To amend the Internal Revenue Code of 1986 to reduce emissions of carbon dioxide by imposing a tax on primary fossil fuels based on their carbon content.

Summary: Save Our Climate Act of 2007 - Amends the Internal Revenue Code to impose an excise tax on the carbon content of any taxable fuel sold by a manufacturer, producer, or importer. Sets the amount of such tax at $10 per ton of the carbon content in such fuel. Defines "taxable fuel" as coal (including lignite and peat), petroleum and any petroleum product, and natural gas. Exempts from such tax the sale or in-kind exchange of fuel for deposit in the Strategic Petroleum Reserve and certain exports or resales of such fuel.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Save Our Climate Act of 2007''.

SEC. 2. FINDINGS.

    The Congress finds as follows:
            (1) The Intergovernmental Panel on Climate Change (IPCC) 
        has concluded that human emissions of greenhouse gases, 
        particularly carbon dioxide are responsible for global climate 
        change.
            (2) The IPCC has estimated that global temperatures will 
        rise between 3.2-7.2 degrees Farenheit in the next 100 years if 
        carbon dioxide emissions are not dramatically reduced.
            (3) An increase of even a few degrees could have major 
        adverse impacts on both the human and man-made environments, 
        due to rising sea-levels, intensification of weather events, 
        mass extinction of species, and scarcity of water.
            (4) The United States is responsible for nearly 24 percent 
        of the world's carbon dioxide emissions, equaling approximately 
        six billion metric tons of carbon dioxide per year.
            (5) In order to stabilize the earth's climate and prevent 
        catastrophic global climate change, the level of worldwide 
        carbon dioxide emissions need to be reduced 80 percent by 2050.
            (6) A tax on fossil fuels based on carbon content will 
        reduce the incentive to burn those fuels, thereby reducing 
        carbon dioxide emissions.
            (7) Revenue collected from a tax on fossil fuels could be 
        used to decrease taxes on low and middle-income taxpayers, to 
        fund research and development of alternative green energy 
        sources, or to increase funding for other domestic social 
        priorities.

SEC. 3. IMPOSITION OF CARBON TAX ON PRIMARY FOSSIL FUELS.

    (a) General Rule.--Chapter 38 of the Internal Revenue Code of 1986 
(relating to environmental taxes) is amended by adding at the end 
thereof the following new subchapter:

           ``Subchapter E--Carbon Tax on Primary Fossil Fuels

``Sec. 4691. Imposition of tax.

``SEC. 4691. IMPOSITION OF TAX.

    ``(a) General Rule.--There is hereby imposed a tax on any taxable 
fuel sold by the manufacturer, producer, or importer thereof.
    ``(b) Amount of Tax.--
            ``(1) In general.--The amount of tax imposed by subsection 
        (a) on any taxable fuel shall be an equivalent amount to $10 
        per ton of carbon content in such fuel, as determined by the 
        Secretary in consultation with the Secretary of Energy.
            ``(2) Annual increase in amount of tax.--For each calendar 
        year beginning after 2008 and ending with the year after the 
        target attainment year, paragraph (1) shall be applied by 
        substituting for `$10' the following: `the amount in effect 
        under this paragraph for the preceding calendar year, increased 
        by $10,'.
            ``(3) Rate freeze after target attainment.--For the second 
        year after the target attainment year and each year thereafter, 
        the amount in effect under paragraph (1) shall be the amount in 
        effect under paragraph (1) for the first year after the target 
        attainment year.
            ``(4) Target attainment year.--For purposes of paragraph 
        (2), a calendar year is the target attainment year if the level 
        of carbon dioxide emissions in the United States for the 
        calendar year does not exceed 20 percent of the level of carbon 
        dioxide emissions in the United States for calendar year 1990, 
        as determined by the Energy Information Administration, 
        Department of Energy.
    ``(c) Taxable Fuel.--For purposes of this section, the term 
`taxable fuel' means--
            ``(1) coal (including lignite and peat),
            ``(2) petroleum and any petroleum product (as defined in 
        section 4612(a)(3)), and
            ``(3) natural gas,
which is extracted, manufactured, or produced in the United States or 
entered into the United States for consumption, use, or warehousing.
    ``(d) Other Definitions.--For purposes of this section--
            ``(1) United states.--The term `United States' has the 
        meaning given such term by section 4612(a)(4).
            ``(2) Importer.--The term `importer' means the person 
        entering the taxable fuel for consumption, use, or warehousing.
            ``(3) Ton.--The term `ton' means 2,000 pounds. In the case 
        of any taxable fuel which is a gas, the term `ton' means the 
        amount of such gas in cubic feet which is the equivalent of 
        2,000 pounds on a molecular weight basis.
    ``(e) Exception.--No tax shall be imposed by subsection (a) on the 
sale or in-kind exchange of any taxable fuel for deposit in the 
Strategic Petroleum Reserve established under part B of title I of the 
Energy Policy and Conservation Act.
    ``(f) Special Rules.--
            ``(1) Only 1 tax imposed with respect to any product.--No 
        tax shall be imposed by subsection (a) with respect to a 
        taxable fuel if, with respect to such fuel, the person who 
        would be liable for such tax establishes that a prior tax 
        imposed by such subsection has been imposed and no refund or 
        credit with respect to such tax is allowed under subsection 
        (g).
            ``(2) Fractional part of ton.--In the case of a fraction of 
        a ton, the tax imposed by subsection (a) shall be the same 
        fraction of the amount of such tax imposed on a whole ton.
            ``(3) Use and certain exchanges by manufacturer, etc.--
                    ``(A) Use treated as sale.--If any person 
                manufactures, produces, or imports any taxable fuel and 
                uses such fuel, then such person shall be liable for 
                tax under subsection (a) in the same manner as if such 
                fuel were sold by such person.
                    ``(B) Special rules for inventory exchanges.--
                            ``(i) In general.--Except as provided in 
                        this subparagraph, in any case in which a 
                        manufacturer, producer, or importer of a 
                        taxable fuel exchanges such fuel as part of an 
                        inventory exchange with another person--
                                    ``(I) such exchange shall not be 
                                treated as a sale, and
                                    ``(II) such other person shall, for 
                                purposes of subsection (a), be treated 
                                as the manufacturer, producer, or 
                                importer of such fuel.
                            ``(ii) Registration requirement.--Clause 
                        (i) shall not apply to any inventory exchange 
                        unless--
                                    ``(I) both parties are registered 
                                with the Secretary as manufacturers, 
                                producers, or importers of taxable 
                                fuels, and
                                    ``(II) the person receiving the 
                                taxable fuel has, at such time as the 
                                Secretary may prescribe, notified the 
                                manufacturer, producer, or importer of 
                                such person's registration number and 
                                the internal revenue district in which 
                                such person is registered.
                            ``(iii) Inventory exchange.--For purposes 
                        of this subparagraph, the term `inventory 
                        exchange' means any exchange in which 2 persons 
                        exchange property which is, in the hands of 
                        each person, property described in section 
                        1221(a)(1).
    ``(g) Refund or Credit for Certain Uses.--
            ``(1) Manufacture or production of another taxable fuel.--
        Under regulations prescribed by the Secretary, if--
                    ``(A) a tax under subsection (a) was paid with 
                respect to any taxable fuel, and
                    ``(B) such fuel was used by any person in the 
                manufacture or production of any other substance which 
                is a taxable fuel,
        then a credit or refund (without interest) shall be allowed, in 
        the same manner as if it were an overpayment of tax imposed by 
        subsection (a), to such person in an amount equal to the tax so 
        paid.
            ``(2) Embedded or sequestered carbon.--Under regulations 
        prescribed by the Secretary, if--
                    ``(A) a tax under subsection (a) was paid with 
                respect to any taxable fuel,
                    ``(B) a person uses such fuel in the manufacture or 
                production of any substance which is not a taxable 
                fuel, and
                    ``(C) in the process of such manufacture or 
                production, carbon in such fuel is embedded or 
                sequestered,
        then a credit or refund (without interest) shall be allowed to 
        such person in the same manner as if it were an overpayment of 
        tax imposed by subsection (a). The amount of such credit or 
        refund shall be an amount equal to the amount of tax in effect 
        under subsection (a) with respect to such fuel for the calendar 
        year in which such manufacture or production occurred, 
        determined on the basis of carbon so embedded or sequestered.
            ``(3) Limitation.--In any case to which paragraph (1) or 
        (2) applies, the amount of any such credit or refund shall not 
        exceed the amount of tax imposed by subsection (a) on the 
        taxable fuel used in such manufacture or production (or which 
        would have been imposed by such subsection on such other fuel 
        but for subsection (h)).
    ``(h) Exemption for Exports of Taxable Fuels.--
            ``(1) Tax-free sales.--
                    ``(A) In general.--No tax shall be imposed by 
                subsection (a) on the sale by the manufacturer or 
                producer of any taxable fuel for export or for resale 
                by the purchaser to a second purchaser for export.
                    ``(B) Proof of export required.--Rules similar to 
                the rules of section 4221(b) shall apply for purposes 
                of subparagraph (A).
            ``(2) Credit or refund where tax paid.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), if--
                            ``(i) tax under subsection (a) was paid 
                        with respect to any taxable fuel, and
                            ``(ii)(I) such fuel was exported by any 
                        person, or
                            ``(II) such fuel was used as a material in 
                        the manufacture or production of a taxable fuel 
                        which was exported by any person and which, at 
                        the time of export, was a taxable fuel,
                credit or refund (without interest) of such tax shall 
                be allowed or made to the person who paid such tax.
                    ``(B) Condition to allowance.--No credit or refund 
                shall be allowed or made under subparagraph (A) unless 
                the person who paid the tax establishes that he--
                            ``(i) has repaid or agreed to repay the 
                        amount of the tax to the person who exported 
                        the taxable fuel, or
                            ``(ii) has obtained the written consent of 
                        such exporter to the allowance of the credit or 
                        the making of the refund.
                    ``(C) Refunds directly to exporter.--The Secretary 
                shall provide, in regulations, the circumstances under 
                which a credit or refund (without interest) of the tax 
                under subsection (a) shall be allowed or made to the 
                person who exported the taxable fuel, where--
                            ``(i) the person who paid the tax waives 
                        his claim to the amount of such credit or 
                        refund, and
                            ``(ii) the person exporting the taxable 
                        fuel provides such information as the Secretary 
                        may require in such regulations.
            ``(3) Regulations.--The Secretary shall prescribe such 
        regulations as may be necessary to carry out the purposes of 
        this subsection.''.
    (b) Study.--Not later than 5 years after the date of the enactment 
of this Act, and every 5 years thereafter, the Secretary of the 
Treasury, in consultation with the Secretary of Energy, shall conduct a 
study on the environmental, economic, and revenue impacts regarding the 
tax imposed by subchapter E of chapter 38 of the Internal Revenue Code 
of 1986 (relating to carbon tax on primary fossil fuels). The Secretary 
shall submit each study to the Committee on Ways and Means of the House 
of Representatives and the Committee on Finance of the Senate.
    (c) Clerical Amendment.--The table of subchapters for chapter 38 of 
such Code is amended by adding at the end thereof the following new 
item:

         ``subchapter e. carbon tax on primary fossil fuels''.

    (d) Effective Date.--The amendments made by this section shall take 
effect on January 1, 2008.