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Annual Energy Outlook 2016

Full Release Date: September 15, 2016   |  Next Release Date:  January 2017   |  full report

Market Trends: Emissions

Energy-related carbon dioxide emissions projections depend on assumptions about economic growth, energy prices, resource availability, and policies

The AEO2016 Reference case assumes that current laws and regulations remain in effect through 2040. However, the status of the Clean Power Plan (CPP), which is on hold pending judicial review, is uncertain. The Reference case assumes implementation of the CPP as scheduled and uses mass-based standards that impose limits on carbon dioxide (CO2) emissions from fossil fuel-fired generators. The No CPP case assumes that no federal carbon reduction program is implemented. The No CPP case represents the upper end of the range of CO2 emissions (5,468 million metric tons) in 2040, but the range of projected energy-related CO2 emissions in 2040 is more than 800 million metric tons across the alternative cases included in AEO2016 (Figure MT-61). Projected emissions vary, depending on assumptions about economic growth, energy prices, and policies. In the High Economic Growth case, emissions in 2040 are close to emissions in the No CPP case—even though the High Economic Growth case includes the CPP—because emissions increase outside the electric power sector in response to higher economic growth.

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The Extended Policies case represents the lower end of the emissions range, with CO2 emissions falling to 4,623 million metric tons in 2040, 23% below the 2005 level. The Extended Policies case assumes that existing policies and regulations remain in effect, or are extended beyond sunset dates specified in current regulation, and that existing tax credits that have scheduled reductions and sunset dates remain unchanged through 2040. Efficiency policies, including corporate average fuel economy standards, appliance standards, and building codes, are expanded beyond current provisions, and the CPP regulations that reduce CO2 emissions from electric power generation are tightened after 2030. The result is that, by 2040, energy-related CO2 emissions are 846 million metric tons lower in the Extended Policies case than in the No CPP case.

Variations in natural gas prices have less impact than the CPP requirements on total CO2 emissions. Because the limit that the CPP imposes on CO2 emissions in the electric power sector is met in all cases, differences in energy-related emissions occur only in the end-use sectors. As a result, CO2 emissions in 2040 in the Low Oil Price and High Oil Price cases fall within the range of emissions created by the No CPP and Extended Policies cases.

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