The United States (US) has put in place significant energy and climate policy reforms designed to put the country on a path towards a clean, secure and affordable energy system for a net zero economy while promoting equity and high-quality jobs.

The United States is the world’s second-largest consumer of energy and emitter of carbon dioxide (CO₂), but it is also a major technology and innovation leader, and rapid growth in clean energy investment has resulted in it becoming a world-leading market for renewables, battery, electrolyser and heat pump manufacturing, and electric vehicle (EV) sales. It is also the largest biofuels producer in the world. The United States is experiencing robust economic growth accompanied by declining emissions and efficiency improvements. In 2023, the rate of energy efficiency improvements is expected to reach 4%. This is the level also seen each year this decade at the global level in the IEA Net Zero Scenario and COP28 pledge to double global energy intensity progress from 2% to 4%. The United States has promoted significant investment in renewable energy capacity, nuclear lifetime extensions and new builds and low-carbon fuels. Domestic coal use has declined to a historic low. In 2023, total CO₂ emissions from energy combustion in the United States declined by 4%, while the economy grew by 2.5%. Two-thirds of the reduction in emissions came from the electricity sector. 

The US energy transition depends on the development of new infrastructure in all sectors, and the federal government is pursuing a “private sector-led government-enabled approach” to bring this about.

Under the Fiscal Responsibility Act of 2023, the federal government is modernising the National Environmental Policy Act (NEPA) and the Council on Environmental Quality regulations for environmental permits by federal agencies. Among other things, this involves adopting global best practices such as fixed timelines for decisions and streamlining approvals for faster permitting. It is also promoting investment and standards in every sector of the economy. The US government expects that with the BIL/IRA in place (all stated policies), the United States can achieve emissions reductions of 40% by 2030, and that additional emissions reductions will come from state-level and other subnational actions, future federal policy initiatives, and private sector and civil society initiatives, notably in transport, buildings and industry sectors.

In the power sector, the United States aims to have 100% carbon-free electricity generation by 2035, using wind, solar, geothermal, hydropower, nuclear and biomass alongside fossil fuels with carbon capture and storage (CCS). Thanks to IRA credits, IEA projections in the IEA World Energy Outlook 2023 indicate that the US power sector is on course for a 50% reduction in emissions and an 80% reduction in unabated coal-fired power by 2030. The US government is working to accelerate interregional transmission investment, including under Article 216 of the Federal Power Act, and FERC Order 2023 is fast-tracking renewable energy connections. Accelerated action brought about by Clean Electricity Tax Credits, faster permitting of transmission, investment in flexibility from battery storage, which has risen sixfold since 2020, and active demand response could see the share of renewable energy in the United States rise from 22% in 2023 to 34% by 2028, based on the IEA’s Renewable Energy Progress Tracker. To reach 100% carbon-free electricity by 2035, the United States estimates it needs 2 000 GW of new clean electricity clean electricity capacity and energy storage by 2035.  

In the industry sector, the United States aims to reduce emissions from industry, accounting for 30% of total energy-related CO₂ emissions, under the Industrial Decarbonisation Roadmap for 2030, compared to 2015 levels. IEA World Energy Outlook 2023 analysis suggests that emissions are likely to decline by 15% between 2022 and 2030 thanks to incentives for industrial efficiency and abatement technologies under the IRA. To reach its goal, the US government needs to lower risks for infrastructure investment in grids, CO₂ and hydrogen pipelines while boosting efficiency standards and rules for low-carbon fuels both domestically and internationally. The United States could leverage first-of-a-kind (FOAK) demonstration and commercialisation through industrial lift-offs such as the Clean Fuels & Products Shot™ to capitalise on business and export opportunities. Initiatives to promote common international standards, data benchmarks and policy learnings could help to stimulate infrastructure investment.

In the transport sector, the United States adopted strong fuel economy standards and is promoting investment in a range of clean vehicles. The federal government has set a target for 50% of new passenger cars and light truck sales to be zero emissions by 2030. IEA World Energy Outlook 2023 projections suggest that the United States is on course to achieve this target thanks in large part to IRA incentives for electric cars and stronger fuel economy standards, and to moves in several states to adopt new zero-emission vehicle standards. Looking further ahead, the National Blueprint for Transportation Decarbonisation has created an interagency framework for reaching net zero emissions in transport by 2050. Electric car sales have grown fast to reach around 9.5% of total light-duty vehicle sales in 2023. The build-out of a national charging network along highways is a key priority, and the US government needs to work with the private sector to speed up the roll-out of EV charging infrastructure and support electrification of freight.

In the buildings sector, the Blueprint for Decarbonising Buildings aims to achieve a 65% reduction in buildings’ emissions by 2035 and a 90% reduction by 2050, compared to 2005 levels. Thanks to the implementation of model codes, including through the National Buildings Performance Standards Coalition of over 30 states, cities and local governments, progress in commercial buildings is good, but lags in the residential sector. Federal programmes and collaborative efforts should prioritise energy efficiency improvements in residential buildings and the renovation of the existing building stock, 70% of which will still be in place in 2050. 

Affordability, equity and quality jobs are at the heart of federal government policy making. This is backed by good jobs principles and labour standards, which have been introduced, to also ensure investment supports high-quality jobs. The Justice40 Initiative directs 40% of the benefits of certain federal investments, notably investments in climate and clean energy, to disadvantaged communities. Both labour standards and the Justice40 Initiative is supported by federal action to ensure that many programmes and investments, including legacy programmes and new programmes under the BIL/IRA, benefit energy workers, including those facing displacement by the energy transition and marginalised disadvantaged communities that are underserved and overburdened by the energy system.

Under the leadership of the DOE’s Office of Energy Jobs and the Office of Energy Justice and Equity, a strategy is being deployed for community and labour union engagement, including through the Community Benefits Plan, with a view to operationalise and mobilise labour standards and Justice40. The IRA also includes place-based bonus tax credits that will help drive additional investment in energy and underserved communities. A key priority is the creation of quality jobs to attract and retain skilled workers, and this is a fundamental pillar of the US manufacturing and supply chains strategy. Several federal programmes further support equity and affordability through a focus on low-income households. These include the Weatherization Assistance Program, the Energy Efficiency and Conservation Block Grant Program, and the Home Energy Rebates Program.

This enhanced focus on the people-centred aspects of energy transitions is well-aligned with the direction of energy and social policy in a number of other countries around the world. The Community Benefits Plan framework that operationalises both labour standards and the Justice 40 Initiative has the potential to be transformative and could help other governments around the world as they consider how to promote equity and justice in the energy transition. Engaging and partnering with workers, communities and citizens is a long-term investment and requires expanded programmes to build capacity and deliver equitable access, good jobs and other benefits. The US is tracking clean energy jobs as part of its excellent job data collection in the United States Energy and Employment Report (USEER). The Office of Jobs also intends to project workforce needs with a future looking companion study to USEER. The DOE’s Community Benefits Program also sets shared goals and performance metrics to enable tracking progress over time.

Managing energy security during the transition requires governments to accelerate the pace of clean energy investment on the supply and demand side, treating energy efficiency as the first fuel. Governments need to deal with emerging security risks, such as critical minerals supply chains, nuclear fuel security and climate change impacts, along with oil, gas and electricity security risks.

Mitigating rapidly growing global demand for critical minerals and the high market concentration of supply and processing is a key policy priority for the United States. Legislation under the IRA and BIL is having a meaningful impact on domestic mining, supported by the work of the Interagency Working Group on Mining Laws, Regulations and Permitting. The international Minerals Security Partnership, which includes a shared commitment to high environmental, social and governance standards, could be integrated with the DOE’s efforts to diversify the supply of critical minerals under BIL and IRA investments. Close co-operation with international allies and partners is an essential pillar of the US critical minerals strategy, with a range of multilateral and bilateral co-ordination and collaboration platforms underway or under development. In the context of the Russian Federation’s invasion of Ukraine, nuclear fuel diversification and increasing the supply of domestic uranium supply are also priorities. In 2023, the Nuclear Fuel Security Act established a Nuclear Fuel Security Program to boost domestic production and ensure a consistent supply of domestically produced, converted and enriched uranium.

The increasing frequency and impact of extreme weather events poses a challenge for electricity reliability. NERC (North American Electric Reliability Corporation) and the Federal Energy Regulatory Commission (FERC) are now working to develop new reliability standards which should help strengthen resilience once they are implemented. Alongside this, the federal government needs to compel owners and operators of critical energy infrastructure to take action to make infrastructure more resilient in the face of extreme weather and wildfires, following Winter Storm Elliot in December 2022. While adaptation is already recognised as a priority, more could be done to make progress based on the climate adaptation and resilience plans adopted by the DOE and 23 federal agencies. The National Climate Resilience Framework is a helpful step towards a collaborative framework across sectors and states and should help to catalyse actions in the coming years.

Economic incentives favour the retirement of older, less efficient fossil fuel power plants, and there is a risk that this might lead to insufficient power supply under adverse conditions if adequate alternative sources of energy are not put in place. Unjustified barriers to intra-regional power grids and other constraints on the ramping up of clean energy generation capacity need to be removed to avoid the deterioration of power system stability.

The orderly and secure transition of the energy system away from unabated fossil fuels is necessary to deliver on the United States’ and global emissions reduction goals. A significant boost is needed for the full implementation of the programmes under the BIL/IRA designed to support new infrastructure and the retirement, reuse and repurposing of existing infrastructure. This offers an opportunity for the US government to work with industry on net zero compatible pathways and the implementation of new rules for sharply reducing methane and other GHG emissions from oil and gas operations, including through electrification and investment in clean energy.

Despite production growth, there are concerns around the security of natural gas supply in the domestic market, largely driven by usage in power generation to cover demand peaks. Regulators will need to ensure that natural gas infrastructure (transport and storage capacity) remains adequate to meet peak demand even as natural gas demand declines. Meanwhile, natural gas exports play an important role in enhancing global gas security following the fundamental changes in the global gas market brought about by Russia’s invasion of Ukraine. US liquefied natural gas (LNG) exports are expected to continue to grow in the medium term. US LNG export capacity has more than tripled since 2018 and is set to nearly double by 2030, based on approved projects.

The United States remains vulnerable to global and domestic oil market tightness as a major oil consumer and net importer of crude oil. The Strategic Petroleum Reserve (SPR) remains of fundamental importance to domestic and global oil security and is a key pillar of the IEA’s oil stockholding system. Stock releases from the SPR in 2022, including as part of the March and April 2022 IEA Collective Actions, played a significant role in alleviating supply tightness at a time of market uncertainty following Russia’s invasion of Ukraine. As a result of emergency sales and unrelated sales mandated by Congress, the SPR fell to an historic 34-year low in 2023, which, if left at low levels, could undermine market confidence in the United States’ ability to respond to worst-case scenario oil supply disruptions. To head off such concerns, the federal government has initiated a three-part SPR replenishment strategy, and progress is already being made. The successful implementation of this strategy should strengthen US and global resilience to oil market shocks.

The government of the United States should:

• Seek to maximise investor confidence by maintaining a high degree of policy stability and continuity and accelerating cross-government collaboration.
• Increase the Department of Energy’s and national laboratories’ capacity to deliver federal programmes, notably those aimed at strengthening domestic supply chains and manufacturing and sectoral transitions to meet commercialisation goals across the research, development, demonstration and deployment continuum.
• Make further progress towards US 2030 and 2050 emissions reduction targets by continuing to develop sectoral pathways and reinforcing the planning, co-ordination and development of policies and technology programmes for scaling up energy efficiency, renewables and low-carbon technologies in each sector.
• Embed justice and equity over the long term by expanding programmes with state, local, tribal and territorial communities to build capacity and deliver equitable access and benefits, good jobs and other benefits in collaboration with those communities.
• Continue to develop a robust international energy strategy, working with partners to bolster global energy security, including through measures that promote critical minerals security, diverse nuclear fuels and sufficiently large Strategic Petroleum Reserve, while supporting clean energy transitions around the world, particularly in developing countries.
• Support the federal climate resilience framework by ensuring that rigorous reliability standards are in place for all critical energy infrastructure. Strengthen institutional arrangements for planning, monitoring and reporting, and prioritising investment in interregional networks to boost weatherisation, winterisation and cooling, notably for disadvantaged communities.