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Emissions Declining as U.S. Power Shifts Green Despite Paris Agreement Withdrawal

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Wednesday, July 12, 2017 8:30 AM / Fitch Ratings 

Fitch Ratings believes the announcement by the Trump administration to withdraw from the Paris climate agreement will not reverse the tide for the ongoing greening of the U.S. power sector. Coal is struggling against competitively priced natural gas and zero marginal cost renewable generation. More consumers are demanding green power and states are charging ahead with their renewable policy goals, with many aggressively expanding them.

Based on preliminary data, CO2 emissions from the power sector in the U.S. have declined approximately 25% in 2016 as compared with 2005 levels. This has largely been driven by coal to gas substitution, as tighter environmental mandates and significant declines in the price of natural gas have led to a spate of coal retirements. 

Approximately 62GW of coal-fired capacity has been retired since 2005. Supportive state renewable policies and federal tax incentives have supported a robust growth in zero emission wind and solar generation. Power demand has largely stagnated over the last five years due to energy efficiency initiatives, further helping to curb CO2 emissions from the U.S. power sector.

Fitch considers it unlikely the coal retirement trend will reverse, despite the significant shift in policy direction under the new administration. Approximately 20GW of coal-fired capacity is at risk of retirement over the next decade. 

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