II 

109TH CONGRESS 

1ST SESSION S. 342

To provide for a program of scientific research on abrupt climate change, 

to accelerate the reduction of greenhouse gas emissions in the United 

States by establishing a market-driven system of greenhouse gas 

tradeable allowances, to limit greenhouse gas emissions in the United 

States and reduce dependence upon foreign oil, and ensure benefits 

to consumers from the trading in such allowances. 

IN THE SENATE OF THE UNITED STATES 

FEBRUARY 10, 2005

Mr. MCCAIN (for himself, Mr. LIEBERMAN, Ms. SNOWE, Mrs. FEINSTEIN, Mr. 

CHAFEE, Mr. DURBIN, Mr. LAUTENBERG, Mrs. MURRAY, Mr. NELSON

of Florida, Mr. CORZINE, Ms. CANTWELL, Mr. KERRY, and Mr. DAYTON) 

introduced the following bill; which was read twice and referred to the 

Committee on Environment and Public Works 

A BILL

To provide for a program of scientific research on abrupt 

climate change, to accelerate the reduction of greenhouse 

gas emissions in the United States by establishing a 

market-driven system of greenhouse gas tradeable allowances, to limit greenhouse gas emissions in the United 

States and reduce dependence upon foreign oil, and ensure benefits to consumers from the trading in such 

allowances.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,
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1 SECTION 1. SHORT TITLE. 

2 This Act may be cited as the ‘‘Climate Stewardship 

3 Act of 2005’’. 

4 SEC. 2. TABLE OF CONTENTS. 

5 The table of contents for this Act is as follows:

Sec. 1. Short title. 

Sec. 2. Table of contents. 

Sec. 3. Definitions. 

TITLE I—FEDERAL CLIMATE CHANGE RESEARCH AND RELATED 

ACTIVITIES 

Sec. 101. National Science Foundation fellowships. 

Sec. 102. Commerce Department study of technology transfer barriers. 

Sec. 103. Report on United States impact of Kyoto Protocol. 

Sec. 104. Research grants. 

Sec. 105. Abrupt climate change research. 

Sec. 106. Impact on low-income populations research. 

Sec. 107. NIST greenhouse gas functions. 

Sec. 108. Development of new measurement technologies. 

Sec. 109. Enhanced environmental measurements and standards. 

Sec. 110. Technology development and diffusion. 

Sec. 111. Agricultural outreach program. 

TITLE II—NATIONAL GREENHOUSE GAS DATABASE 

Sec. 201. National Greenhouse Gas Database and registry established. 

Sec. 202. Inventory of greenhouse gas emissions for covered entities. 

Sec. 203. Greenhouse gas reduction reporting. 

Sec. 204. Measurement and verification. 

TITLE III—MARKET-DRIVEN GREENHOUSE GAS REDUCTIONS 

Subtitle A—Emission Reduction Requirements; Use of Tradeable Allowances 

Sec. 301. Covered entities must submit allowances for emissions. 

Sec. 302. Compliance. 

Sec. 303. Borrowing against future reductions. 

Sec. 304. Other uses of tradeable allowances. 

Sec. 305. Exemption of source categories. 

Subtitle B—Establishment and Allocation of Tradeable Allowances 

Sec. 331. Establishment of tradeable allowances. 

Sec. 332. Determination of tradeable allowance allocations. 

Sec. 333. Allocation of tradeable allowances. 

Sec. 334. Ensuring target adequacy. 

Sec. 335. Initial allocations for early participation and accelerated participation. 

Sec. 336. Bonus for accelerated participation. 

Subtitle C—Climate Change Credit Corporation 
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Sec. 351. Establishment. 

Sec. 352. Purposes and functions. 

Subtitle D—Sequestration Accounting; Penalties 

Sec. 371. Sequestration accounting. 

Sec. 372. Penalties.

1 SEC. 3. DEFINITIONS. 

2 In this Act: 

3 (1) ADMINISTRATOR.—The term ‘‘Adminis4 trator’’ means the Administrator of the Environ5 mental Protection Agency. 

6 (2) BASELINE.—The term ‘‘baseline’’ means 

7 the historic greenhouse gas emission levels of an en8 tity, as adjusted upward by the Administrator to re9 flect actual reductions that are verified in accord10 ance with—

11 (A) regulations promulgated under section 

12 201(c)(1); and 

13 (B) relevant standards and methods devel14 oped under this title. 

15 (3) CARBON DIOXIDE EQUIVALENTS.—The term 

16 ‘‘carbon dioxide equivalents’’ means, for each green17 house gas, the amount of each such greenhouse gas 

18 that makes the same contribution to global warming 

19 as one metric ton of carbon dioxide, as determined 

20 by the Administrator. 

21 (4) COVERED SECTORS.—The term ‘‘covered 

22 sectors’’ means the electricity, transportation, indus-
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1 try, and commercial sectors, as such terms are used 

2 in the Inventory. 

3 (5) COVERED ENTITY.—The term ‘‘covered en4 tity’’ means an entity (including a branch, depart5 ment, agency, or instrumentality of Federal, State, 

6 or local government) that—

7 (A) owns or controls a source of green8 house gas emissions in the electric power, in9 dustrial, or commercial sectors of the United 

10 States economy (as defined in the Inventory), 

11 refines or imports petroleum products for use in 

12 transportation, or produces or imports 

13 hydrofluorocarbons, perfluorocarbons, or sulfur 

14 hexafluoride; and 

15 (B) emits, from any single facility owned 

16 by the entity, over 10,000 metric tons of green17 house gas per year, measured in units of carbon 

18 dioxide equivalents, or produces or imports—

19 (i) petroleum products that, when 

20 combusted, will emit, 

21 (ii) hydrofluorocarbons, perfluorocar22 bons, or sulfur hexafluoride that, when 

23 used, will emit, or 

24 (iii) other greenhouse gases that, 

25 when used, will emit, 
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1 over 10,000 metric tons of greenhouse gas per 

2 year, measured in units of carbon dioxide 

3 equivalents. 

4 (6) DATABASE.—The term ‘‘database’’ means 

5 the national greenhouse gas database established 

6 under section 201. 

7 (7) DIRECT EMISSIONS.—The term ‘‘direct 

8 emissions’’ means greenhouse gas emissions by an 

9 entity from a facility that is owned or controlled by 

10 that entity. 

11 (8) FACILITY.—The term ‘‘facility’’ means a 

12 building, structure, or installation located on any 1 

13 or more contiguous or adjacent properties of an enti14 ty in the United States. 

15 (9) GREENHOUSE GAS.—The term ‘‘greenhouse 

16 gas’’ means—

17 (A) carbon dioxide; 

18 (B) methane; 

19 (C) nitrous oxide; 

20 (D) hydrofluorocarbons; 

21 (E) perfluorocarbons; and 

22 (F) sulfur hexafluoride. 

23 (10) INDIRECT EMISSIONS.—The term ‘‘indirect 

24 emissions’’ means greenhouse gas emissions that 

25 are—
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1 (A) a result of the activities of an entity; 

2 but 

3 (B) emitted from a facility owned or con4 trolled by another entity. 

5 (11) INVENTORY.—The term ‘‘Inventory’’ 

6 means the Inventory of U.S. Greenhouse Gas Emis7 sions and Sinks, prepared in compliance with the 

8 United Nations Framework Convention on Climate 

9 Change Decision 3/CP.5). 

10 (12) LEAKAGE.—The term ‘‘leakage’’ means—

11 (A) an increase in greenhouse gas emis12 sions by one facility or entity caused by a re13 duction in greenhouse gas emissions by another 

14 facility or entity; or 

15 (B) a decrease in sequestration that is 

16 caused by an increase in sequestration at an17 other location. 

18 (13) PERMANENCE.—The term ‘‘permanence’’ 

19 means the extent to which greenhouse gases that are 

20 sequestered will not later be returned to the atmos21 phere. 

22 (14) REGISTRY.—The term ‘‘registry’’ means 

23 the registry of greenhouse gas emission reductions 

24 established under section 201(b)(2). 
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1 (15) SECRETARY.—The term ‘‘Secretary’’ 

2 means the Secretary of Commerce. 

3 (16) SEQUESTRATION.—

4 (A) IN GENERAL.—The term ‘‘sequestra5 tion’’ means the capture, long-term separation, 

6 isolation, or removal of greenhouse gases from 

7 the atmosphere. 

8 (B) INCLUSIONS.—The term ‘‘sequestra9 tion’’ includes—

10 (i) agricultural and conservation prac11 tices; 

12 (ii) reforestation; 

13 (iii) forest preservation; and 

14 (iv) any other appropriate method of 

15 capture, long-term separation, isolation, or 

16 removal of greenhouse gases from the at17 mosphere, as determined by the Adminis18 trator. 

19 (C) EXCLUSIONS.—The term ‘‘sequestra20 tion’’ does not include—

21 (i) any conversion of, or negative im22 pact on, a native ecosystem; or 

23 (ii) any introduction of non-native 

24 species. 
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1 (17) SOURCE CATEGORY.—The term ‘‘source 

2 category’’ means a process or activity that leads to 

3 direct emissions of greenhouse gases, as listed in the 

4 Inventory. 

5 (18) STATIONARY SOURCE.—The term ‘‘sta6 tionary source’’ means generally any source of 

7 greenhouse gases except those emissions resulting di8 rectly from an engine for transportation purposes. 

9 TITLE I—FEDERAL CLIMATE 

10 CHANGE RESEARCH AND RE11 LATED ACTIVITIES 

12 SEC. 101. NATIONAL SCIENCE FOUNDATION FELLOWSHIPS. 

13 The Director of the National Science Foundation 

14 shall establish a fellowship program for students pursuing 

15 graduate studies in global climate change, including capa16 bility in observation, analysis, modeling, paleoclimatology, 

17 consequences, and adaptation. 

18 SEC. 102. COMMERCE DEPARTMENT STUDY OF TECH19 NOLOGY TRANSFER BARRIERS. 

20 (a) STUDY.—The Assistant Secretary of Technology 

21 Policy at Department of Commerce shall conduct a study 

22 of technology transfer barriers, best practices, and out23 comes of technology transfer activities at Federal labora24 tories related to the licensing and commercialization of en25 ergy efficient technologies, and other technologies that, 
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1 compared to similar technology in commercial use, result 

2 in reduced emissions of greenhouse gases or increased se3 questration of greenhouse gases. The study shall be sub4 mitted to the Senate Committee on Commerce, Science, 

5 and Transportation and the House of Representatives 

6 Committee on Science within 6 months after the date of 

7 enactment of this Act. The Assistant Secretary shall work 

8 with the existing interagency working group to address 

9 identified barriers. 

10 (b) AGENCY REPORT TO INCLUDE INFORMATION ON

11 TECHNOLOGY TRANSFER INCOME AND ROYALTIES.—

12 Paragraph (2)(B) of section 11(f) of the Stevenson13 Wydler Technology Innovation Act of 1980 (15 U.S.C. 

14 3710(f)) is amended—

15 (1) by striking ‘‘and’’ after the semicolon in 

16 clause (vi); 

17 (2) by redesignating clause (vii) as clause (ix); 

18 and 

19 (3) by inserting after clause (vi) the following: 

20 ‘‘(vii) the number of fully-executed li21 censes which received royalty income in the 

22 preceding fiscal year for climate-change or 

23 energy-efficient technology; 
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1 ‘‘(viii) the total earned royalty income 

2 for climate-change or energy-efficient tech3 nology; and’’. 

4 (c) INCREASED INCENTIVES FOR DEVELOPMENT OF

5 CLIMATE-CHANGE OR ENERGY-EFFICIENT TECH6 NOLOGY.—Section 14(a) of the Stevenson-Wydler Tech7 nology Innovation Act of 1980 (15 U.S.C. 3710c(a)) is 

8 amended—

9 (1) by striking ‘‘15 percent,’’ in paragraph 

10 (1)(A) and inserting ‘‘15 percent (25 percent for cli11 mate change-related technologies),’’; and 

12 (2) by inserting ‘‘($250,000 for climate change13 related technologies)’’ after ‘‘$150,000’’ each place 

14 it appears in paragraph (3). 

15 SEC. 103. REPORT ON UNITED STATES IMPACT OF KYOTO 

16 PROTOCOL. 

17 Within 6 months after the date of enactment of this 

18 Act, the Secretary shall execute a contract with the Na19 tional Academy of Science for a report to the Senate Com20 mittee on Commerce, Science, and Transportation and the 

21 House of Representatives Committee on Science on the ef22 fects that the entry into force of the Kyoto Protocol with23 out United States participation will have on—

24 (1) United States industry and its ability to 

25 compete globally; 
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1 (2) international cooperation on scientific re2 search and development; and 

3 (3) United States participation in international 

4 environmental climate change mitigation efforts and 

5 technology deployment. 

6 SEC. 104. RESEARCH GRANTS. 

7 Section 105 of the Global Change Research Act of 

8 1990 (15 U.S.C. 2935) is amended—

9 (1) by redesignating subsection (c) as sub10 section (d); and 

11 (2) by inserting after subsection (b) the fol12 lowing: 

13 ‘‘(c) RESEARCH GRANTS.—

14 ‘‘(1) COMMITTEE TO DEVELOP LIST OF PRI15 ORITY RESEARCH AREAS.—The Committee shall de16 velop a list of priority areas for research and devel17 opment on climate change that are not being ad18 dressed by Federal agencies. 

19 ‘‘(2) DIRECTOR OF OSTP TO TRANSMIT LIST TO

20 NSF.—The Director of the Office of Science and 

21 Technology Policy shall transmit the list to the Na22 tional Science Foundation. 

23 ‘‘(3) FUNDING THROUGH NSF.—

24 ‘‘(A) BUDGET REQUEST.—The National 

25 Science Foundation shall include, as part of the 
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1 annual request for appropriations for the 

2 Science and Technology Policy Institute, a re3 quest for appropriations to fund research in the 

4 priority areas on the list developed under para5 graph (1). 

6 ‘‘(B) AUTHORIZATION.—For fiscal year 

7 2005 and each fiscal year thereafter, there are 

8 authorized to be appropriated to the National 

9 Science Foundation not less than $25,000,000, 

10 to be made available through the Science and 

11 Technology Policy Institute, for research in 

12 those priority areas.’’. 

13 SEC. 105. ABRUPT CLIMATE CHANGE RESEARCH. 

14 (a) IN GENERAL.—The Secretary, through the Na15 tional Oceanic and Atmospheric Administration, shall 

16 carry out a program of scientific research on potential ab17 rupt climate change designed—

18 (1) to develop a global array of terrestrial and 

19 oceanographic indicators of paleoclimate in order 

20 sufficiently to identify and describe past instances of 

21 abrupt climate change; 

22 (2) to improve understanding of thresholds and 

23 nonlinearities in geophysical systems related to the 

24 mechanisms of abrupt climate change; 
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1 (3) to incorporate these mechanisms into ad2 vanced geophysical models of climate change; and 

3 (4) to test the output of these models against 

4 an improved global array of records of past abrupt 

5 climate changes. 

6 (b) ABRUPT CLIMATE CHANGE DEFINED.—In this 

7 section, the term ‘‘abrupt climate change’’ means a change 

8 in climate that occurs so rapidly or unexpectedly that 

9 human or natural systems may have difficulty adapting 

10 to it. 

11 (c) AUTHORIZATION OF APPROPRIATIONS.—There 

12 are authorized to be appropriated to the Secretary for fis13 cal year 2005 $60,000,000 to carry out this section, such 

14 sum to remain available until expended. 

15 SEC. 106. IMPACT ON LOW-INCOME POPULATIONS RE16 SEARCH. 

17 (a) IN GENERAL.—The Secretary shall conduct re18 search on the impact of climate change on low-income pop19 ulations everywhere in the world. The research shall—

20 (1) include an assessment of the adverse impact 

21 of climate change on developing countries and on 

22 low-income populations in the United States; 

23 (2) identify appropriate climate change adapta24 tion measures and programs for developing countries 

25 and low-income populations and assess the impact of 
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1 those measures and programs on low-income popu2 lations; 

3 (3) identify appropriate climate change mitiga4 tion strategies and programs for developing coun5 tries and low-income populations and assess the im6 pact of those strategies and programs on developing 

7 countries and on low-income populations in the 

8 United States; and 

9 (4) include an estimate of the costs of devel10 oping and implementing those climate change adap11 tation and mitigation programs. 

12 (b) REPORT.—Within 1 year after the date of enact13 ment of this Act, the Secretary shall transmit a report 

14 on the research conducted under subsection (a) to the Sen15 ate Committee on Commerce, Science, and Transpor16 tation, the Senate Committee on Environment and Public 

17 Works, the House of Representatives Committee on 

18 Science, and the House of Representatives Committee on 

19 Energy and Commerce. 

20 (c) AUTHORIZATION OF APPROPRIATIONS.—There 

21 are authorized to be appropriated to the Secretary 

22 $2,000,000 to carry out the research required by sub23 section (a). 
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1 SEC. 107. NIST GREENHOUSE GAS FUNCTIONS. 

2 Section 2(c) of the National Institute of Standards 

3 and Technology Act (15 U.S.C. 272(c)) is amended—

4 (1) by striking ‘‘and’’ after the semicolon in 

5 paragraph (21); 

6 (2) by redesignating paragraph (22) as para7 graph (23); and 

8 (3) by inserting after paragraph (21) the fol9 lowing: 

10 ‘‘(22) perform research to develop enhanced 

11 measurements, calibrations, standards, and tech12 nologies which will facilitate activities that reduce 

13 emissions of greenhouse gases or increase sequestra14 tion of greenhouse gases, including carbon dioxide, 

15 methane, nitrous oxide, ozone, perfluorocarbons, 

16 hydrofluorocarbons, and sulfur hexafluoride; and’’. 

17 SEC. 108. DEVELOPMENT OF NEW MEASUREMENT TECH18 NOLOGIES. 

19 To facilitate implementation of section 204, the Sec20 retary shall initiate a program to develop, with technical 

21 assistance from appropriate Federal agencies, innovative 

22 standards and measurement technologies to calculate 

23 greenhouse gas emissions or reductions for which no accu24 rate or reliable measurement technology exists. The pro25 gram shall include—
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1 (1) technologies (including remote sensing tech2 nologies) to measure carbon changes and other 

3 greenhouse gas emissions and reductions from agri4 culture, forestry, and other land use practices; and 

5 (2) technologies to calculate non-carbon dioxide 

6 greenhouse gas emissions from transportation. 

7 SEC. 109. ENHANCED ENVIRONMENTAL MEASUREMENTS 

8 AND STANDARDS. 

9 The National Institute of Standards and Technology 

10 Act (15 U.S.C. 271 et seq.) is amended— 

11 (1) by redesignating sections 17 through 32 as 

12 sections 18 through 33, respectively; and 

13 (2) by inserting after section 16 the following: 

14 ‘‘SEC. 17. CLIMATE CHANGE STANDARDS AND PROCESSES. 

15 ‘‘(a) IN GENERAL.—The Director shall establish 

16 within the Institute a program to perform and support re17 search on global climate change standards and processes, 

18 with the goal of providing scientific and technical knowl19 edge applicable to the reduction of greenhouse gases (as 

20 defined in section 3(8) of the Climate Stewardship Act of 

21 2005) and of facilitating implementation of section 204 

22 of that Act. 

23 ‘‘(b) RESEARCH PROGRAM.—

24 ‘‘(1) IN GENERAL.—The Director is authorized 

25 to conduct, directly or through contracts or grants, 
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1 a global climate change standards and processes re2 search program. 

3 ‘‘(2) RESEARCH PROJECTS.—The specific con4 tents and priorities of the research program shall be 

5 determined in consultation with appropriate Federal 

6 agencies, including the Environmental Protection 

7 Agency, the National Oceanic and Atmospheric Ad8 ministration, and the National Aeronautics and 

9 Space Administration. The program generally shall 

10 include basic and applied research— 

11 ‘‘(A) to develop and provide the enhanced 

12 measurements, calibrations, data, models, and 

13 reference material standards which will enable 

14 the monitoring of greenhouse gases; 

15 ‘‘(B) to assist in establishing a baseline 

16 reference point for future trading in greenhouse 

17 gases and the measurement of progress in emis18 sions reduction; 

19 ‘‘(C) that will be exchanged internationally 

20 as scientific or technical information which has 

21 the stated purpose of developing mutually rec22 ognized measurements, standards, and proce23 dures for reducing greenhouse gases; and 
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1 ‘‘(D) to assist in developing improved in2 dustrial processes designed to reduce or elimi3 nate greenhouse gases. 

4 ‘‘(c) NATIONAL MEASUREMENT LABORATORIES.— 

5 ‘‘(1) IN GENERAL.—In carrying out this sec6 tion, the Director shall utilize the collective skills of 

7 the National Measurement Laboratories of the Na8 tional Institute of Standards and Technology to im9 prove the accuracy of measurements that will permit 

10 better understanding and control of these industrial 

11 chemical processes and result in the reduction or 

12 elimination of greenhouse gases. 

13 ‘‘(2) MATERIAL, PROCESS, AND BUILDING RE14 SEARCH.—The National Measurement Laboratories 

15 shall conduct research under this subsection that in16 cludes—

17 ‘‘(A) developing material and manufac18 turing processes which are designed for energy 

19 efficiency and reduced greenhouse gas emissions 

20 into the environment; 

21 ‘‘(B) developing chemical processes to be 

22 used by industry that, compared to similar 

23 processes in commercial use, result in reduced 

24 emissions of greenhouse gases or increased se25 questration of greenhouse gases; and 
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1 ‘‘(C) enhancing building performance with 

2 a focus in developing standards or tools which 

3 will help incorporate low- or no-emission tech4 nologies into building designs. 

5 ‘‘(3) STANDARDS AND TOOLS.—The National 

6 Measurement Laboratories shall develop standards 

7 and tools under this subsection that include software 

8 to assist designers in selecting alternate building 

9 materials, performance data on materials, artificial 

10 intelligence-aided design procedures for building sub11 systems and ‘smart buildings’, and improved test 

12 methods and rating procedures for evaluating the 

13 energy performance of residential and commercial 

14 appliances and products. 

15 ‘‘(d) NATIONAL VOLUNTARY LABORATORY ACCREDI16 TATION PROGRAM.—The Director shall utilize the Na17 tional Voluntary Laboratory Accreditation Program under 

18 this section to establish a program to include specific cali19 bration or test standards and related methods and proto20 cols assembled to satisfy the unique needs for accredita21 tion in measuring the production of greenhouse gases. In 

22 carrying out this subsection the Director may cooperate 

23 with other departments and agencies of the Federal Gov24 ernment, State and local governments, and private organi25 zations.’’. 
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1 SEC. 110. TECHNOLOGY DEVELOPMENT AND DIFFUSION. 

2 The Director of the National Institute of Standards 

3 and Technology, through the Manufacturing Extension 

4 Partnership Program, may develop a program to promote 

5 the use, by the more than 380,000 small manufacturers, 

6 of technologies and techniques that result in reduced emis7 sions of greenhouse gases or increased sequestration of 

8 greenhouse gases. 

9 SEC. 111. AGRICULTURAL OUTREACH PROGRAM. 

10 (a) IN GENERAL.—The Secretary of Agriculture, act11 ing through the Global Change Program Office and in 

12 consultation with the heads of other appropriate depart13 ments and agencies, shall establish the Climate Change 

14 Education and Outreach Initiative Program to educate, 

15 and reach out to, agricultural organizations and individual 

16 farmers on global climate change. 

17 (b) PROGRAM COMPONENTS.—The program—

18 (1) shall be designed to ensure that agricultural 

19 organizations and individual farmers receive detailed 

20 information about—

21 (A) the potential impact of climate change 

22 on their operations and well-being; 

23 (B) market-driven economic opportunities 

24 that may come from storing carbon in soils and 

25 vegetation, including emerging private sector 

26 markets for carbon storage; and 
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1 (C) techniques for measuring, monitoring, 

2 verifying, and inventorying such carbon capture 

3 efforts; 

4 (2) may incorporate existing efforts in any area 

5 of activity referenced in paragraph (1) or in related 

6 areas of activity; 

7 (3) shall provide—

8 (A) outreach materials to interested par9 ties; 

10 (B) workshops; and 

11 (C) technical assistance; and 

12 (4) may include the creation and development 

13 of regional centers on climate change or coordination 

14 with existing centers (including such centers within 

15 NRCS and the Cooperative State Research Edu16 cation and Extension Service).

17 TITLE II—NATIONAL 

18 GREENHOUSE GAS DATABASE 

19 SEC. 201. NATIONAL GREENHOUSE GAS DATABASE AND 

20 REGISTRY ESTABLISHED. 

21 (a) ESTABLISHMENT.—As soon as practicable after 

22 the date of enactment of this Act, the Administrator, in 

23 coordination with the Secretary, the Secretary of Energy, 

24 the Secretary of Agriculture, and private sector and non25 governmental organizations, shall establish, operate, and 
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1 maintain a database, to be known as the ‘‘National Green2 house Gas Database’’, to collect, verify, and analyze infor3 mation on greenhouse gas emissions by entities. 

4 (b) NATIONAL GREENHOUSE GAS DATABASE COM5 PONENTS.—The database shall consist of—

6 (1) an inventory of greenhouse gas emissions; 

7 and 

8 (2) a registry of greenhouse gas emission reduc9 tions and increases in greenhouse gas sequestra10 tions. 

11 (c) COMPREHENSIVE SYSTEM.—

12 (1) IN GENERAL.—Not later than 2 years after 

13 the date of enactment of this Act, the Administrator 

14 shall promulgate regulations to implement a com15 prehensive system for greenhouse gas emissions re16 porting, inventorying, and reductions registration. 

17 (2) REQUIREMENTS.—The Administrator shall 

18 ensure, to the maximum extent practicable, that—

19 (A) the comprehensive system described in 

20 paragraph (1) is designed to—

21 (i) maximize completeness, trans22 parency, and accuracy of information re23 ported; and 
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1 (ii) minimize costs incurred by entities 

2 in measuring and reporting greenhouse gas 

3 emissions; and 

4 (B) the regulations promulgated under 

5 paragraph (1) establish procedures and proto6 cols necessary—

7 (i) to prevent the double-counting of 

8 greenhouse gas emissions or emission re9 ductions reported by more than 1 reporting 

10 entity; 

11 (ii) to provide for corrections to errors 

12 in data submitted to the database; 

13 (iii) to provide for adjustment to data 

14 by reporting entities that have had a sig15 nificant organizational change (including 

16 mergers, acquisitions, and divestiture), in 

17 order to maintain comparability among 

18 data in the database over time; 

19 (iv) to provide for adjustments to re20 flect new technologies or methods for 

21 measuring or calculating greenhouse gas 

22 emissions; 

23 (v) to account for changes in registra24 tion of ownership of emission reductions 
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1 resulting from a voluntary private trans2 action between reporting entities; and 

3 (vi) to clarify the responsibility for re4 porting in the case of any facility owned or 

5 controlled by more than 1 entity. 

6 (3) SERIAL NUMBERS.—Through regulations 

7 promulgated under paragraph (1), the Administrator 

8 shall develop and implement a system that pro9 vides—

10 (A) for the verification of submitted emis11 sions reductions registered under section 204; 

12 (B) for the provision of unique serial num13 bers to identify the registered emission reduc14 tions made by an entity relative to the baseline 

15 of the entity; 

16 (C) for the tracking of the registered re17 ductions associated with the serial numbers; 

18 and 

19 (D) for such action as may be necessary to 

20 prevent counterfeiting of the registered reduc21 tions. 

22 SEC. 202. INVENTORY OF GREENHOUSE GAS EMISSIONS 

23 FOR COVERED ENTITIES. 

24 (a) IN GENERAL.—Not later than July 1st of each 

25 calendar year after 2008, each covered entity shall submit 
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1 to the Administrator a report that states, for the pre2 ceding calendar year, the entity-wide greenhouse gas emis3 sions (as reported at the facility level), including—

4 (1) the total quantity of direct greenhouse gas 

5 emissions from stationary sources, expressed in units 

6 of carbon dioxide equivalents, except those reported 

7 under paragraph (3); 

8 (2) the amount of petroleum products sold or 

9 imported by the entity and the amount of green10 house gases, expressed in units of carbon dioxide 

11 equivalents, that would be emitted when these prod12 ucts are used for transportation in the United 

13 States, as determined by the Administrator under 

14 section 301(b); 

15 (3) the amount of hydrofluorocarbons, 

16 perfluorocarbons, or sulfur hexafluoride, expressed 

17 in units of carbon dioxide equivalents, that are sold 

18 or imported by the entity and will ultimately be 

19 emitted in the United States, as determined by the 

20 Administrator under section 301(d); and 

21 (4) such other categories of emissions as the 

22 Administrator determines in the regulations promul23 gated under section 201(c)(1) may be practicable 

24 and useful for the purposes of this Act, such as—
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1 (A) indirect emissions from imported elec2 tricity, heat, and steam; 

3 (B) process and fugitive emissions; and 

4 (C) production or importation of green5 house gases. 

6 (b) COLLECTION AND ANALYSIS OF DATA.—The Ad7 ministrator shall collect and analyze information reported 

8 under subsection (a) for use under title III. 

9 SEC. 203. GREENHOUSE GAS REDUCTION REPORTING. 

10 (a) IN GENERAL.—Subject to the requirements de11 scribed in subsection (b)—

12 (1) a covered entity may register greenhouse 

13 gas emission reductions achieved after 1990 and be14 fore 2010 under this section; and 

15 (2) an entity that is not a covered entity may 

16 register greenhouse gas emission reductions achieved 

17 at any time since 1990 under this section. 

18 (b) REQUIREMENTS.—

19 (1) IN GENERAL.—The requirements referred 

20 to in subsection (a) are that an entity (other than 

21 an entity described in paragraph (2)) shall—

22 (A) establish a baseline; and 

23 (B) submit the report described in sub24 section (c)(1). 
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1 (2) REQUIREMENTS APPLICABLE TO ENTITIES

2 ENTERING INTO CERTAIN AGREEMENTS.—An entity 

3 that enters into an agreement with a participant in 

4 the registry for the purpose of a carbon sequestra5 tion project shall not be required to comply with the 

6 requirements specified in paragraph (1) unless that 

7 entity is required to comply with the requirements 

8 by reason of an activity other than the agreement. 

9 (c) REPORTS.—

10 (1) REQUIRED REPORT.—Not later than July 

11 1st of the each calendar year beginning more than 

12 2 years after the date of enactment of this Act, but 

13 subject to paragraph (3), an entity described in sub14 section (a) shall submit to the Administrator a re15 port that states, for the preceding calendar year, the 

16 entity-wide greenhouse gas emissions (as reported at 

17 the facility level), including—

18 (A) the total quantity of direct greenhouse 

19 gas emissions from stationary sources, ex20 pressed in units of carbon dioxide equivalents; 

21 (B) the amount of petroleum products sold 

22 or imported by the entity and the amount of 

23 greenhouse gases, expressed in units of carbon 

24 dioxide equivalents, that would be emitted when 

25 these products are used for transportation in 
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1 the United States, as determined by the Admin2 istrator under section 301(b); 

3 (C) the amount of hydrofluorocarbons, 

4 perfluorocarbons, or sulfur hexafluoride, ex5 pressed in units of carbon dioxide equivalents, 

6 that are sold or imported by the entity and will 

7 ultimately be emitted in the United States, as 

8 determined by the Administrator under section 

9 301(d); and 

10 (D) such other categories of emissions as 

11 the Administrator determines in the regulations 

12 promulgated under section 201(c)(1) may be 

13 practicable and useful for the purposes of this 

14 Act, such as—

15 (i) indirect emissions from imported 

16 electricity, heat, and steam; 

17 (ii) process and fugitive emissions; 

18 and 

19 (iii) production or importation of 

20 greenhouse gases. 

21 (2) VOLUNTARY REPORTING.—An entity de22 scribed in subsection (a) may (along with estab23 lishing a baseline and reporting emissions under this 

24 section)—
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•S 342 IS 

1 (A) submit a report described in paragraph 

2 (1) before the date specified in that paragraph 

3 for the purposes of achieving and 

4 commoditizing greenhouse gas reductions 

5 through use of the registry and for other pur6 poses; and 

7 (B) submit to the Administrator, for inclu8 sion in the registry, information that has been 

9 verified in accordance with regulations promul10 gated under section 201(c)(1) and that relates 

11 to—

12 (i) any activity that resulted in the 

13 net reduction of the greenhouse gas emis14 sions of the entity or a net increase in se15 questration by the entity that were carried 

16 out during or after 1990 and before the es17 tablishment of the database, verified in ac18 cordance with regulations promulgated 

19 under section 201(c)(1), and submitted to 

20 the Administrator before the date that is 4 

21 years after the date of enactment of this 

22 Act; and 

23 (ii) with respect to the calendar year 

24 preceding the calendar year in which the 

25 information is submitted, any project or 
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•S 342 IS 

1 activity that resulted in the net reduction 

2 of the greenhouse gas emissions of the en3 tity or a net increase in net sequestration 

4 by the entity. 

5 (3) PROVISION OF VERIFICATION INFORMATION

6 BY REPORTING ENTITIES.—Each entity that submits 

7 a report under this subsection shall provide informa8 tion sufficient for the Administrator to verify, in ac9 cordance with measurement and verification methods 

10 and standards developed under section 204, that the 

11 greenhouse gas report of the reporting entity—

12 (A) has been accurately reported; and 

13 (B) in the case of each voluntary report 

14 under paragraph (2), represents—

15 (i) actual reductions in direct green16 house gas emissions—

17 (I) relative to historic emission 

18 levels of the entity; and 

19 (II) after accounting for any in20 creases in indirect emissions described 

21 in paragraph (1)(C)(i); or 

22 (ii) actual increases in net sequestra23 tion. 

24 (4) FAILURE TO SUBMIT REPORT.—An entity 

25 that participates or has participated in the registry 
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•S 342 IS 

1 and that fails to submit a report required under this 

2 subsection shall be prohibited from using, or allow3 ing another entity to use, its registered emissions re4 ductions or increases in sequestration to satisfy the 

5 requirements of section 301. 

6 (5) INDEPENDENT THIRD-PARTY VERIFICA7 TION.—To meet the requirements of this section and 

8 section 203, an entity that is required to submit a 

9 report under this section may—

10 (A) obtain independent third-party 

11 verification; and 

12 (B) present the results of the third-party 

13 verification to the Administrator. 

14 (6) AVAILABILITY OF DATA.—

15 (A) IN GENERAL.—The Administrator 

16 shall ensure that information in the database 

17 is—

18 (i) published; and 

19 (ii) accessible to the public, including 

20 in electronic format on the Internet. 

21 (B) EXCEPTION.—Subparagraph (A) shall 

22 not apply in any case in which the Adminis23 trator determines that publishing or otherwise 

24 making available information described in that 

25 subparagraph poses a risk to national security 
32

•S 342 IS 

1 or discloses confidential business information 

2 that can not be derived from information that 

3 is otherwise publicly available and that would 

4 cause competitive harm if published. 

5 (7) DATA INFRASTRUCTURE.—The Adminis6 trator shall ensure, to the maximum extent prac7 ticable, that the database uses, and is integrated 

8 with, Federal, State, and regional greenhouse gas 

9 data collection and reporting systems in effect as of 

10 the date of enactment of this Act. 

11 (8) ADDITIONAL ISSUES TO BE CONSIDERED.—

12 In promulgating the regulations under section 

13 201(c)(1) and implementing the database, the Ad14 ministrator shall take into consideration a broad 

15 range of issues involved in establishing an effective 

16 database, including—

17 (A) the data and information systems and 

18 measures necessary to identify, track, and 

19 verify greenhouse gas emissions in a manner 

20 that will encourage private sector trading and 

21 exchanges; 

22 (B) the greenhouse gas reduction and se23 questration measurement and estimation meth24 ods and standards applied in other countries, as 

25 applicable or relevant; 
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•S 342 IS 

1 (C) the extent to which available fossil 

2 fuels, greenhouse gas emissions, and greenhouse 

3 gas production and importation data are ade4 quate to implement the database; and 

5 (D) the differences in, and potential 

6 uniqueness of, the facilities, operations, and 

7 business and other relevant practices of persons 

8 and entities in the private and public sectors 

9 that may be expected to participate in the data10 base. 

11 (d) ANNUAL REPORT.—The Administrator shall pub12 lish an annual report that—

13 (1) describes the total greenhouse gas emissions 

14 and emission reductions reported to the database 

15 during the year covered by the report; 

16 (2) provides entity-by-entity and sector-by-sec17 tor analyses of the emissions and emission reduc18 tions reported; 

19 (3) describes the atmospheric concentrations of 

20 greenhouse gases; 

21 (4) provides a comparison of current and past 

22 atmospheric concentrations of greenhouse gases; and 

23 (5) describes the activity during the year cov24 ered by the period in the trading of greenhouse gas 

25 emission allowances. 
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•S 342 IS 

1 SEC. 204. MEASUREMENT AND VERIFICATION. 

2 (a) STANDARDS.—

3 (1) IN GENERAL.—Not later than 1 year after 

4 the date of enactment of this Act, the Secretary 

5 shall establish by rule, in coordination with the Ad6 ministrator, the Secretary of Energy, and the Sec7 retary of Agriculture, comprehensive measurement 

8 and verification methods and standards to ensure a 

9 consistent and technically accurate record of green10 house gas emissions, emission reductions, sequestra11 tion, and atmospheric concentrations for use in the 

12 registry. 

13 (2) REQUIREMENTS.—The methods and stand14 ards established under paragraph (1) shall include—

15 (A) a requirement that a covered entity 

16 use a continuous emissions monitoring system, 

17 or another system of measuring or estimating 

18 emissions that is determined by the Secretary 

19 to provide information with precision, reli20 ability, accessibility, and timeliness similar to 

21 that provided by a continuous emissions moni22 toring system where technologically feasible; 

23 (B) establishment of standardized meas24 urement and verification practices for reports 

25 made by all entities participating in the reg26 istry, taking into account—
35

•S 342 IS 

1 (i) protocols and standards in use by 

2 entities requiring or desiring to participate 

3 in the registry as of the date of develop4 ment of the methods and standards under 

5 paragraph (1); 

6 (ii) boundary issues, such as leakage; 

7 (iii) avoidance of double counting of 

8 greenhouse gas emissions and emission re9 ductions; 

10 (iv) protocols to prevent a covered en11 tity from avoiding the requirements of this 

12 Act by reorganization into multiple entities 

13 that are under common control; and 

14 (v) such other factors as the Sec15 retary, in consultation with the Adminis16 trator, determines to be appropriate; 

17 (C) establishment of methods of—

18 (i) estimating greenhouse gas emis19 sions, for those cases in which the Sec20 retary determines that methods of moni21 toring, measuring or estimating such emis22 sions with precision, reliability, accessi23 bility, and timeliness similar to that pro24 vided by a continuous emissions monitoring 
36

•S 342 IS 

1 system are not technologically feasible at 

2 present; and 

3 (ii) reporting the accuracy of such es4 timations; 

5 (D) establishment of measurement and 

6 verification standards applicable to actions 

7 taken to reduce, avoid, or sequester greenhouse 

8 gas emissions; 

9 (E) in coordination with the Secretary of 

10 Agriculture, standards to measure the results of 

11 the use of carbon sequestration and carbon re12 capture technologies, including—

13 (i) soil carbon sequestration practices; 

14 and 

15 (ii) forest preservation and reforest16 ation activities that adequately address the 

17 issues of permanence, leakage, and 

18 verification; 

19 (E) establishment of such other measure20 ment and verification standards as the Sec21 retary, in consultation with the Secretary of Ag22 riculture, the Administrator, and the Secretary 

23 of Energy, determines to be appropriate; 

24 (F) establishment of standards for obtain25 ing the Secretary’s approval of the suitability of 
37

•S 342 IS 

1 geological storage sites that include evaluation 

2 of both the geology of the site and the entity’s 

3 capacity to manage the site; and 

4 (G) establishment of other features that, 

5 as determined by the Secretary, will allow enti6 ties to adequately establish a fair and reliable 

7 measurement and reporting system. 

8 (b) REVIEW AND REVISION.—The Secretary shall pe9 riodically review, and revise as necessary, the methods and 

10 standards developed under subsection (a). 

11 (c) PUBLIC PARTICIPATION.—The Secretary shall—

12 (1) make available to the public for comment, 

13 in draft form and for a period of at least 90 days, 

14 the methods and standards developed under sub15 section (a); and 

16 (2) after the 90-day period referred to in para17 graph (1), in coordination with the Secretary of En18 ergy, the Secretary of Agriculture, and the Adminis19 trator, adopt the methods and standards developed 

20 under subsection (a) for use in implementing the 

21 database. 

22 (d) EXPERTS AND CONSULTANTS.—

23 (1) IN GENERAL.—The Secretary may obtain 

24 the services of experts and consultants in the private 

25 and nonprofit sectors in accordance with section 
38

•S 342 IS 

1 3109 of title 5, United States Code, in the areas of 

2 greenhouse gas measurement, certification, and 

3 emission trading. 

4 (2) AVAILABLE ARRANGEMENTS.—In obtaining 

5 any service described in paragraph (1), the Sec6 retary may use any available grant, contract, cooper7 ative agreement, or other arrangement authorized by 

8 law. 

9 TITLE III—MARKET-DRIVEN 

10 GREENHOUSE GAS REDUCTIONS 

11 Subtitle A—Emission Reduction 

12 Requirements; Use of Tradeable 

13 Allowances 

14 SEC. 301. COVERED ENTITIES MUST SUBMIT ALLOWANCES 

15 FOR EMISSIONS. 

16 (a) IN GENERAL.—Beginning with calendar year 

17 2010—

18 (1) each covered entity in the electric genera19 tion, industrial, and commercial sectors shall submit 

20 to the Administrator one tradeable allowance for 

21 every metric ton of greenhouse gases, measured in 

22 units of carbon dioxide equivalents, that it emits 

23 from stationary sources, except those described in 

24 paragraph (2); 
39

•S 342 IS 

1 (2) each producer or importer of 

2 hydrofluorocarbons, perfluorocarbons, or sulfur 

3 hexafluoride that is a covered entity shall submit to 

4 the Administrator one tradeable allowance for every 

5 metric ton of hydrofluorocarbons, perfluorocarbons, 

6 or sulfur hexafluoride, measured in units of carbon 

7 dioxide equivalents; that it produces or imports and 

8 that will ultimately be emitted in the United States, 

9 as determined by the Administrator under sub10 section (d) and 

11 (3) each petroleum refiner or importer that is 

12 a covered entity shall submit one tradeable allowance 

13 for every unit of petroleum product it sells that will 

14 produce one metric ton of greenhouse gases, meas15 ured in units of carbon dioxide equivalents, as deter16 mined by the Administrator under subsection (b), 

17 when used for transportation. 

18 (b) DETERMINATION OF TRANSPORTATION SECTOR

19 AMOUNT.—For the transportation sector, the Adminis20 trator shall determine the amount of greenhouse gases, 

21 measured in units of carbon dioxide equivalents, that will 

22 be emitted when petroleum products are used for trans23 portation. 

24 (c) EXCEPTION FOR CERTAIN DEPOSITED EMIS25 SIONS.—Notwithstanding subsection (a), a covered entity 
40

•S 342 IS 

1 is not required to submit a tradeable allowance for any 

2 amount of greenhouse gas that would otherwise have been 

3 emitted from a facility under the ownership or control of 

4 that entity if—

5 (1) the emission is deposited in a geological 

6 storage facility approved by the Administrator under 

7 section 204(a)(2)(F); and 

8 (2) the entity agrees to submit tradeable allow9 ances for any portion of the deposited emission that 

10 is subsequently emitted from that facility. 

11 (d) DETERMINATION OF HYDROFLUROCARBON, 

12 PERFLUOROCARBON, AND SULFUR HEXAFLUORIDE

13 AMOUNT.—The Administrator shall determine the 

14 amounts of hydrofluorocarbons, perfluorocarbons, or sul15 fur hexafluoride, measured in units of carbon dioxide 

16 equivalents, that will be deemed to be emitted for purposes 

17 of this Act. 

18 SEC. 302. COMPLIANCE. 

19 (a) IN GENERAL.—

20 (1) SOURCE OF TRADEABLE ALLOWANCES

21 USED.—A covered entity may use a tradeable allow22 ance to meet the requirements of this section with23 out regard to whether the tradeable allowance was 

24 allocated to it under subtitle B or acquired from an-
41

•S 342 IS 

1 other entity or the Climate Change Credit Corpora2 tion established under section 351. 

3 (2) VERIFICATION BY ADMINISTRATOR.—At 

4 various times during each year, the Administrator 

5 shall determine whether each covered entity has met 

6 the requirements of this section. In making that de7 termination, the Administrator shall—

8 (A) take into account the tradeable allow9 ances submitted by the covered entity to the 

10 Administrator; and 

11 (B) retire the serial number assigned to 

12 each such tradeable allowance. 

13 (b) ALTERNATIVE MEANS OF COMPLIANCE.—For the 

14 years 2010 and after, a covered entity may satisfy up to 

15 15 percent of its total allowance submission requirement 

16 under this section by—

17 (1) submitting tradeable allowances from an18 other nation’s market in greenhouse gas emissions 

19 if—

20 (A) the Secretary determines that the 

21 other nation’s system for trading in greenhouse 

22 gas emissions is complete, accurate, and trans23 parent and reviews that determination at least 

24 once every 5 years; 
42

•S 342 IS 

1 (B) the other nation has adopted enforce2 able limits on its greenhouse gas emissions 

3 which the tradeable allowances were issued to 

4 implement; and 

5 (C) the covered entity certifies that the 

6 tradeable allowance has been retired unused in 

7 the other nation’s market; 

8 (2) submitting a registered net increase in se9 questration, as registered in the database, adjusted, 

10 if necessary, to comply with the accounting stand11 ards and methods established under section 372; 

12 (3) submitting a greenhouse gas emissions re13 duction (other than a registered net increase in se14 questration) that was registered in the database by 

15 a person that is not a covered entity; or 

16 (4) submitting credits obtained from the Ad17 ministrator under section 303. 

18 (c) DEDICATED PROGRAM FOR SEQUESTRATION IN

19 AGRICULTURAL SOILS.—If a covered entity chooses to 

20 satisfy 15 percent of its total allowance submission re21 quirements under the provisions of subsection (b), it shall 

22 satisfy up to 1.5 percent of its total allowance submission 

23 requirement by submitting registered net increases in se24 questration in agricultural soils, as registered in the data-
43

•S 342 IS 

1 base, adjusted, if necessary, to comply with the accounting 

2 standards and methods established under section 371. 

3 SEC. 303. BORROWING AGAINST FUTURE REDUCTIONS. 

4 (a) IN GENERAL.—The Administrator shall establish 

5 a program under which a covered entity may—

6 (1) receive a credit in the current calendar year 

7 for anticipated reductions in emissions in a future 

8 calendar year; and 

9 (2) use the credit in lieu of a tradeable allow10 ance to meet the requirements of this Act for the 

11 current calendar year, subject to the limitation im12 posed by section 302(b). 

13 (b) DETERMINATION OF TRADEABLE ALLOWANCE

14 CREDITS.—The Administrator may make credits available 

15 under subsection (a) only for anticipated reductions in 

16 emissions that—

17 (1) are attributable to the realization of capital 

18 investments in equipment, the construction, recon19 struction, or acquisition of facilities, or the deploy20 ment of new technologies—

21 (A) for which the covered entity has exe22 cuted a binding contract and secured, or ap23 plied for, all necessary permits and operating or 

24 implementation authority; 
44

•S 342 IS 

1 (B) that will not become operational within 

2 the current calendar year; and 

3 (C) that will become operational and begin 

4 to reduce emissions from the covered entity 

5 within 5 years after the year in which the credit 

6 is used; and 

7 (2) will be realized within 5 years after the year 

8 in which the credit is used. 

9 (c) CARRYING COST.—If a covered entity uses a cred10 it under this section to meet the requirements of this Act 

11 for a calendar year (referred to as the use year), the 

12 tradeable allowance requirement for the year from which 

13 the credit was taken (referred to as the source year) shall 

14 be increased by an amount equal to—

15 (1) 10 percent for each credit borrowed from 

16 the source year; multiplied by 

17 (2) the number of years beginning after the use 

18 year and before the source year. 

19 (d) MAXIMUM BORROWING PERIOD.—A credit from 

20 a year beginning more than 5 years after the current year 

21 may not be used to meet the requirements of this Act for 

22 the current year. 

23 (e) FAILURE TO ACHIEVE REDUCTIONS GENER24 ATING CREDIT.—If a covered entity that uses a credit 

25 under this section fails to achieve the anticipated reduc-
45

•S 342 IS 

1 tion for which the credit was granted for the year from 

2 which the credit was taken, then—

3 (1) the covered entity’s requirements under this 

4 Act for that year shall be increased by the amount 

5 of the credit, plus the amount determined under 

6 subsection (c); 

7 (2) any tradeable allowances submitted by the 

8 covered entity for that year shall be counted first 

9 against the increase in those requirements; and 

10 (3) the covered entity may not use credits 

11 under this section to meet the increased require12 ments. 

13 SEC. 304. OTHER USES OF TRADEABLE ALLOWANCES. 

14 (a) IN GENERAL.—Tradeable allowances may be sold, 

15 exchanged, purchased, retired, or used as provided in this 

16 section. 

17 (b) INTERSECTOR TRADING.—Covered entities may 

18 purchase or otherwise acquire tradeable allowances from 

19 other covered sectors to satisfy the requirements of section 

20 301. 

21 (c) CLIMATE CHANGE CREDIT ORGANIZATION.—The 

22 Climate Change Credit Corporation established under sec23 tion 351 may sell tradeable allowances allocated to it 

24 under section 332(a)(2) to any covered entity or to any 

25 investor, broker, or dealer in such tradeable allowances. 
46

•S 342 IS 

1 The Climate Change Credit Corporation shall use all pro2 ceeds from such sales in accordance with the provisions 

3 of section 352. 

4 (d) BANKING OF TRADEABLE ALLOWANCES.—Not5 withstanding the requirements of section 301, a covered 

6 entity that has more than a sufficient amount of tradeable 

7 allowances to satisfy the requirements of section 301, may 

8 refrain from submitting a tradeable allowance to satisfy 

9 the requirements in order to sell, exchange, or use the 

10 tradeable allowance in the future. 

11 SEC. 305. EXEMPTION OF SOURCE CATEGORIES. 

12 (a) IN GENERAL.—The Administrator may grant an 

13 exemption from the requirements of this Act to a source 

14 category if the Administrator determines, after public no15 tice and comment, that it is not feasible to measure or 

16 estimate emissions from that source category, until such 

17 time as measurement or estimation becomes feasible. 

18 (b) REDUCTION OF LIMITATIONS.—If the Adminis19 trator exempts a source category under subsection (a), the 

20 Administrator shall also reduce the total tradeable allow21 ances under section 331(a)(1) by the amount of green22 house gas emissions that the exempted source category 

23 emitted in calendar year 2000, as identified in the 2000 

24 Inventory. 
47

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1 (c) LIMITATION ON EXEMPTION.—The Administrator 

2 may not grant an exemption under subsection (a) to car3 bon dioxide produced from fossil fuel. 

4 Subtitle B—Establishment and 

5 Allocation of Tradeable Allowances 

6 SEC. 331. ESTABLISHMENT OF TRADEABLE ALLOWANCES. 

7 (a) IN GENERAL.—The Administrator shall promul8 gate regulations to establish tradeable allowances, denomi9 nated in units of carbon dioxide equivalents, for calendar 

10 years beginning after 2009, equal to—

11 (1) 5896 million metric tons, measured in units 

12 of carbon dioxide equivalents, reduced by 

13 (2) the amount of emissions of greenhouse 

14 gases in calendar year 2000 from non-covered enti15 ties. 

16 (b) SERIAL NUMBERS.—The Administrator shall as17 sign a unique serial number to each tradeable allowance 

18 established under subsection (a), and shall take such ac19 tion as may be necessary to prevent counterfeiting of 

20 tradeable allowances. 

21 (c) NATURE OF TRADEABLE ALLOWANCES.—A 

22 tradeable allowance is not a property right, and nothing 

23 in this title or any other provision of law limits the author24 ity of the United States to terminate or limit a tradeable 

25 allowance. 
48

•S 342 IS 

1 (d) NON-COVERED ENTITY.—In this section: 

2 (1) IN GENERAL.—The term ‘‘non-covered enti3 ty’’ means an entity that—

4 (A) owns or controls a source of green5 house gas emissions in the electric power, in6 dustrial, or commercial sectors of the United 

7 States economy (as defined in the Inventory), 

8 refines or imports petroleum products for use in 

9 transportation, or produces or imports 

10 hydrofluorocarbons, perfluorocarbons, or sulfur 

11 hexafluoride; and 

12 (B) is not a covered entity. 

13 (2) EXCEPTION.—Notwithstanding paragraph 

14 (1), an entity that is a covered entity for any cal15 endar year beginning after 2009 shall not be consid16 ered to be a non-covered entity for purposes of sub17 section (a) only because it emitted, or its products 

18 would have emitted, 10,000 metric tons or less of 

19 greenhouse gas, measured in units of carbon dioxide 

20 equivalents, in the year 2000. 

21 SEC. 332. DETERMINATION OF TRADEABLE ALLOWANCE 

22 ALLOCATIONS. 

23 (a) IN GENERAL.—The Secretary shall determine—
49

•S 342 IS 

1 (1) the amount of tradeable allowances to be al2 located to each covered sector of that sector’s allot3 ments; and 

4 (2) the amount of tradeable allowances to be al5 located to the Climate Change Credit Corporation 

6 established under section 351. 

7 (b) ALLOCATION FACTORS.—In making the deter8 mination required by subsection (a), the Secretary shall 

9 consider—

10 (1) the distributive effect of the allocations on 

11 household income and net worth of individuals; 

12 (2) the impact of the allocations on corporate 

13 income, taxes, and asset value; 

14 (3) the impact of the allocations on income lev15 els of consumers and on their energy consumption; 

16 (4) the effects of the allocations in terms of eco17 nomic efficiency; 

18 (5) the ability of covered entities to pass 

19 through compliance costs to their customers; 

20 (6) the degree to which the amount of alloca21 tions to the covered sectors should decrease over 

22 time; and 

23 (7) the need to maintain the international com24 petitiveness of United States manufacturing and 
50

•S 342 IS 

1 avoid the additional loss of United States manufac2 turing jobs. 

3 (c) ALLOCATION RECOMMENDATIONS AND IMPLE4 MENTATION.—Before allocating or providing tradeable al5 lowances under subsection (a) and within 24 months after 

6 the date of enactment of this Act, the Secretary shall sub7 mit the determinations under subsection (a) to the Senate 

8 Committee on Commerce, Science, and Transportation, 

9 the Senate Committee on Environment and Public Works, 

10 the House of Representatives Committee on Science, and 

11 the House of Representatives Committee on Energy and 

12 Commerce. The Secretary’s determinations under para13 graph (1), including the allocations and provision of 

14 tradeable allowances pursuant to that determination, are 

15 deemed to be a major rule (as defined in section 804(2) 

16 of title 5, United States Code), and subject to the provi17 sions of chapter 8 of that title. 

18 SEC. 333. ALLOCATION OF TRADEABLE ALLOWANCES. 

19 (a) IN GENERAL.—Beginning with calendar year 

20 2010 and after taking into account any initial allocations 

21 under section 334, the Administrator shall—

22 (1) allocate to each covered sector that sector’s 

23 allotments determined by the Administrator under 

24 section 332 (adjusted for any such initial allocations 
51

•S 342 IS 

1 and the allocation to the Climate Change Credit 

2 Corporation established under section 351); and 

3 (2) allocate to the Climate Change Credit Cor4 poration established under section 351 the tradeable 

5 allowances allocable to that Corporation. 

6 (b) INTRASECTORIAL ALLOTMENTS.—The Adminis7 trator shall, by regulation, establish a process for the allo8 cation of tradeable allowances under this section, without 

9 cost to covered entities, that will—

10 (1) encourage investments that increase the ef11 ficiency of the processes that produce greenhouse 

12 gas emissions; 

13 (2) minimize the costs to the government of al14 locating the tradeable allowances; 

15 (3) not penalize a covered entity for emissions 

16 reductions made before 2010 and registered with the 

17 database; and 

18 (4) provide sufficient allocation for new en19 trants into the sector. 

20 (c) POINT SOURCE ALLOCATION.—The Adminis21 trator shall allocate the tradeable allowances for the elec22 tricity generation, industrial, and commercial sectors to 

23 the entities owning or controlling the point sources of 

24 greenhouse gas emissions within that sector. 
52

•S 342 IS 

1 (d) HYDROFLUOROCARBONS, PERFLUOROCARBONS, 

2 AND SULFUR HEXAFLUORIDE.—The Administrator shall 

3 allocate the tradeable allowances for producers or import4 ers of hydrofluorocarbons, perfluorocarbons, or sulfur 

5 hexafluoride to such producers or importers. 

6 (e) SPECIAL RULE FOR ALLOCATION WITHIN THE

7 TRANSPORTATION SECTOR.—The Administrator shall al8 locate the tradeable allowances for the transportation sec9 tor to petroleum refiners or importers that produce or im10 port petroleum products that will be used as fuel for trans11 portation. 

12 (f) ALLOCATIONS TO RURAL ELECTRIC COOPERA13 TIVES.—For each electric generating unit that is owned 

14 or operated by a rural electric cooperative, the Adminis15 trator shall allocate each year, at no cost, allowances in 

16 an amount equal to the greenhouse gas emissions of each 

17 such unit in 2000, plus an amount equal to the average 

18 emissions growth expected for all such units. The alloca19 tions shall be offset from the allowances allocated to the 

20 Climate Change Credit Corporation. 

21 SEC. 334. ENSURING TARGET ADEQUACY. 

22 (a) IN GENERAL.—Beginning 2 years after the date 

23 of enactment of this Act, the Under Secretary of Com24 merce for Oceans and Atmosphere shall review the allow-
53

•S 342 IS 

1 ances established by section 331 no less frequently than 

2 biennially—

3 (1) to re-evaluate the levels established by that 

4 subsection, after taking into account the best avail5 able science and the most currently available data, 

6 and 

7 (2) to re-evaluate the environmental and public 

8 health impacts of specific concentration levels of 

9 greenhouse gases, 

10 to determine whether the allowances established by sub11 section (a) continue to be consistent with the objective of 

12 the United Nations’ Framework Convention on Climate 

13 Change of stabilizing levels of greenhouse gas emissions 

14 at a level that will prevent dangerous anthropogenic inter15 ference with the climate system. 

16 (b) REVIEW OF 2010 LEVELS.—The Under Secretary 

17 shall specifically review in 2008 the level established under 

18 section 331(a)(1), and transmit a report on his reviews, 

19 together with any recommendations, including legislative 

20 recommendations, for modification of the levels, to the 

21 Senate Committee on Commerce, Science, and Transpor22 tation, the Senate Committee on Environment and Public 

23 Works, the House of Representatives Committee on 

24 Science, and the House of Representatives Committee on 

25 Energy and Commerce. 
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•S 342 IS 

1 SEC. 335. INITIAL ALLOCATIONS FOR EARLY PARTICIPA2 TION AND ACCELERATED PARTICIPATION. 

3 Before making any allocations under section 333, the 

4 Administrator shall allocate—

5 (1) to any covered entity an amount of 

6 tradeable allowances equivalent to the amount of 

7 greenhouse gas emissions reductions registered by 

8 that covered entity in the national greenhouse gas 

9 database if—

10 (A) the covered entity has requested to use 

11 the registered reduction in the year of alloca12 tion; 

13 (B) the reduction was registered prior to 

14 2010; and 

15 (C) the Administrator retires the unique 

16 serial number assigned to the reduction under 

17 section 201(c)(3); and 

18 (2) to any covered entity that has entered into 

19 an accelerated participation agreement under section 

20 336, such tradeable allowances as the Administrator 

21 has determined to be appropriate under that section. 

22 SEC. 336. BONUS FOR ACCELERATED PARTICIPATION. 

23 (a) IN GENERAL.—If a covered entity executes an 

24 agreement with the Administrator under which it agrees 

25 to reduce its level of greenhouse gas emissions to a level 

26 no greater than the level of its greenhouse gas emissions 
55

•S 342 IS 

1 for calendar year 1990 by the year 2010, then, for the 

2 6-year period beginning with calendar year 2010, the Ad3 ministrator shall— 

4 (1) provide additional tradeable allowances to 

5 that entity when allocating allowances under section 

6 334 in order to recognize the additional emissions 

7 reductions that will be required of the covered entity; 

8 and 

9 (2) allow that entity to satisfy 20 percent of its 

10 requirements under section 301 by—

11 (A) submitting tradeable allowances from 

12 another nation’s market in greenhouse gas 

13 emissions under the conditions described in sec14 tion 312(b)(1); 

15 (B) submitting a registered net increase in 

16 sequestration, as registered in the National 

17 Greenhouse Gas Database established under 

18 section 201, and as adjusted by the appropriate 

19 sequestration discount rate established under 

20 section 371; or 

21 (C) submitting a greenhouse gas emission 

22 reduction (other than a registered net increase 

23 in sequestration) that was registered in the Na24 tional Greenhouse Gas Database by a person 

25 that is not a covered entity. 
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1 (b) TERMINATION.—An entity that executes an 

2 agreement described in subsection (a) may terminate the 

3 agreement at any time. 

4 (c) FAILURE TO MEET COMMITMENT.—If an entity 

5 that executes an agreement described in subsection (a) 

6 fails to achieve the level of emissions to which it committed 

7 by calendar year 2010—

8 (1) its requirements under section 301 shall be 

9 increased by the amount of any tradeable allowances 

10 provided to it under subsection (a)(1); and 

11 (2) any tradeable allowances submitted there12 after shall be counted first against the increase in 

13 those requirements. 

14 Subtitle C—Climate Change Credit 

15 Corporation 

16 SEC. 351. ESTABLISHMENT. 

17 (a) IN GENERAL.—The Climate Change Credit Cor18 poration is established as a nonprofit corporation without 

19 stock. The Corporation shall not be considered to be an 

20 agency or establishment of the United States Government. 

21 (b) APPLICABLE LAWS.—The Corporation shall be 

22 subject to the provisions of this title and, to the extent 

23 consistent with this title, to the District of Columbia Busi24 ness Corporation Act. 
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1 (c) BOARD OF DIRECTORS.—The Corporation shall 

2 have a board of directors of 5 individuals who are citizens 

3 of the United States, of whom 1 shall be elected annually 

4 by the board to serve as chairman. No more than 3 mem5 bers of the board serving at any time may be affiliated 

6 with the same political party. The members of the board 

7 shall be appointed by the President of the United States, 

8 by and with the advice and consent of the Senate and shall 

9 serve for terms of 5 years. 

10 SEC. 352. PURPOSES AND FUNCTIONS. 

11 (a) TRADING.—The Corporation— 

12 (1) shall receive and manage tradeable allow13 ances allocated to it under section 333(a)(2); and 

14 (2) shall buy and sell tradeable allowances, 

15 whether allocated to it under that section or ob16 tained by purchase, trade, or donation from other 

17 entities; but 

18 (3) may not retire tradeable allowances unused. 

19 (b) USE OF TRADEABLE ALLOWANCES AND PRO20 CEEDS.—

21 (1) IN GENERAL.—The Corporation shall use 

22 the tradeable allowances, and proceeds derived from 

23 its trading activities in tradeable allowances, to re24 duce costs borne by consumers as a result of the 
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1 greenhouse gas reduction requirements of this Act. 

2 The reductions—

3 (A) may be obtained by buy-down, subsidy, 

4 negotiation of discounts, consumer rebates, or 

5 otherwise; 

6 (B) shall be, as nearly as possible, equi7 tably distributed across all regions of the 

8 United States; and 

9 (C) may include arrangements for pref10 erential treatment to consumers who can least 

11 afford any such increased costs. 

12 (2) TRANSITION ASSISTANCE TO DISLOCATED

13 WORKERS AND COMMUNITIES.—The Corporation 

14 shall allocate a percentage of the proceeds derived 

15 from its trading activities in tradeable allowances to 

16 provide transition assistance to dislocated workers 

17 and communities. Transition assistance may take 

18 the form of—

19 (A) grants to employers, employer associa20 tions, and representatives of employees—

21 (i) to provide training, adjustment as22 sistance, and employment services to dis23 located workers; and 
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1 (ii) to make income-maintenance and 

2 needs-related payments to dislocated work3 ers; and 

4 (B) grants to State and local governments 

5 to assist communities in attracting new employ6 ers or providing essential local government serv7 ices. 

8 (3) PHASE-OUT OF TRANSITION ASSISTANCE.—

9 The percentage allocated by the Corporation under 

10 paragraph (2)—

11 (A) shall be 20 percent for 2010; 

12 (B) shall be reduced by 2 percentage 

13 points each year thereafter; and 

14 (C) may not be reduced below zero. 

15 (4) ADAPTATION AND MITIGATION ASSISTANCE

16 FOR LOW-INCOME PERSONS AND COMMUNITIES.—

17 The Corporation shall allocate a portion of the pro18 ceeds derived from its trading activities to funding 

19 climate change adaptation and mitigation programs 

20 to assist low-income populations identified in the re21 port submitted under section 106(b) as having par22 ticular needs in addressing the impact of climate 

23 change. 

24 (5) TECHNOLOGY DEPLOYMENT PROGRAMS.—

25 The Corporation shall establish and carry out a pro-
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1 gram, through direct grants, revolving loan pro2 grams, or other financial measures, to provide sup3 port for the deployment of technology to assist in 

4 compliance with this Act by distributing the pro5 ceeds from no less than 10 percent of the total al6 lowances allocated to it. The support shall include 

7 the following: 

8 (A) COAL GASIFICATION COMBINED-CYCLE

9 AND GEOLOGICAL CARBON STORAGE PRO10 GRAM.—The Corporation shall establish and 

11 carry out a program, through direct grants, to 

12 provide incentives for the repowering of existing 

13 facilities or construction of new facilities pro14 ducing electricity or other products from coal 

15 gasification combined-cycle plants that capture 

16 and geologically store at least 90 percent of the 

17 carbon dioxide produced at the facility in ac18 cordance with requirements established by the 

19 Administrator to ensure the permanence of the 

20 storage and that such storage will not cause or 

21 contribute to significant adverse effects on pub22 lic health or the environment. The Corporation 

23 shall ensure that no less than 20 percent of the 

24 funding under this program is distributed to 

25 rural electric cooperatives. 
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1 (B) AGRICULTURAL PROGRAMS.—The Cor2 poration shall establish and carry out a pro3 gram, through direct grants, revolving loan pro4 grams, or other financial measures, to provide 

5 incentives for greenhouse gas emissions reduc6 tions or net increases in greenhouse gas seques7 tration on agricultural lands. The program shall 

8 include incentives for—

9 (i) production of wind energy on agri10 cultural lands; 

11 (ii) agricultural management practices 

12 that achieve verified, incremental increases 

13 in net carbon sequestration, in accordance 

14 with the requirements established by the 

15 Administrator under section 371; and 

16 (iii) production of renewable fuels 

17 that, after consideration of the energy 

18 needed to produce such fuels, result in a 

19 net reduction in greenhouse gas emissions. 

20 Subtitle D—Sequestration 

21 Accounting; Penalties 

22 SEC. 371. SEQUESTRATION ACCOUNTING. 

23 (a) SEQUESTRATION ACCOUNTING.—If a covered en24 tity uses a registered net increase in sequestration to sat25 isfy the requirements of section 301 for any year, that 
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1 covered entity shall submit information to the Adminis2 trator every 5 years thereafter sufficient to allow the Ad3 ministrator to determine, using the methods and stand4 ards created under section 204, whether that net increase 

5 in sequestration still exists. Unless the Administrator de6 termines that the net increase in sequestration continues 

7 to exist, the covered entity shall offset any loss of seques8 tration by submitting additional tradeable allowances of 

9 equivalent amount in the calender year following that de10 termination. 

11 (b) REGULATIONS REQUIRED.—The Secretary, act12 ing through the Under Secretary of Commerce for Science 

13 and Technology, in coordination with the Secretary of Ag14 riculture, the Secretary of Energy, and the Administrator, 

15 shall issue regulations establishing the sequestration ac16 counting rules for all classes of sequestration projects. 

17 (c) CRITERIA FOR REGULATIONS.—In issuing regula18 tions under this section, the Secretary shall use the fol19 lowing criteria: 

20 (1) If the range of possible amounts of net in21 crease in sequestration for a particular class of se22 questration project is not more than 10 percent of 

23 the median of that range, the amount of sequestra24 tion awarded shall be equal to the median value of 

25 that range. 
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1 (2) If the range of possible amounts of net in2 crease in sequestration for a particular class of se3 questration project is more than 10 percent of the 

4 median of that range, the amount of sequestration 

5 awarded shall be equal to the fifth percentile of that 

6 range. 

7 (3) The regulations shall include procedures for 

8 accounting for potential leakage from sequestration 

9 projects and for ensuring that any registered in10 crease in sequestration is in addition that which 

11 would have occurred if this Act had not been en12 acted. 

13 (d) UPDATES.—The Secretary shall update the se14 questration accounting rules for every class of sequestra15 tion project at least once every 5 years. 

16 SEC. 372. PENALTIES. 

17 Any covered entity that fails to meet the require18 ments of section 301 for a year shall be liable for a civil 

19 penalty, payable to the Administrator, equal to thrice the 

20 market value (determined as of the last day of the year 

21 at issue) of the tradeable allowances that would be nec22 essary for that covered entity to meet those requirements 

23 on the date of the emission that resulted in the violation.

Æ