Introduction

The Annual Energy Outlook 2016 (AEO2016) represents current federal and state legislation and final implementation of regulations as of the end of February 2016. The AEO2016 Reference case assumes that current laws and regulations affecting the energy sector are largely unchanged throughout the projection period (including the implication that laws that include sunset dates are no longer in effect at the time of those sunset dates) [1]. The potential effects of proposed legislation, regulations, or standards—or of sections of authorizing legislation that have been enacted but are not funded, or for which parameters will be set in a future regulatory process—are not reflected in the AEO2016 Reference case, but some are considered in alternative cases. This section summarizes federal and state legislation and regulations newly incorporated or updated in AEO2016 since the completion of the Annual Energy Outlook 2015 (AEO2015) in April 2015. This section also summarizes selected rules and regulations that have been proposed recently and have the potential to affect the projection significantly.

Examples of federal and state legislation and regulations incorporated in the AEO2016 Reference case, or whose handling has been modified, include:

• Incorporation of the U.S. Environmental Protection Agency's final rules for the Clean Power Plan (CPP) [2] under the Clean Air Act (CAA) Section 111(b) and 111(d). Section 111(b) sets carbon pollution standards for new, modified, and reconstructed power plants. Section 111(d) sets performance standards for existing fossil fuel-fired plants. Final rules to support the performance standards and model trading rules were in effect by October 2015. However, in February 2016, the U.S. Supreme Court issued a stay on enforcement of the existing power plant rule, pending resolution of legal challenges [3]. The AEO2016 Reference case includes the CPP. An alternative No CPP case, which assumes that the CPP is not enforced, also is included in AEO2016, as are several cases that consider the implication of alternative approaches to CPP implementation.
• Incorporation of the California Air Resource Board (CARB) Zero-Emission Vehicle (ZEV) program for model year (MY) 2018 and later vehicles [4]. The ZEV program is part of California's Advanced Clean Cars Program. Nine other states have fully adopted the CARB Advanced Clean Cars program standards. The latest amendment to the ZEV program, which affects model year (MY) 2018 and later vehicles, requires a certain percentage of an automaker’s sales to be made up of ZEVs and Transitional Zero-Emission Vehicles (TZEVs). The ZEV sales requirement is administered through credits, with the required allowable credits calculated as a percentage of the automaker's conventional gasoline and diesel light-duty vehicle (LDV) sales, averaged over the previous three model years.
• Revisions to reflect the extension of the production tax credit (PTC) for wind and a 30% investment tax credit (ITC) for solar, enacted in December 2015 as part of the 2016 Consolidated Appropriations Act [5]. Unlike previous extensions, which maintained the inflation-adjusted value of the PTCs for the duration of the extensions, the current extension introduces a phaseout that reduces the value of the credit over time before final expiration.
• Adoption of newly added or modified federal efficiency standards for residential and commercial appliances and equipment established under authority of the Energy Policy and Conservation Act of 1975, the National Appliance Energy Conservation Act of 1987, and the Energy Independence and Security Act of 2007. The Reference case includes only promulgated standards and comprehensive consensus agreements.
• Incorporation of modifications to existing state Renewable Portfolio Standards (RPS) or similar laws, to reflect the addition of a new RPS policy in Vermont and expanded RPS targets in California and Hawaii [6]. The Reference case does not include laws and regulations with either voluntary goals or targets that can be substantially satisfied with nonrenewable resources.
• Updates in AEO2016 to better reflect the International Convention for the Prevention of Pollution from Ships (MARPOL) [7], which mandates that existing ships either burn fuel containing a maximum of 0.1% sulfur or use scrubbers to remove sulfur emissions. The U.S. Energy Information Administration (EIA) has updated AEO2016 to improve the calculation of the amount of fuel consumed by ocean-going vessels traveling though North American and Caribbean emissions control areas, including the effects of compliance strategies. Further, EIA has updated the methodology for calculating energy demand for oceangoing vessels to include estimations of fuel consumption by ship type and commodity moved.
• Laws and regulations will continue to evolve over time, and some laws include sunset provisions that may be extended. However, even in situations where existing legislation contains provisions to allow revision of implementing regulations, those provisions may not be exercised consistently. The implications of some pending and possible developments are examined in alternative cases included in AEO2016. In addition, at the request of both federal agencies and Congress, EIA has regularly examined the potential implications of other possible energy options in special analyses that can be found on the EIA website at http://www.eia.gov/analysis/reports.cfm?t=138.