Hitting the brakes:

The results of the November 2024 election, US tensions with China and US rising budget deficits could significantly alter the path of US energy policy.   

• A second Trump White House is likely to issue executive orders that would roll back support for low-carbon energy, while the permitting of LNG projects would likely be expedited.  

• The Environmental Protection Agency (EPA), Department of Energy (DOE) and Treasury Department would promulgate new regulations that would favour fossil fuels. For example, the 45V production tax credit could favour blue hydrogen over green hydrogen.  

• The EPA would be likely to roll back methane regulations, new power plant emissions standards and lower emissions targets in the transport sector.  

• A full repeal of the IRA is unlikely. However, new legislation and trade policy targeting China’s dominance of low-carbon supply chain is likely to emerge.  

• Broad-based corporate tax cuts could reduce the tax capacity available to help renewable and new energy investors monetise the credits provided by the IRA. 

• US government spending could also be limited to address the country’s debt burden. The US Congressional Budget Office expects the debt-to-GDP ratio to reach 109% by 2030 and hit 155% by 2050. 
  

The US is the second-largest greenhouse gas emitter globally behind China. Investment in low-carbon supply in the US is key to lowering global emissions in our base case outlook. In this forecast, we project that by 2030 the US will reach peak fossil fuel demand and have about 30% of global CCUS capacity, and electricity demand will double by 2050.  

In a delayed transition scenario where policy support for low-carbon energy is cut back, fossil fuel demand would peak at least 10 years later than our base case. Total gas demand would rise to be 6 billion cubic feet per day (bcfd) higher by 2030 than in our base case, a jump of 6%. CCUS and low-carbon hydrogen would face a slower investment pathway, constrained by policy and cost uncertainty.  

Under these circumstances, net zero quickly becomes out of reach, and a new slower pathway emerges for the energy transition (see Figure 2). Each sector, from transport to power and emerging technologies, will be affected by a complex set of drivers. We break these down below.  

A look at new car sales in the US so far in 2024 offers clear indications that a slower energy transition is plausible. Consumers are increasingly embracing hybrids as a lower-carbon alternative to conventional gasoline and diesel, and one which also removes the range anxiety of a fully electric vehicle. While sales of hybrids have leapt 57%, EV sales have undershot expectations, growing by only 19%. 

We expect a second Trump administration would amplify this trend by weakening federal greenhouse gas (GHG) emissions and fuel economy standards for the 2027-32 timeframe. This would likely lead to automakers increasing investment in hybrids to meet consumer demand while complying with federal emissions targets. As a result, the total stock of EVs by 2050 would be 50% lower than in our base case.  

Automakers would increasingly shift EV batteries from high-cost metals such as cobalt to lower-cost iron-based chemistries. US battery raw material demand would be about 27% lower than in our base case, easing supply chain stress and US reliance on China. (US battery raw material demand includes lithium, graphite, nickel, manganese and cobalt.) 

With hybrids, not EVs, in the driving seat of transport decarbonisation, US oil demand could be 15 million barrels per day by 2050, down only 24% from 2024 levels.  

Across all outlooks, we expect strong growth in zero-carbon power generation in the coming decades. However, the pace of that growth will depend on the policy environment. In our delayed transition scenario, we project that total US wind, solar and energy storage capacity would be about 500 gigawatts (GW), or 25% lower in 2050 compared to our base case. 

In this scenario, we do not assume legislative changes to the production and investment tax credits in the IRA. While Republicans have voted to end these provisions, the benefits of investment supported by these tax credits are widely spread across the US, underpinning bipartisan support. A vote to end the PTC and ITC, while not impossible, is unlikely.   

Instead, our delayed transition scenario models other factors that constrain investment in low-carbon energy, including:  

• Reforms to generator interconnection queues fail to clear current backlogs and interconnection delays impede the growth of new renewable generation. 

• Infrastructure permitting reform remains limited. Harmonising local, state and federal permitting proves to be an insurmountable challenge.  

• Trade policy continues to restrict imports, with Section 201 and 232 tariffs, intended to protect domestic industries from imported supply, remaining in effect.  

• Cuts in financial support from the DOE’s Loan Program Office, the EPA’s US$27 billion Greenhouse Gas Reduction Fund and the DOE’s Grid Resilience and Innovation Program.  

In our base case, only 5% of the low-carbon hydrogen projects likely to take a final investment decision (FID) in the next two years will be for green (electrolytic) production. Blue hydrogen, made from natural gas with carbon capture, has also faced challenges. Both Woodside’s H2OK facility and Nutrein’s US$2 billion Geismar blue ammonia plant have delayed FIDs, citing reasons including the need for clarification of government tax incentives and uncertain demand. These trends suggest that low-carbon hydrogen momentum could slow even with the IIJA and IRA.  

With the market challenges facing electrolytic hydrogen and the changes to the national policy environment, we assume the rules for eligibility for tax credits under the IRA would be adjusted to tilt incentives towards blue hydrogen. 

Since 2020, California’s utility-scale battery capacity has expanded eight-fold to 8.4 GW. By the end of the year, we expect battery capacity to reach 11.7 GW. A look at state-level policies shows that momentum for low-carbon investment can be independent of federal policy. 

State-level renewable portfolio standards and voluntary renewable energy targets supported wind and solar capacity expansions of over 13% a year on average between 2016 and 2020, during the last Trump presidency. Right now, 13 US states have statutory carbon regimes, covering around 8% of US emissions. Markets in the Regional Greenhouse Gas Initiative and the Western Climate Initiative pack a punch by supporting net zero technologies like long-duration energy storage. Meanwhile, California’s Low Carbon Fuel Standard (LCFS) creates price signals for investment in over 600 fuels and carbon abatement technologies. Long term, LCFS and similar programs in other states will help underpin investments in low-carbon hydrogen, direct air capture (DAC) and bioenergy across the country. 

While a second Trump administration would almost certainly reduce federal support for decarbonisation, individual states will take up the baton.