Why focusing on electrical grid fuel mixes may be the fastest way to reduce emissions at scale

Why focusing on electrical grid fuel mixes may be the fastest way to reduce emissions at scale

Residential emissions account for as much as 20% of the greenhouse gas footprint of the United States every year.1If the country is going to help mitigate the impacts of climate change, households across the country will need to reduce their emission footprints. Federal, state, and local governments alike will likely need to develop new incentives and target investments towards projects that facilitate this shift. Financial market stakeholders - asset managers, insurance companies, and other financial institutions - may face additional regulations related to emissions associated with their portfolios. Energy costs associated with fossil fuels may rise because of these regulations, adding to the cost burden of many households and affecting mortgage markets. For all these stakeholders, understanding the implications, risks, and opportunities associated with the transition to a low carbon economy requires information about where emissions are highest today.

In Part 1of this series, ICE Sustainable Finance presented energy usage estimates for residential households across the country. In Part 2, we described how energy usage is converted into greenhouse gas emission estimates. Here, in Part 3, we explore the energy usage and emissions estimates of specific counties across the United States.

Counties with similar energy usage, but very different emissions

ICE Sustainable Finance identified 129 counties in nine states - Alabama, Georgia, Lousiana, Mississippi, North Carolina, Tennessee, Texas, Virginia, and Washington - with similar median residential energy usage of 25,000 ± 500 kwh annually, under the countrywide median of 30,000 kwh for single family households; Figure 1).2

However, despite having similar energy usage, median annual emissions for single family households in these counties varies by almost a factor of three (from 3,700 to 11,127 kg CO2e). The level of reliance on the electricity grid is also very different across these counties (Scope 2 Emissions); electricity is responsible for 50% to 79% of the energy generated in these counties.

Across these 129 counties, those in Washington had by far the lowest overall emissions. Counties in Washington are also the only group with higher median Scope 1 emissions than Scope 2 emissions, because Washington State draws a significant amount of energy from hydroelectricity (67% of the state's electricity generation in 2022).3Louisiana's counties have about four timesthe Scope 2 emissions than counties with similar energy usage in Washington, because much of Louisiana's electrical grid fuel mix4is dominated by natural gas.

Counties with similarly high energy usage, but very different emissions

Across the country, ICE Sustainable Finance identified 29 counties with high annual household energy usage (46,000 ± 500 kwh; Figure 2), spread across Illinois and New York.5

Despite similar average energy usage, median emissions across these counties varies significantly. The median household in the Illinois counties emits over 20% more greenhouse gas than those in New York. Scope 1 emissions are higher in New York than in Illinois, so the disparity in total emissions is entirely due to differences in Scope 2 emissions across these counties. These Scope 2 emissions are determined by the fuel mixes used by the regional electricity grids. The electrical grid subregion that covers Illinois generated electricity primarily from natural gas (>60%) in 2022; the grid subregion that covers New York had a resource mix that included only 29% gas, along with 31% nuclear and 31% hydropower in 2022.6

Implications

Household-level residential energy usage and emissions across the United States are influenced by many different factors. Climate variation, decades of different developer and homeowner choices, the availability of resources (like hydropower), and legacy infrastructure all have interacting and important roles.

The large emission footprint of U.S. residential energy use (20% of the country's total emissions) means that if the country is going to meet its goal of reducing emissions to 50% of 2005 levels by 2030, households will need to reduce their emissions. Based on the analysis shown in this series, one of the fastest ways to do this at scale may be to focus on fuel mixes used by electrical grids. A shift to lower carbon fuels for the grids in states like Illinois and Louisiana (Figures 1 and 2), for example, could affect the emissions of millions of households. These kinds of efforts may also be more equitable in many cases, as lower-income households may not be able to easily afford to install heat pumps and electrify. Efforts to regulate the efficiency of household appliances, while they may reduce emissions, operate on time horizons that are likely too long to help meet the United States' 2030 emissions goals; homeowners often only replace dishwashers and fridges when they no longer work.

Household energy use and emissions also have implications for financial markets. Investors, asset managers, and financial institutions alike may soon face additional regulations related to emissions associated with their portfolios. Energy costs associated with fossil fuels may rise because of these regulations, adding to the cost burden of many households and affecting mortgage markets.

For all of these stakeholders, information about residential emissions today will help target efforts, investments, and resouces effectively during the transition to a lower carbon economy. Households and energy systems across the country will need to make large-scale changes - changes that are well worth understanding and preparing for.