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US economy decouples from emissions in 2023 in what may be a structural shift

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In 2023, the US economy grew even as greenhouse gas emissions declined, resuming a trend that had been interrupted by the post-Covid recovery, according to preliminary estimates by Rhodium Group.

Why it matters: This could reinforce the idea that GDP growth and emissions are decoupling in the world’s largest economy.

The latest: The US economy expanded by 2.4% in 2023, while emissions fell 1.9% from a year before thanks to a relatively mild winter and declining coal power output, according to Rhodium’s analysis. Notwithstanding a temporary rebound in the wake of the Covid-19 pandemic, emissions are now down 17.2% from 2005 levels.

“We’ve seen periods of decoupling over the past 10-15 years — first as the shale gas revolution pushed some coal out of the power sector, and more recently we’ve seen variable renewables supplanting coal as well,” Ben King, an associate director with Rhodium’s energy and climate practice, tells The Progress Playbook.

A “strict decoupling” would require no rebounds in emissions — as was the case in 2021 and 2022, King says, adding that shifting definitions of both GDP and emissions muddy the waters too.

Further, the rate at which emissions decline must be at least three times faster than 2023 levels if the US is to meet its goal of halving emissions by 2030.

While that target will be elusive based on the current trajectory, Rhodium nevertheless expects US emissions to be 32-42% below 2005 levels in 2030. That’s thanks to the profound impact of the Inflation Reduction Act and other legislation that incentivises decarbonisation.

Based on a rudimentary estimate of 2% GDP growth a year, this suggests a “longer-term continued decoupling and a structural acceleration of decarbonisation,” King said.

Yes, but: Globally, planet-heating emissions reached a fresh record in 2023.

In a recent report, Rhodium found that the world is “very likely” on track to exceed 2°C above pre-industrial temperatures, although the step up in decarbonisation efforts means we should “avoid the most catastrophic projections.”

Keeping the increase in global temperatures below 2°C will require deployments of mature clean energy technologies in emerging markets such as India and other non-OECD countries in Asia, the Middle East, and Africa.

It will also require “a significant acceleration of policy and innovation” to drive down the cost of other, less mature clean technologies that could decarbonise hard-to-abate sectors, particularly industry, shipping, and aviation, Rhodium said.

Tags: Ben King, Decoupling emissions, Net zero, Renewable energy, Renewables, Rhodium Group
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