Energy Systems

Key Finding 2

North American energy-related CO₂e emissions have declined at an average rate of about 1% per year, or about 19.4 teragrams CO₂e, from 2003 to 2014 (very high confidence).

Description of evidence base

Data on CO₂e emissions are calculated by the EIA, IEA, and CDIAC databases (Boden et al., 2016) and by the WRI CAIT database (cait.wri.org). All data suggest similar trends, although the exact values differ. Key Finding 2 is consistent across these sources.

Major uncertainties

These datasets include uncertainties related to the amount of fossil fuel used (typically identified through sales-weighted averages to create a national average) and the carbon and heat contents of the energy reserve (e.g., see U.S. EPA 2017a, Annex 2). According to the literature, there are further uncertainties related to lost and fugitive emissions (Alvarez et al., 2012; Brandt et al., 2014; Karion et al., 2013; Pétron et al., 2014; Zavala-Araiza et al., 2015). Estimates of fugitive CH₄ levels indicate that these emissions are unlikely to substantially alter Key Finding 2 (Alvarez et al., 2012; Brandt et al., 2014). Fugitive CH₄ from oil, gas, and coal production and transportation is included in U.S EPA and DOE and Canadian and Mexican inventories, but there may be further emissions that are not yet accounted. For U.S. DOE, fugitive emissions include the unintended leaks of gas from the processing, transmission, and transportation of fossil fuels. Furthermore, while the trends are consistent across data sources, the absolute values of GHG emissions levels from energy consumption and production vary across datasets because of differences in system boundary definitions, inclusion of industrial process emissions, emissions factors applied, and other issues.

Assessment of confidence based on evidence and agreement, including short description of nature of evidence and level of agreement

There is very high confidence in the likelihood that the statement is based on consistent findings across the data sources assessed.

Estimated likelihood of impact or consequence, including short description of basis of estimate

It is not appropriate to reflect on the likelihood of impacts of these trends without longer time series demonstrating that North American and international energy and industrial GHG emissions continue to decline. The total effect of energy and industrial GHG emissions on atmospheric GHG concentrations and climate change depends on total international emissions and future GHG emissions trajectories.

Summary sentence or paragraph that integrates the above information

Key Finding 2 that North American energy and industrial GHG emissions have declined since 2007 is supported by multiple datasets, with total uncertainty surrounding fugitive CH₄ and various emissions calculation approaches unlikely to alter this finding.

Key Finding 3

The shifts in North American energy use and CO₂e emissions have been driven by factors such as 1) lower energy use, initially as a response to the global financial crisis of 2007 to 2008 (high confidence, very likely); but increasingly due to 2) greater energy efficiency, which has reduced the regional energy intensity of economic production by about 1.5% annually from 2004 to 2013, enabling economic growth while lowering energy CO₂e emissions. Energy intensity has fallen annually by 1.6% in the United States and 1.5% in Canada (very high confidence, very likely). Futher factors driving lower carbon intensities include 3) increased renewable energy production (up 220 petajoules [PJ] annually from 2004 to 2013, translating to an 11% annual average increase in renewables) (high confidence, very likely); 4) a shift to natural gas from coal sources for industrial and electricity production (high confidence, likely); and 5) a wide range of new technologies, including, for example, alternative fuel vehicles (high confidence, likely).

Description of evidence base

Over the past decade, Key Finding 3 found that annual energy intensity dropped 1.5% in Canada, 0.04% in Mexico, and 1.6% in the United States. In the United States, gross domestic product (GDP) has grown by more than 10% from 2008 to 2015, while fossil fuel combustion CO₂ emissions declined 6% from 2008 to 2014. Canada’s GDP grew by 11% from 2008 to 2015, while its energy-related CO₂ emissions grew roughly 2% from 2008 to 2014. In Mexico, GDP grew 15% between 2008 and 2015, and energy-related CO₂ emissions remained relatively flat, with a 0.3% decrease from 2008 to 2014 (IEA 2016a; IMF 2016).

Economic structural changes have contributed to some of this decline, with more of North American manufacturing occurring overseas, especially in East Asian countries. From 2004 to 2014, the United States exhibited net offshoring every year except for 2011 (Kearney 2015). More recently, there were reports of reshoring to the United States, although there is uncertainty in whether this will exceed or even break even with continued offshoring (Sirkin et al., 2011; Tate 2014). Today, a trend of nearshoring is projected as manufacturing costs in China rise and companies move their operations to Mexico (Kitroeff 2016; Priddle and Snavely 2015).

North American renewable energy production has increased over the past 10 years. For electricity, nonhydropower renewables, including wind, solar, and biomass, have increased from 2.4% in 2004 to 6.1% in 2013. This translates into a 10.6% annual average increase, adding approximately 220 PJ of renewable energy into the North American electricity system annually (EIA 2016c).

A large portion of Canada’s 80% of nonfossil power generation comes from hydropower, while in the United States and Mexico nonfossil power contributes 32% and 22%, respectively, largely from nuclear. In total, carbon-free power sources contribute 38% of North American energy generation (EIA 2016c).

Major uncertainties

As with other contributing factors to energy and industrial emissions reductions, there is some uncertainty regarding the contribution of reduced energy intensity to emissions reductions. Kotchen and Mansur (2016) estimate reduced energy intensity contributed 6% of U.S. emissions reductions from 2007 to 2013.

The largest uncertainty surrounds the trajectory of carbon-free energy deployment in North America, which likely will depend heavily on policies that continue to incentivize lower-carbon forms of energy relative to fossil fuels. The declining cost of renewable and nonfossil technologies have made them cost-competitive with fossil fuels in some but not all regions of North America, and the future trajectories of technology cost reductions also are uncertain and dependent on public and private investment in research, development, and demonstration.

Although renewable energy deployment has been recognized as a contributing factor to GHG emissions reductions in North America, the precise scale of influence has been debated. The global financial crisis and natural gas deployment are likely to have had a larger effect than renewable energy in reducing North American energy emissions during 2007 to 2009 (Feng et al., 2015; Gold 2013; U.S. DOE 2015a), but, subsequently, changes in the energy system (including the increase in renewable energy and decrease in energy intensities) have helped to continue the trend.

Assessment of confidence based on evidence and agreement, including short description of nature of evidence and level of agreement

There is very high confidence in the finding based on the results of official data.

Estimated likelihood of impact or consequence, including short description of basis of estimate

Reductions in the energy intensity of economic output are very likely to be based on structural economic changes that will have lasting effects in reducing the GHG emissions from economic growth. The exception is whether “reshoring” occurs (i.e., the transfer of a business operation that had moved overseas or out of its originating country back to the country where it was originally relocated).

Increasing renewable and nuclear energy technology deployment is likely to continue based on existing and planned policies in North American countries, as well as market and technology cost trends. Increasing deployment of these technologies would have significant impacts on energy and industrial GHG emissions.

Summary sentence or paragraph that integrates the above information

In Key Finding 3, reduced energy intensity of economic output in North America is allowing for reduced energy-related GHG emissions even as the three North American economies recover from the 2007 to 2008 recession. These trends very likely reflect structural economic changes that would have a lasting effect on energy-related GHG emissions into the future and may represent a departure from the typical rebounding cycles experienced previously.

Although still a relatively small share of its energy mix, North America increased renewable energy production by about 220 PJ annually from 2004 to 2013, translating to a 10.6% annual average increase. In 2013, nonhydropower renewable fuels reached 3.25 EJ but accounted for about 6.1% of total electricity generation. Hydropower and nonfossil nuclear power sources remain the most important low-carbon energy generators, accounting for 31.7% of total electricity generation.

Renewable energy and nuclear energy technologies are a small but growing portion of the North American energy sector and are likely to have an ongoing effect in reducing energy and industrial emissions if policy, market, and technology trends hold.

Key Finding 4

A wide range of plausible futures exists for the North American energy system in regard to carbon emissions. Forecasts to 2040, based on current policies and technologies, suggest a range of carbon emissions levels from an increase of over 10% to a decrease of over 14% (from 2015 carbon emissions levels). Exploratory and backcasting approaches suggest that the North American energy system emissions will not decrease by more than 13% (compared with 2015 levels) without both technological advances and changes in policy. For the United States, however, decreases in emissions could plausibly meet a national contribution to a global pathway consistent with a target of warming to 2°C at a cumulative cost of $1 trillion to $4 trillion (US$ 2005).

Description of evidence base

Key Finding 4 is based on results from three different types of energy scenarios, including five projections (United States from EIA, Canada from Environment and Climate Change Canada, Mexico from IEA, and private firms BP and ExxonMobil); exploratory scenarios from Royal Dutch Shell, the World Energy Council, and the Pew Center on Global Climate Change; and backcasting scenarios from the Deep Decarbonization Pathways Project (for the United States, Canada, and Mexico), the Energy Modeling Forum (i.e., includes approximately nine different modeling groups), and the U.S. government. The statement on mitigation costs (“US$107 and $206 billion (US$ 2015) annually”) is from the findings of a report by U.S. EPA (2017b).

Major uncertainties

There are significant incalculable uncertainties for futures studies. Therefore, no certainties, qualitative or quantitative, have been provided.

Assessment of confidence based on evidence and agreement, including short description of nature of evidence and level of agreement

With high confidence, the literature that forecasts carbon trajectories agrees generally with the outcome of the review provided.

Estimated likelihood of impact or consequence, including short description of basis of estimate

The provision of future studies is for decision making. The scenario data provide enough information for a discussion of how to mitigate carbon emissions.

Summary sentence or paragraph that integrates the above information

There are a variety of carbon futures for the North American energy system. They include higher and much lower emissions levels, depending on both current trends and potential future uses of technologies. Importantly, achieving significantly lower emissions in the near future will depend on policy, without which it will not be achieved.