In this year’s report, we find that the US is on track to reduce GHG emissions by 27-41% below 2005 levels in 2040, considering all relevant federal and state policies on the books as of June 2026. These emissions outcomes represent divergent futures after the late 2020s. In the high-emissions scenario, the emissions reductions that have characterized the last 20 years slow through the early 2030s before reversing direction altogether, with growing emissions through most of that decade. In the low-emissions case, the economic competitiveness of clean technologies relative to fossil incumbents, alongside an imperative for “speed-to-power” for large loads, continues—and accelerates—GHG emission declines through 2040.

Under the hood of these economy-wide findings, key sectoral shifts are the drivers of long-term emissions outcomes:

The power sector has taken on increased salience beyond energy analysts in recent months, and for good reason. Surging electricity demand, driven increasingly by new AI data centers, is running into a power grid that has seen flat load growth for the better part of three decades. This is all happening against a backdrop of shifting policy, as the most impactful parts of the clean electricity tax credits are set to phase out over the next few years. As a result, new clean generation on the grid surges through the late 2020s across all scenarios, but natural gas and renewables compete for dominance thereafter. In the low-emissions scenario, the US sustains continued near-record growth for renewables through 2040. In the high-emissions case, clean capacity additions slow to a trickle in the 2030s while large amounts of new natural gas meet surging demand. The result is 2040 power sector emissions that are 48% lower than 2025 in the low-emissions case but only 24% lower in the high-emissions case.
In the transportation sector, emissions decline by 12-22% in 2040 compared to 2025. Sustained growth in the passenger electric vehicle (EV) fleet drives down economy-wide motor gasoline consumption, with the biggest impacts occurring when EVs are more cost-competitive with gasoline incumbents in the low and mid-emissions scenarios.
The outcome for industrial emissions hinges on two main factors: emissions associated with the production, processing, and transportation of oil and gas, and underlying economic growth. With higher oil and gas production and faster macroeconomic growth in the high-emissions scenario, emissions increase by 15% in 2040 compared to 2025. Lower oil and gas production (while still quite robust, especially natural gas production) and slower economic growth lead to a 4% decline in industrial emissions in the low-emissions case over the same window.
Global trade dynamics increasingly affect US oil and gas production, a trend underscored by ongoing uncertainty in these markets caused by the war with Iran and associated disruptions to shipping in the Strait of Hormuz. Here again we see a divergence between scenarios. Plentiful subsurface resource and relatively low prices increase the share of crude oil that is exported in the mid- and high-emissions scenarios, and we project increased production levels accordingly. Decreasing domestic demand and high prices lead to lower oil and gas production in the low-emissions scenario. Natural gas is more resilient across scenarios, with liquified natural gas (LNG) exports increasing by 94-148% in 2040 relative to today’s levels. Domestic consumption of gas is flat-to-down across these scenarios in 2040, so the 1-44% increase in US gas production is mostly driven by this export dynamic.

Though we try to capture as much uncertainty as we can in our model inputs, still other factors may push the energy system beyond the bounds we contemplate in this report. Expectations for data center growth continue to trend upward, but are subject to the dual threats of public backlash and a potential popping of the bubble. The US could unlock still more growth of the grid to meet the associated electricity demand through permitting reform and effective cost allocation, or energy affordability threats could become even more connected with data centers in the public consciousness. The war in Iran may end soon—or not—with longer-term implications for global oil and gas markets.

Chapter 1: Energy on the front page

In a year that certainly doesn’t lack for eventful news, it’s telling that major themes related to the US and global energy systems have broken containment from conversations among energy analysts into front-page news. A growing share of the public is tracking the explosive growth in electricity demand coming from the build-out of data centers (and developing strong feelings on the subject). They know the role that public utility commissioners play in setting electricity rates. And they now know that 20% of the world’s oil transits the Strait of Hormuz.

These topics are all interconnected and exacerbated by escalating uncertainty that has become a persistent feature of the US energy system and US policymaking more broadly. And, alongside updating our expectations for key drivers of energy system evolution like technology costs and macroeconomic expectations, these are also important topics that we tackle in this year’s Taking Stock report.

Data center expectations continue to grow but more barriers are on the horizon

Expectations for near-term and future data center demand growth continue to rise. This demand outlook is largely driven by increasing interest and investment in AI, which has become more deeply embedded in the US economy since this time last year. We have revised our data center demand assumptions upward accordingly, reflecting an 11% increase from Taking Stock 2025 in 2040. But uncertainty persists in our (and others’) projections: the gap between the lowest and highest analyst expectations for total data center electricity demand in 2030 (just over three years from now) is more than the total electricity consumption of the states of California and Florida combined.

As data center demand expectations grow, the barriers to data center expansion become more acute and urgent. Rapid access to reliable power remains a major challenge for data center developers. While connecting new loads to the grid is ideal in terms of cost and reliability, building out new grid capacity and the infrastructure required to serve large loads takes a long time—too long for some data center developers who are instead exploring temporary or even permanent behind-the-meter gas generation that can be deployed more quickly. This potentially speedier solution worsens GHG emissions and local air pollution, which is one reason why local opposition to data center development has exploded over the last year and become another major barrier facing developers.

The ever-looming threat of a potential AI bubble bursting further increases the uncertainty of data center demand projections, with ripple effect consequences on grid planning and electricity prices.

Affordable energy takes root as a significant political concern

Another factor driving data center opposition is the fear that the electricity-intensive facilities will drive up electricity prices for residential customers. Affordability for consumers has been a front and center topic since 2021 when inflation first began to surge in the post-Covid recovery, but concerns were largely focused on housing prices, rental prices, and the cost of groceries. Over the last year, affordable energy has gained national attention and emerged as a serious political issue.

Nationwide average real electricity prices increased in 2025, outrunning the pace of inflation and reversing a decade-long downward trend. In some regions (most notoriously in PJM), rapidly increasing demand from data centers contributed to these sudden price hikes, but the factors causing high prices varied across the country. Some drivers of high prices show no signs of improving in the near future. For instance, high inflation in critical energy equipment (e.g., transformers) coupled with an aging grid—or a grid increasingly impacted by natural disasters like wildfires—that requires equipment upgrades, replacement, and expansion suggests that high electricity prices may be here to stay. In Taking Stock 2026, we calibrate the transmission and distribution (T&D) components of electricity prices to reflect recent inflationary pressure and trends towards increased equipment upgrades or replacement.

As we unpacked in a report earlier this year, higher demand can reduce electricity prices by spreading fixed costs over a larger customer base, but this relationship breaks down if new capacity can’t be deployed quickly enough to meet the step changes in load resulting from a data center coming online. With affordability top of mind, many state and local governments have begun taking steps aimed at limiting the impacts of data centers on ratepayers. These actions range from proposals to change rate structures (e.g., such that costs associated with serving large loads are allocated exclusively to those large loads), all the way to data center moratoriums. Many of these policies are still under development or are quite recent, so we largely do not reflect them in this year’s report.

Global energy market turmoil

The Iran war has magnified affordability concerns by driving up world oil prices. The on-again, off-again closure of the Strait of Hormuz has more substantial impacts for other countries globally that are more exposed to direct imports that run through the Strait, including fuel shortages and surging natural gas prices. In the US, the war is showing up largely at the pump: at the time of writing, retail motor gasoline prices are $0.74 (23%) higher than at this time last year, while retail diesel prices are up $1.04 (27%). Domestic natural gas prices, meanwhile, are effectively flat from a year ago and have generally been running under 2025 levels. While the US is far more exposed to global oil market dynamics, even with record levels of liquified natural gas (LNG) exports, it remains largely insulated—though we discuss the extent to which this could change later in the report.

There is no clarity as to when normal shipment volumes will resume or when (or even if) prices will return to pre-conflict baselines. In our analysis, we include the impact of the war on oil prices in 2026 as well as a more extended impact on refined petroleum product prices over the next few years.

Surging clean energy demand against a steadier policy backdrop

After a tumultuous first year of the second Trump administration, the federal energy policy landscape remains largely the same as a year ago. The changes made to the tax code by the FY2025 budget reconciliation bill (often called the “One Big Beautiful Bill Act”) have entered their implementation phase, with the IRS issuing guidance on interpreting new prohibited foreign entity and commence construction requirements. On the regulatory front, the Environmental Protection Agency (EPA) finalized its repeal of GHG emissions standards for vehicles and continued to advance its rollback of GHG and other pollution standards for power plants. And, as we began to explore in last year’s Taking Stock report, there is still considerable uncertainty around the issuance of federal permits and other actions for new renewable generators. We unpack the full suite of federal and state policies we model in the Technical Appendix to this year’s report.

Against this backdrop, 2025 was a record year for energy storage installations on the grid and the second-best year for new utility-scale solar builds. New clean generating capacity met more than three-quarters of new load added to the grid in 2025. What’s more, as we unpack in greater detail later in this report, we’re poised to see record levels of solar and storage deployment in 2026 and 2027 as well, alongside double-digit gigawatts of new onshore wind coming online. A combination of rushing to claim expiring tax credits alongside the urgent need for more capacity on the grid has helped accelerate this surge in new clean generator installations.

These same technologies are also being battered by other headwinds, which are impactful today and will take on increasing importance in the years ahead. Interconnection queues remain massive, and it’s exceptionally difficult to build big transmission lines. We took a closer look at these factors this year and updated costs accordingly. Supply chains remain backlogged, especially for critical grid infrastructure equipment. And an increasing share of counties have laws on the books to restrict wind and solar development. As costs continue to decline for these technologies, these other barriers are likely to increasingly serve as the bottlenecks to increased deployment.

In this year’s Taking Stock, we work to bring all of these threads together and estimate where the US energy system and associated GHG emissions will head through 2040. In Chapter 2, we unpack our methodology and key inputs to our modeling. In Chapter 3, we dive deeper into key sectoral trends and outcomes. Finally, in Chapter 4, we discuss what’s on the horizon for the US energy system.

Chapter 2: Bounding uncertainty in projections

We project the energy system and emissions impacts of current policies under a range of possible future trajectories for energy markets, technology, and the economy. Critically, we do not produce probabilistic forecasts but rather determine a range of possible outcomes using a combination of testing and modeler judgment. The ranges we report represent distinct emissions pathways rather than confidence intervals on a central estimate.

We provide emissions and energy system projections for three main current policy scenarios:

Our high-emissions scenario provides a reasonable upper bound on US emissions through 2040, combining the lowest projections of oil and gas prices with the most conservative cost declines for a range of clean technologies (including clean power, EVs, industrial decarbonization technologies, and direct air capture) and faster economic growth than the latest Congressional Budget Office (CBO) projections through 2040. This scenario also includes a broader range of planned LNG export facility additions.
Our low-emissions scenario provides a reasonable lower bound on US emissions through 2040, effectively the inverse scenario of our high emissions pathway. It combines the highest projections of oil and gas prices with the most aggressive cost declines and performance improvements for clean technologies. It also assumes economic growth aligned with the latest CBO projections and the completion of LNG export capacity currently under construction or in the commissioning stage per the latest Energy Information Administration (EIA) data.
Our mid-emissions scenario adopts more moderate trajectories for some of these factors. It assumes continued cost declines for clean technologies, but less aggressive declines than in our low-emissions scenario, and sees oil and gas prices that roughly split the difference between prices in the low and high-emissions scenarios. It also assumes economic growth aligned with the latest CBO projections and planned LNG export capacity consistent with the latest EIA data on facilities under construction or in the commissioning stage.

Federal policy environment

We generally reflect current, “on-the-books” policy as of June 2026 in this year’s Taking Stock report. That includes the repeal of EPA’s GHG standards for model year 2027 and later light-, medium-, and heavy-duty vehicles, which was finalized in February 2026. It also includes changes to EPA’s hydrofluorocarbon regulations, finalized this May, that effectively delay standards by 2-6 years. This July, EPA is expected to finalize the repeal of GHG standards for power plants and propose sweeping changes to the methane standards for oil and gas operations. We assume both sets of standards are repealed in Taking Stock. Though these policies aren’t yet finalized and will likely face court challenges, the administration has prioritized these deregulatory actions, and the courts have generally allowed them. As a result, we expect the finalized rules to hew very closely to a complete rollback and believe it is appropriate to discuss energy system and climate trends accordingly.

Technology costs and constraints

This year, the second year running without an Annual Technology Baseline (ATB) from the National Laboratory of the Rockies (NLR), we take a new approach to technology cost projections. We derived our own clean technology cost pathways for solar and onshore wind starting from the most recent estimates of current costs from NLR and generally assuming similar cost declines to NLR’s 2024 ATB. Our utility-scale storage costs come from a 2025 literature review compiled by NLR. We updated our nuclear cost assumptions to reflect recent research out of MIT (advanced nuclear) and Energy Futures Finances Forum (small modular reactors). Finally, we updated the geothermal resource base and capital costs, including expanding potential resources to near-field and deep enhanced geothermal systems (EGS) based on data from a recent Princeton study.

To reflect the gas turbine supply crunch and resulting cost pressures, we constrained the build-out of gas capacity through 2029 and doubled the capital costs for all gas generators through 2030 (this results in capital costs that range from $2,000-$2,500/kW in 2025 dollars through 2030). We assume that gas turbine manufacturing capacity expands in response to this supply crunch enough to ease prices after 2030.

It’s challenging to capture the impacts of non-cost barriers like the interconnection queue and slow transmission expansion with precision using an economy-wide energy model. We represent these barriers by increasing grid connection costs for solar and wind, since solar and wind are more likely than other technologies to require transmission expansion and upgrades to link quality resources with demand centers.

Data center demand growth

We reflect the same data center demand pathway across all scenarios, derived from a literature review of the most recent data center demand projections. We include regional representation of data center demand growth that’s informed by the Electric Power Research Institute’s report on state-level data center demand projections. New this year, we provide our state-level projections of demand growth by sector, including data centers, in data dashboards within ClimateDeck, Rhodium’s free interactive data platform.

Iran war representation

To capture the impacts of the Iran war, we calibrate the 2026 Brent oil price to EIA’s June Short-Term Energy Outlook projection ($95/barrel). We perform the same price calibration for key refined petroleum products like motor gasoline, diesel, and jet fuel. Short-term elevated domestic oil prices have a lasting upwards impact on oil and gas production levels. Oil and gas production increases by up to 5-10% (+3-4 quads) in the near term relative to a scenario without the global oil price shock, and production impacts shrink to zero by 2040. Higher oil and gas production levels in turn lower wholesale natural gas prices. The Henry Hub spot price declines by 20% in the near-term compared to a scenario without the global oil price shock.

We provide greater details on the policies, constituent inputs of these scenarios, and our modeling environment in the Technical Appendix to this report.

Using RHG-NEMS

We use RHG-NEMS to quantify energy sector and emissions outcomes. RHG-NEMS is Rhodium Group’s modified version of the National Energy Modeling System (NEMS), a model developed by the EIA to produce their AEOs. Rhodium Group maintains a version of NEMS that we modify from the EIA base version. As we do each year with base NEMS, in addition to changing many key inputs (as described above) and bringing the current policy representation up to date as of June 2026, we also vary key assumptions and algorithms in the model based on research and recent real-world observations.

We expand this version of NEMS to include all sectors of the US economy and coverage for all six greenhouse gases targeted for reduction under the Kyoto Protocol. We continue to use the latest land use, land use change, and forestry (LULUCF) projections from the US Fifth Biennial Report. Consistent with EPA’s annual Inventory of Greenhouse Gas Emissions and Sinks and United Nations Framework Convention on Climate Change (UNFCCC) requirements, we use 100-year global warming potential (GWP) values from the IPCC Fifth Assessment Report (AR5). Finally, we downscale this data to provide state-level results for key metrics.

Chapter 3: Emissions outlook and key sectoral trends

The US is on track to emit 3.8-4.8 gigatons (Gt) of net GHG emissions in 2040, representing a 27-41% reduction in emissions from 2005 levels and a 12-29% reduction from 2025 levels (Figure 1). Across all scenarios, emissions decline substantially from 2025 to 2027 as unprecedented levels of planned clean energy investments come online in time to claim federal tax credits. After federal tax credits expire for most clean investments, scenarios diverge.