Economy, weather, and CO₂

U.S. macroeconomics
Our macroeconomic forecast for December 2024 is mostly unchanged compared with November. We assume real GDP will grow by 2.7% in 2024 and 2.1% in 2025, both of which are unchanged from last month. The largest difference from last month comes in 4Q24, when we now assume GDP will grow at an annualized rate of 1.5% compared with 1.9% assumed in the November STEO. The macroeconomic forecasts in the STEO are based on S&P Global’s macroeconomic model. We incorporate STEO energy price forecasts into the model to obtain the final macroeconomic assumptions.

Even though the target for the federal funds rate has declined by 75 basis points since September, 10-year Treasury yields and other long-term interest rates have risen over the same period. The yield on 10-year U.S. Treasury bonds has increased from 3.6% to 4.4% and is currently 0.4 percentage points higher than what we assumed in November.

The result of the increase has been increased borrowing costs, which are reflected in our assumptions regarding the trajectory of real fixed investment. We now assume that real fixed investment will contract in 4Q24 and slow growth in 1H25 will contribute to slower GDP growth in 4Q24.

Emissions
Our December forecast of U.S. energy-related carbon dioxide (CO2) emissions in 2024 and 2025 has changed slightly since our initial January 2024 STEO. These changes to our emissions forecast can be seen in both 2024 and 2025 across several fuels.

Our forecast of total energy-related U.S. CO2 emissions in 2024 has changed by less than 1% since January as a result of offsetting differences in emissions among fossil fuels. Our forecast for petroleum emissions is lower than it was in our January outlook mostly because there has been less distillate consumption than we expected. Distillate consumption in 2024 is lower than we forecast in our January STEO because of less manufacturing activity than expected and, to a lesser degree, more use of biofuels. These decreases are offset by more CO2 emissions from natural gas than expected because of low natural gas fuel costs as well as relatively hotter summer weather, which increased natural gas-fired generation to meet air-conditioning demand.

Although we expect CO2 emissions in 2025 to about the same as they were in 2024, our forecast for 2025 CO2 emissions is 2% (or around 100 million metric tons) higher than it was in forecast in our January 2024 outlook. The outlook for more emissions in 2025 is mostly associated with an upward revision in coal-fired electricity generation. Compared with our January forecast, we expect more coal generation in 2025 due to an upward revision in overall electricity demand associated with rising electricity consumption from data centers. Increased petroleum product consumption, mostly motor gasoline, also increased our 2025 emissions estimates. We attribute this upward revision in consumption partially to an upward revision in disposable income, amid other factors influencing supply and demand for gasoline.

Weather
Based on current forecasts and data from NOAA, we expect a colder December than we have experienced recently, with 770 heating degree days (HDDs) across the United States in December, 24% more than December 2023 and 9% more than the 10-year December average. The cold weather in December more than offsets the warmer start to the winter in November, which had 12% fewer HDDs than the 10-year November average. As a result, we expect the 2024–2025 winter heating season (November—March) will be colder than last winter, averaging 3,210 HDDs overall (6% more HDDs), but still slightly warmer than the previous 10-year winter average (2% fewer HDDs).