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More natural gas capacity is retired and less new capacity is added in the carbon fee cases compared with the Reference case, although natural gas-fired plants with carbon capture and storage (CCS) technology become cost competitive before 2050.Ĭarbon fees increase the contribution of renewable generation in these cases as renewables, such as wind and solar, become more cost competitive relative to fossil fuels. In addition, not only is less nuclear power capacity retired in the carbon fee cases relative to the AEO2021 Reference case, but new capacity is added. The majority of the projected capacity additions come from solar photovoltaics. In the medium to long term, more renewables and energy storage capacity leads to further CO 2 reductions in the carbon fee cases. electric power sector, amounting to 82% of the difference in projected CO 2 emissions in 2050 when comparing the $35 Fee case with the AEO2021 Reference case in 2050.įuel substitution is relatively inexpensive in the electric power sector in the short term as coal is displaced by natural gas. The majority of emissions reductions that occur in response to carbon fees come from the U.S. Other pathways to emissions reductions, such as reducing CO 2 from bulk chemical production and from significantly greater penetration of alternative-fueled vehicles, require higher fees than we explored. These reductions occur for all modeled fee cases. The most immediate CO 2 reductions come by replacing coal-fired generation in the electric power sector with natural gas or non-emitting renewables. The Reference case projects an increase of more than 5% in CO 2 emissions between 20. energy-related CO 2 emissions by 2050 compared with 2020. In the $35 Fee case, we project a reduction of 19% in U.S. energy-related CO 2 emissions in 2050 than in the AEO2021 Reference case, which assumes no changes in current laws and regulations and current views on the rate of technology improvements. In the highest-priced $35 Fee case, we project 23% less U.S. These cases are labeled as the $15, $25, and $35 carbon fee cases for simplicity.
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The three carbon fee cases we examine assume economy-wide implementation of fees that start at $15.14, $25.23, and $35.33 per metric ton of CO 2 in 2023 and grow by 5% each year thereafter up through 2050. Emissions would decrease the most in the first 5–10 years but have significantly less effect beyond that period (Figure ES-1). energy-related carbon dioxide (CO 2) emissions. Our analysis indicates that the carbon fee levels presented in this report would initially reduce the levels of U.S.
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