The reference case is not a prediction of what will happen, but rather a modeled projection of what may happen based on the agency’s best assessment of current economic, demographic, and technological trends, and the assumption that current laws and policies affecting the energy sector do not change during the 2020-2050 projection period.
Although unrealistic, the assumption of unchanging policy is analytically reasonable because one cannot project how new policies may change energy markets without first producing a baseline case based on current policies. EIA explores how changes in current trends would change reference case projections through six “side cases”: the High and Low Oil Price cases, the High and Low Oil and Gas Technology Cases, and the High and Low Economic Growth cases.
Some big takeaways from the reference case are highly relevant to the Trump administration’s “energy dominance” agenda, which champions the freedom of U.S. energy producers to compete for customers in the global marketplace. For example, the United States becomes a net energy exporter in 2020 and remains so throughout the projection period, exports of liquefied natural gas more than double by 2030 and continue to increase through 2050, yet U.S. natural gas prices “remain comparatively low during the projection period compared with historical prices, leading to increased use of this fuel across end-use sectors and increased liquefied natural gas exports.”
That cheery projection contradicts the gloomy assessments of various ideological and economic interest groups who warn that freedom to export oil and gas will inflate consumer utility bills and undermine U.S. manufacturing competitiveness. EIA’s assessment is straight in line with Econ 101: Freedom to export attracts investment, which increases production, which keeps energy prices low.
EIA’s reference case also projects continuing declines in the carbon dioxide intensity of the U.S. economy through the projection period. The overall carbon dioxide intensity of the electric power sector declined by about 25 percent from the mid-2000s to 2018 and continues to decline through 2050 in the reference case. “When the electric power sector energy is distributed to the end-use sectors,” carbon dioxide intensities decline by 10-11 percent in the residential, commercial and industrial sectors, and by 5 percent in the transportation sector. Energy freedom does not aim at reducing carbon dioxide intensity, but achieves it as if by an invisible hand.