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Accelerating Decarbonization of the U.S. Energy System (2021)

Chapter: 2 Opportunities for Deep Decarbonization in the United States, 20212030

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Suggested Citation:"2 Opportunities for Deep Decarbonization in the United States, 20212030." National Academies of Sciences, Engineering, and Medicine. 2021. Accelerating Decarbonization of the U.S. Energy System. Washington, DC: The National Academies Press. doi: 10.17226/25932.
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Suggested Citation:"2 Opportunities for Deep Decarbonization in the United States, 20212030." National Academies of Sciences, Engineering, and Medicine. 2021. Accelerating Decarbonization of the U.S. Energy System. Washington, DC: The National Academies Press. doi: 10.17226/25932.
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Suggested Citation:"2 Opportunities for Deep Decarbonization in the United States, 20212030." National Academies of Sciences, Engineering, and Medicine. 2021. Accelerating Decarbonization of the U.S. Energy System. Washington, DC: The National Academies Press. doi: 10.17226/25932.
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Suggested Citation:"2 Opportunities for Deep Decarbonization in the United States, 20212030." National Academies of Sciences, Engineering, and Medicine. 2021. Accelerating Decarbonization of the U.S. Energy System. Washington, DC: The National Academies Press. doi: 10.17226/25932.
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Suggested Citation:"2 Opportunities for Deep Decarbonization in the United States, 20212030." National Academies of Sciences, Engineering, and Medicine. 2021. Accelerating Decarbonization of the U.S. Energy System. Washington, DC: The National Academies Press. doi: 10.17226/25932.
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Suggested Citation:"2 Opportunities for Deep Decarbonization in the United States, 20212030." National Academies of Sciences, Engineering, and Medicine. 2021. Accelerating Decarbonization of the U.S. Energy System. Washington, DC: The National Academies Press. doi: 10.17226/25932.
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Suggested Citation:"2 Opportunities for Deep Decarbonization in the United States, 20212030." National Academies of Sciences, Engineering, and Medicine. 2021. Accelerating Decarbonization of the U.S. Energy System. Washington, DC: The National Academies Press. doi: 10.17226/25932.
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Suggested Citation:"2 Opportunities for Deep Decarbonization in the United States, 20212030." National Academies of Sciences, Engineering, and Medicine. 2021. Accelerating Decarbonization of the U.S. Energy System. Washington, DC: The National Academies Press. doi: 10.17226/25932.
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Suggested Citation:"2 Opportunities for Deep Decarbonization in the United States, 20212030." National Academies of Sciences, Engineering, and Medicine. 2021. Accelerating Decarbonization of the U.S. Energy System. Washington, DC: The National Academies Press. doi: 10.17226/25932.
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Suggested Citation:"2 Opportunities for Deep Decarbonization in the United States, 20212030." National Academies of Sciences, Engineering, and Medicine. 2021. Accelerating Decarbonization of the U.S. Energy System. Washington, DC: The National Academies Press. doi: 10.17226/25932.
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Suggested Citation:"2 Opportunities for Deep Decarbonization in the United States, 20212030." National Academies of Sciences, Engineering, and Medicine. 2021. Accelerating Decarbonization of the U.S. Energy System. Washington, DC: The National Academies Press. doi: 10.17226/25932.
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Suggested Citation:"2 Opportunities for Deep Decarbonization in the United States, 20212030." National Academies of Sciences, Engineering, and Medicine. 2021. Accelerating Decarbonization of the U.S. Energy System. Washington, DC: The National Academies Press. doi: 10.17226/25932.
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Suggested Citation:"2 Opportunities for Deep Decarbonization in the United States, 20212030." National Academies of Sciences, Engineering, and Medicine. 2021. Accelerating Decarbonization of the U.S. Energy System. Washington, DC: The National Academies Press. doi: 10.17226/25932.
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Suggested Citation:"2 Opportunities for Deep Decarbonization in the United States, 20212030." National Academies of Sciences, Engineering, and Medicine. 2021. Accelerating Decarbonization of the U.S. Energy System. Washington, DC: The National Academies Press. doi: 10.17226/25932.
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Suggested Citation:"2 Opportunities for Deep Decarbonization in the United States, 20212030." National Academies of Sciences, Engineering, and Medicine. 2021. Accelerating Decarbonization of the U.S. Energy System. Washington, DC: The National Academies Press. doi: 10.17226/25932.
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Suggested Citation:"2 Opportunities for Deep Decarbonization in the United States, 20212030." National Academies of Sciences, Engineering, and Medicine. 2021. Accelerating Decarbonization of the U.S. Energy System. Washington, DC: The National Academies Press. doi: 10.17226/25932.
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Page 55
Suggested Citation:"2 Opportunities for Deep Decarbonization in the United States, 20212030." National Academies of Sciences, Engineering, and Medicine. 2021. Accelerating Decarbonization of the U.S. Energy System. Washington, DC: The National Academies Press. doi: 10.17226/25932.
×
Page 56
Suggested Citation:"2 Opportunities for Deep Decarbonization in the United States, 20212030." National Academies of Sciences, Engineering, and Medicine. 2021. Accelerating Decarbonization of the U.S. Energy System. Washington, DC: The National Academies Press. doi: 10.17226/25932.
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Page 57
Suggested Citation:"2 Opportunities for Deep Decarbonization in the United States, 20212030." National Academies of Sciences, Engineering, and Medicine. 2021. Accelerating Decarbonization of the U.S. Energy System. Washington, DC: The National Academies Press. doi: 10.17226/25932.
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Page 58
Suggested Citation:"2 Opportunities for Deep Decarbonization in the United States, 20212030." National Academies of Sciences, Engineering, and Medicine. 2021. Accelerating Decarbonization of the U.S. Energy System. Washington, DC: The National Academies Press. doi: 10.17226/25932.
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Page 59
Suggested Citation:"2 Opportunities for Deep Decarbonization in the United States, 20212030." National Academies of Sciences, Engineering, and Medicine. 2021. Accelerating Decarbonization of the U.S. Energy System. Washington, DC: The National Academies Press. doi: 10.17226/25932.
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Page 60
Suggested Citation:"2 Opportunities for Deep Decarbonization in the United States, 20212030." National Academies of Sciences, Engineering, and Medicine. 2021. Accelerating Decarbonization of the U.S. Energy System. Washington, DC: The National Academies Press. doi: 10.17226/25932.
×
Page 61
Suggested Citation:"2 Opportunities for Deep Decarbonization in the United States, 20212030." National Academies of Sciences, Engineering, and Medicine. 2021. Accelerating Decarbonization of the U.S. Energy System. Washington, DC: The National Academies Press. doi: 10.17226/25932.
×
Page 62
Suggested Citation:"2 Opportunities for Deep Decarbonization in the United States, 20212030." National Academies of Sciences, Engineering, and Medicine. 2021. Accelerating Decarbonization of the U.S. Energy System. Washington, DC: The National Academies Press. doi: 10.17226/25932.
×
Page 63
Suggested Citation:"2 Opportunities for Deep Decarbonization in the United States, 20212030." National Academies of Sciences, Engineering, and Medicine. 2021. Accelerating Decarbonization of the U.S. Energy System. Washington, DC: The National Academies Press. doi: 10.17226/25932.
×
Page 64
Suggested Citation:"2 Opportunities for Deep Decarbonization in the United States, 20212030." National Academies of Sciences, Engineering, and Medicine. 2021. Accelerating Decarbonization of the U.S. Energy System. Washington, DC: The National Academies Press. doi: 10.17226/25932.
×
Page 65
Suggested Citation:"2 Opportunities for Deep Decarbonization in the United States, 20212030." National Academies of Sciences, Engineering, and Medicine. 2021. Accelerating Decarbonization of the U.S. Energy System. Washington, DC: The National Academies Press. doi: 10.17226/25932.
×
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Suggested Citation:"2 Opportunities for Deep Decarbonization in the United States, 20212030." National Academies of Sciences, Engineering, and Medicine. 2021. Accelerating Decarbonization of the U.S. Energy System. Washington, DC: The National Academies Press. doi: 10.17226/25932.
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Suggested Citation:"2 Opportunities for Deep Decarbonization in the United States, 20212030." National Academies of Sciences, Engineering, and Medicine. 2021. Accelerating Decarbonization of the U.S. Energy System. Washington, DC: The National Academies Press. doi: 10.17226/25932.
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Suggested Citation:"2 Opportunities for Deep Decarbonization in the United States, 20212030." National Academies of Sciences, Engineering, and Medicine. 2021. Accelerating Decarbonization of the U.S. Energy System. Washington, DC: The National Academies Press. doi: 10.17226/25932.
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Suggested Citation:"2 Opportunities for Deep Decarbonization in the United States, 20212030." National Academies of Sciences, Engineering, and Medicine. 2021. Accelerating Decarbonization of the U.S. Energy System. Washington, DC: The National Academies Press. doi: 10.17226/25932.
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Suggested Citation:"2 Opportunities for Deep Decarbonization in the United States, 20212030." National Academies of Sciences, Engineering, and Medicine. 2021. Accelerating Decarbonization of the U.S. Energy System. Washington, DC: The National Academies Press. doi: 10.17226/25932.
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Suggested Citation:"2 Opportunities for Deep Decarbonization in the United States, 20212030." National Academies of Sciences, Engineering, and Medicine. 2021. Accelerating Decarbonization of the U.S. Energy System. Washington, DC: The National Academies Press. doi: 10.17226/25932.
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Page 72
Suggested Citation:"2 Opportunities for Deep Decarbonization in the United States, 20212030." National Academies of Sciences, Engineering, and Medicine. 2021. Accelerating Decarbonization of the U.S. Energy System. Washington, DC: The National Academies Press. doi: 10.17226/25932.
×
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Suggested Citation:"2 Opportunities for Deep Decarbonization in the United States, 20212030." National Academies of Sciences, Engineering, and Medicine. 2021. Accelerating Decarbonization of the U.S. Energy System. Washington, DC: The National Academies Press. doi: 10.17226/25932.
×
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Suggested Citation:"2 Opportunities for Deep Decarbonization in the United States, 20212030." National Academies of Sciences, Engineering, and Medicine. 2021. Accelerating Decarbonization of the U.S. Energy System. Washington, DC: The National Academies Press. doi: 10.17226/25932.
×
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Suggested Citation:"2 Opportunities for Deep Decarbonization in the United States, 20212030." National Academies of Sciences, Engineering, and Medicine. 2021. Accelerating Decarbonization of the U.S. Energy System. Washington, DC: The National Academies Press. doi: 10.17226/25932.
×
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Suggested Citation:"2 Opportunities for Deep Decarbonization in the United States, 20212030." National Academies of Sciences, Engineering, and Medicine. 2021. Accelerating Decarbonization of the U.S. Energy System. Washington, DC: The National Academies Press. doi: 10.17226/25932.
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Suggested Citation:"2 Opportunities for Deep Decarbonization in the United States, 20212030." National Academies of Sciences, Engineering, and Medicine. 2021. Accelerating Decarbonization of the U.S. Energy System. Washington, DC: The National Academies Press. doi: 10.17226/25932.
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Suggested Citation:"2 Opportunities for Deep Decarbonization in the United States, 20212030." National Academies of Sciences, Engineering, and Medicine. 2021. Accelerating Decarbonization of the U.S. Energy System. Washington, DC: The National Academies Press. doi: 10.17226/25932.
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Suggested Citation:"2 Opportunities for Deep Decarbonization in the United States, 20212030." National Academies of Sciences, Engineering, and Medicine. 2021. Accelerating Decarbonization of the U.S. Energy System. Washington, DC: The National Academies Press. doi: 10.17226/25932.
×
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Suggested Citation:"2 Opportunities for Deep Decarbonization in the United States, 20212030." National Academies of Sciences, Engineering, and Medicine. 2021. Accelerating Decarbonization of the U.S. Energy System. Washington, DC: The National Academies Press. doi: 10.17226/25932.
×
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Suggested Citation:"2 Opportunities for Deep Decarbonization in the United States, 20212030." National Academies of Sciences, Engineering, and Medicine. 2021. Accelerating Decarbonization of the U.S. Energy System. Washington, DC: The National Academies Press. doi: 10.17226/25932.
×
Page 82
Suggested Citation:"2 Opportunities for Deep Decarbonization in the United States, 20212030." National Academies of Sciences, Engineering, and Medicine. 2021. Accelerating Decarbonization of the U.S. Energy System. Washington, DC: The National Academies Press. doi: 10.17226/25932.
×
Page 83
Suggested Citation:"2 Opportunities for Deep Decarbonization in the United States, 20212030." National Academies of Sciences, Engineering, and Medicine. 2021. Accelerating Decarbonization of the U.S. Energy System. Washington, DC: The National Academies Press. doi: 10.17226/25932.
×
Page 84
Suggested Citation:"2 Opportunities for Deep Decarbonization in the United States, 20212030." National Academies of Sciences, Engineering, and Medicine. 2021. Accelerating Decarbonization of the U.S. Energy System. Washington, DC: The National Academies Press. doi: 10.17226/25932.
×
Page 85
Suggested Citation:"2 Opportunities for Deep Decarbonization in the United States, 20212030." National Academies of Sciences, Engineering, and Medicine. 2021. Accelerating Decarbonization of the U.S. Energy System. Washington, DC: The National Academies Press. doi: 10.17226/25932.
×
Page 86
Suggested Citation:"2 Opportunities for Deep Decarbonization in the United States, 20212030." National Academies of Sciences, Engineering, and Medicine. 2021. Accelerating Decarbonization of the U.S. Energy System. Washington, DC: The National Academies Press. doi: 10.17226/25932.
×
Page 87
Suggested Citation:"2 Opportunities for Deep Decarbonization in the United States, 20212030." National Academies of Sciences, Engineering, and Medicine. 2021. Accelerating Decarbonization of the U.S. Energy System. Washington, DC: The National Academies Press. doi: 10.17226/25932.
×
Page 88
Suggested Citation:"2 Opportunities for Deep Decarbonization in the United States, 20212030." National Academies of Sciences, Engineering, and Medicine. 2021. Accelerating Decarbonization of the U.S. Energy System. Washington, DC: The National Academies Press. doi: 10.17226/25932.
×
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Suggested Citation:"2 Opportunities for Deep Decarbonization in the United States, 20212030." National Academies of Sciences, Engineering, and Medicine. 2021. Accelerating Decarbonization of the U.S. Energy System. Washington, DC: The National Academies Press. doi: 10.17226/25932.
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2 Opportunities for Deep Decarbonization in the United States, 2021−2030 INTRODUCTION Since the industrial revolution, U.S. greenhouse gas (GHG) emissions have risen steadily in most years, in tandem with an economy fueled by fossil fuels. In recent years, however, the correlation between U.S. economic growth and emissions has weakened. After peaking in 2007, emissions have declined in 7 of the past 11 years, falling 11 percent from 2007 to 2018 (EPA, 2020) even as the economy grew by 19 percent over the same time (OMB, 2020). Nonetheless, emissions are not declining in all economic sectors, and the transition to a zero-carbon economy is not occurring fast enough to meet climate targets. As discussed in Chapter 1, the United States emits about 6.7 billion metric tons of carbon dioxide equivalent (GtCO2e) each year, of which roughly 80 percent is carbon dioxide (CO2), with the remainder split between methane (10 percent), nitrous oxide (7 percent), and the fluorinated gases (F-gases) (3 percent). Positive changes in land use and forestry offset about 700 million metric tons of carbon dioxide annually, with the result that net U.S. greenhouse gas emissions have hovered around 6 billion metric tons of CO2e over the past several years (2018 data, from EPA, 2020). As shown in Figure 2.1, when all GHG emissions, including from electricity generation, are distributed by end-use sector, buildings account for the largest share of gross emissions at 32 percent, followed by industry (29 percent), transportation (28 percent), and agriculture (10 percent). When electricity emissions are considered separately, transportation is the top source of direct emissions (28 percent), followed by the electric power sector (27 percent), industry (22 percent), commercial and residential buildings (12 percent), and agriculture (10 percent) (EPA, 2020). FIGURE 2.1 U.S. gross GHG emissions in 2018 by sector. The remaining 1 percent of emissions come from U.S. territories, and EPA does not disaggregate these into sectors. SOURCE: Data from EPA (2020). PREPUBLICATION COPY—SUBJECT TO FURTHER EDITORIAL CORRECTION 40

Electric power generation has been the real workhorse of emissions reductions, with carbon dioxide emissions from electricity generation declining by a third from 2005 to 2019 (EIA, 2020a). This decrease resulted from the replacement of the oldest, least-efficient coal plants with output at plants that burn natural gas (up 15 percentage points of U.S. market share from 2009), and renewable energy, primarily variable generation from wind (up 5.5 percentage points) and solar (up 2 percentage points) (EIA, 2020b). Rapid declines in power sector emissions have been facilitated by the low cost of extracting natural gas from shale formations and precipitous declines in the cost of new solar photovoltaics (PVs; 89 percent cheaper since 2009) and new wind facilities (70 percent cheaper since 2009) (Lazard, 2019). All three of these trends have been driven by proactive public policy support, although these technologies were nascent and still costly (Trembath et al., 2012; Cox et al., 2015; Nemet, 2019; DOE-EERE, 2020b). Thanks to ongoing policy support and steady innovation by the private sector (and preferences among many corporations for renewable power), the electricity sector could deliver as much as 90 percent clean electricity by 2035 at rates comparable to today’s levels. Such an outcome could occur by retaining existing hydropower and nuclear capacity, accelerating deployment of wind and solar to displace coal and some gas-fired generation, retaining most existing natural gas power plants for reliability and flexibility purposes, and building out sufficient electric transmission capacity to connect new renewable generation to the grid (Phadke et al., 2020). However, there are limits to the quantity of cost-effective emissions reductions achievable with mature technologies, even in the power sector. Even taking into consideration the future coal-plant retirements that have already been announced, there could still be significant coal plant capacity online by 2030, unless competitive pressure increases over time (EIA, 2020c). Some of the remaining coal plants are owned by traditional investor-owned and publicly owned utilities, with their coal-plant investment costs included in the utility’s rate base and recovered through retail rates, and are therefore partially shielded from market forces. Additionally, some coal plants provide local reliability service and may not be able to retire unless their capacity is replaced in the near term with sufficient amounts of other resources (e.g., new gas-fired capacity) capable of providing such services, and it may be difficult, if not impossible, to get approvals for such new fossil units. Also, some existing nuclear reactors have been unable to recover their costs in competitive wholesale markets, in part because current markets do not value the carbon-free attribute of electricity generated from nuclear plants. This is especially true for single-unit nuclear power plants and those that are not supported by state policies (e.g., New Jersey’s Zero Emissions Certificate Law). The retirement of nuclear power plants will need to be offset by additional net-zero carbon generation to continue making forward progress toward decarbonization goals. While natural gas plants can continue to provide reliability and flexibility services in the near term, reaching a 100 percent carbon-free electricity sector will ultimately require deployment of one or more “clean firm” electricity sources, including geothermal energy, biogas, nuclear energy, natural gas with carbon capture and sequestration (CCS), and hydrogen or other carbon-free fuels produced from net-zero carbon processes. Clean firm resources offer the benefit of carbon-free, dispatchable electricity that is available on demand for as long as needed without dependence on weather, and are thus critical complements to weather-dependent variable renewables and energy-constrained electricity storage technologies (Sepulveda et al., 2018). Emissions from end-use sectors have not declined as rapidly, and in some cases have even increased. Since 2005, direct emissions (i.e., not accounting for electricity consumption) from transportation and industry declined by 5 percent and 2 percent, respectively. Emissions from agriculture and buildings grew by 5 percent and 6 percent (EPA, 2020). Across the end-use sectors, the story has been remarkably consistent: increased activity in each sector has been partially offset by moderate levels of efficiency improvements, resulting in only incremental changes in emissions. In the transportation sector, growth in vehicle miles traveled has been offset by improved fuel economy. In the industrial sector, increased economic output has been offset by a combination of more efficient industrial processes and structural changes in the economy (e.g., a shift away from energy-intensive manufacturing to the services industry). And in the buildings sector, growth in floor space has been offset by improved efficiencies of buildings and appliances. PREPUBLICATION COPY—SUBJECT TO FURTHER EDITORIAL CORRECTION 41

Deep decarbonization of the transportation, industry, and buildings sectors will require taking full advantage of a broader suite of decarbonization tools, including (1) accelerating improvement in end-use efficiency to reduce total fuel and materials demand; (2) substituting hydrocarbon fuels with carbon-free electricity; (3) using “drop-in” hydrocarbon fuels with net-zero lifecycle greenhouse gas emissions; and (4) using carbon capture and sequestration (CCS), enhanced land carbon sinks, or increases in negative emissions technologies (NETs) to capture or offset emissions from residual fossil fuel use. This interim report focuses on actions to decarbonize the U.S. economy as part of efforts to reduce net GHG emissions—across all gases—to zero by midcentury. Figure 2.2 provides an illustrative path to achieving net-zero emissions, in which gross carbon dioxide emissions from the end-use sectors are almost completely eliminated, and negative emissions technologies are scaled up to offset residual emissions from hard-to-abate energy sectors. Non-CO2 gases and land sinks are discussed in Box 2.1. FIGURE 2.2 An illustrative path to net-zero greenhouse gas emissions by 2050, by gas. Carbon dioxide (CO2) emissions from fossil fuel combustion and other sources decline to 5 percent of 2005 levels, with residual emissions from hard-to-abate sectors. In accordance with the IPCC pathways consistent with 1.5°C of warming, methane and nitrous oxide emissions decline to 35 percent and 75 percent of their 2010 levels. The U.S. land sink is maintained at current levels. NETs begin removing atmospheric CO2 on a large scale in 2035, and scale up to roughly 150 million metric tons annually by 2050. This is one of many possible paths to net-zero emissions and illustrates the key ingredients or building blocks of a net- zero emissions economy: (1) deep reductions in CO2 emissions (deep decarbonization); (2) declines in non-CO2 GHGs; (3) maintenance or expansion of land carbon sinks; and (4) expansion of negative emissions technologies. Some end-use subsectors will be difficult (or prohibitively expensive) to decarbonize completely by 2050. In particular, aviation and shipping are more challenging to electrify than other transportation sectors, and low-carbon fuels may not reach sufficient scale by midcentury. Many industrial sectors, such as cement, iron, and steel and chemicals manufacturing, pose unique decarbonization challenges—for example, decarbonization options for high-temperature heat (Friedmann et al., 2019) and industrial process emissions (de Pee et al., 2018; Rissman et al., 2020), and sector-specific integration challenges. PREPUBLICATION COPY—SUBJECT TO FURTHER EDITORIAL CORRECTION 42

While technologies exist to cut emissions in these sectors, they remain at precommercial or first-of-a-kind demonstration stages and require significant improvement in cost and performance to become commercially viable. Proactive innovation and maturation of emerging technologies over the next decade could ultimately supply a range of decarbonization options, even in these difficult-to-decarbonize sectors, but the feasibility of complete decarbonization by 2050 remains uncertain. Negative emissions technologies such as direct air capture and storage (DACS) and bioenergy with carbon capture and sequestration (BECCS) may be needed to offset these residual emissions, and provide additional tools in the decarbonization toolkit. To achieve net-zero CO2 emissions, residual emissions from the energy end- use sectors and negative emissions must sum to zero. LESSONS FROM DEEP DECARBONIZATION STUDIES AND THE HISTORY OF ENERGY INNOVATION This report builds on a rich literature of research exploring what a net-zero emissions economy looks like and how to make this transition. Previous deep decarbonization studies vary in their specific technology and policy recommendations, but all share several common core elements. Specifically, the studies promote pathways that combine the following:  reducing overall energy demand through increased energy and materials efficiency;  decarbonizing electricity generation;  switching to electricity and low-carbon fuels in buildings, transportation, and industry (which often involves lower overall energy use in addition to electrification);  capturing carbon from residual use of fossil fuels at stationary sources (e.g., fossil power plants, cement, ammonia production);  reducing non-CO2 emissions; and  enhancing land sinks and negative emissions technologies to offset all remaining direct emissions. Most importantly, these analyses find that deep decarbonization is technically feasible at relatively low cost. 1. Deep decarbonization is technically feasible, but proactive innovation is essential. Deep decarbonization studies find that reaching net-zero emissions is technically feasible (and relatively low cost) provided that significant proactive effort is invested over the next decade to drive the maturation and improvement of a range of more nascent technologies and solutions needed to reach net- zero emissions. For example, the International Energy Agency (IEA) finds that nearly half of the global annual emissions reductions necessary to achieve a net-zero energy system by 2050 will likely have to come from technologies that are currently at the demonstration or prototype stage of development but are not yet commercially available (IEA, 2020a). Although nascent, all of these technologies are technically feasible and do not require fundamental scientific “breakthroughs” in order to be deployed (although continued and expanded investment in scientific research can contribute further solutions not yet considered above). The challenge today is to drive the scale-up, maturation, cost reduction, and steady improvement of the full suite of low-carbon solutions. The history of successful energy innovations points the way forward. Over the past decades, the United States has seen precipitous declines in the cost of five key technologies: wind power, solar power, shale gas, light emitting diodes (LEDs), and lithium-ion batteries for electric vehicles and grid-connected electricity storage (Trembath, 2012; DOE, 2015a). Deployment of these technologies has helped to bring about the bulk of emissions reductions to date and has transformed the economics of decarbonization. In each case, these remarkable trends were influenced by PREPUBLICATION COPY—SUBJECT TO FURTHER EDITORIAL CORRECTION 43

similar processes involving both proactive public investment in research, development, and demonstration (RD&D) and the creation of markets to hasten early adoption and ignite private sector innovation and competition through incentives and standards. Examples include the unconventional gas tax credit for shale gas, production and investment tax credits for wind and solar, utility rebate programs for LEDs, and fuel economy and zero emissions vehicle standards and electric vehicle subsidies for lithium-ion batteries. Thanks to prior decades of investment and policy, all five of these technologies went from expensive “alternative energy” to cost-competitive, mainstream energy choices that are transforming the electricity, buildings and appliances, and transportation sectors and will enable cost-effective and sustained reductions in GHG emissions over decades to come. Now, even as the United States targets deployment of these technologies at scale, the task remains to use this same successful engine of innovation to complete the net-zero carbon toolkit. 2. Changes in energy expenditures during a net-zero transition are manageable, and less than historical expenditures. Under a business-as-usual scenario, U.S. energy consumers across residential, commercial, industrial, and other sectors are likely to spend more than $1 trillion annually on energy services between now and 2050 (EIA, 2019). This level of spending, including investment dollars that underpin it, provides an opportunity to leverage and redirect investment and expenditures toward a clean energy system. Historical expenditures on energy ranged from 5.5 percent to nearly 14 percent of GDP for much of the period from 1970 through 2018 (EIA, 2020d). Global and domestic spikes in the price of natural gas and oil have historically driven energy expenditures to the higher end of the range (as high as 9.6 percent of GDP as recently as 2008 [EIA, 2020d]). These spikes have exposed U.S. consumers and the economy to risk that could be substantially insulated if the nation were to build a net-zero emissions economy. Multiple studies estimate that net-zero emissions could be achieved while spending roughly 4−6 percent of GDP on energy in total (Haley et al., 2019; Larson et al., 2020). Energy system expenditures in a net-zero emissions economy are likely to be higher than a business-as-usual pathway—Princeton’s Net- Zero America study (Larson et al., 2020) estimates cumulative incremental cost (net present value, NPV) of $4−6 trillion from 2020 to 2050 relative to a reference case. However, adopting a net-zero economy in the United States would reduce the risks of spikes in fossil markets and reduce the share of economic activity spent on energy services relative to today’s levels, while also eliminating the United States’ ongoing contributions to climate change. Estimates of the incremental cost of a net-zero transition have been decreasing over time as the costs of clean energy technologies (e.g., wind, solar, and electric vehicles) have been declining, indicating that innovation can further decrease the costs of the clean transition. PREPUBLICATION COPY—SUBJECT TO FURTHER EDITORIAL CORRECTION 44

FIGURE 2.3 Historical energy system costs as a percentage of GDP, with representations of the ranges of projected energy system costs under two different net-zero studies (Haley et al., 2019; upper, orange, and Net-Zero America (Larson et al., 2020; lower, purple) as well as four EIA projections: Annual Energy Outlook 2019 Reference (green) and Low Oil and Gas Price (light blue) cases and Annual Energy Outlook 2020 Reference (gray) and Low Oil Price (yellow) cases. These EIA projections illustrate the wide variation in energy system spending as proportion of GDP owing to unpredictable fluctuations in the prices of oil and gas, and explain the variation between the two studies (in modeling reference scenarios, Haley et al. used the AEO2019 reference oil and gas price scenario and Larson et al. used the AEO2019 low oil and gas price scenario). The ranges from the two studies are bound by each study’s highest and lowest cost cases. In Haley et al. (2019), the high cost bound is in the low land NETs case (a scenario with a lower uptake of carbon in land sinks, resulting in a more restricted energy system-wide emissions budget), and the low cost bound is in the low electrification case through 2040 and the no new nuclear case 2040−2050. In Net-Zero America (Larson et al., 2020), the high cost bound is in the high electrification, 100 percent renewables case, and the low cost bound is in the high electrification and high- electrification, low renewables cases. SOURCE: Data from EIA historical data; EIA AEO (2019); EIA AEO (2020); Larson et al. (2020); and Haley et al. (2019). 3. A net-zero economy requires fundamental shifts in our energy systems. The success of any pathway requires high levels of public acceptance and is bounded by societal constraints and expectations. Any pathway to decarbonization entails fundamental shifts in the way Americans power their homes and economies, produce goods, deliver services, transport people and goods, and manage public and private lands. This transition is bounded by societal expectations of reliability and costs of energy services and products, considerations of energy access and equity, uncertainties in the pace of technology development and deployment, and regulatory and market barriers to new technologies (EFI, 2019). The energy system has considerable inertia, aversion to risk, and market, finance, and regulatory structures that favor incumbents. Previous experiences have demonstrated that widespread adoption of new technologies is facilitated by perceived value, clear communication, and consumer incentives. For PREPUBLICATION COPY—SUBJECT TO FURTHER EDITORIAL CORRECTION 45

example, much of the success of the ENERGY STAR program can be attributed to its recognizable and easily understandable labeling and purchase incentives, in addition to consumer desire for improved energy efficiency (EPA, 2017). Similarly, Tesla offers vehicles that have both desirable performance features as well as decarbonization benefits. Societal preferences and policy, regulatory, and investment environments will constrain and shape the transition (EFI, 2019). These ideas are further discussed in Chapter 3. 4. Long lifetimes and slow stock turnover of energy infrastructure and equipment limit the pace of the transition. Slow stock turnover in buildings, industrial facilities, and other long-lived assets leaves little room for delay and few opportunities to replace or repurpose existing infrastructure for a low-carbon energy system (Figure 2.4). Deep decarbonization can be achieved without retiring existing equipment and infrastructure before the end of their economic lifetime, which reduces the cost of the transition (Williams et al., 2014). However, long-lived infrastructure, such as power plants, buildings, and many industrial facilities and equipment, has only one natural replacement cycle before midcentury. As these assets are replaced, the new equipment must be consistent with the net-zero transition path in order to achieve net zero at the lowest total cost. Failure to replace retiring infrastructure with efficient, low-carbon successors will either result in the inability to meet emission-reduction targets or require early retirement of the replacement equipment, leading to sunk costs and stranded assets. Recent studies see the 2020s as the time to build out enabling infrastructure for the net-zero transition and end most new investments in infrastructure to transport fossil fuels (e.g., pipelines) (Williams et al., 2018; Farbes et al., 2020; Kwok et al., 2020). Required infrastructure developments include EV-charging infrastructure for vehicles and long-distance high-voltage transmission lines (Podesta et al., 2019; Haley et al., 2019; Phadke et al., 2020), as well as hydrogen transport and storage infrastructure and with the need to plan for CO2 infrastructure, including pipelines and storage, to come online during the 2030−2035 period (Larson et al., 2020). Efforts to site and permit new infrastructure projects must be initiated soon, given the challenges associated with obtaining permits and the long build-times. For example, new transmission lines, which are needed to connect renewable resources to areas of high electricity demand, can take as long as 16 years, and an average of 8−10 years, to site and permit (Reed et al., 2020). PREPUBLICATION COPY—SUBJECT TO FURTHER EDITORIAL CORRECTION 46

FIGURE 2.4 Typical lifetimes for key energy sector assets. The operating lifetime of some energy assets can exceed several decades, slowing the pace at which they can be replaced with cleaner and more efficient technologies. As shown by the box representing the 30-year period remaining until 2050, many assets, such as power plants, pipelines, building stock, industrial plants and equipment, and even aircraft and HVAC systems will have few natural opportunities for clean replacement before 2050. SOURCE: Adapted from IEA (2020). Energy Technology Perspectives 2020. All rights reserved; as modified by the National Academy of Sciences. 5. Repurposing existing fossil fuel infrastructure can reduce the overall costs of the transition while reducing the potential for stranded assets and workers. Repurposing existing energy infrastructure could play a key role in enabling a clean energy future by reducing the overall costs of the transition to clean energy, as well as mitigating likely opposition to the needed transition by reducing the potential for stranded investments and workers (EFI, 2019). For example, upgrading or converting natural gas pipelines to carry hydrogen/natural gas blends or 100 percent hydrogen could help retain the use of those pipelines in a low-carbon energy system, avoiding the need for more costly and difficult-to-site new builds while also preventing stranded assets for pipeline owners and preserving jobs in natural gas transmission and distribution utilities. Using residual oil and gas basins for permanent underground storage of carbon dioxide could help oil companies transition into PREPUBLICATION COPY—SUBJECT TO FURTHER EDITORIAL CORRECTION 47

carbon management utilities. Maximizing the use of existing infrastructure would help create greater buy- in for companies and their employees who benefit from the current carbon-intensive economy. 6. A net-zero economy is very different from one with more modest reductions. Near-term actions can avoid locking in suboptimal resources. Reaching net-zero emissions is much more challenging and requires a different set of low-carbon resources than a system with more modest reductions. For example, modest emissions reductions in the power sector (e.g., 50 percent−70 percent CO2 reductions) can be achieved with deployment of natural gas-fired power plants. However, transitioning to near-zero emissions from electricity generation requires replacing the vast majority of fossil fuel power plants or equipping them with carbon capture technologies (Jenkins et al., 2018). Similarly, moderate transportation sector reductions can be achieved by blending conventional biofuels with petroleum-based transportation fuels. However, there is strong agreement in the literature that decarbonizing transportation entails the phase-out of internal combustion engine (ICE) vehicles and replacement with electric drivetrains, including battery electric and fuel cell vehicles. Policies that produce incremental reductions in emissions without facilitating transformation can lead to technology lock-in and emissions cul-de-sacs that make deep decarbonization by midcentury unattainable (Williams et al., 2014). 7. Different decarbonization scenarios reflect different societal preferences regarding the mix of policies and technologies they employ. These scenarios can be assessed by technology mix, cost, resource needs, infrastructure buildout rates, stranded investments, jobs created and lost, societal impacts, and a suite of other factors. Decarbonization pathways differ in their varied mixes of policies and the central technologies upon which they depend. Some pathways are constructed using least-cost models that deploy or retire energy infrastructure based on the lowest cost of meeting energy demand without emissions. Least-cost models generally employ a broad range of zero-carbon technologies, although such models may not account for permitting and siting, regulatory, financing, or other barriers. Sometimes, lowest-cost pathways from a techno-economic or engineering perspective overlook costly impacts on certain communities or minimize or ignore friction in markets that make it difficult to accomplish those least-cost approaches. Some other pathways are constructed using a preferred set of technologies, such as 100 percent renewables scenarios (in the electricity sector or economy wide). Still others are developed by envisioning different policy pathways, such as pathways that rely heavily on technology-neutral carbon prices or clean energy standards. In general, decarbonization modeling finds that scenarios that constrain available technology options result in higher overall mitigation costs than scenarios that are technology neutral. For example, the Intergovernmental Panel on Climate Change (IPCC) Fifth Assessment Report determined that mitigation costs increased by 138 percent in models with no CCS (IPCC, 2014), and Sepulveda et al. (2018) find that decarbonizing the electricity sector is 11 to 163 percent more expensive if all clean-firm power generation technologies such as nuclear, CCS, and bioenergy are excluded. More difficult to quantify, but just as important, scenarios that remove viable options generally present a greater risk of failure, as they depend more heavily on scale-up of favored technologies without impediment by any social, financial, regulatory, or other barriers. An effective risk-management strategy would hedge against likely failure modes by investing in low-carbon technologies or strategies that may prove unnecessary in a favored scenario, but provide critical alternatives should one or more bottlenecks slow progress. 8. There are many pathways to zero emissions, and they share several core features. All plausible pathways to zero emissions share core features: decarbonizing electricity; switching to electricity and other low-carbon fuels for energy services in the transportation, industry, and buildings sectors; increasing energy efficiency in each of those sectors, in the power sector, and in materials; increasing carbon sequestration, and reducing emissions of non-carbon climate pollutants. PREPUBLICATION COPY—SUBJECT TO FURTHER EDITORIAL CORRECTION 48

In particular, there is strong agreement among deep decarbonization studies on the following points:  Energy and materials efficiency: One of the lowest-cost decarbonization opportunities, helps to reduce the overall need for low-carbon fuels and electricity, and will continue to be important across all economic sectors through the next 30 years (Williams et al., 2014; White House, 2016).  Zero-carbon electricity: The electric power sector should cut emissions faster and deeper than other sectors of the economy in order to meet economy-wide targets, owing to the comparative ease and wide range of zero-carbon generation options (Kriegler et al., 2014; White House, 2016; Morrison et al., 2015; Williams et al., 2014; Krey et al., 2014).  Electrification and fuel switching: Electrification of energy services where possible—for example, space and water heating in buildings, light-duty cars and trucks, and some industrial processes—is key to further reducing the use of fossil energy in the end-use sectors (Kriegler et al., 2014; White House, 2016; Morrison et al., 2015; Williams et al., 2014; Jacobson et al., 2015; Steinberg et al., 2017). Zero- and low-carbon fuels can then meet much of the remaining demand for liquid and gaseous fuels (de Pee et al., 2018; ETC, 2018; Davis et al., 2018).  Carbon capture and sequestration (CCS): Important for mitigating industrial process emissions and may also be a useful option for the power sector (IPCC, 2018; de Pee et al., 2018; Rissman et al., 2020; Friedmann et al., 2019; ETC, 2018; Sepulveda et al., 2018).  Non-CO2 gases: These are more challenging to address, although options exist to transition away from hydrofluorocarbons (HFCs) in refrigeration and cooling, and to minimize emissions of methane and nitrous oxide (IPCC, 2018).  Negative emissions: Enhancing carbon sequestration through land sinks and negative emissions technologies is important to counter residual emissions from non-CO2 gases and hard-to-abate energy sectors that are impossible or prohibitively expensive to eliminate completely (IPCC, 2018; NASEM, 2019). 9. Decarbonization studies converge on similar near-term (2021−2030) specific actions needed to put the United States on a path to net-zero emissions by 2050. Feasible decarbonization pathways are very similar in the first 10 years and diverge only in later years. This first report focuses on near-term priority decarbonization actions for 2021−2030 that are robust across many scenarios or retain optionality in the face of uncertainty about the final decarbonization pathway. The committee’s assessment of decarbonization approaches and pathways from 2021−2050 will be discussed in its second report. Analyses that model pathways to net-zero emissions in 2050 agree that in the next 10 years, the United States must:  Improve efficiency of material and energy use by 15 to 19 percent in the industrial sector (Ungar and Nadel, 2019; Larson et al., 2020); 20 to 30 percent in the building sector (Ungar and Nadel, 2019; Mahajan, 2019); and 10 to 15 percent in the transportation sector between 2021 and 2030 (Larson et al., 2020).  Electrify energy services that directly use fossil fuels at the rate of 10 to 50 percent of new light- duty vehicles, and heat pump electrification of space heating and water heating in 15 to 25 percent of residences, with all new construction to be fully electric in order to achieve >50 percent of building energy supplied by electricity by 2030 (up from ~44 percent today). Industrial boilers fueled with natural gas are replaced with electric as they retire (Ungar and Nadel, 2019; Mahajan, 2019a; Mahajan, 2019b; Rissman, 2019a; Larson et al., 2020).  Increase clean electricity generation from 37 percent of U.S. electricity in 2020 to roughly 75 percent by 2030 through expanding generation capacity of wind (~250−300 GW) and grid-scale solar (~280−360 GW) (Larson et al., 2020; Phadke et al., 2020). Coal retirements continue or PREPUBLICATION COPY—SUBJECT TO FURTHER EDITORIAL CORRECTION 49

accelerate and contribute ~1 GtCO2 emissions reduction by 2030. These analyses assume that most existing nuclear capacity should be preserved (and/or expanded with upgrades), with studies ranging from 11 GW retirement to 5 GW addition in 2030 (Haley et al., 2019; Larson et al., 2020).  Build no new long-lived fossil fuel infrastructure (such as pipelines) that cannot be repurposed for use in a net-zero economy, and instead build network infrastructure to enable net-zero energy transition. This assumes that the nation must begin the siting, permitting, and building of high- voltage transmission lines (up to ~60 percent increase in total GW-miles of capacity [Larson et al., 2020]), electric-vehicle charging infrastructure (Haley et al., 2019; Podesta et al., 2019), with ~1−3 million Level 2 chargers and ~100,000 DC faster chargers (Larson et al., 2020), and the planning for siting, permitting, and construction of hydrogen storage and transport networks and trunk pipelines for a national CO2 transport system (as much as 12,000 miles by 2030 [Larson et al., 2020]).  Continue to demonstrate and improve CCS and capture as much as 65 MMT CO2 per year at industrial and power facilities, equivalent to about 5 large cement facilities, 5−10 methane reforming hydrogen production facilities, and 5−10 gas power plants with CCS (Larson et al., 2020). Begin demonstration of direct air capture (DAC), and build out DAC capacity of 9 MMT CO2 per year by 2030 (Larsen et al., 2019).  Invest in RD&D and create niche markets via incentives and standards to drive innovation, maturation, and improvement of a range of nascent technologies including for hydrogen production from biomass gasification, direct air capture, low-carbon or carbon-sequestering materials, low-carbon synthetic fuels, advanced nuclear, and other low-carbon energy technologies (Haley et al., 2019; Larson et al., 2020; NASEM, 2019; Podesta et al., 2019). This report builds on the existing, robust literature on possible pathways to deep decarbonization. Metrics for three of the most recent and comprehensive studies are reported in more detail in Table 2.1. The scenarios analyzed in these studies projected energy demand, share of non-emitting electricity, share of electricity in final energy demand, energy productivity, and scale of CCS, land sinks, hydrogen production, impact of non-CO2 gases, building energy intensity, and EV share. Table 2.1 compares both their 2030 and 2050 results. Although these studies and models rely on different assumptions, data, and methods, the comparison in Table 2.1 illustrates their coherence in the first 10 years in particular. 10. New open-source energy system optimization models need to be developed to further study transitions, trade-offs, and opportunities in net-zero energy systems. No model currently exists in the public domain that is capable of modeling all major elements of a net-zero system at the requisite level of detail to analyze: deep reductions in energy demand through efficiency in vehicles, appliances, buildings; flexible central-station and distributed resources (including flexible demand) at dispatch time scales; power flows and realistic expansion of local and high-voltage electricity networks; gas and liquid fuels production, transportation, storage, and consumption; CO2 capture, pipelines, use, and sequestration; and non-CO2 greenhouse gases and carbon sinks. The primary technical impediment to developing such a model is computational constraints, because the model must simultaneously optimize decisions across all sectors, at high temporal resolution (to capture flexibility needs and impacts of variable renewable electricity production), and with sufficient geospatial detail to capture complex variations in demand, siting limitations, and local policies and to provide actionable insights to inform real-world decision making. New tools and ways of thinking about energy system models will be required to overcome these barriers. The United States should invest in the development of an ecosystem of open-access modeling tools and open-source data to accurately parameterize these models to help plan the transition to net zero and to better represent the universe of possible net-zero transitions. PREPUBLICATION COPY—SUBJECT TO FURTHER EDITORIAL CORRECTION 50

TABLE 2.1 Relevant Metrics/Indicators Across Three Separate Decarbonization Studies 2030 2050 Deep Deep Key Metric 2015 a Decarboniz Net-Zero Decarboniz Net-Zero Energy Energy ation America ation America Innovationb Innovation Pathways Projectd Pathways Project c Project Project Final Annual Energy 97 129 80 64–67 125 65 50–56 Demand (quads) Percent Non- emitting 18 60 55 62–77 100 85 98–100 electricity Electricity share of final energy 28 44 32 21–25 73 60 38–51 demand (percent) Energy productivity of GDP ($ economic 185.5 182 293 350–367 272 524 609–682 output per energy) ($ billion/quad)e Carbon capture 0 30.6 ND 65–197 26 775 690–1760 (MMT CO2/yr) Land sinks (MMT 760 245 1050 750 630 1050 850 CO2/yr) Hydrogen production 0.74f 2.5 <1 0.95–1.9 5.5 <1 7–18 (quads/yr) Non-CO2 gases (MMT 1264 1243 ND 1090 587 ND 1020 CO2e/yr) Building energy 18 17 16.4 18–19 11 13 13–15 demand (quads/yr) EV share of light-duty 1 47 44 6–17 100 100 61–96 vehicle stock (percent) PREPUBLICATION COPY—SUBJECT TO FURTHER EDITORIAL CORRECTION 51

a U.S. EIA 2019a and 2020a; EPA, 2019; EPA, 2020; White House, 2016. b Energy Innovations, 2020. c Haley et al., 2019. Follows EIA projections for economic growth and increased consumption of “energy services.” Assumes rapid adoption of electrification technologies and high-efficiency technologies where the end-use is already electric (i.e., refrigeration) or where complete electrification is infeasible. Adoption rates of these technologies accelerate through 2030, with the stock of these technologies lagging but making steady progress through 2050. Assumes an enhanced land sink 50 percent larger than the current annual sink. Assumes that nuclear plants already in operation will be operated and retired based on the schedule in the 2017 Annual Energy Outlook. d Larson et al., 2020. e Calculated using data from PWC, 2017. f D. Brown, 2016. U.S. Hydrogen Production—2015. CryoGas International. NOTE: These studies, while conducted with different modeling frameworks and assumptions, find commonality in the near term and greater divergence in the long term. This comparison illustrates agreement in the literature regarding near-term actions to begin a long-term energy transition and underscores the importance of actions that maintain or enhance optionality in the long term. ND = not determined. THE FIRST 10 YEARS: FIVE CRITICAL ACTIONS This report identifies 10-year actions that are robust across decarbonization pathways. The committee emphasizes strategies that are (1) “no-regrets” actions that would be needed regardless of the final path taken or (2) that retain “optionality” and flexibility so that the United States can take advantage of technological advances, mitigate risks that could derail primary strategies, and avoid stranded actions. Such an approach is also important in light of uncertainties in technology, support for climate policy, differences in regional energy resources or stakeholder preferences, and future climate impacts. The final report focusing on a longer time period will need to consider more strongly methods for planning and policy making under deep uncertainty (Marchau et al., 2019; Mathy et al., 2016; Waisman et al., 2019; Bataille et al., 2016). However, identifying a strategy for 2021−2030 is easier than it sounds, because feasible paths for near-term emissions reductions and early investment in long-term potential strategies are very similar in the first 10 years and diverge only in later years. For these strategies, the committee has provided estimates of the pace and depth of needed technology deployment and action, in order to provide the order of magnitude of changes warranted in a no-regrets strategy and set of actions in the next 10 years. A selection of these is summarized in Table 2.3 below. 1. Invest in energy efficiency and productivity. Energy and materials efficiency is one of the most cost-effective near-term approaches to reduce energy demand and associated emissions. This approach includes adopting developing technologies and processes that increase fuel efficiency of vehicles (on-road and off-road, including farming equipment); increasing the efficiency of building enclosures as well as installing efficient appliances and equipment in buildings; enhancing energy productivity in manufacturing and other industrial processes and in the power generation fleet; and improving systems efficiencies from greater energy system integration. Demand efficiency and materials efficiency measures (e.g., recycling and reuse) are also included in this category. Priority actions in the 2021−2030 time frame include the following:  Buildings: Reduce building space conditioning and plug load energy use by 3 percent per year for existing buildings from a 2018 baseline, to achieve a 30 percent reduction by 2030. Meet the Architecture 2030 goal of carbon neutrality for all new buildings, developments, and major renovations by 2030 (Architecture 2030, n.d.). These targets may be met by implementing a PREPUBLICATION COPY—SUBJECT TO FURTHER EDITORIAL CORRECTION 52

combination of sustainable design strategies, generation of on-site renewable energy, and/or purchasing (20 percent maximum) of off-site renewable energy. It is also critical to work toward maximum conditioning goals for new construction that reflect passive house site energy standards of 5−60 kBtu/ft2/year (depending on climate and building type), with plug loads held to 3000−4000 kWh/year per household, and peak demand capped under 10 W/m2 (3.2 Btu/ft2). As addressed in Wright and Klingenberg (2018), it is essential to reduce peak loads in addition to operational demands through conservation and load shifting in both new and existing buildings. Incorporate district heating, where feasible.  Transportation: Increase energy productivity by encouraging shifts in transportation from single-occupancy light-duty vehicles (LDVs) to multi-occupancy vehicles, public transit, cycling, and walking (although historically, these shifts can be difficult or costly to achieve). Shift on-road trucking to freight rail. Steadily improve the fuel efficiency of new ICE vehicles—especially important for the medium-duty vehicle/heavy-duty vehicle (MDV/HDV) sectors, as well as planes, ships, and trains, which are more difficult and/or expensive to power with electricity. Encourage flexible and remote work patterns. Invest in improved real-time traffic control, introduce automated vehicles for smoother traffic flow and less congestion from crashes, and reduce travel through telework and mixed-use development. Efficiency improvements could reduce emissions by 10 to 30 percent over the next few decades (Lah, 2017). Between 2007 and 2017, average annual improvement in LDV fuel economy was 1.9 percent per year, and this could be continued in the next decade and extended to trucks with appropriate policies in place (Table 4.1 of Davis and Boundy, 2020). The aviation and maritime industries have also established goals and policies for substantial GHG reductions, primarily through efficiency improvements in the use of alternative fuels (USG, 2015; ICCT, 2018).  Industry: Deliver 25 percent of the potential industrial sector energy efficiency reductions (3 quads, 117 million tons CO2 reduction) by 2030 (Ungar and Nadel, 2019). Achieve 3 percent per year sustained improvement in industrial energy productivity (i.e., dollar of economic output per energy consumed) and improving materials efficiency by minimizing/recycling waste by 10 percent, and advancing waste heat recovery/reuse to improve energy efficiency of process equipment such as furnaces by 10 percent. Optimize systems and promote energy and materials management—for example, strategic energy management (SEM)—across all industries and all size companies, advance smart manufacturing, and institute circular economy strategies.  Embodied energy in products and building materials: Increase materials and water efficiency to reduce associated energy and GHG inputs. Decrease high-carbon-intensive building and infrastructure materials with goals to reduce carbon intensity by a minimum of 30 percent and to pursue carbon-sequestering alternatives. 2. Electrify energy services in the buildings, transportation, and industry sectors. Electrification of energy services, in tandem with decarbonization of electricity generation, has emerged as a core element in nearly all deep decarbonization scenarios. The greatest near-term (2021−2030) potential for electrification is in the buildings and transportation sectors. In buildings, electric heat pumps for space conditioning and water heating can help lower carbon emissions compared to fossil systems. Among LDVs, electric vehicles are projected to reach cost-parity with internal combustion engine vehicles in the next decade and, in conjunction with relatively low-carbon electricity, will also reduce emissions. Some potential exists for electrification of industrial processes, although electrification technologies for the industrial sector are at a relatively early stage of development and play a greater role beyond the 2030 time frame, as electrification technologies mature, decline in cost, and are demonstrated at scale. PREPUBLICATION COPY—SUBJECT TO FURTHER EDITORIAL CORRECTION 53

 Buildings: o Space heating: Deploy high-efficiency heat pumps in ~25 percent of current residences by 2030 (25−30 million households) and 15 percent of commercial buildings. Focus on stock turnover and new builds in climate zones 1−5,1 planning for 100 percent of sales by 2030. o Hot water: Switch to heat-pump hot water heaters when existing stock reaches end of life, ramping up to 100 percent of new sales by 2030.  Transportation: o Electric vehicles: Approximately 50 percent of new vehicle sales across all vehicle classes (light, medium, and heavy duty) and 15 percent of on-road fleet will be electric vehicles (with some fuel cell EVs in the MDV and HDV subsectors) by 2030. This includes approximately 50 million LDV cars and trucks and 1 million MDV and HDV trucks and buses. Invest in more electrified train services and aircraft. Ports and airport taxiing should be electrified. o Renewable transportation fuels: Expand power to liquids opportunities for post-2030 by developing regionally based pilot production facilities.  Industry: o Develop and deploy options to decrease emissions from process heat production, including a significant proportion of electric technologies. As opportunities arise for replacement of legacy equipment, advance the use of low-temperature solutions such as heat pumps, infrared, microwave, electric and hybrid boilers, and other options as described in Rightor et al. (2020, Appendix A). o Deploy tens of GWs of electric boilers to supply low- and medium-temperature heat for various industrial processes whenever electricity cost, economics, and non-energy benefits can justify replacement. In some applications, electric boilers can be installed alongside existing gas boilers, enabling hybrid use of electricity to displace fossil fuels when electricity supply is abundant and costs are low. o Deploy 1−2 GW of advanced industrial heat pumps (IHPs), with early development/ demonstrations at industrial clusters to lower barriers, for a range of process heat, drying, evaporator trains, and other applications lowering CO2 emissions with the electricity coming from low-carbon sources. 3. Produce carbon-free electricity. The electric sector plays a critical role in decarbonization, both in terms of reducing GHG emissions from electricity production and use and for supporting the decarbonization of other sectors. Since 2005, the share of electricity from zero-carbon emitting sources—including nuclear power, hydropower, wind, solar, biomass, and geothermal—has increased from 28 percent to 37 percent. This growth comes primarily from wind and solar, as cost reductions and policy incentives have combined to drive deployment (even as other zero-carbon emitting technologies have declined or remained stagnant). Wind or solar power is now the cheapest source of new electricity generation in 34 percent of U.S. counties, based on levelized cost of electricity and considering regional differences in capital costs and fuel delivery prices (UT-Austin, 2020). The 2020s are a key decade to build out the electric transmission and distribution infrastructure needed to accommodate flows from and access to these commercially ready new zero-carbon resources. 1 Climate zones are based on heating degree days, average temperatures, and precipitation. Climate zones 1−5 cover all of the United States except for the “cold,” “very cold,” and “subarctic” regions that include Alaska, the northern half of Rockies, the Upper Plains states, Minnesota and Wisconsin, northern Michigan, upstate New York, and the northern half of New England (DOE, 2015b). PREPUBLICATION COPY—SUBJECT TO FURTHER EDITORIAL CORRECTION 54

 Electricity generation and storage: o Carbon-free electricity: Roughly double the share of U.S. electricity generation from carbon- free sources from 37 percent today to roughly 75 percent nationwide by 2030. o Wind and solar power: Deploy ~250−300 GW of wind (~2−3× existing capacity) and ~300 GW of solar (~4× existing) by 2030, supplying approximately 50 percent of U.S. electricity generation (up from 10 percent today). To reach this level, the sustained annual pace of wind and solar capacity deployment must match or exceed record annual rates to date from 2021−2025 and accelerate to roughly double that rate in the 2026−2030 time frame. o Coal power: Manage continued (or accelerated) retirement of existing coal-fired power plants, including associated operational reliability and local economic transition challenges and impacts. o Nuclear power: Preserve existing nuclear power plants wherever safe to continue operation as a foundation for growing the carbon-free share of electricity generation. The deployment of small modular reactors may occur by the late 2020s and provide additional clean electricity generation. o Natural gas power plants: Modest decline in gas-fired electric generation (10 percent−30 percent) and capacity is roughly flat nationally through 2030 to maintain reliability as coal (and some nuclear) units retire, and to provide system flexibility alongside wind, solar, and storage, while avoiding new commitments to long-lived natural gas pipeline infrastructure. o Energy storage: Deploy 10−60 GW / 40−400 GWh of intraday energy storage capacity (e.g., battery energy storage) through 2030 to reduce need for infrequently utilized peaking power plants, mitigate transmission and distribution constraints, and integrate variable renewable energy. Enhanced demand flexibility (e.g., through real-time pricing, demand response programs, and aggregation and control of flexible loads such as electric vehicle charging) can directly reduce the scale of battery storage required. 4. Plan, permit, and build critical infrastructure and repurpose existing energy infrastructure. In the 2020s, efforts must begin to build out enabling infrastructure for the low-carbon transition. These will include EV-charging networks (to enable vehicle electrification); long-distance high-voltage transmission lines (to bring remote power resources to population centers, because high-quality renewable sources are often not located near major load centers); upgrades to distribution grid upgrades to enable electrification of heating and transport; and renewable fuel (e.g., hydrogen) transport and storage infrastructure. Planning and siting for a national CO2 pipeline system should begin immediately, and various developments in the first half of the decade will determine whether CO2 infrastructure, including pipelines and storage, will need to be built at scale by 2030 or the middle of the next decade.  Transportation: o Charging infrastructure: Proactive build-out of EV charging infrastructure to facilitate greater adoption of EVs, including 2−3 million Level 2 chargers and at least 100,000 DC fast chargers by 2030. This infrastructure should be a mix of private and public ownership and operation, including fleet operators. o Investment in vehicle connectivity and real-time control infrastructure.  Electricity transmission and distribution: o Electric transmission: Strengthen and expand U.S. long-distance electricity transmission by identifying corridors needed to support wind and solar deployment (both through 2030 and beyond, given the long siting and build timeline for transmission), which will require policy and process reforms described in Chapter 4. Leverage opportunities to reconductor existing transmission lines at higher voltages and take advantage of existing rights of way and PREPUBLICATION COPY—SUBJECT TO FURTHER EDITORIAL CORRECTION 55

dynamic line rating to enhance existing transfer capacity. Increase overall transmission capacity (as measured in GW-miles) by about 40 percent by 2030. Incorporate new materials to reduce losses and increase efficiency. o Electric distribution: Strengthen distribution-system planning, investment, and operations to allow for greater use of flexible demand and distributed energy resources for system needs, improve asset utilization in the distribution network, and efficiently accommodate up to an approximately 10 percent increase in peak electricity demand from EVs, heat pumps, and other new loads during the next decade. Prepare for more-rapid electrification and peak demand growth after 2030. o Expand smart grids: Expand automation and controls across electricity distribution networks and end-use devices by increasing the fraction of electricity meters with advanced two-way communications capabilities from about half to 80 percent. Smart grid expansion will enable greater demand response of EV charging, space and water heating loads, and cooling energy storage for air conditioning buildings. It will also allow the use of a variety of smart home and business technologies that can increase energy efficiency while reducing consumer costs. Further development of the broadband network across the country is required in order to enable these smart grid expansions. Such actions could also spur economic development and potentially reduce transportation-related carbon emissions by facilitating telework.  Fuels: o Expand hydrogen infrastructure, including transmission and distribution. o Leverage the current natural gas pipeline infrastructure to operate with 5 percent hydrogen (on an energy basis), with appropriate user retrofits. Complete one or more demonstrations of large-frame combustion turbine operations consuming greater than 20 percent hydrogen (by energy content) on an annual basis through typical operational cycles for multiple years to reduce technology risk and identify longevity and operability challenges with high hydrogen/natural gas blends. o Build connections from points of H2 generation (via electrolysis or other renewable sources) to the user base, current hydrogen delivery infrastructure, and natural gas distribution system (for blending purposes). Maximize opportunities to utilize and repurpose existing gaseous and liquid fuel transmission, distribution, and logistics infrastructure. Expand hydrogen refueling for medium- and heavy-duty vehicles. Hydrogen networks will likely be regional in scope, given the ability to cost-effectively produce hydrogen in most parts of the country from a combination of electrolysis, natural gas reforming with CCS, and biomass gasification.  Industry: o Define infrastructure requirements to deliver on industrial needs (e.g., interconnections, substations, high-voltage lines, storage, and grid energy flows). Pursue these capacity improvements in collaboration with utilities and industry, again starting with clusters. o Build capability, market pull, and lower costs for hydrogen use in iron and steel, chemistry, and refining, targeting 2 percent of combined energy and fuel use by 2030 to kick-start future increases.  Carbon capture, utilization, or sequestration (CCUS): o CCUS network development: Set the foundation for large-scale CCUS by planning for the location and timing of an “interstate CO2 highway system” or trunk line network, and determine by mid-decade whether construction of trunk lines needs to be completed by 2030 or 2035 (~10,000 miles, up from 4,500 miles today). Regional clusters can be a starting point of a larger, interconnected network. This network will connect the high CO2 supply that needs to be abated long term (50 to 75 MMT CO2 per year by 2030 and as much as 250 PREPUBLICATION COPY—SUBJECT TO FURTHER EDITORIAL CORRECTION 56

MMT CO2 by 2035) to regions of high CO2 use potential or storage. Development of a CO2 network could involve repurposing existing natural gas or oil pipeline infrastructure or rights- of-way. o Reservoir characterization: Characterize sustained CO2 injection rates that can be achieved across each of the major CO2 sequestration basins and identify by 2030 high injection rate locations suitable for injection of approximately 250 million metric tons of CO2 per year. 5. Expand the innovation toolkit. For some sources of emissions, and particularly those in harder-to-abate sectors, low-carbon alternatives are still in the pilot stage or remain nascent industries. For these sectors, near-term opportunities for emissions reduction are limited to improving energy efficiency, materials efficiency, demand management, and other tools that reduce—but cannot completely eliminate—the emissions intensity of these sectors. Maturation, improvement, and scale-up of an expanded set of carbon-free alternatives will be needed as near-term emission reduction opportunities are exhausted. Bringing new energy technologies to market can take 20−70 years from the first prototype, and driving maturation and cost declines for nascent industries proceeds over a decade or longer time scales. Therefore, proactive RD&D and market creation efforts are needed in the 2020s to develop, improve, and scale-up nascent low-carbon energy technologies, including the following:  Electricity generation: o RD&D and early market deployment for clean-firm electricity resources (e.g., advanced nuclear, CCS, enhanced geothermal, and hydrogen combustion turbines or fuel cells).  Industry: o Develop transformative processes for utilizing low-carbon energy carriers (e.g., hydrogen) in the generation of low-carbon precursors and products (ammonia, methanol, ethylene, etc.) and as solutions for reductants (e.g., steel). o Develop and pursue low-carbon process heat solutions across all temperature ranges, especially providing options for mid- and high temperatures. o Advance electrolyzer efficiency and longevity, thereby enabling lower costs and broader application of water electrolysis for H2 and other electrolytic processes o Substantially increase the efficiency of separations to cut energy costs (upward of 50 percent energy spend for some processes) and introduce low-carbon separation (e.g., membranes driven by electricity).  Energy storage: o RD&D for batteries and other energy storage technologies. o Improve battery storage for vehicle applications to achieve cost below $50/kWh, performance above 500 Wh/kg, a 10-year life, and several thousand cycles. o Improve long-duration energy storage for deployment with the electric grid and renewable energy to operate at an ultra-low cost per kWh (~ $1/kWh) and long asset life (e.g., 10−30 years).  Fuels: o RD&D and early market deployment to reduce costs of net- zero carbon fuels, including drop-in and non-drop in fuels, to be cost-competitive with electrification. Specific areas of interest include hydrogen production from electrolysis, biomass gasification, and methane reforming with CCS, particularly early commercial deployment to drive experience and reduce costs; synthesis of hydrocarbon fuels from cellulosic biomass and H2 and CO2 via Fischer-Tropsch or methanation processes (e.g., “drop-in” fuels); and high-yield bioenergy crops. PREPUBLICATION COPY—SUBJECT TO FURTHER EDITORIAL CORRECTION 57

 Carbon capture, utilization, or sequestration: o Develop CCUS technologies (including with support of enabling policies) for a variety of applications across the industry and power generation sectors. o Perform advanced characterization of geologic formations that have received little attention but may have significant impact (e.g., basalt, ultramafics,2 and saline aquifers). Survey and analyze natural and industrial alkaline sources that could serve as a feedstock for CO2 mineralization. o Integrate CCS with process heat to lower costs. o Continue developing and deploying more efficient capture technologies (e.g., Jacoby, 2020) and other negative emission technologies. o Advance direct CO2 utilization (e.g., syngas, Fischer Tropsch, etc., with renewable H2 and recycled CO2).  Innovation to reduce infrastructure siting challenges: o Increase investment in research, technology, and process/procedural solutions that reduce siting challenges with network infrastructure, including repurposing existing natural gas or oil pipelines for hydrogen or CO2 transport, developing low-cost underground transmission lines on existing rights of way, and increasing utilization and transfer capacities of existing electricity transmission. o Coordination of these activities to account for the timing of demand changes for CO2, natural gas, and oil as well as the higher pressure operation of CO2 pipelines will be required. BOX 2.1 Methods to Limit Non-CO2 GHG Emissions The committee focused this interim report on CO2 emissions, as directed by its task statement, but also recognizes that net-zero refers to all anthropogenic greenhouse gases covered by the UNFCCC, including methane, N2O, and fluorinated gases. The sources of non-CO2 gases are generally more challenging to address than CO2, in part because they are more diffuse and because some are associated with agricultural activities that cannot be fully abated. However, some reductions can be achieved through higher efficiency processes (precision agriculture to reduce N2O, improved methane leak detection and mitigation to reduce CH4 from fossil energy systems, etc.), and by replacing hydrofluorocarbons (HFCs) in refrigeration and air conditioning with other coolants such as CO2. As detailed in the recent National Academies of Sciences, Engineering, and Medicine report on negative emissions technologies, the existing land sink and other low-cost agricultural and forestry options can offset any residual non-CO2 emissions (NASEM, 2019). Non-CO2 emissions in the United States totaled 1,250 million metrics tons of CO2-equivalent (MtCO2e) in 2018 (EPA, 2020). These non-CO2 greenhouse gases, including methane, nitrous oxide, and fluorinated greenhouse gases, are more effective than CO2 at trapping heat within the atmosphere and in some cases can remain in the atmosphere for longer periods of time. Given the significant warming effect of non-CO2 greenhouse gases, achieving the nation’s climate goals requires deep reductions in their emissions in addition to deep decarbonization strategies. In line with the IPCC Special Report on 1.5°C, this report assumes that methane emissions can be reduced by 65 percent below 2010 levels by 2050, and nitrous oxide can be reduced 25 percent (IPCC, 2018). Per the Kigali Amendment, HFCs will be reduced by 85 percent by 2045 (United Nations, 2016). With these conditions in place and utilizing various abatement strategies, total non-CO2 emissions would decline from 1,250 MtCO2e in 2018 to 600−700 Mt CO2e by 2050. To offset these residual non-CO2 emissions 2 Ultramafic rock is igneous in nature. PREPUBLICATION COPY—SUBJECT TO FURTHER EDITORIAL CORRECTION 58

and achieve net-zero total GHG emissions, implementation of negative emission technologies that sequester CO2 are also required. Non-CO2 GHGs originate from a wide variety of sources. The main sources of methane include enteric fermentation and manure management associated with domestic livestock, natural gas systems, decomposition of wastes in landfills, and coal mining (White House, 2016; EPA, 2020). Nitrous oxide emissions are associated with agricultural soil management, stationary fuel combustion, manure management, and mobile sources of fuel combustion (EPA, 2020). The vast majority of fluorinated gases emitted are HFCs primarily used for refrigeration and air conditioning. The energy system has the largest potential for non-CO2 GHG mitigation, followed by the industrial, waste, and agricultural sectors (EPA, 2019). Natural gas and coal activities represent the largest contributors to non-CO2 emissions. In natural gas and oil systems, significant mitigation of non- CO2 emissions can be achieved through changes in operational practices, including directed inspection and maintenance. In coal mining, reduction of ventilation air methane and degasification for power generation and pipeline injection represent most of the abatement potential. Mitigation potential from the industrial processes sector lies primarily in refrigerants, air conditioning, and N2O abatement measures in fertilizer production. Significant mitigation potential also exists in electronics manufacturing and aluminum and magnesium production. In the waste sector, abatement measures in landfills—including collection and flaring, landfill gas utilization systems, and waste diversion practices—and improvements to wastewater infrastructure can provide significant reductions in non-CO2 GHG emissions. Measures applied to livestock, croplands, and rice cultivation, such as use of anti-methanogens and reduction of fertilization, provide the highest mitigation potential in the agricultural sector. Additional mitigation measures in the agricultural sector include livestock dietary manipulations like the use of propionate precursors; manure management with large-scale complete-mix digesters, covered lagoons, and fixed film digesters, and cropland strategies such as no- till practices and nitrification inhibitors. Concurrent with the abatement measures above, implementation of negative emission technologies (NETs) and strategies is necessary to achieve net-zero emissions by 2050. A 2019 National Academies committee estimated the low-cost removal potential of NETs (less than $20/tCO2) in the United States at 520 MtCO2, assuming full adoption of agricultural soil conservation practices and forestry management practices (NASEM, 2019). Including bioenergy with carbon capture and sequestration plants and waste biomass capture could remove another 500 MtCO2 at less than $100/tCO2. These low- cost options of agricultural soil conservation and forestry management practices can be implemented now, and, together with the ongoing managed forest carbon sink in the United States (700 MtCO2/y but declining), are enough to offset the residual non-CO2 GHG emissions. In the long term, these practices could be supplemented by other technologies for removing CO2 from the atmosphere (e.g., direct air capture and carbon mineralization), whose research needs were laid out in the 2019 National Academies report. The forestry and agricultural policies necessary to create and maintain the required ecosystem sinks are not part of this interim report but will be part of the final report. However, the economy-wide price on carbon proposed in Chapter 4 should be enough through 2030 and beyond given the costs reported for land-based negative emission technologies in NASEM (2019). The required forestry effort was included as part of the Obama Administration’s Deep Decarbonization Report (White House, 2016) and is widely understood. The necessary policies for agricultural soils are well-developed for some crop and soil combinations, but a monitoring and verification effort involving direct measurements of a statistical sample would need to be developed by the USDA. Additionally, the National Academies committee (2019) called for an experimental effort to extend the ability to restore lost carbon in agricultural soils to all croplands and grazing lands. Private companies who seek co-benefits and carbon credits from private markets have now begun that work at the required scale. Extending the improvements for forestry management to include urban forests would not greatly add to the carbon removal potential. However, the co-benefits from increasing urban forestry are large and include reducing urban heat island effect and improving ambient air quality. PREPUBLICATION COPY—SUBJECT TO FURTHER EDITORIAL CORRECTION 59

IMPACT ON U.S. ENERGY EXPENDITURES IN THE 2020S Many recent studies estimate that from a technical point of view, the United States could transition to net zero by 2050 using only commercial and near-commercial technologies and spending a smaller fraction of the nation’s GDP on energy system expenditures3 than the country has in the past, including the past decade (see Figure 2.3). However, energy system expenditures during a net-zero transition would be significantly greater than business as usual. If technological options improve faster than considered in recent modeling studies, then the cost of decarbonization could prove lower. Studies reviewed by the committee in this chapter (Larson et al., 2020; SDSN, 2020) indicate that cumulative incremental energy system expenditures during a net-zero energy transition would be approximately $100–$300 billion through 2030, and $4−$6 trillion through 2050 beyond the $22.4 trillion in a business-as-usual baseline. (These estimates are reported on a net present value basis [NPV] of cumulative total expenditures with a 2 percent real social discount rate.4 With a 5 percent social discount rate, the impact would be $210–$270 billion through 2030 and $2−$3 trillion through 2050. These estimates do not provide a commensurate indicator of the benefits of these investments). It is important to note that these estimates of energy costs do not capture general equilibrium effects, such as changes in global oil prices. Note, however, that a net-zero transition would greatly reduce U.S. oil demand and put substantial downward pressure on prices. Nor do these cost estimates include impacts of changes in U.S. balance-of-trade and other effects, which include both positive and negative factors. The costs for deep decarbonization also must be considered in the context of the considerable benefits of a clean energy transition that could offset some, all, or more than the cost of the transition. There are climate benefits, new economic and employment opportunities, substantial improvements in public health, and intangible global leadership credentials. For example, Hsiang et al. (2017) estimate U.S. economic losses of 1.2 percent of GDP per 1°C temperature rise, with risk distributed unequally across the country and the poorest third of counties in the United State projected to incur the largest damages. They estimate the mitigation of economic damages of $200−$300 billion annually by 2100 compared to a business-as-usual course. Benefits of a net-zero transition also include reductions in premature deaths owing to reduced air pollution from fossil fuels, with the magnitude ranging by study: a reduction of 85,000 total premature deaths from air pollution over the 2020−2050 time period from decarbonizing electricity (Phadke et al., 2020); a reduction of 11,000 to 52,000 annual premature deaths from the elimination of air pollution from coal power plants (Prehoda and Pearce, 2017; Larson et al., 2020); and a reduction of up to 200,000 annual premature deaths from eliminating air pollution from fossil fuels entirely (Lelieveld et al., 2019). In addition, a recent report estimated 5 million sustained jobs could be associated with electrifying most energy uses beyond an even larger initial surge of the infrastructure deployment (Griffith and Calisch, 2020), although this would be offset by the loss of about 1.6 million jobs in fossil fuel related sectors. Another recent study estimates that a net increase of roughly 1 million to 5 million jobs would be supported by energy supply-related sectors by 2050 (0.5–1 million by 2030), as total employment in wind, solar, transmission, and other growing sectors offset losses in oil, gas, and coal, in aggregate (Larson et al., 2020). The committee’s task directed it to focus on mitigating emissions, and therefore these beneficial impacts are not extensively reviewed. However, it is clear there are substantial benefits of a net-zero transition. 3 The energy system expenditures referenced here encompass both energy supply and demand, but do not include capital investments. 4 Discount rates put a present value on future costs and benefits. Social discount rates attempt to value the cost and benefits for future generations relative to costs and benefits today. PREPUBLICATION COPY—SUBJECT TO FURTHER EDITORIAL CORRECTION 60

MOBILIZING CAPITAL INVESTMENT IN THE 2020S Figure 2.5 and Table 2.2 summarize the roughly $2 trillion in incremental capital investments that must be mobilized over the next decade for projects that come online by 2030 (i.e., total capital in service in the 2020s) to put the United States on track to net zero by 2050. This includes roughly $0.9 trillion in incremental capital investment in supply-side sectors and networks (roughly double the total capital expenditures under business-as-usual) and $1.2 trillion in incremental demand-side investments in buildings, vehicles, and industrial efficiency. It is important to note that these capital investments are not a direct cost borne by either taxpayers or energy consumers. They are investments in the U.S. economy made by both private and public sector actors. The sum of capital investments that must be mobilized in the 2020s is much larger than the increase in total consumer energy expenditures described above because capital investments are paid back through energy expenditures over many years and because investments in renewable electricity, efficient buildings and vehicles, and other capital-intensive measures offset significant annual expenditures on consumption of fuels. Box 2.2 discusses potential synergies within the systems involved in a net-zero transition, including possible trade-offs and unintended consequences. PREPUBLICATION COPY—SUBJECT TO FURTHER EDITORIAL CORRECTION 61

FIGURE 2.5 To put the United States on a path to net-zero emissions by 2050, roughly $2.1 trillion in incremental capital investment needs to be mobilized into the five critical actions for 2021–2030 described above. Estimates rounded to nearest $10 billion and should be treated as approximate (e.g., order of magnitude) given uncertainties. Other potentially significant changes in capital expenditures are not estimated in the above figure, including changes in natural gas, coal, and oil transportation and delivery networks, establishment of bioenergy crops, decarbonization measures in other industries besides cement and hydrogen production, and efficiency improvements in aviation, rail, and shipping. SOURCE: Committee generated using data from Larson et al. (2020) and Ungar and Nadel (2019). PREPUBLICATION COPY—SUBJECT TO FURTHER EDITORIAL CORRECTION 62

TABLE 2.2 Comparison of Supply-Side Capital Investment Needed Between 2021 and 2030 in Princeton Net-Zero America Study of High Electrification (E+) Net-Zero Pathway and Reference Scenario Supply Side—Total Billion USD, 2021−2030 Capital Investment Reference Net-Zero (E+) Wind 110 414 Solar 62 374 Natural gas CT and CCGT 101 112 Electricity Natural gas with CCS 0 0 Li-ion battery storage 3 3 Biomass with CCS 0 2 Electricity transmission 203 356 Electricity distribution 352 369 Networks EV chargers 1 7 CO2 storage 0 11 CO2 transportation 0 68 H2—gas reforming 3 3 H2—gas reforming with 0 7 CCS H2—biomass gasification 0 0 with CCS Fuels and Industry Electric boilers 0 12 Gas boilers 5 5 Cements w/CCS 0 9 DRI steel 0 0 Total supply side capital 840 1752 expenditure, 2021–2030 NOTE: The Princeton Net-Zero America analysis (Larson et al., 2020) quotes both total capital in service for projects that come online from 2021 to 2030 and total capital mobilized, which includes capital being spent in the 2020s for projects that come online post-2030. This table quotes total capital in service. SOURCE: Data from Larson et al. (2020). PREPUBLICATION COPY—SUBJECT TO FURTHER EDITORIAL CORRECTION 63

BOX 2.2 Managing Synergies, Trade-Offs, and Unintended Consequences of Decarbonization Transitions Carbon, energy, climate, and economic systems are highly integrated with significant positive and negative feedbacks, and complex system effects, both within the United States and worldwide. Relationships and feedbacks among the systems include the type, location, and magnitude of emissions, energy used, material flows, business transactions, and energy services, as well as the resulting climate, health, and economic impacts. These systems will remain highly entwined in a net- zero emissions future, although the magnitude and sometimes direction of the interactions will change. Understanding the current and future relationships and feedbacks among these systems is important for developing effective decarbonization policies and for creating strategies for businesses, organizations, and individuals in response to decarbonization policies. Policy makers should be attentive to how policies in one sector influence the carbon, energy, climate, social, and economic systems in other sectors. Some actions that reduce emissions and climate damage in one sector are likely to have favorable synergies with decarbonization in other sectors, while others will have negative synergies. Specific areas where interactions may manifest such interactions include land use and the built environment, fuel and material flows, and changes in embodied carbon and life cycle emissions associated with energy end-use technologies. Policy makers should look to enhance positive synergies while managing negative synergies and unintended consequences. Positive synergies could include decarbonizing both the industrial and transportation sectors with hydrogen, synthetic net-zero carbon fuels, and CCS; facilitating decarbonization of transportation and the built environment through smart growth policies; and developing more efficient energy end-use equipment to provide greater opportunities to manage load and reduce the need for fossil fuels in end-use sectors and electricity generation. Negative synergies can include the need to replace chemical precursors derived from oil refining and the potential impacts on carbon sinks from land conversion to renewable energy production. Effective management of these synergistic effects would benefit from a whole-economy, comprehensive decarbonization policy process, rather than the current sector-by-sector process governed by congressional committees and agency jurisdiction at the federal level, and similar siloed structures at all levels of government. Both the transition period and the final decarbonized economy will experience new resource needs and constraints, often only emerging after the transition has started. Further research and strategy development in these areas are necessary to minimize negative impacts and create opportunities. PREPUBLICATION COPY—SUBJECT TO FURTHER EDITORIAL CORRECTION 64

TABLE 2.3 Key Actions Necessary by 2030 for the Five Key Decarbonization Approaches in a Selection of Sectors Electrify energy services in the Improve efficiency buildings, and energy transportation, and Build critical Innovate to complete productivity industrial sectors Decarbonize electricity infrastructure the low-carbon toolkit ● Pursue deep energy ● Integrate flexible efficiency in buildings demand and onsite energy ● Maximize waste heat and appliances. ● After efficiency, storage to minimize peak ● Reduce carbon in utilization in district ● Work toward update heating and hot demands. building materials energy systems. Buildings achieving carbon- water with electric heat ● Integrate through substitution. ● Design waste to neutral new buildings pumps to eliminate onsite photovoltaics on roofs ● Innovate to sequester energy infrastructures for and 50 percent combustion. and parking lots where carbon in buildings. buildings. reduction for existing locational value justifies buildings by 2050. cost. ● Invest in ubiquitous ● Transition to EV charging multiple occupancy infrastructure. ● Reduce costs of trips. ● Aggressively pursue ● Pursue energy ● Invest in vehicle renewable fuels. ● Improve ICE fuel zero emission vehicle efficiency for connectivity and real-time ● Repurpose pipeline efficiency. mandates. Transportation infrastructure control infrastructure. infrastructure. ● Encourage urban ● Deploy more zero- construction and related ● Invest in the H2 ● Develop improved planning and carbon transportation freight transportation. fueling infrastructure, fuel cells and hydrogen infrastructure to fuels. including the design and storage. facilitate biking and deployment of fueling walkability. stations. ● Drive RD&D to use ● Develop process heat ● Build capability green H2 in processes ● Triple energy portfolio, including (substations, HV lines, (e.g., ammonia, MeOH, productivity electricity technology, etc.) to expand use of ● Increase on-site/ DRI, high-temperature improvement rate. increasing use 5 percent. low-carbon electricity at nearby generation of process heat). ● Expand strategic ● Develop more clusters. renewable electricity. ● Scale electricity for energy management efficient electrolyzers for ● Expand ability to Industry ● Increase availability use in processes (e.g., and smart H2, electrochemistry, and blend H2 into natural gas of low-carbon electricity high-temperature manufacturing. direct reduced iron for networks by upgrading at key industrial clusters process heat like ● Drive system steel. valves, controls, to catalyze adoption. crackers, or steel optimization and ● Drive early solutions applications. making). materials efficiency. (e.g., hybrid boilers, heat ● Build connections ● Innovative pumps). between renewable separations technologies PREPUBLICATION COPY—SUBJECT TO FURTHER EDITORIAL CORRECTION 65

Electrify energy services in the Improve efficiency buildings, and energy transportation, and Build critical Innovate to complete productivity industrial sectors Decarbonize electricity infrastructure the low-carbon toolkit generation and users of that reduce energy use H2. by >50 percent. ● Expand adoption of ● Target widespread electrified vehicles ● Develop and deploy adoption of electrified through lower cost and low-emissions personal and higher energy density ● Where cost effective, manufacturing and commercial vehicles, batteries. install onsite energy processing of energy ● Invest in energy buses, trains, and some ● Incorporate energy storage to accommodate storage technologies. storage RD&D to lower aircraft. storage with renewable peak usage demands. ● Expand charging costs, facilitate Electrical Energy ● Utilize energy energy generation to ● Deploy energy storage infrastructure for recycling, adopt low Storage storage to enable enable lower cost to facilitate integration of electrified vehicles. environmental impact widespread adoption of industrial operations. variable renewable ● Where cost effective, materials and processes, renewable energy ● Where cost effective, energy generation. use energy storage to increase energy density. generation to reduce deploy energy storage in optimize transmission and fossil fuel-burning buildings coupled with distribution asset power plants and use of renewable energy utilization. peaker plants. to facilitate electrification. ● Drive RD&D to use ● Expand ability to green H2 in fuel blend H2 into natural gas formation processes ● Employ electrolysis as by upgrading valves, (e.g., ammonia, a flexible consumer of controls, and applications. methanol). Fuels electricity to produce ● Build connections ● Drive RD&D for air- zero-carbon fuels and between renewable to-fuels, synfuels, and feedstocks. generation and users of synthetic aggregate H2. processes with CO2 as a feedstock. ● Increase the share of ● Expand long-distance ● Reinforce Electricity U.S. electricity from transmission capacity distribution networks. Generation and carbon-free sources from ~120,000 GW-miles by ● Enhance the ability Transmission ~37 percent of U.S. 2030 to connect wind and of distribution system generation today to solar resources to demand planning, investment, PREPUBLICATION COPY—SUBJECT TO FURTHER EDITORIAL CORRECTION 66

Electrify energy services in the Improve efficiency buildings, and energy transportation, and Build critical Innovate to complete productivity industrial sectors Decarbonize electricity infrastructure the low-carbon toolkit roughly 75 percent by centers, a ~60 percent and operations to use 2030. increase. flexible demand and ● Deploy ~250−300 distributed energy GW of new wind and resources to improve ~280–360 GW of new network asset utilization solar by 2030. and efficiently ● Retire as much as 100 accommodate increased percent of installed coal- demands from electric fired capacity by 2030 (or vehicles, heat pumps, retrofit with systems to and other new loads. capture ≥ 90 percent of CO2 emissions). ● Decrease natural gas- fired generation by ~10−30 percent by 2030 and keep capacity roughly flat nationally ● Demonstrate and ● Drive RD&D for air- improve use of CCS in to-fuels, synfuels, and ● Increase carbon methane reforming, synthetic aggregate capture deployment biomass gasification, and processes with CO2 as a across all sectors for biofuel production feedstock. existing technologies. facilities to produce zero- ● Improve ● Plan for pipeline carbon and carbon- understanding of CO2 Carbon Capture infrastructure required for negative fuels. storage of non-oil and and CO2 transportation to go ● Demonstrate and gas reservoirs, including Sequestration online between improve use of bioenergy basalts and ultramafic 2025−2035. with CCU to produce minerals. ● Increase deployment CO2 for Fischer-Tropsch ● Advance CO2 of dedicated geologic and methanation for mineralization through storage projects in production of synthetic mine tailings and other sedimentary basins. drop-in liquid and industrial alkaline gaseous fuels. wastes. NOTE: EE = energy efficiency, HV = high voltage, DRI = direct reduced iron, GWP = global warming potential, CFCs = chlorofluorocarbons. PREPUBLICATION COPY—SUBJECT TO FURTHER EDITORIAL CORRECTION 67

IMPLICATIONS BY SECTOR The following topical boxes (Boxes 2.3 through 2.9) highlight the committee’s evaluation of technologies and approaches required in 2021−2030 to remain on the trajectory for full decarbonization by 2050, organized by sector. Energy demand, supply, carrier, and storage approaches are discussed, including needs for buildings, transportation, industry, energy storage, fuels, electricity generation and transmission, and carbon capture and sequestration. For each topic, the following aspects are highlighted:  technologies and approaches with the greatest near-term (2021−2030) emissions impact;  technologies and approaches that have a large potential impact/role in 2031−2050 but need improvement and maturation over the next decade; and  network infrastructure or other enabling technology or research investment needs that have to be deployed to pave the way to deep decarbonization. The overall goals for a decarbonization policy plan and the beneficial policies to implement the needed emissions reduction approaches are discussed in Chapters 3 and 4, respectively. BOX 2.3 Buildings Building demand reduction presents the largest opportunity to reduce energy demand, as critical to decarbonization as reducing emissions from energy supply. Commercial and residential buildings use 39 percent of total U.S. energy and are responsible for over 35 percent of total U.S. greenhouse gas emissions (EPA, 2020). The built environment can significantly reduce its energy demand, its share of electricity demand, and its embodied carbon. To enable intelligent policy and investment in demand reduction in the building sector, emissions from residential and commercial buildings should be considered together (Figure 2.3.1a) and should consider all associated electricity energy use and emissions (2.3.1b), as well as the embodied carbon in their use of steel, concrete, aluminum, and plastics (2.3.1c). Improvements in the built environment can dramatically reduce energy demand while optimizing asynchronous energy supply (often via thermal storage) and providing measurable gains for productivity, health, and environmental quality. FIGURE 2.3.1a,b,c Collecting all building-related GHG emissions reveals that 39 percent of the environmental challenge is in building construction and operations SOURCE: Carnegie Mellon Center for Building Performance and Diagnostics (2020). PREPUBLICATION COPY—SUBJECT TO FURTHER EDITORIAL CORRECTION 68

As evident in the benchmarking data from Seattle displayed in Figure 2.3.2, the worst performing buildings use 2.5−8 times more fossil fuel and electricity than the best performing ones. Demand reductions of 40 percent are easily achievable by 2030, and 80 percent reductions in building energy use intensity (EUI) are achievable by 2050 in the United States, combining new and retrofit construction. Moreover, these massive reductions in demand are some of the most cost-effective investments for decarbonization (McKinsey, 2013). 350 95th Percentile Source Energy Use Intensity  300 5th Percentile 250 (kBtu/sq ft) 200 150 100 50 0 Multifamily Hotel Retail Office K‐12 Education Residential Building Subsector FIGURE 2.3.2 Variation in source energy use intensity (EUI) in five building types. SOURCE: Committee generated using data from Sullivan (2019). Six overarching goals and strategies to achieve building demand reduction and decrease carbon emissions from the building sector are described below: 1. Invest in demand reduction to improve quality of life, provide U.S. jobs, and reduce inequities. Current U.S. codes, standards, RD&D, and investments in building demand reduction significantly lag behind peer nations. The development of national standards and the removal of market barriers can lead to significant reductions in energy use from key building technologies through their natural replacement cycle. Such standards, which would likely be enforced at a local or state level, are further discussed in Chapter 4. 2. Make strategic investments in building efficiency and fuel switching to meet near-term building energy and carbon goals, as outlined in (Ungar and Nadel, 2019):1 o Appliance and equipment efficiency: 5.6 quads, 210 M MtCO2/yr reductions. Next- generation Energy Star standards and replacements for low-income homeowners offer 70 percent energy savings from a dozen products: residential water heaters, central air conditioners/heat pumps, showerheads, clothes dryers, refrigerators, faucets, and furnaces, as well as commercial/industrial fans, electric motors, transformers, air compressors, and packaged unitary air conditioners and heat pumps. o Net-zero emissions in new homes and commercial buildings: 5.7 quads, 265 M MtCO2/yr reductions. Standards and low-income homeowner incentives offer 70 percent energy savings relative to reference-case efficiency levels, with the remaining 30 percent coming from on-site or off-site carbon-free energy systems. PREPUBLICATION COPY—SUBJECT TO FURTHER EDITORIAL CORRECTION 69

o Smart homes and commercial buildings—new and existing: 3.2 quads, 125 M MtCO2/yr reductions. Weatherization Assistance Program (WAP) training and employment for smart controls, access to real-time information, and smart algorithms will optimize energy savings for automation systems in both residential and commercial buildings (Elliott et al., 2012). o District and combined heat, cooling and power—new and existing: 4 quads, 150 MtCO2/yr reductions. Co- or poly-generation of power, heating, hot water and cooling with district energy systems can reduce emissions by 150 million metric tons of CO2 each year by installing new CHP plants with a total capacity of 40 GW by 2020 (Park et al., 2019). As long as there is sufficient waste heat from industry and power generation (including increases in waste-to-power), district energy systems offer substantial efficiencies in mixed-use communities in heating dominated climates and offer resiliency for hospitals, schools, and community spaces. o Existing home and commercial building envelope retrofits: 3.8 quads, 125 M MtCO2/yr reductions. WAP training and employment for retrofits that improve air tightness, envelope insulation, and window quality to meet ENERGY STAR can reduce energy use by 20–30 percent and improve comfort and health (Belzer et al., 2007; Liaukus, 2014). All commercial buildings undergoing major retrofits should achieve 50 percent reductions in demand (Shonder, 2014). o Electrification of space heating and water heating in existing homes and commercial buildings: 0.9 quads (after measures above), 76 M MtCO2/yr reductions. Industry standards and incentives can accelerate the deployment of high-efficiency heat pumps that use electricity from low- or no-carbon generation, including on-site photovoltaics that can offer a level of resiliency. 3. Reduce embodied carbon emissions. As buildings become more efficient, the embodied carbon in building materials becomes as critical as operational carbon. The embodied carbon emissions from all new buildings, infrastructures, and associated materials should be reduced by 50 percent by 2030 and eliminated by 2050. 4. Electrify the built environment and integrate it with the grid. Buildings have a role in electricity generation, storage, and carbon sequestration as well. Buildings and communities play a significant role in decarbonizing energy supply through the following: o Electrification of the built environment with the lowest conditioning, process, plug and parasitic loads through conservation, passive conditioning, and energy cascades; o Peak load shaving and demand flexibility; o District and building combined heat and power (CHP) for 150 MtCO2/year; o Site- and building-integrated photovoltaics and solar thermal, where cost-effective; o Thermal energy storage (water, ice, phase change materials); o Geothermal, aqua-thermal, and ground-coupled HVAC; and o Site-generated electricity and off-peak electricity storage. 5. Enhance the carbon sequestration ability of buildings and infrastructures through a series of innovations: o increasing the use of wood construction from sustainably harvested forests (SFC) to reduce or replace steel, aluminum, and concrete; PREPUBLICATION COPY—SUBJECT TO FURTHER EDITORIAL CORRECTION 70

o encapsulating CO2 into aggregate and/or the sand that makes up 85 percent of concrete to sequester up to 1,200 pounds of CO2 per cubic yard of concrete and allow buildings to be carbon negative; and o restoring indigenous landscapes through green roofs and the reforestation of urban, suburban, and rural communities. 6. Adopt the New Buildings Institute’s five foundations of Zero-Carbon Building Policy: energy efficiency, renewable energy, grid integration and storage, building electrification, and embodied carbon. A net-zero carbon or a net-negative carbon built environment is key for the decarbonization of the United States. Energy Use Intensities should be driven by code to achieve passive house standards of less than 25 to 50 kBTU/sqft per year depending on building type. This should be followed by integrating site and community renewable energy sources with effective grid integration and energy storage, wherever cost effective. These actions should fully anticipate the elimination of fossil fuels and combustion in buildings, with building electrification as a linchpin solution for decarbonization of the United States. Last, the built environment offers a path to carbon sequestration, with sustainably managed forests and the use of carbon sequestering materials. The optimum mix of investments in design for deep efficiencies, electrification with site and community generation, and reduced carbon in building material production or even carbon sequestering material can ensure that the building sector achieves net positive in carbon sequestration (Webster, 2020). 1 The CO2 savings reported for each efficiency and fuel switching investment reflect current grid and fuel emissions levels. PREPUBLICATION COPY—SUBJECT TO FURTHER EDITORIAL CORRECTION 71

BOX 2.4 Transportation In 2018, transportation carbon emissions were predominantly from roadway vehicles, including light-duty vehicles (59 percent) and medium- and heavy-duty trucks (24 percent) (EPA, 2020). Aircraft contributed 10 percent, pipelines emitted 3 percent, while ships and rail each contributed 2 percent. Because vehicles last a decade or more (see Figure 2.4), the next decade should prepare the United States for a major change in vehicle fleet emissions. Priorities and opportunities in the transportation sector are outlined in this box. 1. Improve efficiency and energy productivity. Numerous policies and actions can improve transportation efficiency and energy productivity. Avoiding travel can reduce energy use by 10−30 percent (Lah, 2017; Ungar and Nadel, 2019) with teleworking, encouraging compact, mixed-use cities, local production of food and goods, and others. Shifting travel to more energy efficient modes can also reduce energy use by 10−30 percent (Lah, 2017; Ungar and Nadel, 2019). Examples include vehicular ride sharing (including mass transit), using rail rather than trucking, or adopting biking and walking. Improving the performance of vehicles and transportation networks can also save energy. Fuel efficiency of new light-duty vehicles has doubled over the past 30 years. Data analytics and improved communications permit better management of roadway networks. Safer automated vehicles can reduce crashes and congestion associated with crashes. 2. Electrify Vehicles. Both battery electric and fuel cell vehicles are now offered for commercial sale in the United States. In 2018, 240,000 battery electric vehicles were sold in the United States, representing 1.4 percent of all light-duty vehicle sales (Davis and Boundy, 2020). Battery electric buses and fuel cell vehicles are also available, but sales are much smaller than for light-duty battery electric vehicles. Fuel cell vehicles still have a sizable cost premium and limited hydrogen filling stations. With the continued improvement in battery performance, the extra cost of battery electric vehicles is expected to be small by 2025 (Lutsey and Nicholas, 2019), while the operating costs will likely be lower than conventional vehicles. At the same time, the range of battery electric vehicles has been increasing, with some commercial vehicles offering a 250-mile range or greater. Further, light-duty trucks and buses should be electrified, particularly in urban areas. Over the next decade, the United States needs to ensure that electric vehicles become the predominant share of new purchases. Infrastructure investment is required to enable this switch to electrification. Vehicle charging or hydrogen fueling stations must become widely available. Railroad catenary infrastructure can extend electric locomotive use. Ships and aircraft should switch to grid connections while in port or taxiing. Widespread vehicle electrification should also provide supply chain manufacturing and service opportunities. For example, the United States could become a leader in battery manufacturing and innovation. Vehicular maintenance and training would need to change. 3. Other Actions. Some aircraft services, such as package delivery via drones, could be electrified. Similarly, ships could use fuel cells or small nuclear reactors as power sources. Nevertheless, liquid fuels may be the most cost-effective fuel for long-haul transportation services. Research and development is needed to reduce the cost of producing low-carbon synthetic liquid transportation fuels (discussed further in Box 2.5). Pipelines could be repurposed for carbon dioxide transport and powered by electricity rather than by fossil fuels. PREPUBLICATION COPY—SUBJECT TO FURTHER EDITORIAL CORRECTION 72

BOX 2.5 Industry The U.S. industrial sector is crucial for GHG reductions, accounting for 32 percent of the nation’s energy use including feedstocks (EIA, 2018), 22 percent of GHG emissions, and around a billion metric tons of CO2 emissions/year (EPA, 2020). The sector is an important part of the U.S. economy, accounting for 11 percent of the gross domestic product (GDP) and 13 million direct jobs (NAM, 2018). Thus, it is vital to pursue the transformation while safeguarding competitiveness. Energy inputs for manufacturing are 83 percent from hydrocarbons and 17 percent from electricity (EIA, 2014). The industrial sector is diverse, complex, and intertwined with multilevel value chains. Refining, chemicals, iron and steel, food products, and cement account for the largest portion of the energy use and CO2 emissions. Feedstocks are an important source of embedded energy in chemical manufacture, where they account for up to 60 percent of the combined energy. Process heat uses 61 percent of the on-site energy accounting for 32 percent of GHG emissions and 7 percent of GHG emissions across sectors, with 90 percent from fossil fuels (DOE, 2015c; EIA, 2020e). Given the variation of energy sources, multiple uses, diverse product mix, reliance on carbon for products, and variation in the regional-grid GHG emission intensities, it will be critical to proactively pursue multiple decarbonization pillars in parallel. Low-carbon technologies, approaches, and infrastructure needing RD&D investment are shown in Figure 2.5.1. FIGURE 2.5.1 RD&D investment needs for low-carbon technologies, 2020–2050. Cross-cutting opportunities across sectors include process heat, switching to low-carbon energy sources, separations, electrolyzer efficiency, motor efficiency, and recycling. Sector specific opportunities abound, including transformative process technologies, renewable H2 use in processes, and thermal transfer. During the next 10 years, the key strategies to rapidly and persistently pursue are as follows: 1. Energy efficiency. Accelerate low-capital solutions (e.g., energy, materials, system efficiency; separations, intermittent fuel switching), greatly expand strategic energy management and smart manufacturing. 2. Electrification. Develop and deploy a process heat solutions portfolio featuring electric technologies and more effective electrolyzers for H2. Drive RD&D on electrified processes. Build infrastructure to deliver low-carbon electricity to industrial facilities reliably. PREPUBLICATION COPY—SUBJECT TO FURTHER EDITORIAL CORRECTION 73

3. Hydrogen/low-carbon energy and feedstocks. Rapidly trial and scale-up the use of zero- carbon H2 via blending, in transformative processes at clusters, and for high-temperature process heat. Advance RD&D in these areas. 4. CCUS. Integrate for lower costs, expand infrastructure starting at clusters, expand CO2 utilization. 5. Anticipate/minimize trade-offs. For example, benzene, toluene, xylene (BTX) dependence on refineries, H2 moisture, missing by-product. PREPUBLICATION COPY—SUBJECT TO FURTHER EDITORIAL CORRECTION 74

BOX 2.6 Electrical Energy Storage Reports demonstrate that the greatest reductions in GHG emissions in the near term (2021−2030) are achievable through (1) electrification of end uses and (2) decarbonization of electricity generation (Williams et al., 2014; Haley et al., 2019; Larson et al., 2020). Electrical energy storage will play an important role for both objectives with major impact in transportation and electricity supply. Transportation accounts for roughly 30 percent of all greenhouse gas emission in the United States, with much of that attributed to personal vehicles. Currently, a primary barrier to the widespread adoption of EVs is cost. Battery materials account for 60 percent of the battery cost and therefore are of keen importance for research and development (Leuenberger and Frischknecht, 2010). Although lithium composes only 2 percent of the total battery cost, its supply chain availability is at risk (Majeau-Bettez, 2011; BloombergNEF, 2019; Harper et al., 2019). Modifications to the cathode manufacturing process and introduction of recycling/regeneration approaches may aid in the continual cost reduction (Poyraz et al., 2016; Harper et al., 2019; Wood et al., 2020). A secondary issue limiting adoption is “range anxiety,” which could be addressed with a dual strategy of higher energy density batteries as well as fast charge technology (Li et al., 2001; Tallman et al., 2019; Zheng et al., 2019; IEA, 2020b; Woo and Magee, 2020). An emerging direction is adoption of conversion or alloying electroactive materials that enable multiple electron transfers per active center, dramatically increasing the battery energy density. Resolution of the long-term stability of these systems would enable their adoption. Lithium-ion battery researchers are demonstrating that at the cell level, charge in ~10 minutes may be viable and should be pursued (Ahmadi, 2019; Tallman et al., 2019; Chen et al., 2020). Fast charging stations should be accompanied by renewable energy generation where large loads can be offset through local energy storage and the likelihood of >1 MW being drawn from the grid at once is mitigated (Bhatti et al., 2016). Electrification of light commercial vehicles must also expand. In order to enable the needed > 400-mile range, a specific energy of >200 Wh/kg at the pack level must be achieved and could be realized through next generation lithium metal/sulfur and lithium/air batteries. As renewable energy becomes an increasing part of the U.S. power grid, the need for flexible energy storage increases. Currently, introducing renewables into the U.S. grid infrastructure can increase grid variability owing to inherent intermittency and will increase the discrepancy between electricity supply and demand. Implementation of energy storage technologies can mitigate these issues using electrochemical (batteries, redox flow batteries, supercapacitors, and fuel cells) or non- electrochemical (pumped hydro, compressed air, thermal, flywheel, and superconducting magnetic) approaches. The selection of the appropriate storage is dictated by factors including location, power demand, discharge time, and cost. Notably, the locational limitations can be significant, particularly in urban areas; thus, the discussion here is focused on energy storage with locational flexibility. Currently, >80 percent of large-scale battery storage capacity is from Li-ion batteries (EIA, 2018).Despite their availability and widespread deployment, there are safety and cost concerns associated with introducing Li-ion batteries at the grid level (DOE, 2014; Balaraman, 2020). Expanded research and development with subsequent deployment of batteries or redox flow batteries with aqueous electrolytes can provide safer, lower cost, lower environmental impact, and more scalable alternatives to the nonaqueous electrolytes currently used in Li-ion technologies (DOE, 2018; Wang et al., 2019; Kim et al., 2020). Further, assessing battery aging and failure mechanisms for candidate battery types is an ongoing and important area of inquiry related to prediction of deployment lifetime and the associated costs of installation and replacement (Palacín, 2016). Added efficiency may be possible through coupling of electrochemical energy storage with other methods of storage such as thermal, compressed air, or flywheel still providing installation flexibility. Energy storage technologies capable of achieving very low cost per kWh of storage capacity (on the order of $1−$5/kWh; Sepulveda et al., in press) may ultimately serve as long-duration electricity storage technologies capable of addressing intermittency PREPUBLICATION COPY—SUBJECT TO FURTHER EDITORIAL CORRECTION 75

over weeks-long time periods. Advanced electrochemical, chemical, and thermal storage technologies would be needed to serve in this role and their design and capabilities are very different from shorter- duration grid-scale storage applications such as Li-ion batteries or conventional flow batteries. Key strategies to address the above challenges include 1. Reduce cost of batteries for transportation, including consideration of factors related to materials selection, supply chain, regeneration, and recycling. 2. Increase energy density and develop fast charge capability of batteries to enable expanded adoption of electrified passenger and commercial vehicles as well as some aircraft. 3. Develop low-cost, environmentally benign, safe, long-life electrochemical energy storage for use with renewable energy generation to provide flexibility of site selection, including a range of designs and capabilities suitable for cycling over intraday, interday, and weekly time periods or longer. 4. Couple electrochemical energy storage with thermal and mechanical methods, when possible, to gain efficiency and extend total storage time. PREPUBLICATION COPY—SUBJECT TO FURTHER EDITORIAL CORRECTION 76

BOX 2.7 Fuels Fuel-based energy carriers are deeply embedded in society, have a major infrastructure base, and have very large power densities. As such, even while electrification is important, it is unlikely to be the exclusive approach to enable decarbonization, particularly over the 2050 time frame. In addition, some sectors are harder than others to electrify, and net-zero carbon chemical energy carriers will likely remain the lowest cost option for certain sectors such as aviation and shipping. From a broader perspective, developed economies already have massive built out fuels-handling, logistical, and midstream infrastructures that can be leveraged immediately. Legacy equipment can be readily decarbonized if the fuel is decarbonized. A variety of chemical energy carriers can be produced with net-zero CO2 emissions; estimated current costs are summarized in Table 2.7.1. A convenient way to organize these options is (1) if they emit carbon when oxidized and (2) if they can “drop-in,” without requiring changes to the existing distribution infrastructure and users. Non-drop-in options, like hydrogen, ammonia, or ethanol, can be inserted into current systems as mixes with drop-in fuels. For example, the existing fleet of natural gas- fired power plants can operate with hydrogen levels of up to about 5 percent, and automobiles with ethanol levels of 15 percent. However, such energy carriers cannot be used in significant concentrations without modifying users/carrier infrastructure. TABLE 2.7.1 Comparison of Costs on an Energy Basis for Various Energy Carriers Energy Carrier ($/Gigajoule)a b Conventional natural gas 3 Conventional industrial H2 from natural gas c 7 d Conventional gasoline 15 Renewable hydrogen from electrolysis e 35 Renewable CO2 gasoline f 55 Renewable ethanol fuel g 16 Ammonia from methane h 22 Renewable ammonia i 30 a Note that these numbers come from different sources with different assumptions and so provide general guidance on pricing, but all can move up or down based upon assumptions (e.g., electricity prices). For example, this is likely the reason that the hydrogen production cost is slightly higher than the ammonia. b Average Henry Hub Price 2018 from EIA, 2019b. c $1/kg price 2018 estimate reported in Bonner, 2013. d Spot price for RBOB gasoline in 2019 from Investing.com, 2019. e $5/kg based on estimate reported in IRENA, 2018. f $200/MWh fuel based on Brynolf et al., 2018. g Price from EIA, 2019c and at 89 MJ/gallon. h Price of $500/ton as reported in Schnitkey, 2018. i Price-based factor from Schnitkey, 2018 and EPRI, 2019. SOURCE: Courtesy of Prof. Matthew Realff, Georgia Institute of Technology. Research and demonstrations should continue for both drop-in and non-drop-in options. The following briefly highlights priority research needs for high-potential fuels in each category. 1. Reduce the cost of low-carbon hydrogen production methods and technologies that utilize hydrogen (e.g., fuel cells). Hydrogen (H2) is a non-drop-in fuel and the lowest cost synthetic fuel per energy content. It can be produced by the electrolysis of water using renewable energy sources, via steam methane reforming and autothermal reforming of natural gas (including with PREPUBLICATION COPY—SUBJECT TO FURTHER EDITORIAL CORRECTION 77

CCS, rendering the process zero- or near-zero carbon), and from biomass gasification (including with CCS for a net negative emissions process). 2. Minimize the costs and/or maximize utilization of the existing fuel infrastructure, such as increasing the hydrogen level that gas turbines can accommodate. Maximum insertion levels of H2 into existing transportation systems and consuming devices are set by user requirements (e.g., premixed versus nonpremixed gas turbines or heaters) and pipeline embrittlement concerns. H2 injection into the existing pipeline at low, but progressively increasing, levels is an example of a needed demonstration project. 3. Fund R&D on enabling technologies for low-carbon synthetic fuel production. A variety of synthetic fuels, including ethanol, methane, and gasoline or aviation gas substitutes, emit carbon when combusted. If they are “drop-in” substitutes, such energy carriers would use the existing hydrocarbon infrastructure. To make them net-zero carbon, these drop-in fuels must be produced from captured carbon dioxide and zero-carbon hydrogen and can be synthesized via existing chemical processes, such as water gas shift and commercially available Fischer- Tropsch chemistry. The synthesis of low-carbon liquid fuels is very energy intensive and will require significant amounts of clean energy, likely electricity. Another pathway is through photosynthetic conversion of CO2 and water into biomass and then its subsequent treatment to produce a drop-in fuel. Low-carbon synthetic fuels are currently more expensive to produce than hydrogen—as such, it is important for research and demonstration projects to prioritize driving down costs. PREPUBLICATION COPY—SUBJECT TO FURTHER EDITORIAL CORRECTION 78

BOX 2.8 Electricity Generation and Transmission The electricity sector is a linchpin in any successful transition to a net-zero emissions U.S. economy by 2050 or sooner (Jenkins et al., 2018; Haley et al., 2019; Larson et al., 2020). Pathways to cost-effectively reach net-zero greenhouse emissions entail twin challenges for the electricity sector:  As the source of more than a quarter of U.S. greenhouse gas emissions and with multiple scalable, affordable alternatives to fossil fueled power plants available today, the electricity sector must (and can) cut emissions faster and deeper than any other sector (Phadke et al., 2020; Haley et al., 2019; Vibrant Clean Energy, 2019).  Electricity generation must substantially expand—approximately 10−20 percent by 2030 and 120−170 percent by 2050—to fuel a greater share of energy use in transportation, building space heating, and low- and medium-temperature industrial process heat as well as produce hydrogen from electrolysis and even power direct air capture (Larson et al., 2020). Reducing power-sector emissions rapidly toward zero while expanding electricity production involves the following key strategies: 1. Expansion of carbon-free electricity generation. The share of U.S. electricity from carbon- free sources roughly doubles from about 37 percent of U.S. generation today to roughly 75 percent by 2030 (Larson et al., 2020; Phadke et al., 2020) and ~100 percent by 2050 or sooner. As electricity demand grows during this period, this entails bringing online roughly 2 billion MWh of new carbon-free generation by 2030, enough to supply about half of current U.S. electricity production (EIA, 2020a). 2. Wind and solar power. Wind and solar power capacity expands rapidly, with ~250−300 GW of new wind (2−3 times existing capacity) and ~280–360 GW of new solar (~4 times existing capacity) deployed by 2030 (DOE-EERE, 2020a; SEIA, 2020; Larson et al., 2020). By this date, wind and solar supply about 45−55 percent of electricity nationwide (up from 10 percent today). 3. Coal power. As much as 100 percent of installed coal-fired capacity retires by 2030 (or is retrofit with systems to capture 90 percent or more of CO2 emissions). Phasing out (or capturing CO2 from) coal-fired power reduces U.S. CO2 emissions by ~1 Gt/year, one-sixth of total net U.S. GHG emissions, while avoiding approximately 40,000 deaths and $400 billion in air pollution damages during 2021—2030 (EIA, 2020; EPA, 2020; Larson et al., 2020). 4. Nuclear power. Existing U.S. nuclear plants provide nearly 100 GW of firm low-carbon generation capacity and supply almost one fifth of U.S. electricity today (EIA, 2020). Preserving existing reactors, wherever they are safe to continue operating, provides a cost- effective foundation of low-carbon electricity to build toward decarbonization goals. 5. Natural gas power. Through 2030, natural gas-fired generation declines modestly by ~10−30 percent by 2030 and installed capacity is roughly flat nationally. Remaining gas plants play a key role providing “firm” capacity that is available on demand for as long as needed without dependence on weather (Sepulveda et al., 2018). Existing natural gas capacity may be maintained through 2050 to provide firm capacity, if operated much less frequently and if hydrogen is blended with (or replaces) natural gas to fuel these plants when they do operate to reduce (or eliminate) carbon emissions intensity. 6. Energy storage. ~10–60 GW / 40−400 GWh of battery energy storage capacity is likely needed through 2030 (Larson et al., 2020; Phadke et al., 2020). Storage will likely play a larger PREPUBLICATION COPY—SUBJECT TO FURTHER EDITORIAL CORRECTION 79

role from 2030−2050; during this period, production of hydrogen, ammonia, or synthetic methane from carbon-free electricity can offer a form of longer-term chemical energy storage, and these energy carriers can be used as fuels (or feedstocks) in transportation, heating, and industry or for firm power generation. 7. Transmission networks. Long-distance transmission capacity expands ~120,000 GW-miles by 2030 to connect wind and solar resources to demand centers, a ~60 percent increase (Larson et al., 2020; NREL, 2012). By 2050, long-distance transmission capacity may need to more than triple as electricity demand grows and renewable resources play a central role in the U.S. grid (Larson et al., 2020). 8. Distribution networks. Distribution networks are reinforced and distribution system planning, investment, and operations make better use of flexible demand and distributed energy resources to improve network asset utilization and efficiently accommodate up to 10 percent increase in aggregate peak demands from electric vehicles, heat pumps, and other new loads; prepare for up to 40 percent increase in peak demands by 2040 and roughly 60 percent increase by 2050. PREPUBLICATION COPY—SUBJECT TO FURTHER EDITORIAL CORRECTION 80

BOX 2.9 Carbon Capture and Sequestration Capturing CO2 from point sources avoids emissions into the atmosphere and reduces the carbon footprints of electricity and industrial products such as cement, steel, bioethanol, and so on. CCS is more likely to be used to decarbonize gas power plants, rather than coal power plants. Over 50 percent of today’s coal fleet is over the typical retirement age of 40 years (EIA, 2019). On the other hand, the fleet of natural gas power plants, is relatively young; the majority reach retirement between 2030−2050 (Figure 2.9.1). Natural gas units are therefore more suitable for CCS, which could avoid up to ~700 MtCO2/yr at a cost today of ~ $60/tCO2 avoided (Psarras et al., 2020). The bar graph inset (see Figure 2.9.1) indicates retirement period of the coal and natural gas power fleets along with the number of units (above bars) and cumulative capacities assuming an average age of 40 years. Biomass power plants with CCS could also be deployed in the future to produce electricity with net negative CO2 emissions. FIGURE 2.9.1 Existing CO2 sources from power and industrial sectors overlaid with renewable energy potential, in addition to CO2 storage opportunities, and existing and potential low-carbon power plants that would be coupled to CO2 storage. In the industrial sector, ~330 MtCO2/yr of current process emissions are suitable for carbon capture retrofit (Pilorgé et al., 2020). A number of industries produce CO2 as a chemical by-product of their industrial process in relatively high CO2 concentrations, making the separation of CO2 easier and less costly than more dilute streams of combustion exhaust. The relative scales and exhaust stream concentrations are shown in Table 2.9.1, along with their nth-of-a-kind cost estimates (NASEM, 2019; McQueen et al., 2020; Pilorgé et al., 2020; Psarras et al., 2020). By 2050, production of hydrogen, drop-in fuels and feedstocks from biomass waste with CCS could present a significant opportunity as well, delivering roughly 300−1,000 MtCO2/yr of negative emissions by 2050 (Larson et al., 2020) that can offset direct emissions elsewhere in hard-to-decarbonize sectors. PREPUBLICATION COPY—SUBJECT TO FURTHER EDITORIAL CORRECTION 81

Avoiding CO2 emissions through capture at the point source requires less energy than capture from dilute air. However, direct air capture is receiving increased attention as an approach to offset difficult- to-eliminate emissions from the transportation, industrial heating, and agriculture sectors, and for other options in carbon removal (Wilcox, 2020a,b). Technologies exist for all applications of carbon capture, but in many cases have not yet achieved the scale, maturity, or cost required for the decarbonization needed (e.g., GtCO2/yr). For instance, solid sorbent-based technologies such as those developed by Svante (Global Cement, 2019, 2020) are modular approaches that may be optimized and scaled across the industrial sector where emissions (ktCO2/yr) and CO2 concentrations vary widely. For the power sector, owing to sizable emissions per facility (i.e., MtCO2/yr), separation processes with significant economies of scale, such as solvents (e.g., Fluor) (Reddy and Freeman, 2018), are a good match for retrofitting natural gas plants retiring beyond midcentury. Key strategies for CCS in the next decade are as follows: 1. Increase deployment of all carbon capture technologies shown in Table 2.9.1 over the next decade so that decarbonization can reach the 100 MtCO2/yr scale and DAC deployment occurs on the MtCO2/yr scale. This will require a roughly 10× increase in carbon capture activities. 2. Develop permanent storage of CO2 on the Gt-scale. This amount of storage will be required regardless of the source of CO2, and Figure 2.9.1 shows a number of such opportunities, from geologic storage in saline aquifers to depleted oil and gas reservoirs, to the more nascent opportunities such as alkaline-rich formations like basalts and ultramafic rocks (NASEM, 2019; Kelemen et al., 2019). TABLE 2.9.1 Scale, Energy, Cost, and Example Carbon Capture Projects Globally Capture 2020-Scale Percent Min Work Nth-kind Example Projects Application (MtCO2/yr)a CO2b (kJ/mol)c Costd (Start Date; Scale) ($/tCO2) Natural Gas 700 3–5 ~ 9–10 ~55–60 Elk Hills, Fluor (2020; Mt/yr) Industry (process emissions only) Cement 67 25–30 ~4 ~30 Lafarge Holcim, Total, Svante (2019; kt/yr) Refining 40 15–20 ~6 ~40 Norway, Statoil Mongstad (2012; 100s kt/yr) Bioethanol 37 99+ ~0 ~ < 20 Decator, ADM (2017; Mt/yr) Hydrogen 26 45–70 ~ 2-3 ~ 25–30 Port Arthur, Air Products (2013; Mt/yr) Iron and 19 20–25 ~5 ~35–40 Abu Dhabi CCS Project, Steel UAE (2016; Mt/yr) Air Capturee Solvents ~1 0.04 21 ~150–600 Carbon Engineering (2023; 1 Mt/yr) Solid <1 0.04 21 ~150–600 Climeworks—14 plants Sorbents globally (kt/yr) a Pilorgé et al., 2020; Psarras et al., 2020. b Bains et al., 2017; Pilorgé et al., 2020; Psarras et al., 2020. c Wilcox, 2012. d Based on nth-of-a-kind technology-agnostic modeling from Pilorge et al. (2020). e Cost range is broad and depends on technology and energy resource choices, in addition to scale of deployment. PREPUBLICATION COPY—SUBJECT TO FURTHER EDITORIAL CORRECTION 82

CONCLUSION The many feasible pathways for deep decarbonization by 2050 all have similar requirements in 2021−2030, which are summarized in this report’s five key actions for the 2020s: 1. Invest in energy efficiency and productivity across end-use sectors. 2. Electrify energy services, particularly transportation and heating. 3. Produce carbon-free electricity, doubling the share of clean electricity generation to roughly 75 percent. 4. Plan, permit, and build critical infrastructure and repurpose existing energy infrastructure. 5. Expand the innovation toolkit, investing in RD&D and creating initial markets for nascent net- zero technologies via incentives and standards. In order to remain on a path to decarbonization by 2050, decision makers in transportation, buildings, industry, electricity generation/transmission/distribution, fuels, and other sectors must align their actions with the five key actions. Some actions for 2021−2030 are already under way with existing technology and need to be maintained or accelerated, such as the steady installation of new zero-carbon electricity generation and retirement of coal-fired generation. Some actions could be implemented immediately with existing technology but need to begin, such as replacement of building heating with electric equipment, widespread deployment of electric vehicles, and blending of hydrogen with natural gas in industrial infrastructure and equipment. Other actions, such as carbon capture, require improvement and maturation of existing technologies or new technology or approaches to be developed and tested at scale, and research, development, and deployment in these areas must be accelerated in the decade after the release of this report to provide options in 2030−2050. The investment requirements in 2021−2030 to implement the five key actions would require spending no more of the nation’s GDP on energy services than the United States has over the past decade and would require a total incremental expenditure of about $300 billion above the business-as-usual case through 2030 (an ~3 percent increase relative to business-as-usual). The transition to a decarbonized system would have significant benefits in the United States, on the order of $200−$300 billion annually of avoided climate damages, in addition to preventing hundreds of thousands of premature deaths and saving trillions of dollars of health costs from fossil fuel pollution. Alhough the approaches to decarbonization are well known, and the technologies to get started are ready for implementation in 2021−2030, new policies and systems are required to reduce cost and encourage adoption of needed technologies and approaches at a sufficient pace and scale. The technological goals for a net-zero energy system by 2050 detailed in this chapter are complementary to the socioeconomic goals discussed in Chapter 3 and integral to the policy options presented in Chapter 4. REFERENCES Ahmadi, P. 2019. Environmental Impacts and Behavioral Drivers of Deep Decarbonization for Transportation through Electric Vehicles. Journal of Cleaner Production 225 (July): 1209–1219. Architecture 2030. “The 2030 Challenge,” n.d. https://architecture2030.org/2030_challenges/2030- challenge/. Bains, P., P. Psarras, and J. Wilcox. 2017. CO2 Capture from the Industry Sector. Progress in Energy and Combustion Science 63 (November): 146–172. Balaraman, K. 2020. “Why Is the Utility Industry Less Bullish on Grid-Scale Storage?” Utility Dive. February 13. https://www.utilitydive.com/news/safety-volatile-market-less-bullish-storage/572013/. PREPUBLICATION COPY—SUBJECT TO FURTHER EDITORIAL CORRECTION 83

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The world is transforming its energy system from one dominated by fossil fuel combustion to one with net-zero emissions of carbon dioxide (CO2), the primary anthropogenic greenhouse gas. This energy transition is critical to mitigating climate change, protecting human health, and revitalizing the U.S. economy. To help policymakers, businesses, communities, and the public better understand what a net-zero transition would mean for the United States, the National Academies of Sciences, Engineering and Medicine convened a committee of experts to investigate how the U.S. could best decarbonize its transportation, electricity, buildings, and industrial sectors.

This report, Accelerating Decarbonization of the United States Energy System, identifies key technological and socio-economic goals that must be achieved to put the United States on the path to reach net-zero carbon emissions by 2050. The report presents a policy blueprint outlining critical near-term actions for the first decade (2021-2030) of this 30-year effort, including ways to support communities that will be most impacted by the transition.

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