U.S. Energy Policy at a Crossroads

The Council on Economic Policies is convening a series of roundtables to explore the prospects and obstacles for an affordable, secure and clean energy future, and to build a community of experts in the field across G20 countries. The first roundtable was held in Paris, with a focus on France, followed by a second discussion in London on the United Kingdom. In early 2025, the third roundtable, held in Washington D.C., zoomed in on the United States, followed by a fourth convening in New Delhi on India’s energy future. The next roundtable will focus on Germany.

A more detailed policy brief is available HERE.

The energy sector is vital to the U.S. economy. Electricity is at the centre of daily lives, delivering lighting, heating and power. The transport sector provides vast mobility services, with more than 5 trillion passenger-miles travelling on U.S. highways every year, 700 billion passenger miles by air, and over 50 million metric tons of freight moved daily by trucks, rail and shipping. To meet the country’s energy needs, the sector employs over 8.4 million workers.

Significant shifts

Historically a major consumer of energy, the United States has improved its energy efficiency over recent decades. While electricity generation had nearly tripled between the 1970s and the early 2000s, it has remained broadly stable since then, reflecting a shift towards more efficient energy use. Likewise, energy consumption in the transport, buildings, and industrial sectors has levelled off, albeit at persistently high levels, suggesting a partial decoupling of energy demand from economic growth.

The country’s energy mix is shifting. Nuclear, natural gas and renewables account for a growing share, displacing coal power as the primary generation technology. Driven by increasing cost competitiveness as well as state and federal support, solar and wind power have expanded rapidly in the last two decades, growing from near zero levels to 750 TWh in 2024 – 17% of generation – with further increases in the first quarter of 2025.

Facing challenges

Its strengths notwithstanding, the U.S. energy system faces several challenges. Compared to other OECD countries, energy is priced competitively. Nonetheless, electricity and transport bills account for a substantial portion of many household budgets, particularly those on low incomes, leading to high levels of “energy poverty” and “transport insecurity” that compound with existing income inequalities. Price fluctuations in global oil and gas markets add further volatility. Fossil fuels significantly contribute to poor local air quality, with nearly 40% of Americans residing in areas where pollution levels exceed safe thresholds. In addition, the electricity sector will have to rapidly increase its supply in response to rising demand from data centres, industrial reshoring, and electric vehicles.

U.S. energy policy is at a crossroads. While both the Biden and Trump Administrations have made energy affordability and security a key priority, their strategies differ drastically. Since taking office, the Trump Administration has made significant shifts in federal policies, with a slew of executive orders to:

• deliver a 50% reduction in energy costs in the first year of taking office,
• expand domestic oil and gas production,
• boost U.S. exports of liquefied natural gas,
• roll back federal support for clean technologies such as solar and onshore wind,
• address trade imbalances for key energy technologies and critical minerals,
• reduce reliance on Chinese cleantech supply chains, and
• expand coal mining and its use in power generation.

States and cities

At the same time, despite federal support to clean energy being withdrawn, significant portions of the sector are now able to sustain themselves independently. Technologies such as solar and wind are increasingly the cheapest sources of electricity, due to the rapid fall in upfront costs. Battery storage is following the same trend. Renewable energy can increasingly compete without subsidies.

The role played by states and cities is crucial at the present juncture to build on this momentum. Several states such as California, Colorado and New York already have a well-established track record in supporting an affordable, secure and clean energy future. The continuation of policy measures such as carbon pricing, portfolio standards and renewable targets will be key. Retaining environmental legislation at the state level, including on air pollution and emissions standards, is also critical to ensure that the energy system continues to bring economic benefits while reducing its impact on human health and the natural environment.

An affordable, secure and clean energy future

To maintain its strengths, the U.S. energy sector requires significant public and private investments. Whilst the uncertain political and macroeconomic environment, and the rollback of political support raise concerns, various markers point to a continued shift in the sector. U.S. oil and gas companies are expected to reduce capex in 2025 by 5-10%. U.S. clean energy and transportation investments in Q1 2025 increased by close to 7% compared to the previous year. Several fiscal and regulatory policy measures at the state and local levels are available to further support this momentum towards an affordable, secure and clean U.S. energy future.

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