Navigant Research Blog

Emissions Down Thanks to Less Coal, Petroleum

John Gartner — May 21, 2009

Even though the U.S. economy grew slightly in 2008, CO2 emissions for the year were down by the largest percentage since records have been kept. According to the Department of Energy, the economy grew by 1.1 percent, but emissions dropped by 2.8 percent.

High gas prices during the summer convinced drivers to stay home or use mass transit more frequently, as tailpipe emissions sank 6 percent. Gas prices dropped drastically when the economy slowed, but have since rebounded. With economically minded folks opting for driving vacations instead of flying, the drop in vehicle emissions may not be as great during the summer months.

Emissions from electricity generation dropped by 2.1 percent, 10 times the drop in actual power production (.02 percent).

How can that be? The answer: less coal and petroleum and more renewable power, which was up by 17 percent. And the trend away from coal continues, as it coal electricity generation in March of this year was off by 14.5 percent over a year ago.

Capping carbon emissions has been all over the news as Congress debates cap and trade legislation. Power producers will look to expand renewables to reduce the need to purchase offsets, but according to the non-profit Breakthrough Institute, they could continue to expand emissions as planned and purchase allowable offsets.

The American Clean Energy and Security Act allows all companies that produce emissions to purchase up to two billion tons of domestic and international offsets in lieu of emissions reductions. The Breakthrough Institute reports that by allowing so many offsets, as well as allowing companies to stockpile carbon credits from year to year, the price of carbon offsets might drop substantially. Companies might find it cheaper to buy offsets than invest in renewables, the Institute warns.

That worst-case scenario may be possible, but unlikely. Companies need to make investments in large-scale renewable energy in advance, and they won’t know what offset prices will be in the future, or how many offset might be on the market. Should offset prices drop too low, Congress would likely amend the legislation to reduce the amount available or set a price floor.

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