‹ Analysis & Projections

Annual Energy Outlook 2014

Release Dates: April 7 - 30, 2014   |  Next Early Release Date: December 2014   |  See schedule

Emissions from Executive Summary

Coal's share of electric power generation falls over the projection period


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Although coal is expected to continue its important role in U.S. electricity generation, there are many uncertainties that could affect future outcomes. Chief among them are the relationship between coal and natural gas prices and the potential for policies aimed at reducing greenhouse gas (GHG) emissions. In 2012, natural gas prices were low enough for a few months for power companies to run natural gas-fired generation plants more economically than coal plants in many areas. During those months, coal and natural gas were nearly tied in providing the largest share of total electricity generation, something that had never happened before. In the Reference case, existing coal plants recapture some of the market they recently lost to natural gas plants because natural gas prices rise more rapidly than coal prices. However, the rise in coal-fired generation is not sufficient for coal to maintain its generation share, which falls to 35 percent by 2040 as the share of generation from natural gas rises to 30 percent.


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In the alternative High Oil and Natural Gas Resource case, with much lower natural gas prices, natural gas supplants coal as the top source of electricity generation (Figure 3). In this case, coal accounts for only 27 percent of total generation in 2040, while natural gas accounts for 43 percent. However, while natural gas generation in the power sector surpasses coal generation in 2016 in this case, more coal energy than natural gas energy is used for power generation until 2035 because of the higher average thermal efficiency of the natural gas-fired generating units. Coal use for electric power generation falls to 14.7 quadrillion Btu in 2040 in the High Oil and Natural Gas Resource case (compared with 18.7 quadrillion Btu in the Reference case), while natural gas use rises to 15.1 quadrillion Btu in the same year (Figure 4). Natural gas use for electricity generation is 9.7 quadrillion Btu in 2040 in the Reference case.


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Coal's generation share and the associated carbon dioxide (CO2) emissions could be further reduced if policies aimed at reducing GHG emissions were enacted (Figure 5). For example, in the GHG15 case, which assumes a fee on CO2 emissions that starts at $15 per metric ton in 2014 and increases by 5 percent per year through 2040, coal's share of total generation falls to 13 percent in 2040. Energy-related CO2 emissions also fall sharply in the GHG15 case, to levels that are 10 percent, 15 percent, and 24 percent lower than projected in the Reference case in 2020, 2030, and 2040, respectively. In 2040, energy-related CO2 emissions in the GHG15 case are 28 percent lower than the 2005 total. In the GHG15 case, coal use in the electric power sector falls to only 6.1 quadrillion Btu in 2040, a decline of about two-thirds from the 2011 level. While natural gas use in the electric power sector initially displaces coal use in this case, reaching more than 10 quadrillion Btu in 2016, it falls to 8.8 quadrillion Btu in 2040 as growth in renewable and nuclear generation offsets natural gas use later in the projection period.

Renewable fuel use grows at a faster rate than fossil fuel use


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The share of U.S. electricity generation from renewable energy grows from 13 percent in 2011 to 16 percent in 2040 in the Reference case. Electricity generation from solar and, to a lesser extent, wind energy sources grows as their costs decline, making them more economical in the later years of the projection. However, the rate of growth in renewable electricity generation is sensitive to several factors, including natural gas prices and the possible implementation of policies to reduce GHG emissions. If future natural gas prices are lower than projected in the Reference case, as illustrated in the High Oil and Gas Resource case, the share of renewable generation would grow more slowly, to only 14 percent in 2040. Alternatively, if broad-based policies to reduce GHG emissions were enacted, renewable generation would be expected to grow more rapidly. In three cases that assume GHG emissions fees that range from $10 to $25 per metric ton in 2014 and rise by 5 percent per year through 2040 (GHG10, GHG15, and GHG25), the renewable share of total U.S. electricity generation in 2040 ranges from 23 percent to 31 percent (Figure 8).

The AEO2013 Reference case reflects a less optimistic outlook for advanced biofuels to capture a rapidly growing share of the liquid fuels market than earlier Annual Energy Outlooks. As a result, biomass use in the Reference case totals 5.9 quadrillion Btu in 2035 and 7.1 quadrillion Btu in 2040, up from 4.0 quadrillion Btu in 2011.

Emissions from Market Trends

Renewable Fuel Standard and California Low Carbon Fuel Standard boost the use of new fuels


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In response to the RFS implemented nationwide and the California Low Carbon Fuel Standard (LCFS), consumption of advanced biofuels increases in the AEO2013 Reference case (Figure 101). As defined in the RFS, the advanced renewable fuels category consists of fuels that achieve a 50-percent reduction in life-cycle GHG emissions (including indirect changes in land use). The advanced fuel category includes ethanol produced from sugar cane (but not from corn starch), biodiesel, renewable diesel, and cellulosic biofuels [141]. California uses a large fraction of the total advanced renewable fuel pool in the early years of the projection.

Under the California LCFS, each fuel is considered individually according to its carbon intensity relative to the LCFS target. In general, fuels that qualify as advanced renewable fuels under the RFS have low carbon intensities for the purposes of the California LCFS, but the reverse is not always true.

Starting about 2030, production of cellulosic drop-in biofuels ramps up in California and other states. Outside California, production and consumption of cellulosic biofuels increases rapidly enough to cause a decline in California's fraction of the total advanced biofuels market. Starting in about 2035, corn ethanol with low carbon intensity begins to displace imported sugar cane ethanol in California.

Outlook for U.S. coal production is affected by fuel price uncertainties


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U.S. coal production varies across the AEO2013 cases, reflecting the effects of different assumptions about the costs of producing and transporting coal, the outlook for natural gas prices, and possible controls on GHG emissions (Figure 105). In general, assumptions that reduce the competitiveness of coal versus natural gas result in less coal production: in the High Coal Cost case as a result of significantly higher estimated costs to mine and transport coal, and in the High Oil and Gas Resource case as a result of lower natural gas production costs than in the Reference case. Similarly, actions to reduce GHG emissions can reduce the competiveness of coal, because its high carbon content can translate into a price penalty, in the form of GHG fees, relative to other fuels. Conversely, lower coal prices in the Low Coal Cost case and higher natural gas prices in the Low Oil and Gas Resource case improve the competitiveness of coal and lead to higher levels of coal production.

Of the cases shown in Figure 105, the most substantial decline in U.S. coal production occurs in the GHG15 case, where an economy-wide CO2 emissions price that rises to $53 per metric ton in 2040 leads to a 50-percent drop in coal production from the Reference case level in 2040. Across the remaining cases, variations range from 15 percent lower to 6 percent higher than production in the Reference case in 2020; and by 2040, as the gap in coal prices widens over time, the range of differences increases to 24 percent below and 16 percent above the Reference case in the High Coal Cost and Low Coal Cost cases, respectively. In two additional GHG cases developed for AEO2013 (not shown in Figure 105), economy-wide CO2 allowance fees are assumed to increase to $36 per metric ton in the GHG10 case and $89 per metric ton in the GHG25 case in 2040, resulting in total coal production in 2040 that is 25 percent lower and 72 percent lower, respectively, than in the Reference case.

Concerns about future GHG policies affect builds of new coal-fired generating capacity


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In the AEO2013 Reference case, the cost of capital for investments in GHG-intensive technologies is increased by 3 percentage points, primarily to reflect the behavior of electricity generators who must evaluate long-term investments across a range of generating technologies in an environment where future restrictions of GHG emissions are likely. The higher cost of capital is used to estimate the costs for new coal-fired power plants without carbon capture and storage (CCS) and for capital investment projects at existing coal-fired power plants (excluding CCS). The No GHG Concern case illustrates the potential impact on energy investments when the cost of capital is not increased for GHG-intensive technologies.

In the No GHG Concern case, a lower cost of capital leads to the addition of 26 gigawatts of new coal-fired capacity from 2012 to 2040, up from 9 gigawatts in the Reference case (Figure 107). Nearly all projected builds in the Reference case are plants already under construction. As a result, additions of natural gas, nuclear, and renewable generating capacity all are slightly lower in the No GHG Concern case than in the Reference case.

In addition to affecting builds of new generating capacity, removing the premium for the cost of capital also influences capital investment projects at existing coal-fired power plants. In the No GHG Concern case, the lower cost of capital results in some additional retrofits of flue gas desulfurization (FGD) equipment relative to the Reference case, and fewer retrofits of dry sorbent injection (DSI) systems, which are a less capital-intensive option than FGD for controlling emissions of acid gases. To comply with the requirements specified in the Mercury and Air Toxics Standards (MATS), the AEO2013 projections assume that coal-fired power plants must be equipped with either FGD equipment or DSI systems with full fabric filters

Energy-related carbon dioxide emissions remain below their 2005 level through 2040


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On average, energy-related CO2 emissions in the AEO2013 Reference case decline by 0.2 percent per year from 2005 to 2040, as compared with an average increase of 0.9 percent per year from 1980 to 2005. Reasons for the decline include: an expected slow and extended recovery from the recession of 2007-2009; growing use of renewable technologies and fuels; automobile efficiency improvements; slower growth in electricity demand; and more use of natural gas, which is less carbon-intensive than other fossil fuels. In the Reference case, energy-related CO2 emissions in 2020 are 9.1 percent below their 2005 level. Energy-related CO2 emissions total 5,691 million metric tons in 2040, or 308 million metric tons (5.1 percent) below their 2005 level (Figure 108).

Petroleum remains the largest source of U.S. energy-related CO2 emissions in the projection, but its share falls to 38 percent in 2040 from 44 percent in 2005. CO2 emissions from petroleum use, mainly in the transportation sector, are 448 million metric tons below their 2005 level in 2040.

Emissions from coal, the second-largest source of energy-related CO2 emissions, are 246 million metric tons below the 2005 level in 2040 in the Reference case, and their share of total energy-related CO2 emissions declines from 36 percent in 2005 to 34 percent in 2040. The natural gas share of total CO2 emissions increases from 20 percent in 2005 to 28 percent in 2040, as the use of natural gas to fuel electricity generation and industrial applications increases. Emissions levels are sensitive to assumptions about economic growth, fuel prices, technology costs, and policies that are explored in many of the alternative cases completed for AEO2013.

Power plant emissions of sulfur dioxide are reduced by further environmental controls


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In the AEO2013 Reference case, sulfur dioxide (SO2) emissions from the U.S. electric power sector fall from 4.4 million short tons in 2011 to a range between 1.2 and 1.7 million short tons in the 2016-2040 projection period. The reduction occurs in response to the MATS [142]. Although SO2 is not directly regulated by the MATS, the reductions are achieved as a result of acid gas limits that lead to the installation of FGD units or DSI systems, which also remove SO2. AEO2013 assumes that, in order to comply with MATS, coal-fired power plants must have one of the two technologies installed by 2016. Both technologies, which are used to reduce acid gas emissions regulated under MATS, also reduce SO2 emissions.

EIA assumes a 95-percent SO2 removal efficiency for FGD units and a 70-percent SO2 removal efficiency for DSI systems paired with baghouse fabric filters. AEO2013 also assumes that a baghouse fabric filter is required for all coal-fired plants in order to comply with the nonmercury metal emissions limits set forth by MATS [143, 144].

From 2011 to 2040, approximately 43 gigawatts of coal-fired capacity is retrofitted with FGD units in the Reference case, and another 50 gigawatts is retrofitted with DSI systems. In 2016, all operating coal-fired generation units larger than 25 megawatts are assumed to have either DSI or FGD systems installed. After a 73-percent decrease from 2011 to 2016, SO2 emissions increase slowly from 2016 to 2040 (Figure 109) as total electricity generation from coal-fired power plants increases. The increase is relatively small, however, because overall growth in generation from coal is slow, and the required installations of FGD and DSI equipment limit SO2 emissions from plants in operation.

Nitrogen oxides emissions show little change from 2011 to 2040 in the Reference case


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Annual emissions of nitrogen oxides (NOX) from the electric power sector, which totaled 1.9 million short tons in 2011, range between 1.6 and 2.1 million short tons from 2011 to 2040 (Figure 110). Annual NOX emissions from electricity generation dropped by 47 percent from 2005 to 2011 as a result of the implementation of the Clean Air Interstate Rule (CAIR), which led to year-round operation of advanced pollution control equipment (that under the NOX budget program operated during the summer season only) and to additional installations of NOX pollution control equipment.

In the AEO2013 Reference case, annual NOX emissions in 2040 are 4 percent below the 2011 level, despite a 6-percent increase in annual electricity generation from coal-fired power plants over the period. The drop in emissions is primarily a result of CAIR, which established an annual cap-and-trade program for NOX emissions in 25 states and the District of Columbia. A slight rise in NOX emissions after 2020 corresponds to a projected recovery in coal-fired generation.

MATS does not have a direct effect on NOX emissions, because none of the potential technologies required to comply with MATS has a significant impact on NOX emissions. However, because MATS contributes to a reduction in coal-fired generation nationwide, it indirectly reduces NOX emissions from the power sector in states not affected by CAIR.

From 2011 to 2040, 15.4 gigawatts of coal-fired capacity is retrofitted with NOX controls in the AEO2013 Reference case. Coal-fired power plants can be retrofitted with three types of NOX control technologies: selective catalytic reduction (SCR), selective noncatalytic reduction (SNCR), or low-NOX burners, depending on the specific characteristics of the plant, including boiler configuration and the type of coal used. SCRs make up 90 percent of the NOX controls installed in the Reference case, SNCRs 5 percent, and low-NOX burners 5 percent.

Energy-related carbon dioxide emissions are sensitive to potential policy changes


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Although the AEO2013 Reference case assumes that current laws and regulations remain in effect through 2040, the potential impacts of a future fee on CO2 emissions are examined in three carbon-fee cases, starting at $10, $15, and $25 per metric ton CO2 in 2014 and rising by 5 percent per year annually thereafter. The three fee cases were combined with the Reference case and also, because of uncertainty about the growing role of natural gas in the U.S. energy landscape and how it might affect efforts to reduce GHG emissions, with the High Oil and Gas Resource case (Figure 111).

Emissions fees would have a significant impact on U.S. energy-related CO2 emissions. They would encourage all energy producers and consumers to shift to lower-carbon or zero-carbon energy sources. Relative to 2005 emissions levels, energy-related CO2 emissions are 14 percent, 19 percent, and 28 percent lower in 2025 in the $10, $15, and $25 fee cases using Reference case resources, respectively, and 17 percent, 28 percent, and 40 percent lower in 2040. When combined with High Oil and Gas Resource assumptions, the CO2 fees tend to lead to slightly greater emissions reductions in the near term and smaller reductions in the long term.

The alternative assumptions about natural gas resources have only small impacts on energy-related CO2 emissions in all the cases except the $25 fee cases. Although more abundant and less expensive natural gas in the High Oil and Gas Resource cases does lead to less coal use and more natural gas use, it also reduces the use of renewable and nuclear fuels and increases energy consumption overall. In the long run, the emissions reductions achieved by shifting from coal to natural gas are offset by the impacts of reduced use of renewables and nuclear power for electricity generation, and by higher overall levels of energy consumption.

Carbon dioxide fee cases generally increase the use of natural gas for electricity generation


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The role of natural gas in the CO2 fee cases varies widely over time and, in addition, over the range of assumptions about natural gas resources. When CO2 fees are assumed to be introduced in 2014, natural gas-fired generation increases sharply. The role of natural gas in the CO2 fee cases begins declining between 2025 and 2030, however, as power companies bring more new nuclear and renewable plants on line (Figure 112).

After accounting for about 50 percent of all U.S. electricity generation for many years, coal's share has declined over the past few years because of growing competition from efficient natural gas-fired plants with access to low-cost natural gas. In the Reference case, the share of generation accounted for by coal falls from 42 percent in 2011 to 38 percent in 2025 and 35 percent in 2040. Coal's share falls even further in the CO2 fee cases, to a range between 6 percent and 31 percent in 2025 and between 1 percent and 24 percent in 2040.

As the fee for CO2 emissions increases over time, power companies reduce their use of coal and increase their use of nuclear power, renewables, and natural gas. The nuclear and renewable shares of total generation increase in most of the CO2 fee cases, particularly in the later years of the projections. In the Reference case, nuclear generation accounts for 20 percent of the total in 2025 and 17 percent in 2040. In the CO2 fee cases, the nuclear share varies from 20 to 24 percent in 2025 and 18 to 37 percent in 2040. The renewable share of total generation in 2025 is 14 percent in the Reference case, increasing to 16 percent in 2040. In the CO2 fee cases the renewable share is generally higher, between 15 percent and 21 percent in 2025 and between 17 percent and 31 percent in 2040.

Emissions from Issues in Focus

1. No sunset and extended policies cases

Background

The AEO2013 Reference case is best described as a current laws and regulations case because it generally assumes that existing laws and regulations remain unchanged throughout the projection period, unless the legislation establishing them sets a sunset date or specifies how they will change. The Reference case often serves as a starting point for analysis of proposed changes in legislation or regulations. While the definition of the Reference case is relatively straightforward, there may be considerable interest in a variety of alternative cases that reflect updates or extensions of current laws and regulations. Areas of particular interest include:

  • Laws or regulations that have a history of being extended beyond their legislated sunset dates. Examples include the various tax credits for renewable fuels and technologies, which have been extended with or without modifications several times since their initial implementation.
  • Laws or regulations that call for periodic updating of initial specifications. Examples include appliance efficiency standards issued by the U.S. Department of Energy (DOE) and CAFE and greenhouse gas (GHG) emissions standards for vehicles issued by the National Highway Traffic Safety Administration (NHTSA) and the U.S. Environmental Protection Agency (EPA).
  • Laws or regulations that allow or require the appropriate regulatory agency to issue new or revised regulations under certain conditions. Examples include the numerous provisions of the Clean Air Act that require EPA to issue or revise regulations if it finds that an environmental quality target is not being met.

Two alternative cases are discussed in this section to provide some insight into the sensitivity of results to scenarios in which existing tax credits or other policies do not sunset. No attempt is made to cover the full range of possible uncertainties in these areas, and readers should not view the cases discussed as EIA projections of how laws or regulations might or should be changed. The cases examined here look only at federal laws or regulations and do not examine state laws or regulations.

Analysis cases

The two cases prepared—the No Sunset case and the Extended Policies case—incorporate all the assumptions from the AEO2013 Reference case, except as identified below. Changes from the Reference case assumptions include the following.

No Sunset case

Tax credits for renewable energy sources in the utility, industrial, and buildings sectors, or for energy-efficient equipment in the buildings sector, are assumed to be extended, including the following:

  • The PTC of 2.2 cents per kilowatthour and the 30-percent investment tax credit (ITC) available for wind, geothermal, biomass, hydroelectric, and landfill gas resources, assumed in the Reference case to expire at the end of 2012 for wind and 2013 for the other eligible resources, are extended indefinitely. On January 1, 2013, Congress passed a one-year extension of the PTC for wind and modified the qualification rules for all eligible technologies; these changes are not included in the AEO2013 Reference case, which was completed in December 2012, but they are discussed in "Effects of energy provisions in the American Taxpayer Relief Act of 2012".
  • For solar power investments, a 30-percent ITC that is scheduled to revert to a 10-percent credit in 2016 is, instead, assumed to be extended indefinitely at 30 percent.
  • In the buildings sector, personal tax credits for the purchase of renewable equipment, including photovoltaics (PV), are assumed to be extended indefinitely, as opposed to ending in 2016 as prescribed by current law. The business ITCs for commercial-sector generation technologies and geothermal heat pumps are assumed to be extended indefinitely, as opposed to expiring in 2016; and the business ITC for solar systems is assumed to remain at 30 percent instead of reverting to 10 percent. On January 1, 2013, legislation was enacted to reinstate tax credits for energy-efficient homes and selected residential appliances. The tax credits that had expired on December 31, 2011, are now extended through December 31, 2013. This change is not included in the Reference case.
  • In the industrial sector, the 10-percent ITC for combined heat and power (CHP) that ends in 2016 in the AEO2013 Reference case [65] is assumed to be preserved through 2040, the end of the projection period.

Extended Policies case

The Extended Policies case includes additional updates to federal equipment efficiency standards that were not considered in the Reference case or No Sunset case. Residential and commercial end-use technologies eligible for incentives in the No Sunset case are not subject to new standards. Other than those exceptions, the Extended Policies case adopts the same assumptions as the No Sunset case, plus the following:

  • Federal equipment efficiency standards are assumed to be updated at periodic intervals, consistent with the provisions in existing law, at levels based on ENERGY STAR specifications or on the Federal Energy Management Program purchasing guidelines for federal agencies, as applicable. Standards are also introduced for products that currently are not subject to federal efficiency standards.
  • Updated federal energy codes for residential and commercial buildings increase by 30 percent in 2020 compared to the 2006 International Energy Conservation Code in the residential sector and the American Society of Heating, Refrigerating and Air-Conditioning Engineers Building Energy Code 90.1-2004 in the commercial sector. Two subsequent rounds in 2023 and 2026 each add an assumed 5-percent incremental improvement to building energy codes. The equipment standards and building codes assumed for the Extended Policies case are meant to illustrate the potential effects of those policies on energy consumption for buildings. No cost-benefit analysis or evaluation of impacts on consumer welfare was completed in developing the assumptions. Likewise, no technical feasibility analysis was conducted, although standards were not allowed to exceed the "maximum technologically feasible" levels described in DOE's technical support documents.
  • The AEO2013 Reference, No Sunset, and Extended Policies cases include both the attribute-based CAFE standards for light-duty vehicles (LDVs) in model year (MY) 2011 and the joint attribute-based CAFE and vehicle GHG emissions standards for MY 2012 to MY 2025. The Reference and No Sunset cases assume that the CAFE standards are then held constant at MY 2025 levels in subsequent model years, although the fuel economy of new LDVs continues to rise modestly over time. The Extended Policies case modifies the assumption in the Reference and No Sunset cases, assuming continued increases in CAFE standards after MY 2025. CAFE standards for new LDVs are assumed to increase by an annual average rate of 1.4 percent.
  • In the industrial sector, the ITC for CHP is extended to cover all properties with CHP, no matter what the system size (instead of being limited to properties with systems smaller than 50 megawatts as in the Reference case [66]), which may include multiple units. Also, the ITC is modified to increase the eligible CHP unit cap to 25 megawatts from 15 megawatts. These extensions are consistent with previously proposed legislation.

Analysis results

The changes made to the Reference case assumptions in the No Sunset and Extended Policies cases generally lead to lower estimates for overall energy consumption, increased use of renewable fuels particularly for electricity generation and reduced energy-related carbon dioxide (CO2) emissions. Because the Extended Policies case includes most of the assumptions in the No Sunset case but adds others, the effects of the Extended Policies case tend to be greater than those in the No Sunset case—but not in all cases, as discussed below. Although these cases show lower energy prices, because the tax credits and end-use efficiency standards lead to lower energy demand and reduce the costs of renewable technologies, appliance purchase costs are also affected. In addition, the government receives lower tax revenues as consumers and businesses take advantage of the tax credits.

Energy consumption


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Total energy consumption in the No Sunset case is close to the level in the Reference case (Figure 13). Improvements in energy efficiency lead to reduced consumption in this case, but somewhat lower energy prices lead to relatively higher levels of consumption, partially offsetting the impact of improved efficiency. In 2040, total energy consumption in the Extended Policies case is 3.8 percent below the Reference case projection.

Buildings energy consumption

Renewable distributed generation (DG) technologies (PV systems and small wind turbines) provide much of the buildings-related energy savings in the No Sunset case. Extended tax credits in the No Sunset case spur increased adoption of renewable DG, leading to 61 billion kilowatthours of onsite electricity generation from DG systems in 2025, compared with 28 billion kilowatthours in the Reference case. Continued availability of the tax credits results in 137 billion kilowatthours of onsite electricity generation in 2040 in the No Sunset case—more than three times the amount of onsite electricity generated in 2040 in the Reference case. Similar adoption of renewable DG occurs in the Extended Policies case. With the additional efficiency gains from assumed future standards and more stringent building codes, delivered energy consumption for buildings is 3.9 percent (0.8 quadrillion British thermal units [Btu]) lower in 2025 and 8.0 percent (1.7 quadrillion Btu) lower in 2040 in the Extended Policies case than in the Reference case. The reduction in 2040 is more than seven times as large as the 1.1-percent (0.2 quadrillion Btu) reduction in the No Sunset case.

Electricity use shows the largest reduction in the two alternative cases compared to the Reference case. Building electricity consumption is 1.3 percent and 5.8 percent lower, respectively, in the No Sunset and Extended Policies cases in 2025 and 2.1 percent and 8.7 percent lower, respectively, in 2040 than in the Reference case, as onsite generation continues to increase and updated standards affect a greater share of the equipment stock in the Extended Policies case. Space heating and cooling are affected by the assumed standards and building codes, leading to significant savings in energy consumption for heating and cooling in the Extended Policies case. In 2040, delivered energy use for space heating in buildings is 9.6 percent lower, and energy use for space cooling is 20.3 percent lower, in the Extended Policies case than in the Reference case. In addition to improved standards and codes, extended tax credits for PV prompt increased adoption, offsetting some of the costs for purchased electricity for cooling. New standards for televisions and for personal computers and related equipment in the Extended Policies case lead to savings of 28.3 percent and 31.8 percent, respectively, in residential electricity use for this equipment in 2040 relative to the Reference case. Residential and commercial natural gas use declines from 8.1 quadrillion Btu in 2011 to 7.8 quadrillion Btu in 2025 and 7.2 quadrillion Btu in 2040 in the Extended Policies case, representing a 2.2-percent reduction in 2025 and a 8.5-percent reduction in 2040 relative to the Reference case.

Industrial energy consumption

The No Sunset case modifies the Reference case assumptions by extending the existing ITC for industrial CHP through 2040. The Extended Policies case starts from the No Sunset case and expands the credit to include industrial CHP systems of all sizes and raises the maximum credit that can be claimed from 15 megawatts of installed capacity to 25 megawatts. The changes result in 1.6 gigawatts of additional industrial CHP capacity in the No Sunset case compared with the Reference case in 2025 and 3.5 gigawatts of additional capacity in 2040. From 2025 through 2040, more CHP capacity is installed in the No Sunset case than in the Extended Policy case. CHP capacity is 0.3 gigawatts higher in the No Sunset Case than in the Extended Policies Case in 2025 and 1.2 gigawatts higher in 2040. Although the Extended Policies case includes a higher tax benefit for CHP than the No Sunset case, which by itself provides greater incentive to build CHP capacity, electricity prices are lower in the Extended Policies case than in the No Sunset case starting around 2020, and the difference increases over time. Lower electricity prices, all else equal, reduce the economic attractiveness of CHP. Also, the median size of industrial CHP units size is 10 megawatts [67], and many CHP systems are well within the 50-megawatt total system size, which means that relaxing the size constraint is not as strong an incentive for investment as is allowing the current tax credit for new CHP investments to continue after 2016.

Natural gas consumption averages 9.7 quadrillion Btu per year in the industrial sector from 2011 to 2040 in the No Sunset case—about 0.1 quadrillion Btu, or 0.9 percent, above the level in the Reference case. Over the course of the projection, the difference in natural gas consumption between the No Sunset case and the Reference case is small but increases steadily. In 2025, natural gas consumption in the No Sunset case is approximately 0.1 quadrillion Btu higher than in the Reference Case, and in 2040 it is 0.2 quadrillion Btu higher. Natural gas consumption in the Extended Policies case is virtually the same as in the No Sunset case through 2030. After 2030, refinery use of natural gas stabilizes in the Extended Policies case as continued increases in CAFE standards reduce demand for petroleum products.

Transportation energy consumption

The Extended Policies case differs from the Reference and No Sunset cases in assuming that the CAFE standards recently finalized by EPA and NHTSA for MY 2017 through 2025 (which call for a 4.1-percent annual average increase in fuel economy for new LDVs) are extended through 2040 with an assumed average annual increase of 1.4 percent. Sales of vehicles that do not rely solely on a gasoline internal combustion engines for both motive and accessory power (including those that use diesel, alternative fuels, or hybrid electric systems) play a substantial role in meeting the higher fuel economy standards after 2025, growing to almost 72 percent of new LDV sales in 2040, compared with about 49 percent in the Reference case.


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LDV energy consumption declines in the Reference case from 16.1 quadrillion Btu (8.7 million barrels per day) in 2011 to 14.0 quadrillion Btu (7.7 million barrels per day) in 2025 as a result of the increase in CAFE standards. Extension of the increases in CAFE standards in the Extended Policies case further reduces LDV energy consumption to 11.9 quadrillion Btu (6.5 million barrels per day) in 2040, or about 8 percent lower than in the Reference case. Petroleum and other liquid fuels consumption in the transportation sector is virtually identical through 2025 in the Reference and Extended Policies cases but declines in the Extended Policies case from 13.3 million barrels per day in 2025 to 12.3 million barrels per day in 2040, as compared with 13.0 million barrels per day in 2040 in the Reference case (Figure 14).

Renewable electricity generation

The extension of tax credits for renewables through 2040 would, over the long run, lead to more rapid growth in renewable generation than in the Reference case. When the renewable tax credits are extended without extending energy efficiency standards, as assumed in the No Sunset case, there is a significant increase in renewable generation in 2040 compared to the Reference case (Figure 15). Extending both renewable tax credits and energy efficiency standards in the Extended Policies case results in more modest growth in renewable generation, because renewable generation is a significant source of new generation to meet load growth, and enhanced energy efficiency standards tend to reduce overall electricity consumption and the need for new generation resources.


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The AEO2013 Reference case does not reflect the provisions of the American Taxpayer Relief Act of 2012 (P.L. 112-240) passed on January 1, 2013 [68], which extends the PTCs for renewable generation beyond what is included in the AEO2013 Reference case. While this legislation was completed too late for inclusion in the Reference case, EIA did complete an alternative case that examined key energy-related provisions of that legislation, the most important of which is the extension of the PTC for renewable generation. A brief summary of those results is presented in the box, "Effects of energy provisions in the American Taxpayer Relief Act of 2012."

Effects of energy provisions in the American Taxpayer Relief Act of 2012

On January 1, 2013, Congress passed the American Taxpayer Relief Act of 2012 (ATRA). The law, among other things, extended several provisions for tax credits to the energy sector. Although the law was passed too late to be incorporated in the Annual Energy Outlook 2013 (AEO2013) Reference case, a special case was prepared to analyze some of its key provisions, including the extension of tax credits for utility-scale renewables, residential energy efficiency improvements, and biofuels [69]. The analysis found that the most significant impact on energy markets came from extending the production tax credits (PTCs) for utility-scale wind, and from changing the PTC qualification criteria from being in service on December 31, 2013, to being under construction by December 31, 2013, for all eligible utility-scale technologies. Although there is some uncertainty about what criteria will be used to define "under construction," this analysis assumes that the effective length of the extension is equal to the typical project development time for a qualifying project. For wind, the effective extension is 3 years.


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Compared with the AEO2013 Reference case, ATRA increases renewable generation, primarily from wind (Figure 16). Renewable generation in 2040 is about 2 percent higher in the ATRA case than in the Reference case, with the greatest growth occurring in the near term. In 2016, renewable generation in the ATRA case exceeds that in the Reference case by nearly 9 percent. Almost all the increase comes from wind generation, which in 2016 is about 34 percent higher in the ATRA case than in the Reference case. In 2040, however, wind generation is only 17 percent higher than projected in the Reference case. These results indicate that, while the short-term extension does result in additional wind generation capacity, some builds that otherwise would occur later in the projection period are moved up in time to take advantage of the extended tax credit. The increase in wind generation partially displaces other forms of generation in the Reference case, both renewable and nonrenewable—particularly solar, biomass, coal, and natural gas.

ATRA does not have significant effects on electricity or delivered natural gas prices and generally does not result in a difference of more than 1 percent either above or below Reference case prices. In the longer term (beyond 2020), electricity and natural gas prices generally both are slightly lower in the ATRA case, as increased wind capacity reduces variable fuel costs in the power sector and reduces the demand for natural gas.

Other ATRA provisions analyzed had minimal impact on all energy measures, primarily limited to short-term reductions in renewable fuel prices and a one-year window for residential customers to get tax credits for certain efficiency expenditures. Provisions of the act not addressed in this analysis are likely to have only modest impacts because of their limited scale, scope, and timing.

In the No Sunset and Extended Policies cases, renewable generation more than doubles from 2011 to 2040, as compared with a 64-percent increase in the Reference case. In 2040, the share of total electricity generation accounted for by renewables is between 22 and 23 percent in both the No Sunset and Extended Policies cases, as compared with 16 percent in the Reference case.

Construction of wind-generation units slows considerably in the Reference case from recent construction rates, following the assumed expiration of the tax credit for wind power in 2012. The combination of slow growth in electricity demand, little impact from state-level renewable generation requirements, and low prices for competing fuels like natural gas keeps growth relatively low until around 2025, when load growth finally catches up with installed capacity, and natural gas prices increase to a level at which wind is a cost-competitive option in some regions. Extending the PTC for wind spurs a brief surge in near-term development by 2014, but the factors that limit development through 2025 in the Reference case still largely apply, and growth from 2015 to about 2025 is slow, in spite of the availability of tax credits during the 10-year period. When the market picks up again after 2025, availability of the tax credits spurs additional wind development over Reference case levels. Wind generation in the No Sunset case is about 27 percent higher than in the Reference case in 2025 and 86 percent higher in 2040.

In the near term, the continuation of tax credits for solar generation results in a continuation of recent growth trends for this resource. The solar tax credits are assumed to expire in 2016 in the Reference case, after which the growth of solar generation slows significantly. Eventually, economic conditions become favorable for utility-scale solar without the federal tax credits, and the growth rate picks up substantially after 2025. With the extension of the ITC, growth continues throughout the projection period. Solar generation in the No Sunset case in 2040 is more than 30 times the 2011 level and more than twice the level in 2040 in the Reference case.

The impacts of the tax credit extensions on geothermal and biomass generation are mixed. Although the tax credits do apply to both geothermal and biomass resources, the structure of the tax credits, along with other market dynamics, makes wind and solar projects relatively more attractive. Over most of the projection period, geothermal and biomass generation are lower with the tax credits available than in the Reference case. In 2040, generation from both resources in the No Sunset and Extended Policies cases is less than 10 percent below the Reference case levels. However, generation growth lags significantly through 2020 with the tax credit extensions, and generation in 2020 from both resources is about 20 percent lower in the No Sunset and Extended Policy cases than in the Reference case.


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After 2025, renewable generation in the No Sunset and Extended Policies cases starts to increase more rapidly than in the Reference case. As a result, generation from nuclear and fossil fuels is below Reference case levels. Natural gas represents the largest source of displaced generation. In 2040, electricity generation from natural gas is 13 percent lower in the No Sunset case and 16 percent lower in the Extended Policies case than in the Reference case (Figure 17).

Energy-related CO2 emissions

In the No Sunset and Extended Policies cases, lower overall fossil energy use leads to lower levels of energy-related CO2 emissions than in the Reference case. In the Extended Policies case, the emissions reduction is larger than in the No Sunset case. From 2011 to 2040, energy-related CO2 emissions are reduced by a cumulative total of 4.6 billion metric tons (a 2.8-percent reduction over the period) in the Extended Policies case relative to the Reference case projection, as compared with 1.7 billion metric tons (a 1.0-percent reduction over the period) in the No Sunset case (Figure 18). The increase in fuel economy standards assumed for new LDVs in the Extended Policies case is responsible for 11.4 percent of the total cumulative reduction in CO2 emissions from 2011 to 2040 in comparison with the Reference case. The balance of the reduction in CO2 emissions is a result of greater improvement in appliance efficiencies and increased penetration of renewable electricity generation.


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Most of the emissions reductions in the No Sunset case result from increases in renewable electricity generation. Consistent with current EIA conventions and EPA practice, emissions associated with the combustion of biomass for electricity generation are not counted, because they are assumed to be balanced by carbon absorption when the plant feedstock is grown. Relatively small incremental reductions in emissions are attributable to renewables in the Extended Policies case, mainly because electricity demand is lower than in the Reference case, reducing the consumption of all fuels used for generation, including biomass.

In both the No Sunset and Extended Policies cases, water heating, space cooling, and space heating together account for most of the emissions reductions from Reference case levels in the buildings sector. In the industrial sector, the Extended Policies case projects reduced emissions as a result of decreases in electricity purchases and petroleum use.

Energy prices and tax credit payments


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With lower levels of fossil energy use and more consumption of renewable fuels stimulated by tax credits in the No Sunset and Extended Policies cases, energy prices are lower than in the Reference case. In 2040, average delivered natural gas prices (2011 dollars) are $0.29 per million Btu (2.7 percent) and $0.59 per million Btu (5.4 percent) lower in the No Sunset and Extended Policies cases, respectively, than in the Reference case (Figure 19), and electricity prices are 3.9 percent and 6.3 percent lower than in the Reference case (Figure 20).


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The reductions in energy consumption and CO2 emissions in the Extended Policies case are accompanied by higher equipment costs for consumers and revenue reductions for the U.S. government. From 2013 to 2040, residential and commercial consumers spend, on average, an additional $20 billion per year (2011 dollars) for newly purchased end-use equipment, DG systems, and residential building shell improvements in the Extended Policies case as compared with the Reference case. On the other hand, residential and commercial customers save an average of $30 billion per year on energy purchases.

Tax credits paid to consumers in the buildings sector (or, from the government's perspective, reduced revenue) in the No Sunset case average $4 billion (2011 dollars) more per year than in the Reference case, which assumes that existing tax credits expire as currently scheduled, mostly by 2016.

The largest response to federal tax incentives for new renewable generation is seen in the No Sunset case, with extension of the PTC and the 30-percent ITC resulting in annual average reductions in government tax revenues of approximately $2.3 billion from 2011 to 2040, as compared with $650 million per year in the Reference case.

3. U.S. reliance on imported liquid fuels in alternative scenarios

Liquid fuels [71] play a vital role in the U.S. energy system and economy, and access to affordable liquid fuels has contributed to the nation's economic prosperity. However, the extent of U.S. reliance on imported oil has often been raised as a matter of concern over the past 40 years. U.S. net imports of petroleum and other liquid fuels as a share of consumption have been one of the most watched indicators in national and global energy analyses. After rising steadily from 1950 to 1977, when it reached 47 percent by the most comprehensive measure, U.S. net import dependence declined to 27 percent in 1985. Between 1985 and 2005, net imports of liquid fuels as a share of consumption again rose, reaching 60 percent in 2005. Since that time, however, the trend toward growing U.S. dependence on liquid fuels imports has again reversed, with the net import share falling to an estimated 41 percent in 2012, and with EIA projecting further significant declines in 2013 and 2014. The decline in net import dependence since 2005 has resulted from several disparate factors, and continued changes in those and other factors will determine how this indicator evolves in the future. Key questions include:

  • What are the key determinants of U.S. liquid fuels supply and demand?
  • Will the supply and demand trends that have reduced dependence on net imports since 2005 intensify or abate?
  • What supply and demand developments could yield an outcome in which the United States is no longer a net importer of liquid fuels?

This discussion considers potential changes to the U.S. energy system that are inherently speculative and should be viewed as what-if cases. The four cases that are discussed include two cases (Low Oil and Gas Resources and High Oil and Gas Resources) in which only the supply assumptions are varied, and two cases (Low/No Net Imports and High Net Imports) in which both supply and demand assumptions change. The changes in these cases generate wide variation from the liquid fuels import dependence values seen in the AEO2013 Reference case, but they should not be viewed as spanning the range of possible outcomes. Cases in which both supply and demand assumptions are modified show the greatest changes. In the Low/No Net Imports case, the United States ceases to be a net liquid fuels importer in the mid-2030s, and by 2040 U.S. net exports are 8 percent of total U.S. liquid fuel production. In contrast, in the High Net Imports case, net petroleum import dependence is above 44 percent in 2040, higher than the Reference case level of 37 percent but still well below the 60-percent level seen in 2005. Cases in which only supply assumptions are varied show intermediate levels of change in liquid fuels import dependence.

As the case names suggest, the Low Oil and Gas Resource case incorporates less-optimistic oil and natural gas resource assumptions than those in the Reference case, while the High Oil and Gas Resource case does the opposite. The other two cases combine different oil and natural gas resource assumptions with changes in assumptions that influence the demands for liquid fuels. The Low/No Net Imports case simulates an environment in which U.S. energy production grows rapidly while domestic consumption of liquid fuels declines. Conversely, the High Net Imports case combines the Low Oil and Gas Resource case assumptions with demand-related assumptions including slower improvements in vehicle efficiency, higher levels of vehicle miles traveled (VMT) relative to the Reference case, and reduced use of alternative transportation fuels.

Resource assumptions

A key contributing factor to the recent decline in net import dependence has been the rapid growth of U.S. oil production from tight onshore formations, which has followed closely after the rapid growth of natural gas production from similar types of resources. Projections of future production trends inevitably reflect many uncertainties regarding the actual level of resources available, the difficulty in extracting them, and the evolution of the technologies (and associated costs) used to recover them. To represent these uncertainties, the assumptions used in the High and Low Oil and Gas Resource cases represent significant deviations from the Reference case.

Estimates of technically recoverable resources from the rapidly developing tight oil formations are particularly uncertain and change over time as new information is gained through drilling, production, and technology experimentation. Over the past decade, as more tight and shale formations have gone into commercial production, estimates of technically and economically recoverable resources have generally increased. Technically recoverable resource estimates, however, embody many assumptions that might not prove to be true over the long term, over the entire range of tight or shale formations, or even within particular formations. For example, the tight oil resource estimates in the Reference case assume that production rates achieved in a limited portion of a given formation are representative of the entire formation, even though neighboring tight oil well production rates can vary widely. Any specific tight or shale formation can vary significantly across the formation with respect to relevant characteristics [72], resulting in widely varying rates of well production. The application of refinements to current technologies, as well as new technological advancements, can also have a significant but highly uncertain impact on the recoverability of tight and shale crude oil.

As shown in Table 5, the High and Low Oil and Gas Resource cases were developed with alternative crude oil and natural gas resource assumptions giving higher and lower technically recoverable resources than assumed in the Reference case. While these cases do not represent upper and lower bounds on future domestic oil and natural gas supply, they allow for an examination of the potential effects of higher and lower domestic supply on energy demand, imports, and prices.

The Low Oil and Gas Resource case only reflects the uncertainty around tight oil and shale gas resources. The resource estimates in the Reference case are based on crude oil and natural gas production rates achieved in a limited portion of the tight or shale formation and are assumed to be representative of the entire formation. However, the variability in formation characteristics described earlier can also affect the estimated ultimate recovery (EUR) of wells. For the Low Oil and Gas Resource case, the EUR per tight and shale well is assumed to be 50 percent lower than in the AEO2013 Reference case. All other resource assumptions are unchanged from the Reference case.

The High Oil and Gas Resource case reflects a broad-based increase in crude oil and natural gas resources. Optimism regarding increased supply has been buoyed by recent advances in crude oil and natural gas production that resulted in an unprecedented annual increase in U.S. crude oil production in 2012. The AEO2013 Reference case shows continued near-term production growth followed by a decline in U.S. production after 2020. The High Oil and Gas Resource case presents a scenario in which U.S. crude oil production continues to expand after about 2020 due to assumed higher technically recoverable tight oil resources, as well as undiscovered resources in Alaska and the offshore Lower 48 states. In addition, the maximum annual penetration rate for GTL technology is doubled compared to the Reference case.

The tight and shale resources are increased by changing both the EUR per well and the well spacing. A doubling in tight and shale well EUR, when assumed to occur through raising the production type curves [73] across the board, is responsible for the significantly faster increases in production and is also a contributing factor in avoiding the production decline during the projection period. This assumption change is quite optimistic and may alternatively be considered as a proxy for other changes or combinations of changes that have yet to be observed.

Although initial production rates have increased over the past few years, it is too early to conclude that overall EURs have increased and will continue to increase. Instead, producers may just be recovering the resource more quickly, resulting in a more dramatic decline in production later, with little impact on the well's overall EUR. The decreased well spacing reflects less the capability to drill wells closer together (i.e., avoid interference) and instead more the discovery of and production from other shale plays that are not yet in commercial development. These may either be stacked in the same formation or reflect future technological innovations that would bring into production plays that are otherwise not amenable to current hydraulic fracturing technology.

Other resources also are assumed to contribute to supply, as technological or other unforeseen changes improve their prospects. The resource assumptions for the offshore Lower 48 states in the High Oil and Gas Resource case reflect the possibility that resources may be substantially higher than assumed in the Reference case. Resource estimates for most of the U.S. Outer Continental Shelf are uncertain, particularly for resources in undeveloped regions where there has been little or no exploration and development activity, and where modern seismic survey data are lacking [74]. The increase in crude oil resources in Alaska reflects the possibility that there may be more crude oil on the North Slope, including tight oil. It does not, however, reflect an opening of the Arctic National Wildlife Refuge to exploration or production activity. Finally, modest production from kerogen (oil shale) resources, which remains below 140,000 barrels per day through the 2040 projection horizon, is included in the High Oil and Gas Resource case.

Demand assumptions

Reductions in demand for liquid fuels in some uses, such as personal transportation and home heating, coupled with slow growth in other applications, have been another key contributing factor in the decline of the nation's net dependence on imported liquid fuels since 2005. As with supply assumptions, the key analytic assumptions that drive future trends in liquid fuels demand in EIA's projections are subject to considerable uncertainty. The most important assumptions affecting future demand for liquids fuels include:

  • The future level of activities that use liquid fuels, such as VMT
  • The future efficiency of equipment that uses liquid fuels, such as automobiles, trucks, and aircraft
  • The future extent of fuel switching that replaces liquid fuels with other fuel types, such as liquefied natural gas (LNG), biofuels, or electricity.

Two alternative sets of demand assumptions that lead to higher or lower demand for liquid fuels than in the AEO2013 Reference case are outlined below. The two alternative scenarios are then applied in conjunction with the High and Low Oil and Gas Resource cases to develop the Low/No Net Import and High Net Import cases.

Vehicle miles traveled

Projected fuel use by LDVs is directly proportional to light-duty VMT, which can be influenced by policy, but it is driven primarily by market factors, demography, and consumer preferences. All else being equal, VMT is more likely to grow when the driving-age population is growing, economic activity is robust, and fuel prices are moderate. For example, there is a strong linkage between economic activity, employment, and commuting. In addition, there is a correlation between income and discretionary travel that reinforces the economy-VMT link. Turning to demography, factors such as the population level, age distribution, and household composition are perhaps most important for VMT. For example, lower immigration would lead to a smaller U.S. population over time, lowering VMT. The aging of the U.S. population continues and will also have long-term effects on VMT trends, as older drivers do not behave in the same ways as younger or middle-aged drivers. At times, the factors that influence VMT intertwine in ways that change long-term trends in U.S. driving and fuel consumption. For example, the increase in two-income families that occurred beginning in the 1970s created a surge in VMT that involved both economic activity and demographics.

Alternative modes of travel affect VMT to the degree that the population substitutes other travel services for personal LDVs. The level of change is related to the cost, convenience, and geographic extent of mass transit, rail, biking, and pedestrian travel service options. Car-sharing services, which have grown in popularity in recent years, could discourage personal vehicle VMT by putting more of the cost of incremental vehicle use on the margin when compared with traditional vehicle ownership or leasing, where many of the major costs of vehicle use are incurred at the time a vehicle is acquired, registered, and insured. Improvements in the fuel efficiency of vehicles, however, could increase VMT by lowering the marginal costs of driving. In recent analyses supporting the promulgation of new final fuel economy and GHG standards for LDVs in MY 2017 through 2025, NHTSA and EPA applied a 10-percent rebound in travel to reflect the lower fueling costs of more efficient vehicles [75]. Both higher and lower values for the rebound have been advanced by various analysts [76].

Other types of technological change also can affect projected VMT growth. E-commerce, telework, and social media can supplant (or complement) personal vehicle use. Some analysts have suggested an association between rising interest in social media and a decline in the rates at which driving-age youth secure driver licenses; however, that decline also could be related to recent weakness in the economy.

Many of the factors reviewed above were also addressed in the August 2012 National Petroleum Council Future Transportation Fuels study [77]. That study considered numerous specific research efforts, as well as available summaries of the literature on VMT, and concluded that the economic and demographic factors remain dominant. The VMT scenario adopted for most of the analysis in that study reflected declining compound annual growth rates of VMT over time, with the growth rate in VMT, which was 3.1 percent in the 1971-1995 and 2.0 percent in the 1996-2007 periods, falling to under 1 percent after 2035.

In the AEO2013 Reference case, the compound annual rate of growth in light-duty VMT over the period from 2011 to 2040 is 1.2 percent—well below the historical record through 2005 but significantly higher than the average annual light-duty VMT growth rate of 0.7 percent from 2005 through 2011. The 2005-2011 period was marked by generally poor economic performance, high unemployment, and high liquid fuel prices, all of which likely contributed to lower VMT growth. While VMT growth rates are expected to rise as the economy and employment levels improve, it remains to be seen to what extent such effects might be counteracted or reinforced by some of the other market factors identified above.

The low demand scenario used in the Low/No Net Imports case holds the growth rate of light-duty VMT over the 2011-2040 period at 0.2 percent per year, lower than its 2005-2011 growth rate. The application of a lower growth rate over a 29-year projection period results in total light-duty VMT 26 percent below the Reference case level in 2040. With population growth at 0.9 percent per year, this implies a decline of 0.7 percent per year in VMT per capita. VMT per licensed driver, which increases by 0.3 percent per year in the AEO2013 Reference case, declines at a rate of 0.8 percent per year in the Low/No Net Imports case. In the High Net Imports case, which assumes more robust demand than in the Reference case, the VMT projection remains close to that in the Reference case, with higher demand resulting from other factors.

Vehicle efficiencies

Turning to vehicle efficiency, the rising fuel economy of new LDVs already has contributed to recent trends in liquid fuels use. Looking forward, the EPA and NHTSA have established joint CAFE and GHG emissions standards through MY 2025. The new CAFE standards result in a fuel economy, measured as a program compliance value, of 47.3 mpg for new LDVs in 2025, based on the distribution of production of passenger cars and light trucks by footprint in AEO2013. The EPA and NHTSA also have established a fuel efficiency and GHG emissions program for medium- and heavy-duty vehicles for MY 2014-18. The fuel consumption standards for MY 2014-15 set by NHTSA are voluntary, while the standards for MY 2016 and beyond are mandatory, except those for diesel engines, which are mandatory starting in 2017.

The AEO2013 Reference case does not consider any possible reduction in fuel economy standards resulting from the scheduled midterm review of the CAFE standards for MY 2023-25, or for any increase in fuel economy standards that may be put in place for model years beyond 2025. The low demand scenario in this article adopts the assumption that post-2025 LDV CAFE standards increase at an average annual rate of 1.4 percent, the same assumption made in the AEO2013 Extended Policies case. In contrast, the high demand scenario assumes some reduction in current CAFE standards following the scheduled midterm review.

Fuel switching

In the AEO2013 Reference case, fuel switching to natural gas in the form of compressed natural gas (CNG) and LNG already is projected to achieve significant penetration of natural gas as a fuel for heavy-duty trucks. In the Reference case, natural gas use in heavy-duty vehicles increases to 1 trillion cubic feet per year in 2040, displacing 0.5 million barrels per day of diesel use. The use of natural gas in the Reference case is economically driven. Even after the substantial costs of liquefaction or compression, fuel costs for LNG or CNG are expected to be well below the projected cost of diesel fuel on an energy-equivalent basis. The fuel cost advantage is expected to be large enough in the view of a significant number of operators to offset the considerably higher acquisition costs of vehicles equipped to use these fuels, in addition to offsetting other disadvantages, such as reduced maximum range without refueling, a lower number of refueling locations, reduced volume capacity in certain applications, and an uncertain resale market for vehicles using alternative fuels. For purposes of the low demand scenario for liquid fuels, factors limiting the use of natural gas in heavy-duty vehicles are assumed to be less significant, allowing for higher rates of market penetration.

Natural gas could also prove to be an attractive fuel in other transportation applications. The use of LNG as a fuel for rail transport, which had earlier been considered for environmental reasons, is now under active consideration by major U.S. railroads for economic reasons, motivated by the same gap between the cost of diesel fuel and LNG now and over the projection period. Because all modern railroad locomotives use electric motors to drive their wheels, a switch from diesel to LNG would entail the use of a different fuel to drive the onboard electric generation system. Retrofits have been demonstrated, but new locomotives with generating units specifically optimized for LNG could prove to be more attractive. Because railroads already maintain their own on-system refueling infrastructure, they may be less subject to the concern that truckers considering a switch to alternative fuel vehicles might have regarding the risks that natural gas refueling systems they require would not actually be built. The high concentration of ownership in the U.S. railroad industry could also facilitate a rapid switch toward LNG refueling, with the associated transition to new equipment, under the right circumstances because there are only a few owners making the decisions.

Marine operators have traditionally relied on oil-based fuels, with large oceangoing vessels almost exclusively fueled with heavy high-sulfur fuel oil that typically sells at a discount relative to other petroleum products. Under the International Maritime Organization's International Convention on the Prevention of Pollution from Ships agreement (MARPOL Annex VI) [78], the use of heavy high-sulfur fuel oil in international shipping started being phased out for environmental reasons in 2010. Although LNG is one possible option, there are many cost and logistical challenges, including the high cost of retrofits, the long lifetime of existing vessels, and relatively low utilization rates for many routes that will have adverse impacts on the economics of marine LNG refueling infrastructure. Unlike the heavy-duty truck market, there has not yet been an LNG-fueled product offered for general use by manufacturers of marine or rail equipment, making cost and performance comparisons inherently speculative.

In addition to the demand assumptions discussed above, other assumption changes were made to capture potential shifts in vehicle cost and consumer preference for LDVs powered by alternative fuels. In the Low/No Net Imports case, the costs of efficiency technologies and battery technologies were lowered, and the market penetration of E85 fuel was increased, relative to the Reference case levels. With regard to E85, assumptions about consumer preference for flex-fuel vehicles were altered to allow for increases in vehicle sales and E85 demand, leading to greater use of domestically-produced biofuel than projected in the Reference case.

Table 6 summarizes the demand-side assumptions in the alternative demand scenarios for liquid fuels. As with the supply assumptions, the assumptions used in the higher and lower demand cases represent substantial deviations from the AEO2013 Reference case, and they might instead be realized in terms of other, as-yet-unforeseen developments in technology, economics, or policy.

Results

The cases considered show how the future share of net imports in total U.S. liquid fuel use varies with changes in assumptions about the key factors that drive domestic supply and demand for liquid fuels (Figure 24). Some of the assumptions in the Low/No Net imports case, such as assumed increases in LDV fuel economy after 2025 and access to offshore resources, could be influenced by future energy policies. However, other assumptions in this case, such as the greater availability of onshore technically recoverable oil and natural gas resources, depend on geological outcomes that cannot be influenced by policy measures; and economic, consumer, or technological factors may likewise be unaffected or only slightly affected by policy measures.

Net imports and prices

In the Low/No Net Imports case, U.S. net imports of liquid fuels are eliminated in the mid-2030s, and the United States becomes a modest net exporter of those fuels by 2040. As discussed above, this case combines optimistic assumptions about the availability of domestic oil and natural gas resources with assumptions that lower demand for liquid fuels, including a decline in VMT per capita, increased switching to natural gas fuels for transportation (including heavy-duty trucks, rail, boats, and ships), continued significant improvements in the fuel efficiency of new vehicles beyond 2025, wider availability and lower costs of electric battery technologies, and greater market penetration of biofuels and other nonpetroleum liquids. Although other combinations of assumptions, or unforeseen technology breakthroughs, might produce a comparable outcome, the assumptions in the Low/No Net Imports case illustrate the magnitude and type of changes that would be required for the United States to end its reliance on net imports of liquid fuels, which began in 1946 and has continued to the present day. Moreover, regardless of how much the United States is able to reduce its reliance on imported liquids, it will not be entirely insulated from price shocks that affect the global oil market [79].


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As shown in Figure 24, the supply assumptions of the High Oil and Gas Resource case alone result in a decline in net import dependence to 7 percent in 2040, compared to 37 percent in the Reference case, with U.S. crude oil production rising to 10.2 million barrels per day in 2040, or 4.1 million barrels per day above the Reference case level. Tight oil production accounts for more than 77 percent (or 3 million barrels per day) of the difference in production between the two cases. Production of NGL in the United States also exceeds the Reference case level.

As a result of higher U.S. liquid fuels production, Brent crude oil prices in the High Oil and Gas Resource case are lower than in the Reference case, which also lowers motor gasoline and diesel prices to the transportation sector, encouraging greater consumption and partially dampening the projected decline in net dependence on liquid fuel imports. In the High Oil and Gas Resource case, the reduction in motor fuels prices increases fuel consumption in 2040 by 350 thousand barrels per day in the transportation sector and 230 thousand barrels per day in the industrial sector, which accounts for nearly all of the increase in total U.S. liquid fuels consumption (600 thousand barrels per day) relative to the Reference case total in 2040.

Global market, the economy, and refining

The addition of assumptions that slow the growth of demand for liquid fuels in the Low/No Net Imports case more than offsets the increase in demand that results from lower liquid fuel prices, so that total liquid fuels consumption in 2040 is 2.1 million barrels per day lower than projected in the Reference case. The combination of high crude oil and natural gas resources and lower demand for liquid fuels pushes Brent crude oil prices to $29 per barrel below the Reference case level in 2040. However, given the cumulative impact of factors that tend to raise world oil prices in real terms over the projection period, inflation-adjusted crude oil prices in the Low/No Net Imports case are still above today's price level.

One of the most uncertain aspects of the analysis concerns the effect on the global market for liquid fuels, which is highly integrated. Although the analysis reflects price effects that are based on the relative scale of the changes in U.S. domestic supply and net U.S. imports of liquid fuels within the overall international crude oil market, strategic choices made by the leading oil-exporting countries could result in price and quantity effects that differ significantly from those presented here. Moreover, regardless of how much the United States reduces its reliance on imported liquids, consumer prices will not be insulated from global oil prices if current policies and regulations remain in effect and world markets for crude oil streams of sulfur quality remain closely aligned absent transportation bottlenecks [80].

Although the focus is mainly on liquid fuels markets, the more optimistic resource assumptions in the High Oil and Gas Resource case also lead to more natural gas production. The higher productivity of shale and tight gas wells puts downward pressure on natural gas prices and thus encourages increased domestic consumption of natural gas (38 trillion cubic feet in the High Oil and Gas Resource case, compared to 30 trillion cubic feet in the Reference case in 2040) and higher net exports (both pipeline and LNG) of natural gas. As a result, projected domestic natural gas production in 2040 is considerably higher in the High Oil and Gas Resource case (45 trillion cubic feet) than in the Reference case (33 trillion cubic feet).

The Low Oil and Gas Resource case illustrates the implications of an outcome in which U.S. oil and gas resources turn out to be smaller than expected in the Reference case. In this case, domestic crude oil production peaks in 2016 at 6.9 million barrels per day, declines to 5.9 million barrels per day in 2028, and remains relatively flat (between 5.8 and 6.0 million barrels per day) through 2040. The lower well productivity in this case puts upward pressure on natural gas prices, resulting in lower natural gas consumption and production. In 2040, U.S. natural gas production is 27 trillion cubic feet in the Low Oil and Gas Resource case, compared with 33 trillion cubic feet in the Reference case.

These alternative cases may also have significant implications for the broader economy. Liquid fuels provide power and raw materials (feedstocks) for a substantial portion of the U.S. economy, and the macroeconomic impacts of both the High Oil and Gas Resource case and the Low/No Net Imports case suggest that significant economic benefits would accrue if some version of those futures were realized (see discussion of NGL later in "Issues in focus"). This is in spite of the fact that petroleum remains a global market in each of the scenarios, which limits the price impacts for gasoline, diesel, and other petroleum-derived fuels. In the High Oil and Gas Resource case, increasing energy production has immediate benefits for the economy. U.S. industries produce more goods with 12 percent lower energy costs in 2025 and 15 percent lower energy costs in 2040. Consumers see roughly 10 percent lower energy prices in 2025, and 13 percent lower energy prices in 2040, as compared with the Reference case. Cheaper energy allows the economy to expand further, with real GDP attaining levels that are on average about 1 percent above those in the Reference case from 2025 through 2040, including growth in both aggregate consumption and investment.

The alternative cases also imply substantial changes in the future operations of U.S. petroleum refineries, as is particularly evident in the Low/No Net Imports case. Drastically reduced product consumption and increased nonpetroleum sources of transportation fuels, taken in isolation, would tend to reduce utilization of U.S. refineries. The combination of higher domestic crude supply and reduced crude runs in the refining sector would sharply reduce or eliminate crude oil imports and could potentially create market pressure for crude oil exports to balance crude supply with refinery runs. However, under current laws and regulations, crude exports require licenses that have not been issued except in circumstances involving exports to Canada or exports of limited quantities of specific crude streams, such as California heavy oil [81].

Rather than assuming a change in current policies toward crude oil exports, and recognizing the high efficiency and low operating costs of U.S. refineries relative to global competitors in the refining sector, exports of petroleum products, which are not subject to export licensing requirements, rise significantly to avoid the uneconomical unloading of efficient U.S. refinery capacity, continuing a trend that has already become evident over the past several years. Product exports rise until the incremental refining value of crude oil processed is equivalent to the cost of crude imports. To balance the rest of the world as a result of increased U.S. product exports, it is assumed that the increased volumes of U.S. liquid fuel product exports would result in a decrease in the volume of the rest of the world's crude runs, and that world consumption, net of U.S. exports, would also be reduced by an amount necessary to keep demand and supply volumes in balance.

Projected carbon dioxide emissions


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Total U.S. CO2 emissions show the impacts of changing fuel prices through all the sectors of the economy. In the High Oil and Gas Resource case, the availability of more natural gas at lower prices encourages the electric power sector to increase its reliance on natural gas for electricity generation. Coal is the most affected, with coal displaced over the first part of the projection, and new renewable generation sources also affected after 2030 or so, resulting in projected CO2 emissions in the High Oil and Gas Resource case that exceed those in the Reference case after 2035 (Figure 25). With less-plentiful and more-expensive natural gas in the Low Oil and Gas Resource and High Net Imports cases, the reverse is true, with fewer coal retirements leading to higher CO2 emissions than in the Reference case early in the projection period. Later in the projection, however, the electric power sector turns first to renewable technologies earlier in the Low Oil and Gas Resource and High Net Imports cases, and after 2030 invests in more nuclear plants, reducing CO2 emissions from the levels projected in the Reference case. In the Low Oil and Gas Resource case, CO2 emissions are lower than in the Reference case starting in 2026. In the Low/No Net Imports case, annual CO2 emissions from the transportation sector continue to decline as a result of reduced travel demand; these emissions are conversely higher in the High Net Imports case. Figure 25 summarizes the CO2 emissions projections in the cases completed for this analysis.

Emissions from Legislation and Regulations

1. Greenhouse gas emissions and corporate average fuel economy standards for 2017 and later model year light-duty vehicles

On October 15, 2012, EPA and the National Highway Traffic Safety Administration (NHTSA) jointly issued a final rule for tailpipe emissions of carbon dioxide (CO2) and CAFE standards for light-duty vehicles, model years 2017 and beyond [16]. EPA, operating under powers granted by the Clean Air Act (CAA), issued final CO2 emissions standards for model years 2017 through 2025 for passenger cars and light-duty trucks, including medium-duty passenger vehicles. NHTSA, under powers granted by the Energy Policy and Conservation Act, as amended by the Energy Independence and Security Act, issued CAFE standards for passenger cars and light-duty trucks, including medium-duty passenger vehicles, for model years 2017 through 2025.

The new CO2 emissions and CAFE standards will first affect model year 2017 vehicles, with compliance requirements increasing in stringency each year thereafter through model year 2025. EPA has established standards that are expected to require a fleet-wide average of 163 grams CO2 per mile for light-duty vehicles in model year 2025, which is equivalent to a fleet-wide average of 54.5 miles per gallon (mpg) if reached only through fuel economy. However, the CO2 emissions standards can be met in part through reductions in air-conditioning leakage and the use of alternative refrigerants, which reduce CO2-equivalent GHG emissions but do not affect the estimation of fuel economy compliance in the test procedure.

NHTSA has established two phases of CAFE standards for passenger cars and light-duty trucks (Table 1). The first phase, covering model years 2017 through 2021, includes final standards that NHTSA estimates will result in a fleet-wide average of 40.3 mpg for light-duty vehicles in model year 2021 [17]. The second phase, covering model years 2022 through 2025, requires additional improvements leading to a fleet-wide average of 48.7 mpg for light-duty vehicles in model year 2025. Compliance with CO2 emission and CAFE standards is calculated only after final model year vehicle production, with fleet-wide light-duty vehicle standards representing averages based on the sales volume of passenger cars and light-duty trucks for a given year. Because sales volumes are not known until after the end of the model year, EPA and NHTSA estimate future fuel economy based on the projected sales volumes of passenger cars and light-duty trucks.

Figure 9. Projected average passenger car CAFE compliance targets (miles per gallon) by vehicle footprint (square feet), model years 2017-2026
figure data

The new CO2 emissions and CAFE standards for passenger cars and light-duty trucks use an attribute-based standard that is determined by vehicle footprint—the same methodology that was used in setting the final rule for model year 2012 to 2016 light-duty vehicles. Footprint is defined as wheelbase size (the distance from the center of the front axle to the center of the rear axle), multiplied by average track width (the distance between the center lines of the tires) in square feet. The minimum requirements for CO2 emissions and CAFE are production-weighted averages based on unique vehicle footprints in a manufacturer's fleet and are calculated separately for passenger cars and light-duty trucks (Figures 9 and 10), reflecting their different design capabilities. In general, as vehicle footprint increases, compliance requirements decline to account for increased vehicle size and load-carrying capability. Each manufacturer faces a unique combination of CO2 emission and CAFE standards, depending on the number of vehicles produced and the footprints of those vehicles, separately for passenger cars and light-duty trucks.

Figure 9. Projected average passenger car CAFE compliance targets (miles per gallon) by vehicle footprint (square feet), model years 2017-2026
figure data

For passenger cars, average fleet-wide compliance levels increase in stringency by 3.9 percent annually between model years 2017 and 2021 and by 4.7 percent annually between 2022 and 2025, based on the model year 2010 baseline fleet. In recognition of the challenge of improving the fuel economy and reducing CO2 emissions of full-size pickup trucks while maintaining towing and payload capabilities, the average annual rate of increase in the stringency of light-duty truck standards is 2.9 percent from 2017 to 2021, with smaller light-duty trucks facing higher increases and larger light-duty trucks lower increases in compliance stringency. From 2022 to 2025, the average annual increase in compliance stringency for all light-duty trucks is 4.7 percent.

The CO2 emissions and CAFE standards also include flexibility provisions for compliance by individual manufacturers, such as: (1) credit averaging, which allows credit transfers between a manufacturer's passenger car and light-duty truck fleets; (2) credit banking, which allows manufacturers to "carry forward" credits earned from exceeding the standards in earlier model years and to "carry back" credits earned in later model years to offset shortfalls in earlier model years; (3) credit trading between manufacturers who exceed their standards and those who do not; (4) air conditioning improvement credits that can be applied toward CO2 emissions standards; (5) off-cycle credits for measurable improvements in CO2 emissions and fuel economy that are not captured by the two-cycle test procedure used to measure emissions and fuel consumption; (6) CO2 emissions "compliance multipliers" for electric, plug-in hybrid electric, compressed natural gas, and fuel cell vehicles through model year 2021; and (7) incentives for the use of hybrid electric and other advanced technologies in full-size pickup trucks.

Finally, flexibility provisions do not allow domestic passenger cars to deviate significantly from annual fuel economy targets. NHTSA retains a required minimum fuel economy level for domestically produced passenger cars by manufacturer that is the higher of 27.5 miles per gallon or 92 percent of the average fuel economy projected for the combined fleet of domestic and foreign passenger cars for sale in the United States. For example, the minimum standard for passenger cars sold by a manufacturer in 2025 would be 50.9 miles per gallon, based on the estimated fleet average passenger car fuel economy for that year.

The AEO2013 Reference case includes the final CAFE standards for model years 2012 through 2016 (promulgated in March 2010) [18] and the standards for model years 2017 through 2025, with subsequent CAFE standards for years 2026-2040 vehicles calculated using 2025 levels of stringency. The AEO2013 Reference case projects fuel economy values for passenger cars, light-duty trucks, and combined light-duty vehicles that differ from NHTSA projections. This variance is the result of a different distribution of the production of passenger cars and light-duty trucks by footprint as well as a different mix between passenger cars and light-duty trucks (Table 2). CAFE standards are included by using the equations and coefficients employed by NHTSA to determine unique fuel economy requirements based on footprint, along with the ability of manufacturers to earn flexibility credits toward compliance. The AEO2013 Reference case projects sales of passenger cars and light-duty trucks by vehicle footprint with the key assumption that vehicle footprints are held constant by manufacturer in each light-duty vehicle size class.

2. Recent rulings on the Cross-State Air Pollution Rule and the Clean Air Interstate Rule

On August 21, 2012, the United States Court of Appeals for the District of Columbia Circuit announced its intent to vacate CSAPR, which it had stayed from going into effect earlier in 2012. CSAPR was to replace CAIR, which was in effect, by establishing emissions caps (levels) for sulfur dioxide (SO2) and nitrogen oxides (NOX) emissions from power plants in the eastern half of the United States. As a result of the court's action, the regulation of SO2 and NOX emissions will continue to be administered under CAIR pending the promulgation of a valid replacement. AEO2013 assumes that CAIR remains a binding regulation through 2040.

Figure 11. States covered by CAIR limits on emissions of sulfur dioxide and nitrogen oxides
figure data

CAIR covers all fossil-fueled power plant units with nameplate capacity greater than 25 megawatts in 27 eastern states and the District of Columbia (Figure 11). Twenty-two states and the District of Columbia fall under the caps for both annual emissions of SO2 and NOX and ozone season NOX. Three states are controlled for only ozone season NOX , and two states are controlled for only annual SO2 and NOX emissions. The caps went into effect for NOX in 2009 and for SO2 in 2010. Both caps are scheduled to be tightened again in 2015. AEO2013 considered how the power sector would use the emissions allowance trading that EPA set up to lower compliance costs, including capturing the interplay of the SO2 program for acid rain under the Clean Air Act Amendments Title IV and the CAIR program that uses the same allowances.

Although CSAPR shared some basic similarities with CAIR, there are key differences between the two programs. Generally, CSAPR had greater limitations on trading to ensure that emissions reductions would occur in all states; lower emissions caps; and more rapid phasing in of tighter emissions caps. CSAPR also did not allow carryover of banked allowances from the Acid Rain SO2 and NOX Budget programs. Each program was aimed at substantial reductions of power sector SO2 and NOX emissions.

AEO2013 represents the limits on SO2 and NOX emissions trading as specified by CAIR. The National Energy Modeling System (NEMS) includes the representation of emissions for both the CAIR and non-CAIR regions. In NEMS, power plants in both regions are required to submit allowances to account for their emissions as if covered by the rule. NEMS allows for power plants in the CAIR regions to trade SO2 allowances with those plants in the non-CAIR region, but the SO2 allowances are valued differently for each region. NEMS also allows for the banking of SO2 and NOX allowances consistent with CAIR's provisions.

4. Maximum Achievable Control Technology for industrial boilers

Section 112 of the CAA requires the regulation of air toxics through implementation of NESHAP for industrial, commercial, and institutional boilers [31]. The final regulations are also known as "Boiler MACT," where MACT is the Maximum Achievable Control Technology. Pollutants covered by the Boiler MACT regulations include control of hazardous air pollutants (HAPs), such as hydrogen chloride, mercury (Hg), and dioxin/furan, as well as carbon monoxide (CO), and particulate matter (PM) as surrogates for other HAPs. Boilers used for generating electricity are explicitly covered by the Mercury and Air Toxics Standards, also under Section 112 of the CAA, and are specifically excluded from Boiler MACT regulations.

The Final Rule for Boiler MACT was issued in March 2011; a partial Reconsideration Rule concerning limited technical corrections to the Final Rule was issued in December 2011, but it did not replace the Final Rule. The AEO2013 Reference case assumes that the Final Rule and the partial Reconsideration Rules are in force. The finalized Boiler MACT rule was announced in December 2012, after the modeling work for AEO2013 was completed. The provisions of the finalized Boiler MACT rule are less stringent than the provisions of the Final Rule and the partial Reconsideration Rule assumed in the Reference case. For AEO2013, the upgrade costs of Boiler MACT were implemented in the Macroeconomic Activity Module (MAM). Upgrade costs used are the "nonproductive costs," which are not associated with efficiency improvements. The upgrade costs are applied as an aggregated cost across all industries. Because of this aggregation of cost and the need for consistency across industries, the cost in the MAM is manifested as a reduction in shipments in the Industrial Demand Module. There is little difference in the cost of compliance for major sources between the March 2011 Final Rule and the December 2011 Reconsideration Rule, and there is no difference for area sources.

Boiler MACT has two compliance groups with different obligations: major source [32], and area source. A site that contains one or more boilers or process heaters that have the potential to emit 10 or more tons of any one HAP per year, or 25 tons or more of a combination of HAP per year, is a major source [33]. An emissions site that is not a major source is classified as an area source[34]. The characteristics of the site determine the compliance group of the boiler. Generally, compliance measures include regular maintenance and tuneups for smaller facilities and emission limits and performance tests for larger facilities. In the Reconsideration Rule, EIA calculations based on EPA estimates revealed that there were 14,111 existing major source boilers in 2011 [35]. Of those, calculations based on EPA estimates revealed that 16 percent burn fuels that potentially may subject them to specific emissions limits and annual performance tests. The existing number of affected area source boilers in 2011 was estimated at 189,450 by EIA, using data from EPA [36].

To comply with Boiler MACT, major source boilers and process heaters whose heat input is less than 10 million Btu per hour must receive tuneups every 2 years [37]. Most existing and new major source boilers or process heaters with heat inputs 10 million Btu per hour or greater that burn coal, biomass, liquid, or "other" gas are subject to emission limits on all five of the HAP listed above [38]. Larger major source boilers with heat input of 25 million Btu per hour or greater that burn coal, biomass, or residual oil must use a continuous emission monitoring system for PM [39]. Major source boilers with heat inputs of 10 million Btu per hour or more that burn natural gas or refinery gas, as well as metal process furnaces, are not subject to specific emissions limits or performance tests [40]. Existing major source boilers must comply with the Final Rule by March 21, 2014; new major source boilers must comply by May 20, 2011, or upon startup, whichever is later [41].

Area source natural gas-fired boilers are not subject to Boiler MACT. Area source coal-fired boilers whose heat input is less than 10 million Btu per hour and biomass-fired and liquid fuel-fired boilers of any size must receive a tuneup every 2 years. Existing area source boilers with heat input of 10 million Btu per hour or greater are subject to emissions limits, must receive an initial energy assessment, and must undergo performance tests every 3 years [42]. Existing and new coal-fired boilers must meet Hg and CO limits; new coal-fired boilers must also meet limits for PM. New oil-fired and biomass-fired boilers must meet emissions limits only for PM [43]. Existing area source boilers subject to an energy assessment and emissions limits must comply by March 21, 2014.

5. State renewable energy requirements and goals: Update through 2012

To the extent possible, AEO2013 incorporates the impacts of state laws requiring the addition of renewable generation or capacity by utilities doing business in the states. Currently, 30 states and the District of Columbia have an enforceable renewable portfolio standard (RPS) or similar law (Table 3). Under such standards, each state determines its own levels of renewable generation, eligible technologies [44], and noncompliance penalties. AEO2013 includes the impacts of all RPS laws in effect at the end of 2012 (with the exception of Alaska and Hawaii, because NEMS provides electricity market projections for the contiguous lower 48 states only). However, the projections do not include policies with either voluntary goals or targets that can be substantially satisfied with nonrenewable resources. In addition, NEMS does not treat fuel-specific provisions—such as those for solar and offshore wind energy—as distinct targets. Where applicable, such distinct targets (sometimes referred to as "tiers," "set-asides," or "carve-outs") may be subsumed into the broader targets, or they may not be included in the modeling because they could be met with existing capacity and/or projected growth based on modeled economic and policy factors.

In the AEO2013 Reference case, states generally are projected to meet their ultimate RPS targets. The RPS compliance constraints in most regions are approximated, because NEMS is not a state-level model, and each state generally represents only a portion of one of the NEMS electricity regions. Compliance costs in each region are tracked, and the projection for total renewable generation is checked for consistency with any state-level cost-control provisions, such as caps on renewable credit prices, limits on state compliance funding, or impacts on consumer electricity prices. In general, EIA has confirmed the states' requirements through original documentation, although the Database of State Incentives for Renewables & Efficiency was also used to support those efforts [45].

No new RPS programs were enacted over the past year; however, some states with existing RPS programs made modifications in 2012, as discussed below. The aggregate RPS requirement for the various state programs, as modeled in AEO2013, is shown in Figure 12. In 2025 the targets account for about 10 percent of U.S. electricity sales. The requirement is derived from the legal targets and projected sales and does not account for any of the discretionary or nondiscretionary waivers or limits on compliance found in most state RPS programs.

At present, most states are meeting or exceeding their required levels of renewable generation based on qualified generation [46]. A number of factors have helped to create an environment favorable for RPS compliance, including a surge of new RPS-qualified generation capacity timed to take advantage of federal incentives that either have expired or were scheduled to expire; significant reductions in the cost of renewable technologies like wind and solar; and generally reduced growth (or, in some cases, even contraction) of electricity sales. In addition to the availability of federal tax credits, which historically have gone through a cycle of expiration and renewal, renewable energy projects were given access to other options for federal support, including cash grants (also known as Section 1603 grants) and loan guarantees. The short-term availability of federal incentives has helped to make renewable capacity attractive to investors and helped utilities meet state requirements or potential future load growth in advance (that is, build ahead of time to take advantage of the federal incentives). The attractiveness of renewable projects to investors has also been supported by declining equipment costs for wind turbines and solar photovoltaic systems, as well as by improvements in the performance of those technologies. The declines in technology cost are, in themselves, the result of a complex set of interactions of policy, market, and engineering factors. Finally, most state RPS programs have targets that are tied to retail electricity sales; and with relatively slow growth in electricity sales in most parts of the country, the renewable generation that has entered service recently has gone further toward meeting the proportionally lower targets for absolute amounts of energy (that is, for kilowatthours of energy, as opposed to energy as a percent of sales).

Total renewable generation required for combined state renewable portfolio standards and projected total achieved, 2012-2040
figure data

EIA projects that, overall, RPS-qualified generation will continue to meet or exceed aggregate targets for state RPS programs through 2040, as shown in Figure 12. Through the next decade, the surplus qualifying generation will decline gradually, as little additional qualifying capacity is added, allowing the targets to catch up with supply. By the end of the projection horizon, however, the surplus widens substantially as renewable generation technologies become increasingly competitive with conventional generation sources. It should be noted that the aggregate targets and qualifying generation shown in Figure 12 may mask significant regional variation, with some regions producing excess qualifying generation and others producing just enough to meet the requirement or even needing to import generation from adjoining regions to meet state targets. Furthermore, just because there is, in aggregate, more qualifying generation than is needed to meet the targets, this does not necessarily imply that projected generation would be the same without state RPS policies. State RPS policies may encourage investment in places where it otherwise would not occur, or would not occur in the amounts projected, even as other parts of the country see substantial growth above state targets, or even in their absence. It does, however, suggest that state RPS programs will not be the sole reason for future growth in renewable generation.

Recent RPS modifications

A number of states modified their RPS programs in 2012, either through regulatory proceedings or through legislative action. These changes are reflected in Table 3. The changes affect some aspects of the laws and implementing regulations, but they do not have substantive effects on the representation of the RPS programs in AEO2013. Key changes include:

California

California Assembly Bill 2196, which establishes requirements for certain biomass-based generation resources, requires that biomass-derived gas be produced on site or sourced from a common carrier pipeline that operates within the state. It also sets additional requirements related to the in-service date of a common carrier source and the ability to claim certain environmental benefits from the use of such sources.

Maryland

The state enacted a series of bills that accelerate the solar-specific compliance schedule (while leaving the aggregate RPS target unchanged) and expand the tier 1 requirement category to include thermal output from certain animal waste and ground-source heat pumps.

Massachusetts

The Department of Energy Resources issued final rules regarding the use of certain biomass resources to meet the RPS standard. Biomass facilities must meet certain conditions with regard to conversion technology and feedstock sourcing to be eligible for use in meeting the standard.

New Hampshire

Senate Bill 218 allows certain thermal resources, including heat derived from qualified solar, geothermal, and biomass sources, to meet renewable energy targets. It also allows electricity produced from the cofiring of biomass in certain existing coal plants to meet the requirements. The bill also adjusts the total renewable energy target upward by 1 percentage point, to 24.8 percent by 2025.

New Jersey

Senate Bill 1925 changed the compliance schedule for the solar component of the RPS. The revised law is implemented with a solar target of 3.47 percent of sales by 2021.

Ohio

The legislature passed a set of laws that allow certain types of cogeneration facilities to qualify in meeting the RPS.

6. California Assembly Bill 32: Emissions cap-and-trade as part of the Global Warming Solutions Act of 2006

California's AB 32, the Global Warming Solutions Act of 2006, authorized the California Air Resources Board (CARB) to set California's overall GHG emissions reduction goal to its 1990 level by 2020 and establish a comprehensive, multi-year program to reduce GHG emissions in California, including a cap-and-trade program [48].In addition to the cap-and-trade program, other authorized measures include the LCFS; energy efficiency goals and programs in transportation, buildings, and industry; combined heat and power goals; and RPS [49].

The cap-and-trade program features an enforceable cap on GHG emissions that will decline over time. CARB will distribute tradable allowances equal to the emissions allowed under the cap. Enforceable compliance obligations begin in 2013 for the electric power sector, including electricity imports, and for industrial facilities. Fuel providers must comply starting in 2015. All facilities that emit 25,000 metric tons carbon dioxide equivalent (CO2e) or more are subject to cap-and-trade regulations. The only exception is that, starting in 2015, all importers of electricity from electric facilities outside of California will be subject to cap-and-trade regulations, even from facilities that emit less than 25,000 metric tons CO2e[50].

The most significant GHG covered under the program is CO2, but the cap-and-trade program covers several other GHGs [51], including methane, nitrous oxide, perfluorocarbons, chlorofluorocarbons, nitrogen trifluoride, and sulfur hexafluoride [52]. In 2007, CARB determined that 427 million metric tons carbon dioxide equivalent (MMTCO2e) was the total state-wide GHG emissions level in 1990 and, therefore, would be the 2020 emissions goal. CARB estimates that the implementation of the cap-and-trade program will reduce GHG emissions by between 18 and 27 MMTCO2e in 2020 [53].

The enforceable cap goes into effect in 2013, and there are three multi-year compliance periods:

  • Compliance period 1 (2013-2014) includes sources of GHG emissions responsible for more than one-third of state-wide emissions.
  • Compliance period 2 (2015-2017) covers sources of GHG emissions responsible for about 85 percent of state-wide emissions.
  • Compliance period 3 (2018-2020) covers the same sources as Compliance Period 2 [54].

The electric power and industrial sectors are required to comply with the cap starting in 2013. Providers of natural gas, propane, and transportation fuels are required to comply starting in 2015, when the second compliance period begins. For the first compliance period, covered entities are required to submit allowances for up to 30 percent of their annual emissions in each year; however, at the end of 2014 they are required to account for all the emissions for which they were responsible during the 2-year period. Each covered entity can also use offsets to meet up to 8 percent of its compliance obligation. Offsets used as part of the program must be approved by CARB and can be canceled later by CARB for certain reasons (a provision known as "buyer liability").

A majority (51 percent) of the allowances [55] allocated over the initial 8 years of the program will be distributed through price containment reserves and auctions, which will be held quarterly when the program commences. CARB's first allowance auction was held in November 2012 [56]. Future auctions may be linked to Québec's cap-and-trade program [57]. Twenty-five percent of the allowances are allocated directly to electric utilities that sell electricity to consumers in the state. Seventeen percent of the allowances are allocated directly to affected industrial facilities in order to mitigate the economic impact of the cap on the industrial sector [58]. Allowance allocations for the industrial sector are based on output. Starting in 2013, the number of allowances allocated annually to the industrial sector declines linearly to 50 percent of the original total in 2020. The remaining 7 percent of the allowances issued in a given year go into a price containment reserve, to be used only if allowance prices rise above a set amount in quarterly auctions.

The AB 32 cap-and-trade provisions, which were incorporated only for the electric power sector in AEO2012, are more fully implemented in AEO2013, adding industrial facilities, refineries, fuel providers, and non-CO2 GHG emissions. The allowance price, representing the incremental cost of complying with AB 32 cap-and-trade, is modeled in the NEMS Electricity Market Module via a region-specific emissions constraint. This allowance price, when added to the market fuel prices, results in higher effective fuel prices [59] in the demand sectors. Limited banking and borrowing, as well as a price containment reserve [60] and offsets, also have been modeled, providing some compliance flexibility and cost containment. NEMS macroeconomic effects are based on an energy-economy equilibrium that reacts to changes in energy prices and energy consumption; however, no macroeconomic effects are assumed explicitly from the AB 32 cap-and-trade provisions.

7. California low carbon fuel standard

The LCFS, administered by CARB [61], is designed to reduce by 10 percent the average carbon intensity of motor gasoline and diesel fuels sold in California from 2012 to 2020 through the increased sale of alternative "low-carbon" fuels. Regulated parties generally are the fuel producers and importers who sell motor gasoline or diesel fuel in California. The program is assumed to remain in place at 2020 levels from 2021 to 2040 in AEO2013. The carbon intensity of each alternative low-carbon fuel, based on life-cycle analyses conducted under the guidance of CARB for a number of approved fuel pathways, is calculated on an energy-equivalent basis, measured in grams of CO2-equivalent emissions per megajoule.

AEO2013 incorporates the LCFS by requiring that the average carbon intensity of motor fuels sold for use in California meets the carbon intensity targets. For the AEO2013 Reference case, carbon intensity targets and the carbon intensities of alternative fuels were adapted from the "Third Notice of Public Availability of Modified Text and Availability of Additional Documents and Information" [62]. Key uncertainties in the modeling of the LCFS are the availability of low-carbon fuels in California and what actions CARB may take if the LCFS is not met. In AEO2013, these uncertainties are addressed by assuming that fuel providers can purchase low-carbon credits if low-carbon fuels cannot be produced and sold at reasonable prices.

In December 2011, the U.S. District Court for the Eastern Division of California ruled in favor of several trade groups that claimed the LCFS violated the interstate commerce clause of the U.S. Constitution by seeking to regulate farming and ethanol production practices in other states. The court granted an injunction blocking enforcement of the LCFS by CARB [63]. In April 2012, the U.S. Ninth District Court of Appeals granted a stay of injunction while CARB appeals the original ruling [64]. Although the future of the LCFS program remains uncertain, the stay of the injunction requires that the program be enforced.

Endnotes

16. U.S. Environmental Protection Agency and National Highway Traffic Safety Administration, "2017 and Later Model Year Light-Duty Vehicle Greenhouse Gas Emissions and Corporate Average Fuel Economy Standards; Final Rule," Federal Register, Vol. 77, No. 199 (Washington, DC: October 15, 2012), https://www.federalregister.gov/articles/2012/10/15/2012-21972/2017-and-later-model-year-light-duty-vehicle-greenhouse-gas-emissions-and-corporate-average-fuel.
17. Fuel economy projection averages based on a 2010 baseline fleet. NHTSA alternatively lists projected compliance fuel economy averages based on the 2008 baseline fleet. EPA lists compliance-level average CO2 tailpipe emissions based solely on the 2008 baseline fleet.
18. U.S. Environmental Protection Agency and National Highway Traffic Safety Administration, "Light-Duty Vehicle Greenhouse Gas Emission Standards and Corporate Average Fuel Economy Standards; Final Rule," Federal Register, Vol. 75, No. 88 (Washington, DC: May 7, 2010), https://www.federalregister.gov/articles/2010/05/07/2010-8159/light-duty-vehicle-greenhouse-gas-emission-standards-and-corporate-average-fuel-economy-standards.
31. Clean Air Act, 42 U.S.C. 7412 (2011), http://www.gpo.gov/fdsys/pkg/USCODE-2011-title42/pdf/USCODE-2011-title42-chap85-subchapI-partA.pdf.
32. U.S. Environmental Protection Agency, "National Emission Standards for Hazardous Air Pollutants for Major Sources: Industrial, Commercial, and Institutional Boilers; Final Rule," Federal Register, Vol. 76, No. 54 (Washington, DC: March 21, 2011) pp. 15,608-15,702, http://www.gpo.gov/fdsys/pkg/FR-2011-03-21/pdf/2011-4494.pdf.
33. U.S. Environmental Protection Agency, "Definitions," Code of Federal Regulations, 40 CFR §63.2 (July 1, 2012), http://www.gpo.gov/fdsys/pkg/CFR-2012-title40-vol10/pdf/CFR-2012-title40-vol10-part63-subpartA.pdf, p. 16.
34. U.S. Environmental Protection Agency, "Definitions," Code of Federal Regulations, 40 CFR §63.2 (July 1, 2012), http://www.gpo.gov/fdsys/pkg/CFR-2012-title40-vol10/pdf/CFR-2012-title40-vol10-part63-subpartA.pdf, pp. 13-14.
35. U.S. Environmental Protection Agency, "National Emission Standards for Hazardous Air Pollutants for Major Sources: Industrial, Commercial, and Institutional Boilers and Process Heaters; Proposed Rule," Federal Register, Vol. 76, No. 247 (Washington, DC: December 23, 2011), p. 80,622, http://www.gpo.gov/fdsys/pkg/FR-2011-12-23/pdf/2011-31667.pdf.
36. U.S. Environmental Protection Agency, "National Emission Standards for Hazardous Air Pollutants for Area Sources: Industrial, Commercial, and Institutional Boilers; Final Rule," Federal Register, Vol. 76, No. 54 (Washington, DC: March 21, 2011), p. 15,579, http://www.gpo.gov/fdsys/pkg/FR-2011-03-21/pdf/2011-4493.pdf.
37. U.S. Environmental Protection Agency, "National Emission Standards for Hazardous Air Pollutants for Major Sources: Industrial, Commercial, and Institutional Boilers and Process Heaters; Final Rule," Federal Register, Vol. 76, No. 54 (Washington, DC: March 21, 2011), p. 15,695, http://www.gpo.gov/fdsys/pkg/FR-2011-03-21/pdf/2011-4494.pdf.
38. U.S. Environmental Protection Agency, "National Emission Standards for Hazardous Air Pollutants for Major Sources: Industrial, Commercial, and Institutional Boilers and Process Heaters; Final Rule," Federal Register, Vol. 76, No. 54 (Washington, DC: March 21, 2011), pp. 15,689-15,691, http://www.gpo.gov/fdsys/pkg/FR-2011-03-21/pdf/2011-4494.pdf.
39. CU.S. Environmental Protection Agency, "National Emission Standards for Hazardous Air Pollutants for Major Sources: Industrial, Commercial, and Institutional Boilers and Process Heaters; Final Rule," Federal Register, Vol. 76, No. 54 (Washington, DC: March 21, 2011), p. 15,615, http://www.gpo.gov/fdsys/pkg/FR-2011-03-21/pdf/2011-4494.pdf.
40. U.S. Environmental Protection Agency, "National Emission Standards for Hazardous Air Pollutants for Major Sources: Industrial, Commercial, and Institutional Boilers and Process Heaters; Final Rule," Federal Register, Vol. 76, No. 54 (Washington, DC: March 21, 2011), p. 15,696, http://www.gpo.gov/fdsys/pkg/FR-2011-03-21/pdf/2011-4494.pdf.
41. U.S. Environmental Protection Agency, "National Emission Standards for Hazardous Air Pollutants for Major Sources: Industrial, Commercial, and Institutional Boilers and Process Heaters," Federal Register, Vol. 76, No. 54 (Washington, DC: March 21, 2011), p. 15,665, http://www.gpo.gov/fdsys/pkg/FR-2011-03-21/pdf/2011-4494.pdf.
42. U.S. Environmental Protection Agency, "National Emission Standards for Hazardous Air Pollutants for Area Sources: Industrial, Commercial, and Institutional Boilers; Final Rule," Federal Register, Vol. 76, No. 54 (Washington, DC: March 21, 2011), p. 15,594, http://www.gpo.gov/fdsys/pkg/FR-2011-03-21/pdf/2011-4493.pdf.
43. U.S. Environmental Protection Agency, "National Emission Standards for Hazardous Air Pollutants for Area Sources: Industrial, Commercial, and Institutional Boilers, Final Rule," Federal Register, Vol. 76, No. 54 (Washington, DC: March 21, 2011), pp. 15,601-15,602, http://www.gpo.gov/fdsys/pkg/FR-2011-03-21/pdf/2011-4493.pdf.
44. The eligible technology, and even the definition of the technology or fuel category, will vary by state. For example, one state's definition of renewables may include hydroelectric power generation, while another's definition may not. Table 3 provides more detail on how the technology or fuel category is defined by each state.
45. More information about the Database of State Incentives for Renewables & Efficiency can be found at http://www.dsireusa.org/incentives.
46. Database of State Incentives for Renewables & Efficiency, http://www.dsireusa.org/rpsdata/index.cfm.
47. Pyrolysis is defined as the thermal decomposition of biomass at high temperatures (greater than 400 °F, or 200 °C) in the absence of air.
48. California Legislative Information, "Assembly Bill No. 32: California Global Warming Solutions Act of 2006" (Sacramento, CA: September 27, 2006), http://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=200520060AB32.
49. California Air Resources Board, "AB 32 Scoping Plan Functional Equivalent Document (FED)" (Sacramento, CA: May 16, 2012), http://www.arb.ca.gov/cc/scopingplan/fed.htm.
50. State of California, "Final Regulation Order, Subchapter 10 Climate Change, Article 5, Sections 95800 to 96023, Title 17, Article 5: California Cap on Greenhouse Gas Emissions and Market-Based Compliance Mechanisms" (Sacramento, CA: December 22, 2011), pp. 47-49, http://www.arb.ca.gov/regact/2010/capandtrade10/finalrevfro.pdf.
51. State of California, "Final Regulation Order, Subchapter 10 Climate Change, Article 5, Sections 95800 to 96023, Title 17, Article 5: California Cap on Greenhouse Gas Emissions and Market-Based Compliance Mechanisms" (Sacramento, CA: December 22, 2011), http://www.arb.ca.gov/regact/2010/capandtrade10/finalrevfro.pdf.
52. California Air Resources Board, "California Greenhouse Gas Emissions Inventory: 2000-2009" (Sacramento, CA: December 2011), p. 10, http://www.arb.ca.gov/cc/inventory/pubs/reports/ghg_inventory_00-09_report.pdf.
53. California Air Resources Board, "Updated Information Digest, Regulation to Implement the California Cap-and-Trade Program" (Sacramento, CA: December 14, 2011), p. 6, http://www.arb.ca.gov/regact/2010/capandtrade10/finuid.pdf.
54. For years 2021-2040 held constant in AEO2013 at 2020 levels.
55. California Air Resources Board, "Appendix J, Allowance Allocation" (Sacramento, CA: October 18, 2010), p. J-12, http://www.arb.ca.gov/regact/2010/capandtrade10/capv4appj.pdf.
56. California Air Resources Board, "California Air Resources Board Quarterly Auction 1" (Sacramento, CA: November 19, 2012), http://www.arb.ca.gov/cc/capandtrade/auction/november_2012/auction1_results_2012q4nov.pdf.
57. California Environmental Protection Agency, "Press Release: California Applauds Québec on Adoption of Amended Cap-and-Trade Program" (Sacramento, CA: December 13, 2012), http://www.calepa.ca.gov/PressRoom/Releases/2012/Quebec.pdf.
58. See Assembly Bill 32, Section 38562(B)(8), http://www.leginfo.ca.gov/pub/05-06/bill/asm/ab_0001-0050/ab_32_bill_20060927_chaptered.pdf. The evaluation of "leakage risk" and the amount allocated to prevent leakage will be revisited by CARB during each of the periodic reviews of the cap-and-trade program, which will occur at least once every three-year compliance cycle.
59. CA price that has been adjusted for allowance costs.
60. State of California, "Final Regulation Order, Subchapter 10 Climate Change, Article 5, Sections 95800 to 96023, Title 17, California Code of Regulations: California Cap on Greenhouse Gas Emissions and Market-Based Compliance Mechanisms" (Sacramento, CA: December 22, 2011), http://www.arb.ca.gov/regact/2010/capandtrade10/finalrevfro.pdf. Note: The final regulation states that reserves are held at 1 percent in compliance period 1, 4 percent in compliance period 2, and 7 percent in compliance period 3. For modeling purposes, post-2020 reserves are set to 0 percent.
61. State of California, "Final Regulation Order, Subchapter 10. Climate Change, Article 4. Regulations to Achieve Greenhouse Gas Reductions, Subarticle 7. Low Carbon Fuel Standard" (Sacramento, CA: January 13, 2010), http://www.arb.ca.gov/regact/2009/lcfs09/finalfro.pdf.
62. California Air Resources Board, "Third Notice of Public Availability of Modified Text and Availability of Additional Documents and Information" (Sacramento, CA: September 17, 2012), http://www.arb.ca.gov/regact/2011/lcfs2011/lcfs3rdnot.pdf.
63. State of California, "Low Carbon Fuel Standard (LCFS) Supplemental Regulatory Advisory 10-04B" (Sacramento, CA: January 1, 2012), http://www.arb.ca.gov/fuels/lcfs/123111lcfs-rep-adv.pdf.
64. California Air Resources Board, "LCFS Enforcement Injunction is Lifted, All Outstanding Reports Now Due April 30, 2012" (Sacramento, CA: April 24, 2012), http://www.arb.ca.gov/fuels/lcfs/LCFS_Stay_Granted.pdf.
65. United States Internal Revenue Code, Title 26, Subtitle A—Income Taxes, §48(a)(2)(A)(ii), http://www.gpo.gov/fdsys/pkg/USCODE-2011-title26/pdf/USCODE-2011-title26-subtitleA-chap1-subchapA.pdf.
66. United States Internal Revenue Code, Title 26, Subtitle A—Income Taxes, §48(c)(3)(B)(iii), http://www.gpo.gov/fdsys/pkg/USCODE-2011-title26/pdf/USCODE-2011-title26-subtitleA-chap1-subchapA.pdf.
67. Calculations based on U.S. Energy Information Administration, Form EIA-860, Schedule 3, 2011 data (Washington, DC: January 9, 2013), http://www.eia.gov/electricity/data/eia860/index.html.
68. U.S. Congress, "American Taxpayer Relief Act of 2012," P.L. 112-240, Sections 401 through 412, http://www.gpo.gov/fdsys/pkg/PLAW-112publ240/pdf/PLAW-112publ240.pdf.
69. Modeled provisions based on U.S. Congress, "American Taxpayer Relief Act of 2012," P.L. 112-240, Sections 401, 404, 405, 407, 408, 409, and 412, http://www.gpo.gov/fdsys/pkg/PLAW-112publ240/pdf/PLAW-112publ240.pdf.
71. Liquid fuels consists of crude oil and condensate to petroleum refineries, refinery gain, NGPL, biofuels, and other liquid fuels produced from non-crude oil feedstocks such as CTL and GTL.
72. Geologic characteristics relevant for hydrocarbon extraction include depth, thickness, porosity, carbon content, pore pressure, clay content, thermal maturity, and water content.
73. A production type curve represents the expected production each year from a well. A well’s EUR equals the cumulative production of that well over a 30-year productive life, using current technology without consideration of economic or operating conditions. A description of a production type curve is provided in the Annual Energy Outlook 2012 "Issues in focus" article, "U.S. crude oil and natural gas resource uncertainty," http://www.eia.gov/forecasts/archive/aeo12/IF_all.cfm#uscrude.
74. A more detailed analysis of the uncertainty in offshore resources is presented in the Annual Energy Outlook 2011 "Issues in focus" article, "Potential of offshore crude oil and natural gas resources," http://www.eia.gov/forecasts/archive/aeo11/IF_all.cfm#potentialoffshore.
75. U.S. Environmental Protection Agency and National Highway Transportation Safety Administration, "2017 and Later Model Year Light-Duty Vehicle Greenhouse Gas Emissions and Corporate Average Fuel Economy Standards: Final Rule," Federal Register, Vol. 77, No. 199 (Washington, DC: October 15, 2012), https://www.federalregister.gov/articles/2012/10/15/2012-21972/2017-and-later-model-year-light-duty-vehicle-greenhouse-gas-emissions-and-corporate-average-fuel.
76. K.A. Small and K.Van Dender, "Fuel Efficiency and Motor Vehicle Travel: The Declining Rebound Effect," University of California, Irvine, Department of Economics, Working Paper #05-06-03 (Irvine, CA: August 18, 2007), http://www.economics.uci.edu/files/economics/docs/workingpapers/2005-06/Small-03.pdf.
77. National Petroleum Council, "Advancing Technology for America’s Transportation Future" (Washington, DC: August 1, 2012), http://www.npc.org/FTF-report-080112/NPC-Fuels_Summary_Report.pdf.
78. International Maritime Organization, Information Resources on Air Pollution and Greenhouse Gas (GHG) Emissions from International Shipping (Marpol Annex VI (SOX, NOX, ODS, VOC) / Greenhouse Gas (CO2) and Climate Change) (London, United Kingdom: December 23, 2011), http://www.imo.org/KnowledgeCentre/InformationResourcesOnCurrentTopics/AirPollutionand
GreenhouseGasEmissionsfromInternationalShippping/Documents/Information%20Resources%20on%20AIR%20POLLUTION%20AND%20GHG%20EMISSIONS%20FROM%20
INTERNATIONAL%20SHIPPING.pdf
.
79. U.S. Energy Information Administration, Could the United States become the leading global producer of liquid fuels, and how much does it matter to U.S. and world energy markets?," This Week in Petroleum (Washington, DC: December 19, 2012), http://www.eia.gov/oog/info/twip/twiparch/2012/121219/twipprint.html.
80. U.S. Energy Information Administration, "Could the United States become the leading global producer of liquid fuels, and how much does it matter to U.S. and world energy markets?," This Week in Petroleum (Washington, DC: December 19, 2012), http://www.eia.gov/oog/info/twip/twiparch/2012/121219/twipprint.html.
81. The circumstances under which the United States can and cannot export crude oil under current law are more fully described in U.S. Energy Information Administration, "Market implications of increased domestic production of light sweet crude oil?," This Week in Petroleum (Washington, DC: November 28, 2012), http://www.eia.gov/oog/info/twip/twiparch/2012/121128/twipprint.html.
141. R. Schnepf and B.D. Yacobucci, Renewable Fuel Standard (RFS): Overview and Issues (Washington, DC: Congressional Research Service, January 23, 2012), http://www.fas.org/sgp/crs/misc/R40155.pdf.
142. U.S. Environmental Protection Agency, "Mercury and Air Toxics Standards," http://www.epa.gov/mats.
143. Recent analysis performed by the EPA indicates that upgraded electrostatic precipitators may also enable coal-fired power plants to meet the nonmercury metal emissions control requirement for MATS. This assumption was not included in AEO2013 but will be revisited in future AEOs.
144. U.S. Energy Information Administration, "Dry sorbent injection may serve as a key pollution control technology at power plants," Today in Energy (March 16, 2012), http://www.eia.gov/todayinenergy/detail.cfm?id=5430.

Reference Case Tables
Table 2. Energy Consumption by Sector and Source - United States XLS
Table 2.1. Energy Consumption by Sector and Source - New England XLS
Table 2.2. Energy Consumption by Sector and Source - Middle Atlantic XLS
Table 2.3. Energy Consumption by Sector and Source - East North Central XLS
Table 2.4. Energy Consumption by Sector and Source - West North Central XLS
Table 2.5. Energy Consumption by Sector and Source - South Atlantic XLS
Table 2.6. Energy Consumption by Sector and Source - East South Central XLS
Table 2.7. Energy Consumption by Sector and Source - West South Central XLS
Table 2.8. Energy Consumption by Sector and Source - Mountain XLS
Table 2.9. Energy Consumption by Sector and Source - Pacific XLS
Table 8. Electricity Supply, Disposition, Prices, and Emissions XLS
Table 18. Energy-Related Carbon Dioxide Emissions by Sector and Source - United States XLS
Table 18.1. Energy-Related Carbon Dioxide Emissions by Sector and Source - New England XLS
Table 18.2. Energy-Related Carbon Dioxide Emissions by Sector and Source - Middle Atlantic XLS
Table 18.3. Energy-Related Carbon Dioxide Emissions by Sector and Source - East North Central XLS
Table 18.4. Energy-Related Carbon Dioxide Emissions by Sector and Source - West North Central XLS
Table 18.5. Energy-Related Carbon Dioxide Emissions by Sector and Source - South Atlantic XLS
Table 18.6. Energy-Related Carbon Dioxide Emissions by Sector and Source - East South Central XLS
Table 18.7. Energy-Related Carbon Dioxide Emissions by Sector and Source - West South Central XLS
Table 18.8. Energy-Related Carbon Dioxide Emissions by Sector and Source - Mountain XLS
Table 18.9. Energy-Related Carbon Dioxide Emissions by Sector and Source - Pacific XLS
Table 19. Energy-Related Carbon Dioxide Emissions by End Use XLS
Table 55. Electric Power Projections for EMM Region - United States XLS
Table 55.1. Electric Power Projections for EMM Region - Texas Regional Entity XLS
Table 55.1. Electric Power Projections for EMM Region - Reliability First Corporation / Michigan XLS
Table 55.11. Electric Power Projections for EMM Region - Reliability First Corporation / West XLS
Table 55.12. Electric Power Projections for EMM Region - SERC Reliability Corporation / Delta XLS
Table 55.13. Electric Power Projections for EMM Region - SERC Reliability Corporation / Gateway XLS
Table 55.14. Electric Power Projections for EMM Region - SERC Reliability Corporation / Southeastern XLS
Table 55.15. Electric Power Projections for EMM Region - SERC Reliability Corporation / Central XLS
Table 55.16. Electric Power Projections for EMM Region - SERC Reliability Corporation / Virginia-Carolina XLS
Table 55.17. Electric Power Projections for EMM Region - Southwest Power Pool / North XLS
Table 55.18. Electric Power Projections for EMM Region - Southwest Power Pool / South XLS
Table 55.19. Electric Power Projections for EMM Region - Western Electricity Coordinating Council / Southwest XLS
Table 55.2. Electric Power Projections for EMM Region - Western Electricity Coordinating Council / California XLS
Table 55.2. Electric Power Projections for EMM Region - Florida Reliability Coordinating Council XLS
Table 55.21. Electric Power Projections for EMM Region - Western Electricity Coordinating Council / Northwest Power Pool Area XLS
Table 55.22. Electric Power Projections for EMM Region - Western Electricity Coordinating Council / Rockies XLS
Table 55.3. Electric Power Projections for EMM Region - Midwest Reliability Council / East XLS
Table 55.4. Electric Power Projections for EMM Region - Midwest Reliability Council / West XLS
Table 55.5. Electric Power Projections for EMM Region - Northeast Power Coordinating Council / Northeast XLS
Table 55.6. Electric Power Projections for EMM Region - Northeast Power Coordinating Council / NYC-Westchester XLS
Table 55.7. Electric Power Projections for EMM Region - Northeast Power Coordinating Council / Long Island XLS
Table 55.8. Electric Power Projections for EMM Region - Northeast Power Coordinating Council / Upstate New York XLS
Table 55.9. Electric Power Projections for EMM Region - Reliability First Corporation / East XLS