Policy implications of net-zero emissions

Abstract

Many countries, subnational jurisdictions, and companies are setting net-zero emissions goals; however, questions remain about strategies to reach these targets, policy measures, technology gaps, and economic impacts. We investigate the potential policy implications of reaching economy-wide net-zero CO2 emissions across the United States by 2050 using results from a multi-model comparison with 14 energy-economic models. Model results suggest that achieving net-zero CO2 targets depends on policies that accelerate deployment of zero-and low-emitting technologies that have seen rapid cost reductions in recent years (including wind, solar, battery storage, and electric vehicles) as well as relatively nascent options (including carbon capture and storage, advanced biofuels, low-carbon hydrogen, advanced nuclear, and long-duration energy storage). While net-zero policies are likely to lower fossil fuel consumption, including considerable coal and petroleum reductions, achieving net-zero emissions does not necessarily mean phasing out all fossil fuels. Model results indicate that the Inflation Reduction Act's energy and climate provisions amplify near-term decarbonization but that net-zero policies have larger impacts on long-run outcomes. Stringent climate policy can have large fiscal impacts on tax revenue and government spending-revenues from carbon pricing and subsidies for carbon removal range from 0.1 % to 3.7 % of GDP in 2050 across models. Each dollar per metric ton carbon price leads to a 0.06 % to 0.31 % reduction in economy-wide CO2 emissions relative to a reference scenario with current policies. Spending on energy across the economy decreases relative to today for many models under reference and net-zero policies, especially as a share of GDP, due primarily to end-use electrification and energy efficiency.