Academic journal article Economic Review - Federal Reserve Bank of Kansas City

Are U.S. States Equally Prepared for a Carbon-Constrained World?

Academic journal article Economic Review - Federal Reserve Bank of Kansas City

Are U.S. States Equally Prepared for a Carbon-Constrained World?

Article excerpt

Climate concerns linked to greenhouse gas emissions, particularly carbon dioxide (CO2), have taken center stage in the national energy policy debate. Domestic energy use and carbon emissions continue to rise, and forecasts suggest further increases under the existing regulatory structure. However, heightened international and domestic pressure to reduce U.S. carbon emissions suggests that additional changes to the regulatory framework are probable in coming years.

Reducing U.S. carbon emissions will likely require a comprehensive national framework that will alter the pattern of energy use and production in all 50 states. At issue for state-level policymakers is that carbon restrictions are unlikely to affect the states equally. Energy use and emission patterns vary widely across states, and there is no accepted framework for allocating shares of a national carbon reduction goal. As a result, states that emit the most carbon or have the most energy- and carbon-intensive economies may shoulder the greatest burden.

This article evaluates the current energy posture of the states and thus how prepared they are to cope with ongoing trends in energy use, especially restrictions on carbon emissions. The findings suggest that the New England, Mid-Atlantic, and West Coast states are generally best prepared. These states have the least energy-intensive economies and use fuel mixes with low average carbon intensity; hence, they already release proportionately less CO2. The states expected to be hardest hit by carbon constraints are the traditional energy-producing and agricultural states. These states have energy-intensive economies, by both domestic and international standards, and will face a considerable challenge in altering their energy use and emissions patterns.

The first section of the article discusses long-run trends in U.S. energy use and carbon emissions, as well as current regulatory efforts to limit carbon emissions. The second section describes the Kaya Identity, a metric that can help evaluate the preparedness of individual states to adapt to greater carbon constraints. The Kaya Identity is used in the third section to illustrate differences in state-level energy use and emissions and to assess the relative preparedness of states to adapt to future carbon constraints.


Climate concerns linked to greenhouse gas emissions are arguably the most important force driving changes in domestic energy use. Carbon emissions continue to rise substantially and, under the existing regulatory framework, are projected to rise further in coming decades. Recent regulatory proposals calling for curbing emissions, however, suggest that much greater restrictions are increasingly likely.

Trends in energy use and emissions

Total energy use-and thus CO2 emissions-continues to rise in the United States.1 The growth in energy use has slowed in recent years but remains persistent, with consumption typically declining only during recessions. In the postwar period, the growth of carbon emissions has undergone two distinct phases, and forecasts suggest it recently entered a third phase (Chart 1).

The first phase stretched from the late 1940s to around 1979, when energy prices began to surge upward. Rising energy use in this phase was driven by intense industrialization and rapid expansion of the U.S. economy, along with low energy costs and limited concern for carbon emissions. Total energy use increased more than 150 percent during the period, raising carbon emissions nearly 125 percent (2.5 percent annual growth). The bulk of these increases took place between 1960 and 1973, as total carbon emissions increased at an annual rate of nearly 4 percent. On a per capita basis, energy consumption increased nearly 50 percent from 1949 to 1979 and produced an increase in carbon emissions from 15 metric tons annually to a peak of more than 22 metric tons (Chart 2).

Following the surge in energy prices in the late 1970s, the U. …

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