenges remain in achieving ambitious emissions reductions. One critical concern is the burgeoning demand for electricity. The electrification of transportation, spurred on by the Inflation Reduction Act, the establishment of new domestic manufacturing facilities for clean energy technologies, and an AI-driven surge in electricity demand from data centres are all projected to increase electricity demand by 24-29% over 2023 levels by 2035. Electrified transportation accounts for nearly half of this projected growth, while data centres are responsible for an additional 22%.
Adding to the challenge is the slow pace of clean energy deployment. Obstacles such as sluggish transmission build-out, burdensome siting and permitting processes, and lengthy interconnection waiting times are hindering the expansion of renewable energy sources. This situation, coupled with the escalating demand from data centres, could have a significant impact on emissions.
Our analysis reveals that if data centre demand increases nearly threefold by 2035 and developers struggle to install new wind and solar capacity, power sector emissions could be over 275 million metric tons (or 56%) higher than our mid-emissions case.
The US faces a complex emissions landscape with pockets of progress offset by significant challenges. While the reduction in oil and gas emissions is encouraging, the growth in electricity demand, particularly from data centres, poses a serious threat to achieving ambitious emissions reduction goals. Overcoming these challenges requires swift action to address the bottlenecks in clean energy deployment and to develop effective strategies to manage the surging demand for electricity.
