BTAC Concept Paper

Policymakers and managers in the U.S. energy sector will face complex multidimensional challenges as they confront potential supply shortfalls, infrastructure constraints, and environmental limitations in the years ahead. Using a technique known as scenario analysis, this paper investigates key energy issues and decisions that could improve or reduce the ability of the United States to deal with the uncertainties that may challenge the U.S. economy during the next fifty years. Four scenarios have been developed representing a diverse range of future worlds to explore the driving forces and critical uncertainties that may shape U.S. energy markets and the economy for the next fifty years. Each scenario has been quantified using a computable general equilibrium model, the All Modular Industry Growth Assessment model, also known as the AMIGA modeling system.

The preliminary results from the scenario analysis suggest that the range of feasible U.S. energy futures is broad, but that energy use is expected to grow under all scenarios. At the same time, the introduction of policies to encourage capital stock turnover and accelerate the commercialization of high-efficiency, low-emissions technologies can significantly reduce future primary energy demand in the United States. Not surprisingly, the analysis suggests that low energy prices can lead to higher economic growth than might occur under standard reference case assumptions. But the analysis also finds that a smart investment path, one that emphasizes both energy efficiency improvements and advanced energy supply technologies, can provide an economic growth similar to lower energy prices.