One of the Energy Information Administration's (EIA) tasks is analyzing the future of the US energy economy. This year's report, released today, looks forward to 2040. And the picture it foresees is one where the US becomes increasingly energy independent, driven in part by our better ability to extract fossil fuels in part by increased efficiency. Meanwhile, the electric sector will shift toward renewables, but the shift will be limited by a slowdown in demand.

As the report notes, there's no way of telling exactly what the future will hold. So the Administration has built a number of scenarios and analyzed each. Three of them involve different levels of economic growth, from 1.8 percent annual GDP increase up to 2.9 percent. There are also high and low fossil fuel prices, as well as a scenario where further technological improvements increase our ability to extract oil and gas.

However, the report also assumes business-as-usual on other accounts. Any incentives for energy production that are scheduled to expire do so and aren't replaced by anything new; state renewable mandates, once met, don't get tightened; etc. Those are unlikely to be accurate assumptions, but it's difficult to predict the course that reality might take. Many existing policies face ongoing legal challenges and the threat of elimination by conservative lawmakers. And there's always a chance that some weather events will trigger public support for more aggressive intervention.

Those caveats aside, however, the report predicts some interesting trends. In the past, economic expansions have been accompanied by rising energy demands. This one seems to be different, and the EIA's report is uncertain as to whether this represents a fundamental shift in the US or if things will trend back to normal once the recovery picks up steam. In any case, the baseline scenario involves relatively low growth in energy use, at 0.3 percent a year.

That number is largely due to a drop in energy use by the transportation sector, driven by fuel economy standards that are currently being tightened. Right now, these standards are resulting in a reduction of the amount of oil that the US has to import. While domestic oil production is expected to slow down in the 2020s, continued increases in transportation efficiency will offset that factor. In fact, in the high oil prices scenario, production is predicted to rise to the point where the US becomes a petroleum exporter.

Meanwhile, the fracking boom will turn the US into an exporter of natural gas. The country is already on the verge of reaching that point, and all scenarios the EIA examined show it becoming an exporter before 2020.

While that reality has made natural gas a very appealing option for generating electricity, the EIA doesn't expect the trend to continue. As with other finite resources, the cost of extraction will eventually push the fuel prices up for these plants. The primary existing alternatives, coal and nuclear, face high capital costs and long construction times. As a result, the EIA report predicts that any increases in electricity demand will be met by wind and solar, the prices of which have continued to drop. In fact, the report expects that wind will displace hydro as the primary source of renewable power.

However, we've already committed to lots of fossil fuel plants that will remain active during this period. As a result, rising fuel costs will help increase electricity prices, as will the need to modernize and expand the grid.

The net result of all these offsetting changes? The energy-related carbon emissions in the US will remain largely flat through 2040, which would represent a drop of about nine percent from 2005 levels. Given that the current administration is promising to drop emissions by over 25 percent compared to 2005—and to do so by 2025—it's clear something radically different from business as usual will be required.

The EIA has made the report available on its website.