I 

111TH CONGRESS 

1ST SESSION H. R. 1666 

To amend the Internal Revenue Code of 1986 to establish an auction and 

revenue collection mechanism for a carbon market that ensures price 

stability with environmental integrity. 

IN THE HOUSE OF REPRESENTATIVES 

MARCH 23, 2009 

Mr. DOGGETT (for himself, Mr. COOPER, Mr. SHULER, Mr. THOMPSON of 

California, Mr. BLUMENAUER, Mr. STARK, Mr. LEWIS of Georgia, Ms. 

BERKLEY, Ms. LINDA T. SA ́NCHEZ of California, Mr. YARMUTH, Mr. 

BRADY of Pennsylvania, Mr. COHEN, Mr. FATTAH, Mr. JOHNSON of 

Georgia, Mr. ROTHMAN of New Jersey, Mr. SIRES, Mr. NADLER of New 

York, Mr. FARR, Mr. CUMMINGS, Ms. CLARKE, Mr. ACKERMAN, and Ms. 

EDDIE BERNICE JOHNSON of Texas) introduced the following bill; which 

was referred to the Committee on Ways and Means, and in addition to 

the Committee on Energy and Commerce, for a period to be subsequently 

determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned 

A BILL 

To amend the Internal Revenue Code of 1986 to establish 

an auction and revenue collection mechanism for a carbon market that ensures price stability with environmental integrity. 

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 ‘‘Safe Markets Develop3 ment Act of 2009’’. 

4 SEC. 2. FINDINGS. 

5 The Congress finds— 

6 (1) a market-based, national emissions cap and 

7 trade program for greenhouse gases shall help meet 

8 national mitigation goals with a high degree of cer9 tainty while creating a new market for emissions al10 lowances; 

11 (2) ensuring a smooth startup of the program 

12 is critical for meeting short- and long-term emissions 

13 goals and maintaining public and political support 

14 for the program; 

15 (3) the economy-wide scale of the new allowance 

16 market and participation in the market of many reg17 ulated entities with little or no experience with cap 

18 and trade programs call for a careful startup phase 

19 for the program; 

20 (4) stable and predictable prices for allowances 

21 shall support development of cost-effective mitigation 

22 technologies and ease the transition for businesses 

23 and consumers making long-term investment deci24 sions; 

25 (5) recent experiences in the oil, housing, elec26 tricity and financial markets suggest that many 


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1 markets are subject to boom and bust cycles and can 

2 be vulnerable to market manipulation or speculative 

3 excesses and that lessons from these experiences 

4 should guide the design of the new cap and trade 

5 program; and 

6 (6) the risks of speculative excess and market 

7 manipulation are highest in the initial period of a 

8 cap and trade program while the regulatory systems 

9 to monitor allowance markets are under development 

10 and regulated sources are less experienced in market 

11 participation. 

12 SEC. 3. PURPOSES. 

13 The purposes of this Act are to— 

14 (1) establish an auction mechanism for the col15 lection of revenue that ensures a smooth price path 

16 while achieving the emissions reductions necessary to 

17 stop climate change; and 

18 (2) direct the revenue raised from the auction 

19 to a trust fund to be used for important public pur20 poses. 


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1 SEC. 4. ISSUING, AUCTIONING, AND ADMINISTERING EMIS2 SIONS ALLOWANCES AND COLLECTION OF 

3 REVENUE. 

4 (a) IN GENERAL.—The Internal Revenue Code of 

5 1986 is amended by adding at the end the following new 

6 subtitle: 

7 ‘‘Subtitle L—Auction Based Carbon 

8 Market 

9 ‘‘CHAPTER 101—EMISSION ALLOWANCES 

‘‘ ‘‘Subchapter A. Allowance auctions and compliance obligations. 

‘‘ ‘‘Subchapter B. Climate Oversight and Coordination Board. 

‘‘ ‘‘Subchapter C. Auction Revenue Trust Fund. 

‘‘ ‘‘Subchapter D. Assurance of cumulation emissions. 

‘‘ ‘‘Subchapter E. Definitions. 

10 ‘‘Subchapter A—Allowance Auctions and 

11 Compliance Obligations 

‘‘Sec. 9901. Allowance auctions. 

‘‘Sec. 9902. Allowance transfer system. 

‘‘Sec. 9903. Compliance obligation. 

‘‘Sec. 9904. Excess Emissions Penalty. 

‘‘Sec. 9905. Allowance banking. 

12 ‘‘SEC. 9901. ALLOWANCE AUCTIONS. 

13 ‘‘(a) AUCTIONS.—The Secretary shall conduct auc14 tions of allowances in accordance with procedures estab15 lished by the Board established under subchapter B to 

16 meet the target allowance price for the year determined 

17 by the Board. The auction schedule is as follows: 

18 ‘‘(1) Four auctions shall be undertaken during 

19 each trading year. 


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1 ‘‘(2) The first auction of each trading year shall 

2 occur between April and June and at least three 

3 weeks after the Board announces a target price for 

4 the trading year. 

5 ‘‘(3) The fourth auction for each trading year 

6 shall be in the last month (March) of the trading 

7 year. 

8 ‘‘(b) AUCTION REVENUE.—All revenue from the auc9 tions under this section shall be deposited in the Auction 

10 Revenue Trust Fund established under subchapter C. 

11 Amounts deposited in such trust fund may be used, sub12 ject to annual appropriation, only for the purposes speci13 fied in other provisions of law. 

14 ‘‘SEC. 9902. ALLOWANCE TRANSFER SYSTEM. 

15 ‘‘(a) ESTABLISHMENT.—The Secretary shall estab16 lish a system for issuing, recording, and tracking emission 

17 allowances, and shall maintain a registry of allowances for 

18 each recorded holder of allowances. 

19 ‘‘(b) RECORDING REQUIREMENT.—The Secretary 

20 shall establish, by rule, a mechanism for the recording of 

21 emission allowances. 

22 ‘‘(c) HOLDERS NOT RESTRICTED.—The privilege of 

23 purchasing, holding, and transferring emission allowances 

24 shall not be restricted to the owners and operators of cov25 ered facilities. 


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1 ‘‘SEC. 9903. COMPLIANCE OBLIGATION. 

2 ‘‘(a) SUBMISSION OF ALLOWANCES.—Not later than 

3 90 days after the end of a calendar year, the owner or 

4 operator of a covered facility shall submit to the Secretary 

5 an emission allowance for each carbon dioxide equivalent 

6 attributable to such facility as calculated by the Adminis7 trator under the Emissions Registry. 

8 ‘‘(b) RETIREMENT OF ALLOWANCES.—Upon receipt 

9 of an emission allowance under subsection (a), the Sec10 retary shall retire the allowance, and shall reduce that cov11 ered entity’s registry account by a corresponding amount. 

12 The Secretary may also retire other allowances as speci13 fied in section 9905. 

14 ‘‘SEC. 9904. EXCESS EMISSIONS PENALTY. 

15 ‘‘(a) IMPOSITION OF PENALTY.—The owner or oper16 ator of any covered facility that fails for any year to sub17 mit to the Secretary, by the deadline described in section 

18 9903(a), 1 or more of the emission allowances due pursu19 ant to that section shall be liable for the payment to the 

20 Secretary of an excess emissions penalty on the date of 

21 such failure. 

22 ‘‘(b) AMOUNT.—The amount of an excess emissions 

23 penalty required to be paid under paragraph (1) shall be 

24 an amount equal to the product obtained by multiplying— 

25 ‘‘(1) the number of excess emission allowances 

26 that the owner or operator failed to submit; and 


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1 ‘‘(2) the greater of— 

2 ‘‘(A) $200; or 

3 ‘‘(B) 3 times the mean market value (as 

4 determined by the Secretary) of an emission al5 lowance during the calendar year for which the 

6 emission allowance were due. 

7 ‘‘(c) DEFICIENCY PROCEDURES NOT TO APPLY.— 

8 Subchapter B of chapter 63 (relating to deficiency proce9 dure for income, estate, gift, and certain excise taxes) shall 

10 not apply in respect of the assessment or collection of any 

11 penalty imposed by subsection (a). 

12 ‘‘(d) COORDINATION WITH OTHER PENALTIES.— 

13 The penalty imposed by this section shall be in addition 

14 to any other penalty imposed under any other provision 

15 of law. 

16 ‘‘SEC. 9905. ALLOWANCE BANKING. 

17 ‘‘In Phase I of the program, the Secretary shall allow 

18 a covered entity to retain, after the retirement of allow19 ances equal to its emissions in the previous calendar year, 

20 a sum of allowances equal to 5 percent of its emissions 

21 in the previous calendar year. The Secretary shall retire 

22 from a covered entity’s account any remaining allowances 

23 in excess of 5 percent of the entity’s emissions during the 

24 previous calendar year. The Secretary shall also retire all 


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1 allowances in the registry accounts of non-covered entities 

2 at the end of each trading year in Phase I of the program. 

3 ‘‘Subchapter B—Climate Oversight and 

4 Coordination Board 

‘‘Sec. 9911. Establishment of a Climate Program Oversight and Coordination 

Board. 

‘‘Sec. 9912. Initial expectations for annual emissions. 

5 ‘‘SEC. 9911. ESTABLISHMENT OF A CLIMATE PROGRAM 

6 OVERSIGHT AND COORDINATION BOARD. 

7 ‘‘(a) ESTABLISHMENT.—There is established a Cli8 mate Program Oversight and Coordination Board (here9 after in this Act referred to as the ‘Board’). 

10 ‘‘(b) PURPOSES.—The purposes of the Board are 

11 to— 

12 ‘‘(1) coordinate and review the work of the Sec13 retary, the Administrator, and other agencies in im14 plementing this Act; 

15 ‘‘(2) make forecasts and to set targets for green 

16 house gas allowance prices; 

17 ‘‘(3) review the functioning of carbon markets, 

18 including allowance auctions, secondary markets in 

19 allowances and associated financial instruments (in20 cluding futures, forwards, options, swaps, and other 

21 derivative contracts); 

22 ‘‘(4) review the regulation and oversight of car23 bon markets; and 


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1 ‘‘(5) provide reports and testimony to Congress 

2 in April or May of each year beginning in 2012. 

3 ‘‘(c) MEMBERSHIP.—(1) The Board shall include 6 

4 members who shall be appointed by the President by and 

5 with the advice and consent of the Senate. In appointing 

6 members of the Board, the President shall select individ7 uals with recognized expertise in relevant areas, including 

8 climate science and economics, and energy and financial 

9 markets. Such persons shall have no other employment. 

10 At least one member shall be a scientist with expertise 

11 in climate change and the effects of climate change on the 

12 environment. In addition, Board shall include the fol13 lowing three voting, ex-officio members: The Secretaries 

14 of the Treasury and Energy and the Administrator of the 

15 Environmental Protection Agency. 

16 ‘‘(2) The ex-officio members of the Board shall serve 

17 without additional compensation and may not serve as 

18 Chairman or Vice Chairman. The ex-officio members of 

19 the Board may, from time to time, designate other officers 

20 or employees of their respective organizations to carry out 

21 their duties on the Board. 

22 ‘‘(d) COMPENSATION.— 

23 ‘‘(1) IN GENERAL.—A member of the Board 

24 shall be compensated at the annual rate of basic pay 


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1 prescribed for level II of the Executive Schedule 

2 under section 5313 of title 5, United States Code. 

3 ‘‘(2) CHAIRPERSON.—The Chairperson of the 

4 Board shall be compensated at the annual rate of 

5 basic pay prescribed for level I of the Executive 

6 Schedule under section 5312 of title 5, United 

7 States Code. 

8 ‘‘(e) TERMS; VACANCIES.— 

9 ‘‘(1) TERMS.—The term of a member of the 

10 Board shall be 10 years, except that the members 

11 first appointed to the Board shall be appointed for 

12 terms in a manner that ensures that the term of not 

13 more than 1 member shall expire during any 2-year 

14 period, and no member serves a term of more than 

15 10 years. 

16 ‘‘(2) OATH OF OFFICE.—A member shall take 

17 the oath of office of the Board by not later than 15 

18 days after the date on which the member is ap19 pointed. 

20 ‘‘(3) REMOVAL.—A member may be removed 

21 from the Board on determination of the President 

22 for cause. The President shall submit to Congress a 

23 notification of any determination by the President to 

24 remove a member of the Board for cause. 


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1 ‘‘(4) VACANCIES.—A member of the Board the 

2 term of whom has expired or otherwise been termi3 nated shall continue to serve until the date on which 

4 a replacement is appointed under subparagraph 

5 (A)(ii), if the President determines that service to be 

6 appropriate. A vacancy on the Board shall not affect 

7 the powers of the Board and shall be filled in the 

8 same manner as the original appointment was made. 

9 ‘‘(5) CHAIRPERSON AND VICE-CHAIRPERSON.— 

10 From among members of the Board, the President 

11 shall appoint 1 member to serve as Chairperson of 

12 the Board for a term of 4 years and member to 

13 serve as Vice-Chairperson of the Board for a term 

14 of 4 years. 

15 ‘‘(6) EX-OFFICIO MEMBERS NOT COVERED.— 

16 The provisions of this subsection apply only to 

17 Board members who are not ex-officio members. 

18 ‘‘(f) PROHIBITIONS.— 

19 ‘‘(1) CONFLICTS OF INTEREST.—The President 

20 shall not appoint to the Board an individual em21 ployed by, or holding any official relationship (in22 cluding any shareholder) with, any entity engaged in 

23 the generation, transmission, distribution, or sale of 

24 energy, an individual who has any pecuniary interest 

25 in the generation, transmission, distribution, or sale 


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1 of energy, or an individual who has a pecuniary in2 terest in the implementation of this Act. 

3 ‘‘(2) NO OTHER EMPLOYMENT.—A member of 

4 the Board (other than an ex-officio member) shall 

5 not hold any other employment during the term of 

6 service of the member. 

7 ‘‘(g) RESOURCES.—The Board may obtain the serv8 ices of such experts and consultants as are necessary to 

9 carry out the provisions of this Act. The administrative 

10 costs of the Board shall be paid out of the revenue from 

11 auctions of greenhouse gas allowances. 

12 ‘‘(h) POWERS AND DUTIES OF THE BOARD.— 

13 ‘‘(1) FORECAST EMISSIONS AND ALLOWANCE

14 PRICES.—Before April 30, 2012, and before April 

15 30 of each successive year through 2019, the Board 

16 shall publish a forecast of gradually rising allowance 

17 prices for the trading years through 2020 that the 

18 Board expects shall be associated with a gradual re19 duction in emissions of greenhouse gases of covered 

20 entities until reaching the level of 4,911 million tons 

21 in 2020. In deciding upon a forecast of allowance 

22 prices the Board shall— 

23 ‘‘(A) review forecasts made by the Sec24 retary of Energy (acting through the Energy 

25 Information Agency) and the Administrator of 


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1 the Environmental Protection Agency, as well 

2 as those of private sector forecasters; and 

3 ‘‘(B) in the years 2013 through 2019, re4 view and update its allowance price forecast as 

5 part of the assessment under paragraph (4) of 

6 this subsection. 

7 ‘‘(2) SELECT ANNUAL PRICE TARGETS.—Before 

8 April 30, 2012, and before April 30 of each succes9 sive year through 2019, the Board shall select a tar10 get allowance price for the trading year that begins 

11 on April 1 of that calendar year, as follows: 

12 ‘‘(A) In 2012, the target price shall be set 

13 at the price the Board determines will achieve 

14 the annual emission expectation for the year as 

15 set forth in section 9912. 

16 ‘‘(B) In 2013 through 2019, the target 

17 price shall be the same as its forecast price for 

18 that year, which may have been revised accord19 ing to paragraph (4). 

20 ‘‘(3) AUCTION PROCEDURES.—The Board shall 

21 establish procedures for auctions of allowances that 

22 would achieve the target price on average over all 

23 trading of allowances during the year, including the 

24 sales of allowances in auctions as well as in sec25 ondary market trading. To achieve the target price, 


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1 the total number of emission allowances issued in 

2 auctions in any particular year may be more or less 

3 than the expected emissions for that year as set 

4 forth in section 9912. 

5 ‘‘(4) CONDUCT AN ANNUAL ASSESSMENT.—On 

6 or before April 30 of each year beginning in 2013, 

7 in consultation with the Secretary, the Secretary of 

8 Energy, and the Administrator, the Board shall pre9 pare an assessment of the program. In Phase I of 

10 the program, the assessment shall include each of 

11 the following: 

12 ‘‘(A) Actual emissions of covered enti13 ties in the previous calendar year. 

14 ‘‘(B) The progress in achieving the 

15 environmental goals of the program. 

16 ‘‘(C) The effectiveness of the moni17 toring of emissions, the registration of al18 lowances, and the enforcement of compli19 ance requirements for covered entities. 

20 ‘‘(D) An analysis of the behavior of 

21 greenhouse gases markets. 

22 ‘‘(E) The effectiveness of the price 

23 target. 

24 ‘‘(F) The reasons for the difference 

25 between actual emissions and the expected 


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1 levels given in section 9912. In considering 

2 the difference between actual and expected 

3 emissions, the Board shall estimate— 

4 ‘‘(i) the amount of the difference 

5 that was attributable to influences 

6 that pertain only to the given calendar 

7 year, including but not limited to un8 usual weather or other transitory 

9 changes in economic activity and en10 ergy use; and 

11 ‘‘(ii) the amount of the difference 

12 attributable to influences that shall 

13 likely persist for multiple calendar 

14 years and the likely duration of each 

15 such influence. 

16 ‘‘(G) A revision in its forecast of al17 lowance prices through 2020 in response to 

18 the persistent influences identified in 

19 clause (ii) of subparagraph (F), but not in 

20 response to the transitory influences identi21 fied in clause (i) of subparagraph (F). 

22 ‘‘(5) MAKE ANNUAL REPORTS TO CONGRESS.— 

23 The Chairman of the Board shall present the assess24 ment in a written report and in testimony before 


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1 each house of Congress in April or May of each 

2 year. 

3 ‘‘(6) CONDUCT A PROGRAM REVIEW IN 2017.— 

4 The Board shall present a report containing a thor5 ough review of the program to the Congress by Oc6 tober 1, 2017, and include in this report its rec7 ommendations for any adjustments in the design 

8 features for Phase II of the program. 

9 ‘‘(i) REVIEW BY GOVERNMENT ACCOUNTABILITY OF10 FICE.—Not later than January 1, 2015, and every three 

11 years thereafter, the Comptroller General of the United 

12 States shall conduct a review of the efficacy of the Board 

13 in fulfilling the purposes and duties of the Board under 

14 this Act. 

15 ‘‘SEC. 9912. INITIAL EXPECTATIONS FOR ANNUAL EMIS16 SIONS. 

17 ‘‘The initial expectation of the greenhouse gas emis18 sions of covered facilities in the cap and trade program 

19 are the amounts for each of the calendar years 2012 

20 through 2050 set forth in the following table: 

‘‘Calendar Year Initial Expectation of Emissions 

(millions of tons of greenhouse gases) 

2012 6,153 

2013 5,998 

2014 5,843 

2015 5,687 


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‘‘Calendar Year Initial Expectation of Emissions 

(millions of tons of greenhouse gases) 

2016 5,532 

2017 5,377 

2018 5,222 

2019 5,066 

2020 4,911 

2021 4,756 

2022 4,600 

2023 4,445 

2024 4,290 

2025 4,135 

2026 3,979 

2027 3,824 

2028 3,669 

2029 3,514 

2030 3,358 

2031 3,203 

2032 3,048 

2033 2,892 

2034 2,737 

2035 2,582 

2036 2,427 

2037 2,271 

2038 2,116 

2039 1,961 

2040 1,806 

2041 1,650 

2042 1,495 


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‘‘Calendar Year Initial Expectation of Emissions 

(millions of tons of greenhouse gases) 

2043 1,340 

2044 1,184 

2045 1,029 

2046 874 

2047 719 

2048 563 

2049 408 

2050 253 

1 ‘‘Subchapter C—Auction Revenue Trust Fund 

‘‘Sec. 9921. Trust Fund. 

2 ‘‘SEC. 9921. TRUST FUND. 

3 ‘‘(a) CREATION OF AUCTION REVENUE TRUST

4 FUND.—There is established in the Treasury of the 

5 United States, the Auction Revenue Trust Fund. 

6 ‘‘(b) FUNDS.—An amount equivalent to all revenues 

7 received from the auction in subchapter A shall be credited 

8 to the Trust Fund. 

9 ‘‘Subchapter D—Assurance of Cumulation 

10 Emissions 

‘‘Sec. 9931. Assurance of cumulative emissions reductions. 

11 ‘‘SEC. 9931. ASSURANCE OF CUMULATIVE EMISSIONS RE12 DUCTIONS. 

13 ‘‘(a) EXCESS EMISSIONS 2012–2019.—If the cumu14 lative emissions of covered entities over the years 2012 

15 through 2019 exceed 1.1 times the sum of the expected 


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1 emissions over those years shown in the table in section 

2 9912 (1.1 times 44,878 million tons = 49,366 million 

3 tons), the excess over 49,366 million tons shall be made 

4 up through a reduction in the target for emissions in the 

5 year 2020 by an equivalent amount of tons. 

6 ‘‘(b) EXCESS EMISSIONS 2012–2020.—If the cumu7 lative emissions of covered entities over the years 2012 

8 through 2020 exceed the sum of the expected emissions 

9 over those years shown in section 9912 (49,789 million 

10 tons), the difference shall be made up through reductions 

11 in the expected emissions for the years 2021 through 

12 2030. Equal percentage reductions shall be made in ex13 pected emissions for the years 2021 through 2030 so that 

14 the sum of those reductions equals the excess of actual 

15 emissions over the expected cumulative emissions for the 

16 years 2012 through 2020. 

17 ‘‘(c) LOWER EMISSIONS.—If the cumulative emis18 sions of covered entities over the years 2012 to 2020 are 

19 less than the sum of the expected emissions over those 

20 years shown in the above table (49,789 million tons), no 

21 adjustment shall be made in expected emissions in the 

22 years 2021 through 2030. 

23 ‘‘Subchapter E—Definitions 

‘‘Sec. 9941. Definitions. 


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1 ‘‘SEC. 9941. DEFINITIONS. 

2 ‘‘For purposes of this subtitle: 

3 ‘‘(1) The term ‘Administrator’ means the Ad4 ministrator of the Environmental Protection Agency. 

5 ‘‘(2) The term ‘carbon dioxide equivalent’ 

6 means, for each greenhouse gas, the quantity of 

7 greenhouse gas that the Administrator determines 

8 makes the same contribution to global warming as 

9 1 metric ton of carbon dioxide. 

10 ‘‘(3) The term ‘covered facility’ means, for each 

11 calendar year, a facility that emits greenhouse gases 

12 in that year and that has an obligation to submit 

13 emission allowances for such greenhouse gas emis14 sions under any cap-and-trade program. 

15 ‘‘(4) The term ‘emission allowance’ ‘’ means an 

16 authorization, under any cap-and-trade program, to 

17 emit 1 carbon dioxide equivalent of greenhouse gas. 

18 ‘‘(5) The term ‘Emissions Registry’ ‘’ means a 

19 greenhouse gases emissions registry for all United 

20 States emissions of greenhouse gases developed by 

21 the Administrator. 

22 ‘‘(6) The term ‘program’ or ‘cap and trade pro23 gram’ means an economy-wide program enacted by 

24 Congress that auctions emission allowances for the 

25 control of greenhouse gases. 


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1 ‘‘(7) The term ‘Phase I of the program’ ‘’ 

2 means the years 2012 through 2019. 

3 ‘‘(8) The term ‘Phase II of the program’ ‘’ 

4 means the years 2020 through 2050. 

5 ‘‘(9) The term ‘price path’ is the forecast of 

6 emission allowance prices by the Climate Program 

7 Oversight and Coordination Board. 

8 ‘‘(10) The term ‘Secretary’ means the Secretary 

9 of the Treasury. 

10 ‘‘(11) The term ‘trading year’ means the period 

11 from April 1 of the concurrent calendar year 

12 through March 31 of the following calendar year (or 

13 the first subsequent business day if those dates fall 

14 on a weekend or holiday). 

15 ‘‘(12) The term ‘Auction Revenue Trust Fund’ 

16 means the trust fund established in the Treasury 

17 under section 9921.’’. 

18 (b) CLERICAL AMENDMENT.—The table of subtitles 

19 for the Internal Revenue Code of 1986 is amended by add20 ing at the end the following new item: 

‘‘Subtitle L. Auction based carbon market.’’. 

Æ 


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