```

[Senate Report 111-121]
[From the U.S. Government Publishing Office]

111th Congress 
 2d Session                      SENATE                          Report
                                                                111-121
_______________________________________________________________________
                                                       Calendar No. 267
 
                CLEAN ENERGY JOBS AND AMERICAN POWER ACT

                               __________

                              R E P O R T

                                 of the

               COMMITTEE ON ENVIRONMENT AND PUBLIC WORKS

                          UNITED STATES SENATE

                              to accompany

                                S. 1733

                             together with

                     ADDITIONAL AND MINORITY VIEWS

                February 2, 2010.--Ordered to be printed
                CLEAN ENERGY JOBS AND AMERICAN POWER ACT
                                                       Calendar No. 267
111th Congress                                                   Report
                                 SENATE
 2d Session                                                     111-121

======================================================================

               CLEAN ENERGY JOBS AND AMERICAN POWER ACT

                                _______
                                

                February 2, 2010.--Ordered to be printed

                                _______
                                

    Mrs. Boxer, from the Committee on Environment and Public Works, 
                        submitted the following

                              R E P O R T

                         [To accompany S. 1733]

                             together with

                     ADDITIONAL AND MINORITY VIEWS

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Environment and Public Works, to which was 
referred a bill (S. 1733) to create clean energy jobs, promote 
energy independence, reduce global warming pollution, and 
transition to a clean energy economy, having considered the 
same, reports favorably with an amendment thereon and 
recommends that the bill, as amended, do pass.

                       Introduction and Purposes

    The Clean Energy Jobs and American Power Act was introduced 
by Senator Kerry, Chairman of the Committee on Foreign 
Relations, and co-sponsored by Senator Boxer, Chairman of the 
Committee on Environment and Public Works, on September 30, 
2009. The bill was referred to the Committee, considered at a 
markup by the Committee held on November 3-5, 2009, and ordered 
favorably reported.
    The Act's primary purposes are to: maintain American global 
economic leadership and create clean energy jobs; achieve 
energy independence; support reliance on a wide variety of 
energy sources, as well as energy efficiency; promote national 
security; reduce global warming pollution; and establish a 
framework for a new clean energy economy.

                  Background and Need for Legislation

 MAINTAINING GLOBAL ECONOMIC LEADERSHIP AND CREATING CLEAN ENERGY JOBS

    Clean energy is the global economic opportunity of the 21st 
century.
    Venture capitalists and governments alike are increasingly 
recognizing the promise of clean energy. The global clean 
energy market is estimated to reach $500 billion a year by 
2020, 2\1/2\ times the current global PC market of $200 
billion.
    Clean energy is a prominent and growing piece of the $6 
trillion world energy market. Today there are 4 billion 
consumers of electricity; that number is expected to increase 
quickly, doubling global energy use over the next 25 years. The 
President's Economic Recovery Advisory Board concluded that 
clean energy ``is perhaps the largest economic opportunity of 
the 21st century.'' And `first actors'--the companies and 
countries who invest early in the clean energy economy--will 
benefit as more nations commit to clean energy goals and fuel 
the clean energy marketplace.\1\
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    \1\The Climate Group, ``Cutting the Cost,'' September 2009.
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    According to the International Energy Agency, more than $26 
trillion will be invested worldwide in energy infrastructure in 
the next two decades.\2\ This is ``the next great global 
industry'' according to John Doerr, head of one the leading 
U.S. venture capital firms.\3\ As the CEO of GE Energy 
testified: ``The U.S. can stand by and watch other countries 
take the leadership role in these technologies, and accrue the 
economic benefits that go with it, or act swiftly to ensure 
that there is a large domestic industry for the best 
technologies.''\4\
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    \2\International Energy Agency, World Energy Outlook 2008 at 5 
(2008).
    \3\Testimony of John Doerr before Senate Committee on Environment & 
Public Works, ``Investing in Green Technology as a Strategy for 
Economic Recovery,'' January 7, 2009.
    \4\Testimony of John Krenicki before Senate Committee on 
Environment & Public Works hearing, ``Ensuring & Enhancing U.S. 
Competitiveness while Moving toward a Clean Energy Economy.'' July 16, 
2009.
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    Today, the U.S. has an opportunity to solidify its 
leadership role in the race to deliver clean energy to the 
global market, but other nations are moving quickly to seize 
these opportunities as well. Although many clean energy 
technologies were developed in the U.S., other countries--
including Germany, Spain, and China--have jumped out ahead on 
deployment and are rapidly increasing their market share. For 
instance, in 2001, the U.S. held 28 percent of the world's 
solar manufacturing market, and China had just 1 percent. By 
2008, China's market share had grown to 29 percent, while 
America's had dropped to 6 percent.\5\
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    \5\Environmental Defense Fund citing PV News April 2009.
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    As of mid-2009, just 2 of the top 10 solar photovoltaic 
manufacturers, 1 of the top 10 wind turbine manufacturers and 1 
of the top 10 advanced battery manufacturers were American.\6\ 
As Mr. Doerr noted: ``If you list today's top 30 companies in 
solar, wind, and advanced batteries, American companies hold 
only 6 spots. That fact should worry us all.''\7\ He added 
that: ``current policies are the principal obstacle to creating 
even more new jobs in the next great industry, clean 
technology.''\8\
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    \6\Lazard, 7/10/09
    \7\January 7, 2009.
    \8\Testimony of John Doerr before Senate Committee on Environment & 
Public Works, ``Ensuring and Enhancing U.S. Competitiveness while 
Moving toward a Clean Energy Economy,'' July 16, 2009.
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    Comprehensive clean energy legislation is one of the keys 
to ensuring that U.S. companies can take advantage of the 
opportunities in the global clean energy marketplace today. The 
bill provides a comprehensive framework that will stimulate the 
large scale investments needed for low- and zero-carbon sources 
of energy and energy efficiency.
    These investments are expected to create millions of new 
jobs. Between 1998 and 2007, clean industry jobs grew at a rate 
of 9 percent, far faster than the economy as a whole.\9\ Two of 
the most thorough analyses of the economic benefits from 
investing in a clean energy economy have projected major new 
job growth, on the order of 1.7-1.9 million net new jobs 
created.\10,\\11\
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    \9\Pew Charitable Trusts, The Clean Energy Economy, 8 (June 2009).
    \10\Political Economy Research Institute/University of 
Massachusetts, Amherst; ``The Economic Benefits of Investing in Clean 
Energy,'' June 2009.
    \11\University of California at Berkeley, Clean Energy and Climate 
Policy for U.S. Growth and Job Creation, Oct. 25, 2009. Can be accessed 
at: http://are.berkeley.edu/dwrh/CERES_Web/Docs/ES_DRHFK091025.pdf.
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    These statistics have been affirmed by business leaders 
testifying before the committees. Wayne Krouse, CEO of Hydro 
Green Energy, LLC testified before the Committee that:

          ``[P]olicies, such as climate change legislation, 
        that recognize and financially value the many benefits 
        of our nation's clean energy technologies, particularly 
        their carbon-free profile, will act as a huge driver 
        for growth and development of the clean technology 
        industry.''\12\ Charles O. Holliday, Jr. CEO of Dupont 
        believes: ``Federal legislation will help create the 
        marketplace that will drive innovation, economic 
        growth, and environmental progress.''\13\ The Committee 
        heard extensive testimony from other representatives of 
        utilities, businesses, unions and investors, who 
        collectively made clear that comprehensive climate 
        legislation is necessary to create the certainty that 
        will attract the large scale private capital 
        investments necessary to spur clean energy job growth.
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    \12\Testimony of Wayne F. Krouse before Senate Committee on 
Environment & Public Works, ``Business Opportunities and Climate 
Policy,'' May 19, 2009.
    \13\Testimony of Charles O. Holliday, Jr. before Senate Committee 
on Environment & Public Works, ``Business Opportunities and Climate 
Policy,'' May 19, 2009.
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                     ACHIEVING ENERGY INDEPENDENCE

    The current economic challenges are exacerbated by 
America's reliance on imported oil. America transfers about 
$330 billion every year to foreign countries to pay for 
oil.\14\ With policies that promote American clean energy and 
energy efficiency, that money can be spent and then reinvested 
here in the United States, providing the capital for sustained 
economic recovery, rather than being sent overseas.
---------------------------------------------------------------------------
    \14\Energy Information Administration Annual Energy Review 2008, 
pages 210-211; can be accessed at: http://www.eia.doe.gov/emeu/aer/pdf/
aer.pdf.
---------------------------------------------------------------------------
    The transition to clean energy means ensuring that all of 
America's energy sources are as clean and efficient as 
possible, without damaging our short-term competitiveness. To 
make America more energy independent, the Act provides 
incentives for investment in each of these sources of power.
    Coal is the source for approximately 50% of our electric 
power generation.\15\ The United States has the largest 
estimated recoverable coal reserves in the world, with 28% of 
global reserves,\16\ and experts agree that coal will continue 
to play a significant part in our energy future, both in the 
United States and throughout the world.\17\
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    \15\Energy Information Administration, Electricity in the United 
States. Can be accessed at: http://tonto.eia.doe.gov/energyexplained/
index.cfm?page=electricity_in_the_united_states.
    \16\U.S. Department of Energy, Energy Information Administration, 
Coal Explained, How Much Coal Is Left (online at www.eia.doe.gov/neic/
infosheets/coalreserves.html); and U.S. Department of Energy, Energy 
Information Administration, International Energy Outlook (May 2009) at 
p.59, Table 9 (online at http://www.eia.doe.gov/oiaf/ieo/pdf/
0484(2009).pdf).
    \17\The Future of Coal--Options for a Carbon-Constrained World, 
Massachusetts Institute of Technology Interdisciplinary Study (2007), 
at ix (online at http://web.mit.edu/coal/).
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    Technology must be developed to address the use of coal and 
its associated global warming emissions. The Act invests an 
estimated $10 billion over ten years to support research and 
development of new carbon capture and sequestration technology, 
to advance the next generation of coal-fired power plants.
    Natural gas is the cleanest form of fossil fuel generated 
power, producing less than half of the carbon dioxide emissions 
of equivalent energy output from burning coal. Currently, 
natural gas provides nearly 20% of our Nation's power.\18\ 
Recent discoveries and advances in drilling technologies have 
increased America's estimated natural gas reserves by 35%, 
decreasing our need to import natural gas from outside of North 
America.\19\
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    \18\Id.
    \19\``Potential Gas Committee Reports Unprecedented Increase in 
Magnitude of U.S. Natural Gas Resource Base.'' Colorado School of 
Mines. June 18, 2009. Can be accessed at: http://www.mines.edu/
Potential-Gas-Committee-reports-unprecedented-increase-in-magnitude-of-
U.S.-natural-gas-resource-base.
---------------------------------------------------------------------------
    The Act creates a new federal program that encourages 
investment in low-carbon power generation, especially natural 
gas. It also provides additional incentives that provide offset 
credits to companies that reduce leaks from natural gas 
pipelines. This will help ensure that America can rely on 
natural gas as a major component of its energy supply.
    Nuclear energy currently provides nearly 20% of our power--
up to as much as 50% of electricity in some states.\20\ The Act 
supports new programs for research and development for advanced 
nuclear technology and nuclear waste management, and training 
programs to train the highly-skilled workforce necessary for 
the construction, operation, maintenance and support of nuclear 
facilities. The bill's pollution reduction program creates 
strong incentives for the development of additional nuclear 
powered electric generation facilities. EPA's analysis 
indicates that under comprehensive climate change legislation, 
the U.S. will be expected to add nearly 160 new nuclear power 
plants by 2050.\21\
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    \20\Energy Information Administration, Electricity in the United 
States. Can be accessed at: http://tonto.eia.doe.gov/energyexplained/
index.cfm?page=electricity_in_the_united_states.
    \21\See EPA Analysis of the American Clean Energy & Security Act of 
2009, H.R. 2454 in the 111th Congress (June 23, 2009) at 10; EPA 
Analysis of Economic Impacts of S. 1733: The Clean Energy Jobs and 
American Power Act of 2009 (October 23, 2009); available at: http://
www.epa.gov/climatechange/economics/economicanalyses.html; U.S. Nuclear 
Regulatory Commission data on current capacity, http://www.nrc.gov/
info-finder/reactor/.
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    Renewable energy and energy efficiency are critical to 
America's future clean energy economy. In the short term, 
increased energy efficiency presents tremendous, low-cost 
opportunities both to reduce carbon emissions and to create 
economic benefits. The global consulting firm McKinsey & 
Company estimates that addressing barriers to energy efficiency 
improvements can reduce end-use energy consumption in 2020 by 
roughly 23 percent of projected demand, potentially abating up 
to 1.1 gigatons of greenhouse gases annually.\22\ Already 
nearly a thousand U.S. cities have adopted ambitious 
environmental standards for new construction and refitting 
existing buildings.\23\ By creating a framework and incentives 
to achieve greater energy efficiencies, the Act will help 
American companies to profit and improve their international 
competitive position.
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    \22\McKinsey & Company, Unlocking Energy Efficiency in the U.S. 
Economy (July 2009). Can be accessed at: http://www.mckinsey.com/
clientservice/electricpowernaturalgas/downloads/
us_energy_efficiency_full_report.pdf
    \23\1,000TH MAYOR--MESA, AZ MAYOR SCOTT SMITH SIGNS THE U.S. 
CONFERENCE OF MAYORS CLIMATE PROTECTION AGREEMENT. The United States 
Conference of Mayors. October 2, 2009. Can be accessed at: http://
www.usmayors.org/pressreleases/uploads/1000signatory.pdf.
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                   CLIMATE CHANGE SCIENCE AND IMPACTS

    The Intergovernmental Panel on Climate Change (IPCC) was 
established in 1988 by the World Meteorological Organization to 
synthesize on an ongoing basis developing peer-reviewed climate 
research. With the active participation of thousands of 
scientists worldwide, the IPCC has released four major 
assessments of climate science since 1990, each relying on 
peer-reviewed work. The IPCC assessments have reported 
increasing certainty about the threat and causes of climate 
change. The IPCC's general finding that the emissions of 
greenhouse gases from human activities are warming the planet 
is also supported by the American Association for the 
Advancement of Science,\24\ the American Geophysical Union,\25\ 
the American Chemical Society,\26\ the American Meteorological 
Society,\27\ and 13 National Academies (including the United 
States' National Academy of Sciences).\28\
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    \24\http://www.aaas.org/news/releases/2007/0202ipcc.shtml.
    \25\http://www.agu.org/sci_soc/policy/positions/
climate_change2008.shtml.
    \26\http://portal.acs.org/portal/fileFetch/C/WPCP_007661/pdf/
WPCP_007661.pdf.
    \27\http://www.ametsoc.org/POLICY/2007climatechange.html.
    \28\http://www.nationalacademies.org/includes/
G8Statement_Energy_07_May.pdf.
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    The most recent Fourth Assessment Report (AR4) was released 
by the IPCC in 2007. AR4 represents six years of work from over 
1,200 authors who are leading experts in their respective 
fields. An additional 2,500 experts reviewed drafts of the 
report. AR4 Working Group I found that the level of carbon 
dioxide in the atmosphere ``has increased from a pre-industrial 
value of about 280 ppm to 379 ppm in 2005.''\29\ Levels of 
methane, another greenhouse gas, have risen from 715 ppb to 
1774 ppb. AR4 concluded that evidence of climate warming is now 
``unequivocal,'' and that it is very likely that human 
activities have caused ``most of the observed increase in 
global average temperatures since the mid-20th century.''
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    \29\IPCC, AR4, Working Group I, Summary for Policy Makers.
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    Within the range of temperatures that could result at the 
end of this century due to greenhouse gas emissions, the IPCC 
predicts that there will be ``significant extinctions around 
the globe''; ``widespread coral mortality''; loss of about 30% 
of global coastal wetlands; decreased productivity of all 
cereal crops at low latitudes and a ``substantial burden on 
health services'' including malnutrition, diarrheal, cardio-
respiratory, and infectious diseases.\30\
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    \30\IPCC, AR4, Working Group II, Summary for Policy Makers.
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    The IPCC's conclusions have been independently confirmed by 
the U.S. Global Change Research Program, a program established 
by Congress\31\ consisting of scientific experts from 13 U.S. 
agencies, under the leadership of the White House Office of 
Science and Technology Policy. In June 2009 the Program 
published its report, Global Climate Change Impacts in the U.S. 
The report reached the following major conclusions:
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    \31\Global Change Research Act of 1990, P.L. 101-606, 104 Stat. 
3096 (Nov. 16, 1990).
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    1. Global warming is unequivocal and primarily human-
induced. Global temperature has increased over the past 50 
years. This observed increase is due primarily to human induced 
emissions of heat-trapping gases.
    2. Climate changes are underway in the United States and 
are projected to grow. Climate-related changes are already 
observed in the United States and its coastal waters. These 
include increases in heavy downpours, rising temperature and 
sea level, rapidly retreating glaciers, thawing permafrost, 
lengthening growing seasons, lengthening ice-free seasons in 
the ocean and on lakes and rivers, earlier snowmelt, and 
alterations in river flows. These changes are projected to 
grow.
    3. Widespread climate-related impacts are occurring now and 
are expected to increase. Climate changes are already affecting 
water, energy, transportation, agriculture, ecosystems, and 
health. These impacts are different from region to region and 
will grow under projected climate change.
    4. Climate change will stress water resources. Water is an 
issue in every region, but the nature of the potential impacts 
varies. Drought, related to reduced precipitation, increased 
evaporation, and increased water loss from plants, is an 
important issue in many regions, especially in the West. Floods 
and water quality problems are likely to be amplified by 
climate change in most regions. Declines in mountain snowpack 
are important in the West and Alaska where snowpack provides 
vital natural water storage.
    5. Crop and livestock production will be increasingly 
challenged. Many crops show positive responses to elevated 
carbon dioxide and low levels of warming, but higher levels of 
warming often negatively affect growth and yields. Increased 
pests, water stress, diseases, and weather extremes will pose 
adaptation challenges for crop and livestock production.
    6. Coastal areas are at increasing risk from sea-level rise 
and storm surge. Sea-level rise and storm surge place many U.S. 
coastal areas at increasing risk of erosion and flooding, 
especially along the Atlantic and Gulf Coasts, Pacific Islands, 
and parts of Alaska. Energy and transportation infrastructure 
and other property in coastal areas are very likely to be 
adversely affected.
    7. Risks to human health will increase. Harmful health 
impacts of climate change are related to increasing heat 
stress, waterborne diseases, poor air quality, extreme weather 
events, and diseases transmitted by insects and rodents. 
Reduced cold stress provides some benefits. Robust public 
health infrastructure can reduce the potential for negative 
impacts.
    8. Climate change will interact with many social and 
environmental stresses. Climate change will combine with 
pollution, population growth, overuse of resources, 
urbanization, and other social, economic, and environmental 
stresses to create larger impacts than from any of these 
factors alone.
    9. Thresholds will be crossed, leading to large changes in 
climate and ecosystems. There are a variety of thresholds in 
the climate system and ecosystems. These thresholds determine, 
for example, the presence of sea ice and permafrost, and the 
survival of species, from fish to insect pests, with 
implications for society. With further climate change, the 
crossing of additional thresholds is expected.
    10. Future climate change and its impacts depend on choices 
made today. The amount and rate of future climate change depend 
primarily on current and future human-caused emissions of heat-
trapping gases and airborne particles. Responses involve 
reducing emissions to limit future warming, and adapting to the 
changes that are unavoidable.\32\
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    \32\http://downloads.globalchange.gov/usimpacts/pdfs/executive-
summary.pdf, Global Climate Change Impacts in the United States, U.S. 
Global Change Research Program (2009). Similar unequivocal conclusions 
were made in reports published by the Program in 2007 and 2008, under 
the Administration of President George W. Bush. See http://
www.globalchange.gov/publications/reports/scientific-assessments/saps.
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    In considering these impacts, it is important to note that 
GHG gases remain in the atmosphere for long time periods. 
Because of the long lifetime of GHGs in the atmosphere and the 
tremendous amount of physical inertia in the climate system, we 
will be unable to avert or reverse severe climate impacts if we 
wait until we observe those impacts. The current levels of 
greenhouse gases, for example, commit us to an increase of at 
least another 1-1.6+F of warming, even if we could stop 
emitting GHGs tomorrow. Similarly, the rise of sea levels in 
response to emissions of GHGs will continue for hundreds of 
years as the heat from climate change slowly mixes through the 
ocean. Therefore, by the time we observe a particular projected 
impact, it may already be too late to avert or reverse that 
impact.
    In summary, both the U.S. and international bodies charged 
with evaluating the science of climate change have concluded 
that the science overwhelmingly establishes the threat posed by 
human-induced climate change and the urgent need to act now to 
avert it.

                      PROTECTING NATIONAL SECURITY

    Unchecked climate change threatens vital U.S. national 
security interests. As Admiral Dennis McGinn, U.S. Navy (Ret.) 
and member of the Center for Naval Analysis' Military Advisory 
Board, testified before the Committee: ``American's current 
energy posture constitutes a serious threat to our national 
security, militarily, diplomatically, and economically.''\33\ 
Mr. McGinn's warnings were echoed in testimony of The Honorable 
John Warner, former Republican Senator and member of the EPW 
Committee, who served as Secretary of the Navy under President 
Nixon, and Kathleen Hicks, Deputy Undersecretary of Defense for 
Strategy, Plans, and Forces, U.S. Department of Defense. Drew 
Sloan, an infantry officer who served in both Iraq and 
Afghanistan, further stated, ``I lead soldiers on the ground in 
hostile situations and my experiences there have given me an 
appreciation for what our fighting men and women will face in 
the future if we do not act decisively against climate 
change.''
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    \33\Testimony of Vice Admiral Dennis McGinn before the Senate 
Committee on Environment and Public Works, ``Legislative Hearing on S. 
1733, Clean Energy Jobs and American Power Act,'' October 28, 2009.
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    The Center for Naval Analysis Corporation (CNA), a non-
profit research organization dedicated to solving national 
security, defense, and a broader range of public interest 
issues, has published two reports entitled National Security 
and the Threat of Climate Change and Powering America's 
Defense: Energy and the Risks to National Security.\34\ The 
reports conclude that, unchecked, climate change will threaten 
U.S. national security by amplifying the conditions for 
political instability, mass migration, and threatening 
America's military infrastructure and energy security.\35\ The 
military advisory board that oversaw these reports was 
comprised of a distinguished panel of retired military officers 
from all service branches.
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    \34\www.cna.org.
    \35\National Security and the Threat of Climate Change, The CNA 
Corporation, 2007, page 6.
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    Civil unrest and political instability caused by the 
extreme weather and ecological conditions associated with 
climate change could ``disrupt our way of life and force 
changes in the way we keep safe and secure.''\36\ Climate 
change has the potential to create more frequent and intense 
natural and humanitarian disasters due to flooding, droughts, 
disease, and crop failure.\37\ Climate change could lead to 
competition for scarce natural resources and ``exacerbate the 
stresses which may lead to conflict.''\38\ Moreover, lack of 
basic human needs like water and food will force the movement 
of people, both within their own borders and internationally. 
These conditions would increase the potential for failed 
states, and thus the growth of global terrorism. Increases in 
weather disasters, such as hurricanes, will also stimulate 
migrations to the U.S.\39\ For example, storm damage and sea 
level rise in the Caribbean islands could contribute to an 
increase in the flow of immigrants into the U.S.\40\ Such 
outcomes will have security consequences for the U.S. because 
it is ``difficult to evaluate U.S. impacts without doing so 
elsewhere.''\41\
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    \36\National Security and the Threat of Climate Change, The CNA 
Corporation, 2007, page 6.
    \37\Testimony of Vice Admiral Dennis McGinn before the Senate 
Committee on Environment and Public Works, ``Legislative Hearing on S. 
1733, Clean Energy Jobs and American Power Act,'' October 28, 2009.
    \38\Testimony of Kathleen Hicks before the Senate Committee on 
Environment and Public Works, ``Legislative Hearing on S. 1733, Clean 
Energy Jobs and American Power Act,'' October 28, 2009.
    \39\Purvis, N, and J. Busby, The Security Implications of Climate 
Change for the UN System, ECSP Report, Issue 10 (2004).
    \40\Campbell, Kurt M. et al., The Age of Consequences: The Foreign 
Policy and National Security Implications of Global Climate Change, 
November 2007, page 56.
    \41\Id.
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    In addition to these indirect risks to national security, 
there are also direct impacts on U.S. military infrastructure 
and operations. According to the National Intelligence Council, 
``the demands of . . . potential humanitarian responses may 
significantly tax U.S. military transportation and support 
force structures, resulting in a strained readiness posture and 
decreased strategic depth for combat operations.''\42\ On top 
of humanitarian and disaster relief, the U.S. military will 
also need to defend the Arctic and its resources undersea, due 
to melting of the Arctic ice.\43\ To prepare for--or avoid--
such impacts, the Pentagon and State Department have 
incorporated the national security implications of climate 
change in their long term strategic planning, the Quadrennial 
Defense Review and Quadrennial Diplomacy and Development 
review, respectively.\44\
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    \42\Testimony of Dr. Thomas Fingar before House Permanent Select 
Committee on Intelligence, ``National Intelligence Assessment on the 
National Security Implications of Global Climate Change to 2030,'' June 
25, 2008.
    \43\National Security and the Threat of Climate Change, The CNA 
Corporation, 2007, page 38.
    \44\Testimony of Kathleen Hicks before the Senate Committee on 
Environment and Public Works, ``Legislative Hearing on S. 1733, Clean 
Energy Jobs and American Power Act,'' October 28, 2009.
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    Dependence on foreign oil weakens international leverage, 
undermines foreign policy objectives, and entangles America 
with unstable regimes.\45\ In 2008, the U.S. spent $386 billion 
dollars to import oil, and much of this money went to countries 
with regimes hostile toward U.S. interests.\46\ Economic 
stability is critical to our national security, and reliance on 
fossil fuel markets that have experienced wild swings constrict 
the economy in the short-term and undermine long-term strategic 
planning.\47\
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    \45\Powering America's Defense: Energy and the Risks to National 
Security, The CNA Corporation, 2009, page 1.
    \46\Testimony of Kathleen Hicks before the Senate Committee on 
Environment and Public Works, ``Legislative Hearing on S. 1733, Clean 
Energy Jobs and American Power Act,'' October 28, 2009.
    \47\Powering America's Defense: Energy and the Risks to National 
Security, The CNA Corporation, 2009, page 11.
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    Included in the CNA's recommendations for mitigating the 
impacts of climate change is a call for the U.S. to commit to 
both a national and international policy that will stabilize 
climate change at levels that will avoid significant security 
impacts. In addition, to reduce our military infrastructure and 
energy security risk, CNA believes that the Department of 
Defense should increase energy efficiency in operations where 
troops are engaged, transform use of energy at installations 
via smart grid technology and electrification of its vehicle 
fleet, and expand adoption of distributed and renewable energy 
generation at its installations.\48\
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    \48\Powering America's Defense: Energy and the Risks to National 
Security, The CNA Corporation, 2009, page ix.
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    Clearly, climate change can be regarded as a ``threat 
multiplier'' that will result in increased demands and stresses 
on the U.S. and the world.\49\ Addressing global climate change 
effectively is critically important to protecting America's 
national security.
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    \49\National Security and the Threat of Climate Change, The CNA 
Corporation, 2007, page 44.
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               THE PATH TO AVOIDING SEVERE CLIMATE CHANGE

    The Act achieves reductions by placing a steadily declining 
cap on carbon pollution, reaching an 83 percent reduction below 
2005 levels by 2050, and calling for a 20 percent reduction by 
2020. Importantly, the Act also provides for periodic review of 
the emissions targets by the National Academy of Sciences, 
including assessment of whether the targets need to be revised 
to provide sufficient protection.
    The bill accomplishes these goals through a pollution 
reduction program that covers less than 2% of American 
businesses and keeps American industry competitive during the 
transition to a new energy economy, while preserving the 
important functions of the Clean Air Act in the area of carbon 
pollution reduction.
    The system applies only to the largest polluters in the 
country--initially around 7,400 facilities that will account 
for 86 percent of U.S. carbon pollution by 2020.\50\ Over 
ninety-eight percent of American businesses, including farmers, 
are not covered by this program. The market-based program also 
provides necessary flexibility. If a company needs more time to 
clean up its carbon pollution, it can pay for the right to keep 
polluting. Alternatively, if a business can decrease pollution 
quickly and affordably, it will be rewarded financially.
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    \50\See Congressional Budget Office, cost estimate for S. 1733, 
Clean Energy Jobs and American Power Act; available at: http://cbo.gov/
ftpdocs/108xx/doc10864/s1733.pdf
---------------------------------------------------------------------------
    The bill also ensures that small businesses, farmers and 
ranchers are not unduly burdened. The bill does not cover any 
agricultural enterprise or any small business that emits less 
than 25,000 tons of carbon-based pollutants per year. This 
25,000 ton cut-off is equivalent to the carbon pollution of 130 
railway cars of coal, 2,300 homes, 4,600 cars, or 58,000 
barrels of oil.
    Delayed emission reductions significantly constrain the 
opportunities to achieve lower stabilisation levels and 
increase the risk of more severe climate change impacts.\51\ 
Because of the long lifetime of GHGs in the atmosphere, delayed 
action will commit all countries to moderate to high climate 
risks, regardless of actions they may seek to take at a later 
date.
---------------------------------------------------------------------------
    \51\IPCC AR4 Synthesis Report.
---------------------------------------------------------------------------

  TECHNOLOGIES ARE AVAILABLE TODAY TO COMBAT GLOBAL WARMING AND SPUR 
                            ECONOMIC GROWTH

    U.S. companies and researchers have led the way in 
developing a broad spectrum of breakthrough technologies 
enabling substantial emissions reductions now. Many studies 
have identified and discussed the numerous emissions reduction 
technologies and practices that are presently available. In 
addition, a study by McKinsey and Company found that 
significant emissions reductions could be achieved from energy 
efficiency measures.\52\
---------------------------------------------------------------------------
    \52\McKinsey & Company, Unlocking Energy Efficiency in the U.S. 
Economy (July 2009). Can be accessed at: http://www.mckinsey.com/
clientservice/electricpowernaturalgas/downloads/
us_energy_efficiency_full_report.pdf
---------------------------------------------------------------------------
    The Advanced Coal Technology Work Group convened by EPA 
reported in January that:

          [W]idespread commercial deployment of [advanced coal 
        and CCS] technologies likely will not occur without 
        legislation that establishes a significant long-term 
        market driver. National mandatory GHG reduction 
        legislation, for example, can provide a carbon price 
        signal that would encourage the widespread deployment 
        of large-scale carbon dioxide capture and sequestration 
        systems. It is critical that any national policy should 
        include provisions that prioritize and encourage early 
        deployment of [advanced coal technology]--particularly 
        CCS.\53\
---------------------------------------------------------------------------
    \53\http://www.epa.gov/air/caaac/coaltech.html.

    A July 2009 analysis by The Climate Group, an international 
coalition of leading organizations and experts, concluded that 
short-term targets are achievable by focusing on energy 
efficiency, deforestation and existing renewable and nuclear 
technologies. Long-term targets require a price on carbon and 
investment and scaling up of known and viable, but not yet 
commercialized, technologies. ``Innovation and technology will 
be essential to provide the answers to climate change, energy 
security and economic growth. The solutions are achievable, 
affordable and realistic but will require concerted effort and 
international cooperation to be successfully executed.''\54\
---------------------------------------------------------------------------
    \54\``Breaking the Climate Deadlock/Technology for a Low Carbon 
Future,'' The Climate Group, July 2009. Available at: http://
www.theclimategroup.org/assets/resources/Technology_ 
for_a_low_carbon_future_report.pdf.
---------------------------------------------------------------------------
    For many clean energy technologies, achieving broad market 
adoption can require substantial capital investments. The 
Committee heard testimony from many experts regarding the 
market framework and certainty that will be a necessary 
prerequisite to the private sector investment that is needed. 
The bill provides this certainty, establishing a long term 
reduction path (and therefore market signal) and a framework 
that includes approximately 86% of our economy's global warming 
emissions in a single comprehensive pollution reduction 
program.
    The bill also provides major financial incentives 
supporting the widespread adoption of these technologies. It 
has been estimated that the allocation and auction of 
allowances under the bill could generate tens of billions of 
dollars annually that will be dedicated to funding of such 
green technology deployment.

                          THE COST OF INACTION

    Failing to effectively avert climate change would likely 
cause major adverse economic impacts. The U.S. Global Change 
Research Program reported in July 2009 that:

          Climate changes are underway in the United States and 
        are projected to grow. Climate-related changes are 
        already observed in the United States and its coastal 
        waters. These include increases in heavy downpours, 
        rising temperature and sea level, rapidly retreating 
        glaciers, thawing permafrost, lengthening growing 
        seasons, lengthening ice-free seasons in the ocean and 
        on lakes and rivers, earlier snowmelt, and alterations 
        in river flows. These changes are projected to 
        grow.\55\
---------------------------------------------------------------------------
    \55\http://www.globalchange.gov/publications/reports/scientific-
assessments/us-impacts; U.S. Climate Change Science Program, Global 
Climate Change Impacts in the United States (Analyses of the Effects of 
Global Climate Change on the U.S. now, and into the future).

    In 2006 the Stern Review on the Economics of Climate 
Change, authored by the former Chief Economist of the World 
Bank Sir Nicholas Stern, concluded that the impacts of climate 
change would total at least 5 percent of global GDP each year 
and could be as high as 20 percent of GDP or more.\56\ Other 
analyses of the economic impacts of four of the most 
significant categories of these impacts--hurricane damage, real 
estate losses, energy costs and water costs--concluded that by 
2025, those impacts would cost 1.36 percent of GDP or $271 
billion, and by 2100 those impacts would cost 1.84 percent of 
GDP, or $1.9 trillion.\57\
---------------------------------------------------------------------------
    \56\http://webarchive.nationalarchives.gov.uk/+/http://www.hm-
treasury.gov.uk/media/4/3/Executive_Summary.pdf.
    \57\http://www.nrdc.org/globalwarming/cost/cost.pdf.
---------------------------------------------------------------------------
    Nonpartisan analyses of S. 1733, and of its House 
counterpart, H.R. 2454, the American Clean Energy and Security 
Act (ACES), have concluded that the costs of the pollution 
reduction and investment program will be very modest. The 
Environmental Protection Agency (EPA) estimated that H.R. 2454 
would cost an average family between $80 and $111 a year and 
estimated that S. 1733 would have similar costs.\58\ At the 
same time, the EPA and EIA analyses show median household 
income rising $4,500 to $5,500 per year, relative to 2009 
levels, far outweighing any increased costs of climate 
legislation.\59\
---------------------------------------------------------------------------
    \58\http://www.epa.gov/climatechange/economics/pdfs/
EPA_S1733_Analysis.pdf.
    \59\http://www.epa.gov/climatechange/economics/pdfs/
HR2454_Analysis.pdf, http://www.eia.doe.gov/oiaf/servicerpt/hr2454/.
---------------------------------------------------------------------------
    In addition, the bill invests emissions allowances and 
allowance value in a number of ways designed to further protect 
U.S. consumers and workers. These include:
     Rebates for low- and moderate-income consumers on 
their energy bills.
     A market stability fund to protect consumers and 
businesses from price volatility. This mechanism ensures that, 
even as the energy economy changes, customers will experience 
stable, affordable prices.
     Support for strong policing measures to establish 
marketplace accountability and ensure the new carbon 
marketplace is transparent, fair, and accountable.
     Billions of dollars in investment for the clean, 
efficient, and renewable use of energy and the deployment of 
twenty-first century energy technologies.
     Worker training for new industries, including new 
programs at post-secondary institutions.
     Support for energy-intensive, trade-exposed 
industries to ensure that U.S. manufacturing remains 
competitive.

                           ECONOMIC ANALYSIS

    EPA conducted and provided to the Committee a synthesis 
report that examined the key differences between S. 1733 and 
H.R. 2454 and analyzed the impacts on the cost estimates 
resulting from each of those key differences, individually and 
in the aggregate. Earlier in 2009, the EPA, the Congressional 
Budget Office (CBO) and the Energy Information Administration 
(EIA) modeled potential economic impacts of H.R. 2454, the 
American Clean Energy and Security Act (ACES), which is very 
similar to S. 1733.\60\ Because of the similarity between the 
two bills, EPA concluded with a very high degree of confidence 
that an additional modeling analysis of S. 1733 would not 
render meaningful new information or significantly different 
results. As EPA explained in its report: ``For the most part 
the differences between the bills result in relatively small 
differences in estimated costs and may even cancel each other 
out.''\61\
---------------------------------------------------------------------------
    \60\http://www.cbo.gov/ftpdocs/102xx/doc10262&/hr2454.pdf; http://
www.epa.gov/climatechange/economics/pdfs/HR2454_Analysis.pdf; and 
http://www.eia.doe.gov/oiaf/servicerpt/hr2454/.
    \61\U.S. EPA, ``Economic Impacts of S. 1733: The Clean Energy Jobs 
and American Power Act of 2009,'' Oct. 23, 2009.
---------------------------------------------------------------------------
    During committee consideration of S. 1733, David McIntosh, 
EPA Assistant Administrator for the Office of Congressional and 
Intergovernmental Relations, described the extensive analysis 
and modeling that laid the foundation for EPA's report on S. 
1733: ``It relied on over 50 modeled scenarios. . . . And all 
of those modeling efforts rely themselves on a large body of 
literature and analysis that, if you put it all together, 
amounts to over 340,000 pages.''\62\
---------------------------------------------------------------------------
    \62\Testimony of David McIntosh before Senate Committee on 
Environment and Public Works, Nov. 3, 2009.
---------------------------------------------------------------------------
    The Committee had much more analysis from EPA with respect 
to S. 1733 than the House Energy and Commerce Committee had 
available when it considered H.R. 2454 earlier this year. On 
May 21, 2009, after a 4-day markup, the House Energy and 
Commerce Committee favorably reported an amended version of 
H.R. 2454 based on a summary of the manager's amendment from 
EPA.
    Finally, it is important to note that at the time of the 
markup S. 1733 did not constitute the complete piece of 
legislation. Rather, S. 1733 would be considered and modeled 
with reported bills from other Committees, including S. 1462, 
from the Committee on Energy and Natural Resources, before 
final legislation will be considered on the Senate floor.

        Discussion of Provisions and Section-by-Section Analysis

Section 1. Short title; Table of contents

    Section 1 provides that the Act may be cited as the ``Clean 
Energy Jobs and American Power Act''.

Section 2. Findings

    Describes the impacts of climate change and the benefits of 
transitioning to a clean energy economy.
            Discussion
    The most central findings of the Act are: (1) the United 
States can take back control of the energy future of the United 
States, strengthen economic competitiveness, safeguard the 
health of families and the environment, and ensure the national 
security, of the United States by increasing energy 
independence; (2) efficiency in the energy sector also 
represents a critical avenue to reduce energy consumption and 
carbon pollution, and those benefits can be captured while 
generating additional savings for consumers; (3) substantially 
increasing the investment in the clean energy future of the 
United States will provide economic opportunities to millions 
of people in the United States and drive future economic growth 
in this country; (4) if unchecked, the impact of climate change 
will include widespread effects on health and welfare, 
including--increased outbreaks from waterborne diseases; more 
droughts; diminished agricultural production; severe storms and 
floods; heat waves; wildfires; and a substantial rise in sea 
levels, due in part to--melting mountain glaciers, shrinking 
sea ice and thawing permafrost.

Section 3. Economy-wide emission reduction goals

    This section establishes targets for reducing greenhouse 
gas (GHG) emissions to:
          97% of 2005 emissions in 2012
          80% of 2005 emissions in 2020
          58% of 2005 emissions in 2030
          17% of 2005 emissions in 2050

Section 4. Definitions

    This section includes definitions of terms used throughout 
the Act

  DIVISION A--AUTHORIZATIONS FOR POLLUTION REDUCTION, TRANSITION, AND 
                               ADAPTATION

Section 101. Structure of Act

    Describes the authorizations included in the bill, 
including those that receive an allocation of allowances under 
Division B.

Section 102. Requirements relating to Federal advisory committees

    This section requires any scientific advisory panel 
convened pursuant to this Act and the members of such panel to 
meet standards of scientific integrity, provide independent 
advice, and avoid or disclose conflicts of interest. The 
section also requires the public disclosure of the charter, 
proceedings and membership of all advisory committees.

Section 103. Voluntary renewable energy markets

    Includes findings describing the accomplishments of 
voluntary renewable energy markets and states that it is the 
policy of the United States to continue to support the growth 
of these markets.

               TITLE I--GREENHOUSE GAS REDUCTION PROGRAMS

                    SUBTITLE A--CLEAN TRANSPORTATION

Section 111. Emission standards

    Amends Title VIII of the Clean Air Act to require EPA to 
establish greenhouse gas emission standards for new heavy-duty 
vehicles and engines, and for nonroad vehicles and engines.

Section 112. Greenhouse gas emission reductions through transportation 
        efficiency

    Section 112 adds a new section to the Clean Air Act, 
Section 831, under which State and local transportation 
agencies will incorporate consideration of transportation 
strategies for reducing greenhouse gas emissions into their 
transportation plans in order to be eligible for the 
transportation planning, transit, and competitive 
transportation grants created in this Act.

Section 113. Transportation greenhouse gas emission reduction program 
        grants

    Section 113 adds a new section to the Clean Air Act, 
Section 832, which creates a planning grant program for MPOs 
and a competitive grant program for States and eligible MPOs to 
help implement emission reduction efforts described in Section 
112 above.

Section 114. SmartWay Transportation Efficiency Program

    Section 114 adds a new section to the Clean Air Act, 
Section 822, which creates statutory authority for the SmartWay 
Transportation Efficiency Program, expanding the current EPA 
SmartWay Transport Partnership.
            Discussion
    According to the Environmental Protection Agency's 
``Inventory of U.S. Greenhouse Gas Emissions and Sinks: 1990--
2007'' the transportation sector is responsible for 28% of the 
greenhouse gas emissions in the United States, second only to 
electricity generation.\63\ Emissions from the transportation 
sector are also growing much faster than many other sectors, 
representing 47% of the increase in total greenhouse gas 
emissions in the United States between 1990 and 2006.\64\ 
Transportation is clearly a significant part of the climate 
problem, and must be part of the solution.
---------------------------------------------------------------------------
    \63\U.S. Environmental Protection Agency, ``Inventory of U.S. 
Greenhouse Gas Emissions and Sinks: 1990-2007,'' at ES-14 (April 15, 
2009).
    \64\U.S. Environmental Protection Agency, Regulatory Announcement, 
``EPA and NHTSA Propose Historic National Program to Reduce Greenhouse 
Gases and Improve Fuel Economy for Cars and Trucks,'' Sept. 2009. 
Available at: http://www.epa.gov/otaq/climate/regulations/
420f09047.pdf.
---------------------------------------------------------------------------
    The bill takes significant steps to reduce greenhouse gas 
emissions from the transportation sector. The legislation 
amends the Clean Air Act to require the EPA Administrator, in 
consultation with the Secretary of Transportation, to establish 
national greenhouse gas emissions reduction goals and develop a 
variety of tools (including emission models, methodologies and 
information as to best practices) to be used by States and 
regions when they develop transportation sector greenhouse gas 
emissions reduction targets and plans. The authority conferred 
upon EPA under the new section 831(a) of the Clean Air Act 
requires consultation and interaction with the Secretary of 
Transportation and maintains the Department of Transportation's 
(USDOT) role in transportation planning. Under this subtitle, 
USDOT (in consultation with EPA) will promulgate regulations 
regarding modeling and measurement of greenhouse gas emissions 
and make appropriate updates to transportation planning 
regulations to facilitate an effective integration of 
greenhouse gas emission reduction into transportation planning.
    This subtitle allows States and participating metropolitan 
planning organizations (MPOs) to develop their own targets and 
strategies for reducing greenhouse gas emissions from the 
transportation sector. Section 134(k) of this subtitle requires 
that the setting of targets and selection of strategies be 
customized to the jurisdiction as the circumstances facing each 
jurisdiction will be different and standardized plans are 
unlikely to be effective.
    The policy, scope of planning, and consultation sections of 
existing federal-aid highway and transit requirements are 
amended to introduce a stronger emphasis on energy consumption, 
greenhouse gas emissions, and sustainable environments. In 
addition, a greater role in the long-range planning process is 
provided for State and local agencies responsible for 
transportation, public transportation, air quality and housing 
as well as Indian tribes and public health agencies, as 
appropriate. This subtitle does not change the longstanding 
roles for the Federal government, State governments, and MPOs 
under Titles 23 and 49.
    The goal of the new planning requirements in this Subtitle 
is to foster performance-based planning by States and MPOs that 
explicitly takes into account greenhouse gas emission 
reductions. Such practices benefit from the adoption of goals 
that are built upon consensus at the community and State 
levels. This subtitle does nothing to preclude citizen 
involvement in planning, or civil actions under NEPA at the 
project level. Section 112(d) clarifies that citizen lawsuits 
shall not be applicable to the provisions of this Act that 
relate to the setting of greenhouse gas emission reduction 
targets nor the development of plans to reduce greenhouse gas 
emissions.
    Scenario analyses, as incorporated into the new planning 
provisions, are intended as procedural planning tools to be 
undertaken before the formulation of targets and strategies, 
not as a project selection mechanism. Furthermore, the minimum 
planning requirements outlined for States and MPOs are intended 
to indicate that a State or MPO is able to take additional 
steps if it so chooses. It is not intended that USDOT add 
minimum requirements to this list through administrative action 
or require the use of a particular technique.
    In addition to comprehensive new planning requirements, 
this subtitle creates an incentive for action by providing 
planning funds to MPOs, discretionary grants for States and 
MPOs to use in implementing their plans, and formula grants to 
public transportation agencies, all of which will be used to 
reduce greenhouse gas emissions from the transportation sector. 
The funding provided rewards MPOs and States for setting their 
own targets and strategies to reduce emissions. If a State or 
MPO's efforts do not meet the requirements of this subtitle or 
are not approved by the Secretary, they are not eligible for 
grants.
    The goal of this Subtitle is to foster performance-based 
planning by States and MPOs that explicitly takes into account 
greenhouse gas emission reductions. Such practices benefit from 
the adoption of goals that are built upon consensus at the 
community and State levels. This subtitle does nothing to 
preclude citizen involvement at the plan level or civil actions 
under NEPA at the project level. Section 112(d) clarifies that 
citizen lawsuits shall not be applicable to the provisions of 
this Act that relate to the setting of greenhouse gas emission 
reduction targets nor the development of plans to reduce 
greenhouse gas emissions.

              SUBTITLE B--CARBON CAPTURE AND SEQUESTRATION

Section 121. National strategy

    Requires the EPA Administrator, in consultation with the 
heads of other relevant Federal agencies, to submit to Congress 
a report setting forth a unified and comprehensive strategy to 
address the key legal and regulatory barriers to the 
commercial-scale deployment of carbon capture and 
sequestration.

Section 122. Regulations for geological sequestration sites

    Amends the Clean Air Act to require the Administrator to 
establish a coordinated approach to the certification and 
permitting of sites where geologic sequestration of carbon 
dioxide will occur. Requires the EPA Administrator to 
promulgate regulations to minimize the risk of escape to the 
atmosphere of carbon dioxide injected for geologic 
sequestration and details the requirements of such regulations.

Section 123. Studies and reports

    Requires the EPA Administrator to establish a multi-
stakeholder task force and conduct a study of the legal 
framework for geologic sequestration sites and activities.

Section 124. Performance standards for new coal-fueled power plants

    Amends the Clean Air Act to establish performance standards 
for new coal-fueled power plants permitted in 2009 or 
thereafter. Describes eligibility criteria, applicable emission 
standards, and the schedule upon which such standards must be 
met. Plants permitted in 2020 or thereafter are required to 
meet specified standards once they begin operations. Plants 
permitted from 2009-2020 are required to meet the specified 
standard after 10 gigawatts of commercial deployment is 
achieved but no later than January 1, 2020.
    Requires the Administrator in consultation with the 
Department of Energy to submit a report to Congress not later 
than June 30, 2017 that includes a finding, based on a review 
of the status of commercial deployment of carbon capture and 
sequestration technology on whether the date for compliance 
with the performance standards should be maintained or extended 
to January 1, 2022.

Section 125. Carbon capture and sequestration demonstration and early 
        deployment program

    Establishes a program for the demonstration and early 
deployment of carbon capture and sequestration (CCS) 
technologies. Authorizes fossil fuel-based electricity 
distribution utilities to hold a referendum on the 
establishment of a Carbon Storage Research Corporation program 
for the demonstration and early deployment of carbon capture 
and sequestration (CCS) technologies. If approved by entities 
representing two-thirds of the nation's fossil fuel-based 
delivered electricity, the Corporation would be operated as a 
division or affiliate of the Electric Power Research Institute 
and would assess power distribution fees totaling approximately 
$1 billion annually for ten years, to be used by the 
Corporation to fund the large-scale demonstration of CCS 
technologies in order to accelerate the commercial availability 
of those technologies.
            Discussion
    Coal-fired plants generate almost a third of U.S. 
CO2 emissions, equal to the emissions from all of 
our cars, trucks, and buses combined.\65\
---------------------------------------------------------------------------
    \65\U.S. Environmental Protection Agency, Inventory of U.S. 
Greenhouse Gas Emissions and Sinks 1990-2007 (April 15, 2009) at Tables 
2-1 2-13 (online at http://www.epa.gov/climatechange/emissions/
downloads09/InventoryUSGhG1990-2007.pdf).
---------------------------------------------------------------------------
    The greenhouse gas emissions from burning coal must be 
addressed in order to avert the worst consequences of global 
climate change. Technology for carbon capture and sequestration 
(CCS) can allow the continued use of coal with greatly reduced 
impact on the climate. CCS involves the physical capture of 
CO2 at power plants, compressing the gas into a 
liquid, and injecting the CO2 into geological 
formations.
    The technologies that are needed to implement CCS exist 
today and have been commercially deployed in other industries, 
such as in oil and gas production. Despite the availability of 
these technologies, however, no full-scale CCS project has yet 
been implemented at a coal-fired power plant, in large measure 
due to the substantial capital investment required at scale.
    S. 1733 provides significant incentives for the development 
and early demonstration of CCS technologies. For example, the 
bill invests up to 5% of allowances in carbon capture and 
sequestration (CCS) projects, estimated to equal more than $3 
billion per year by 2020, and provides advanced payments of 
emission allowances to reward early actors who pledge specific 
reductions through the implementation of CCS technology on new 
or retrofitted plants. The bill also authorizes the private 
sector to establish a ten-year, $10 billion program for the 
development and early demonstration of CCS technologies. 
Moreover, S. 1733 also provides an important indirect incentive 
for CCS, by putting a price on CO2 emissions.
    Because of the very large volumes of CO2 that 
will need to be sequestered, the most promising CO2 
storage potential is in geological formations. However, the 
bill supports potential technologies that can safely sequester 
CO2. For example, the incentives in the bill for CCS 
will apply to CCS technologies that capture CO2 
emissions from power plant flue gas and combines it with other 
materials to produce cement, aggregate, or other building 
materials.\66\
---------------------------------------------------------------------------
    \66\Testimony of Brent Constantz, Ph.D, CEO of Calera Corporation, 
before Senate Appropriations Committee, Subcommittee on Energy and 
Water Development, May 6, 2009.
---------------------------------------------------------------------------
    Currently, the lack of market certainty has prevented 
significant investment in either new pulverized coal or new CCS 
coal plants. For example, 54 percent of coal capacity ordered 
since 2000 has been canceled or put on hold in the last two 
years, in part because of uncertainties concerning the 
enactment of climate legislation, which most in the private 
sector view as likely or inevitable.\67\ Deployment of the 
first 5-10 commercial scale CCS projects will facilitate large-
scale deployment, reduce costs, and lay the groundwork for 
deployment of CCS plants.
---------------------------------------------------------------------------
    \67\http://www.eenews.net/eenewspm/2008/02/19/3/.
---------------------------------------------------------------------------

              SUBTITLE--NUCLEAR AND ADVANCED TECHNOLOGIES

Section 131. Findings and policy

    Provides Congressional findings related to the role of 
nuclear power as an energy source. Establishes a policy of 
promoting a safe and clean nuclear energy industry, through 
reductions in financial and technical barriers to construction 
and operations incentives for the development of a well-trained 
workforce and the growth of safe domestic nuclear and nuclear-
related industries.

Section 132. Nuclear worker training

    Establishes a grant program, administered by EPA, to 
provide assistance for training of workers that will be 
essential for the growth of safe domestic nuclear and nuclear-
related industries.

Section 133. Nuclear safety and waste management programs

    Establishes programs to provide grants and other assistance 
for research projects that seek to develop new technologies for 
nuclear waste management.
            Discussion
    The Committee recognizes that nuclear energy will play an 
important role in meeting emissions reductions goals and in 
transitioning to a clean energy economy. The development of 
nuclear power requires well-trained workers and a safe and 
effective means for disposal of spent nuclear waste. Subtitle C 
seeks to address these issues, with an explicit policy of 
promoting a safe and clean nuclear energy industry, and by 
establishing grant programs to train workers and invest in 
research and development on nuclear waste management 
technologies.

                      SUBTITLE D--WATER EFFICIENCY

Section 141. WaterSense

    Authorizes EPA's WaterSense program, a voluntary program 
for labeling water-efficient high-performance products and 
services. Provides the same type of labeling for water-
efficient products and services as currently in place for 
energy-efficient products under the Energy Star program.

Section 142. Federal procurement of water-efficient products

    Directs Federal agencies to make cost-effective water-
efficient procurement decisions by purchasing WaterSense or 
Federal Energy Management Program certified products whenever 
possible.

Section 143. State residential water efficiency and conservation 
        incentives program

    Authorizes grants to eligible entities for programs 
offering incentives to consumers who purchase and install 
water-efficient products and services such as those labeled 
under WaterSense.
            Discussion
    This Subtitle promotes water efficiency measures. Climate 
change will continue to place extreme pressures on water 
resource availability and water quality throughout the United 
States--effects such as greater evaporation rates, earlier 
snowmelt, extended and extreme drought, water scarcity, extreme 
flooding, and water quality degradation are expected to occur 
at increasing rates.\68\
---------------------------------------------------------------------------
    \68\National Association of Clean Water Agencies, ``Confronting 
Climate Change: An Early Analysis of Water and Wastewater Adaptation 
Costs,'' October 2009, 1-1. Available at:
http://www.nacwa.org/images/stories/public/2009-10-28ccreport.pdf.
---------------------------------------------------------------------------
    Between 1950 and 2000, the U.S. population nearly doubled 
while the public demand for water more than tripled.\69\ 
Climate change impacts coupled with greater public demand for 
water make water efficiency measures, on both the federal and 
state level, paramount to ensuring adequate water supplies.
---------------------------------------------------------------------------
    \69\http://www.epa.gov/WaterSense/water/why.htm.
---------------------------------------------------------------------------
    This Subtitle authorizes the WaterSense program and other 
similar water efficiency measures. Not only does water 
efficiency help to protect the future of our nation's water 
supply, but it also reduces pollution and decreases energy 
consumption by contributing to healthy wetlands, reducing the 
need to construct additional water and wastewater treatment 
facilities, and eliminating excessive surface water 
withdrawals.\70\
---------------------------------------------------------------------------
    \70\http://www.epa.gov/WaterSense/water/save/env_benefits.htm.
---------------------------------------------------------------------------

                       SUBTITLE E--MISCELLANEOUS

Section 151. Office of Consumer Advocacy

    Establishes an Office of Consumer Advocacy within the 
Federal Energy Regulatory Commission to identify and defend the 
consumer interest in proceedings before the Commission.

Section 152. Clean technology business competition grant program

    Provides for grants by EPA to nonprofit organizations for 
competitive programs supporting start-up businesses in the 
areas of energy efficiency, renewable energy, air quality, 
water quality and conservation, transportation, smart grid, 
green buildings, and waste management.

Section 153. Product carbon disclosure program

    Requires EPA to conduct a study regarding effectiveness of 
a voluntary product carbon disclosure and labeling program, to 
implement such a program based on the results of the study, and 
to report to Congress.

Section 154. State recycling programs

    Requires EPA to establish a state recycling and reuse 
program and develop analyses and methodologies to optimize 
reductions of greenhouse gas emissions through recycling and 
reuse. Provides that funds distributed by States under the Act 
to carry out these programs be allocated in minimum proportions 
among county and municipal programs, eligible recycling 
facilities, and eligible manufacturing facilities.
            Discussion
    Preventing and recycling solid waste helps not only to 
better manage the nation's waste stream, it also provides an 
important tool in reducing greenhouse gas emissions. Waste 
prevention and recycling can reduce methane emissions--a potent 
greenhouse gas--from landfills. It can also provide a steady 
source of organic material that can be beneficially reused.
    According to the Environmental Protection Agency, producing 
products from virgin materials typically involves more energy 
than producing the same products from recycled materials. 
Reusing intact products, meanwhile, uses the least amount of 
energy. Reusing materials and products, then, can increase 
energy efficient production and save manufacturers and 
consumers money, while reducing greenhouse gas emissions.

Section 155. Supplemental agriculture, abandoned mine lands, and 
        forestry greenhouse gas reduction and renewable energy program

    Establishes a new program to provide assistance to 
agriculture and forestry landowners and to entities seeking to 
clean up abandoned mine lands for projects that reduce 
greenhouse gases or sequester carbon. Establishes a research 
program for the development and deployment of renewable energy 
technologies in the agricultural and forestry sectors.

Section 156. Economic development climate change fund

    Authorizes the Economic Development Administration to 
provide up to $50 million per year in technical assistance and 
grants for projects that promote green economic development in 
distressed communities.
    This section amends Title II of the Public Works and 
Economic Development Act of 1965 to authorize a program through 
which the Secretary of Commerce may provide technical 
assistance and grants for projects that: (1) promote energy 
efficiency to enhance economic competitiveness; (2) increase 
the use of renewable energy to support economic development; 
(3) develop conventional energy resources to produce 
alternative transportation fuels, electricity and heat; (4) 
develop energy efficient or environmentally sustainable 
infrastructure; (5) promote environmentally sustainable 
economic development practices and models; (6) support 
development of energy efficiency and alternative energy 
development plans, studies or analysis.
    The Federal share for projects funded under this program 
will be 80%, except that the Federal share used to supplement 
another Federal grant, loan or loan guarantee may be 100%. For 
each of fiscal years 2009 through 2013, $50 million is 
authorized for this program.
            Discussion
    This section will authorize the Economic Development 
Administration to provide grants, loans and loan guarantees 
aimed at both improving our environment and supporting job 
creation.

Section 157. Study of risk-based programs addressing vulnerable areas

    Requires preparation of a report within two years assessing 
federal pre-disaster mitigation, emergency response and flood 
insurance policies and programs that affect areas vulnerable to 
the impacts of climate change, with strategies and 
recommendations.
            Discussion
    Federal policies relating to pre-disaster mitigation, 
emergency response and flood insurance programs will be 
critically important to efforts to minimize damage and loss of 
life resulting from increased hurricanes and other climate-
related storms. U.S. Census Bureau data indicate that more than 
35 million Americans live in coastal counties most threatened 
by hurricanes. Testimony provided by the Reinsurance 
Association of America stated that Gulf Coast and Atlantic 
Coast insured property exposure total approximately $9 
trillion, and the U.S. insurance industry has reported more 
than $170 billion of hurricane related losses since 1988. 
Section 157 calls for a study and report analyzing key federal 
policies that will affect areas vulnerable to the impacts of 
climate change, including consistency with the State and tribal 
response and adaptation goals under the Act, and provide 
strategies and recommendations for improving those policies. 
The Committee expects that the study and report will identify 
significant opportunities for cost savings to the Federal 
Government, as well as lead to better preparation of coastal 
areas for climate-related events.

Section 158. Efficient buildings program

    Provides assistance to owners of buildings for verifiable, 
additional, and enforceable improvements in energy performance.

           SUBTITLE F--ENERGY EFFICIENCY AND RENEWABLE ENERGY

Section 161. Renewable energy

    Directs EPA to establish a program to provide grants and 
other assistance to renewable energy projects in states with 
mandatory renewable portfolio standards.

Section 162. Advanced biofuels

    Directs EPA to establish a program to provide grants to 
promote the production and use of advanced biofuels through 
research and development, planning, translation of new 
technologies into commercial use, and construction of 
appropriate facilities.

Section 163. Energy efficiency in building codes

    Requires the EPA Administrator, or such other agency head 
as the President designates, to set a national goal for 
improvement in building energy efficiency, promulgate a rule 
establishing national energy efficiency building codes for 
residential and commercial buildings, and regularly report to 
Congress on progress in improving building efficiency.

Section 164. Retrofit for energy and environmental performance

    Establishes the Retrofit for Energy and Environmental 
Performance Program to provide allowances to States to conduct 
cost-effective building retrofits. Provides that States may use 
local governments or other agencies or entities to carry out 
the work and may use flexible forms of financial assistance 
providing up to 50% of the costs of retrofits, with funding 
increasing in proportion to efficiency achievement. Provides 
additional assistance for the retrofitting of historic 
buildings. Directs the Administrator of EPA to establish 
standards and guidelines for the program, in consultation with 
the Secretary of Energy. Requires States to offer preferential 
access to at least 10% of dedicated program funding to public 
and assisted housing. Allows funding to be used to provide 
training to building staff relating to energy-efficient 
operations and maintenance of residential and nonresidential 
buildings. Nothing in this section would require a homeowner to 
audit or retrofit their home or authorize mandatory enforcement 
of building code requirements.

Section 165. Certified stoves program

    This section directs the Environmental Protection Agency 
(EPA) to establish a program to assist in the replacement of 
older inefficient wood stoves or pellet stoves with cleaner 
burning units to improve air quality, including reductions in 
methane and carbon dioxide from improved combustion efficiency. 
It authorizes the Administrator to provide grants, incentives 
and loans for people who rely on wood as a source of heat.

Section 166. Renewable fuel standard

    This section clarifies that advanced biofuels are included 
in the Renewable Fuels Standard by replacing the term 
``cellulosic biofuel'' with the term ``Advanced Green 
Biofuel.'' Advanced Green Biofuel is defined to mean a fuel 
that is derived from renewable biomass and has lifecycle 
greenhouse gas emissions of at least 60% below the relevant 
baseline.

Section 167. Tree planting programs

    This section authorizes a grant program through the 
Environmental Protection Agency to provide technical and 
financial assistance to plant trees around residential and 
commercial buildings, to reduce energy use and demand peaks.
            Discussion: Energy efficiency
    Increasing energy efficiency can help to reduce household 
and business costs, the need for new electricity generation and 
greenhouse gas and other pollution, while improving the 
reliability of energy supplies and the efficiency of 
manufacturing and other businesses. The programs authorized in 
sections 163, 164, 165 and 167 of this subtitle seek to build 
on and expand the nation's energy security, consumer savings, 
industrial competitiveness and job base by increasing energy 
efficiency. The increase in energy efficiency not only improves 
our national energy security, it can help to address global 
warming and environmental threats--while increasing our 
nation's competitiveness and transforming the way our country 
uses energy. Reduced energy demand can also help to reduce the 
strain on existing electricity systems, resulting in a more 
stable supply of power and less need for new fossil fuel 
burning power plants.
    This subtitle places a focus on improving energy efficiency 
of residential and commercial buildings. According to the 
Department of Energy, the typical U.S. family spends roughly 
$1,900 a year on home utility bills. The Department notes that 
a large portion of the energy used in homes can be wasted. For 
example, uninsulated home heating air ducts can lose up to 60 
percent of the heat in the air that they convey. Insulating 
these ducts can save homes money and reduce energy demand. 
Replacing an old air conditioner with a new, energy-efficient 
model reduces utility cooling bills by up to 50 percent. This 
can also save money on energy bills and reduce energy 
demand.\71\
---------------------------------------------------------------------------
    \71\Energy Savers Booklet: Tips on Saving Energy and Money at Home. 
US Department of Energy. Available at http://www1.eere.energy.gov/
consumer/tips/pdfs/energy_savers.pdf
---------------------------------------------------------------------------
    According to the Department of Energy, the Nation's 
buildings sector accounts for roughly 40 percent of our energy 
use, 72 percent of our electricity consumption, and 34 percent 
of our nation's use of natural gas--and building-related energy 
costs were about $390 billion in 2006.\72\ According to the 
Environmental Protection Agency, commercial buildings that have 
met the agency's Energy Star standards\73\ are one-third more 
energy efficient than average U.S. office buildings and have 
annual energy bills that are 35 percent lower than the average 
building.\74\ Data from the Energy Star program shows that 
buildings that met the program requirements in 2008 resulted in 
a net savings of $5.3 billion, with 18.5 million metric tons of 
avoided greenhouse gas emissions.\75\
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    \72\Buildings Energy Data Book, Sept. 2008, Tables 1.1.3 1.1.6, 
3.1.1, 3.3.1, 4.1.5, 5.1.2, 5.3.1. Available at http://
buildingsdatabook.eren.doe.gov/docs/DataBooks/2008_BEDB_Updated.pdf
    \73\The Environmental Protection Agency's Energy Star Program 
promotes the use of energy efficient products and building designs.
    \74\Summary of the financial benefits of Energy Star labeled 
buildings. US Environmental Protection Agency. Available at: http://
www.energystar.gov/ia/partners/publications/pubdocs/ 
Summary_of_the_Financial_Benefits_23June06_FINAL.pdf
    \75\Energy Star and Other Climate Protection Partnerships: 2008 
Annual Report. US Environmental Protection Agency. Available at http://
www.energystar.gov/ia/partners/publications/pubdocs/
Annual%20Report_122309_to%20EPA_Web.pdf
---------------------------------------------------------------------------
    Retrofits, a major component of increasing energy 
efficiency, and the primary focus of the Retrofits for Energy 
and Environmental Performance program authorized in Section 
164, provide new domestic job opportunities. Retrofitting 
existing homes requires jobs that cannot be exported and must 
be performed in communities across the nation. These jobs 
include installing insulation, new windows and new heating and 
cooling systems. Many of these jobs rely on existing skills 
used in the construction industry.
            Discussion: Renewable fuels
    According to the Environmental Protection Agency, 
transportation accounts for 28 percent of the nation's 
greenhouse gas emissions. Reducing our nation's dependence of 
foreign sources of petroleum to fuel our transportation sector 
strengthens our national security and promotes energy 
independence. The programs authorized in this subtitle promote 
domestic sources of biofuels that accomplish these goals while 
providing domestic sources of employment and reducing 
greenhouse gas emissions.
    The advanced biofuel sector is on the cutting edge of 
science. The advanced green biofuel grant program and the 
modification of the term ``cellulosic'' biofuel in the 
renewable fuels standard recognize the rapid development of 
this technology and seek to promote these new fuel sources. The 
advanced green biofuel program provides the Environmental 
Protection Agency with maximum flexibility to help promote 
advanced biofuel development at each stage of production, 
focusing on fostering advanced green biofuels that are 
sustainably generated throughout the production cycle and that 
can use the nation's existing fuel delivery systems.

  SUBTITLE G--EMISSION REDUCTIONS FROM PUBLIC TRANSPORTATION VEHICLES

Section 171. Short title

Section 172. State fuel economy regulation for taxicabs

    Allows State and local governments to set emissions 
standards for fuel efficiency of taxi cabs at least as 
stringent as applicable Federal standards.

Section 173. State regulation of motor vehicle emissions for taxicabs

    Amends the Clean Air Act to allow State and local 
governments to set emissions standards for emissions from taxi 
cabs at least as stringent as applicable Federal standards.

                SUBTITLE H--CLEAN ENERGY AND NATURAL GAS

Section 181. Clean energy and accelerated emission reduction program

    Authorizes EPA to carry out a program to provide incentive 
payments for power generation projects that achieve reductions 
in greenhouse gases as compared to the electric utility sector 
average.

Section 182. Advanced natural gas technologies

    Authorizes EPA to carry out a program to provide grants for 
research and development of advanced technologies, including 
carbon capture and sequestration, which reduce greenhouse gas 
emissions from natural gas-fueled electricity generation 
facilities.
            Discussion
    Natural gas will play an important role in reducing U.S. 
greenhouse gas emissions because it has by far the lowest 
carbon content of the fossils fuels. Natural gas can be used in 
power generation, transportation, and direct end use 
applications.\76\ Using natural gas in the transportation 
sector can increase our national security by decreasing our use 
of oil--two thirds of which is foreign oil.
---------------------------------------------------------------------------
    \76\Testimony of Joel Bluestein, Senior Vice President, ICF 
International, before Senate Committee on Environment and Public Works, 
``Legislative Hearing on S. 1733, Clean Energy Jobs and American Power 
Act,'' Oct. 28, 2009.
---------------------------------------------------------------------------
    Recent developments in natural gas drilling technology have 
greatly increased estimated U.S. natural gas reserves. The 
Energy Information Agency forecasts that the U.S. production of 
natural gas from unconventional sources will increase from 47% 
of the U.S. total in 2007 to 56% in 2030.\77\
---------------------------------------------------------------------------
    \77\U.S. Department of Energy, Energy Information Agency, Annual 
Energy Outlook 2009 (March 2009) (online at http://www.eia.doe.gov/
oiaf/aeo/gas.html).
---------------------------------------------------------------------------
    Increased production of natural gas, especially from 
unconventional sources where hydraulic fracturing is used or 
where production fluids cannot be re-injected into the 
formations, is not without risks to human health and the 
environment. In the Interior, Environment and Related Agencies 
Appropriations Act, 2010, Congress urged EPA to conduct a 
scientific, peer-reviewed study, including consultation with 
other federal agencies and appropriate State and interstate 
regulatory authorities, on the relationship between hydraulic 
fracturing and drinking water.\78\
---------------------------------------------------------------------------
    \78\H. Conf. Report 111-316 (Oct. 28, 2009), at 109.
---------------------------------------------------------------------------
    Using more domestic natural gas will enhance our economic 
competitiveness. Higher demand for natural gas will create more 
U.S. jobs, and using domestic gas in lieu of imported oil would 
reduce our trade imbalance, keeping more of our energy dollars 
to invest at home instead of sending overseas. Natural gas can 
also be used to develop new, clean-energy technologies such as 
wind-gas hybrid electricity plants, carbon capture and 
sequestration, and natural gas transportation fuels. American 
engineered low-carbon technology innovations could be marketed 
to the rest of the world, helping to reduce worldwide 
CO2 emissions and maintaining the United States' 
leadership in technology innovation.\79\
---------------------------------------------------------------------------
    \79\Testimony of John D. Podesta, President and CEO, Center for 
American Progress, before Senate Committee on Environment and Public 
Works, ``Legislative Hearing on Clean Energy Jobs and American Power 
Act, S. 1733'', Oct. 29, 2009.
---------------------------------------------------------------------------
    S. 1733 will encourage the use of natural gas for power 
generation by authorizing EPA to carry out a program under 
Section 181 to provide incentive payments for power generation 
projects that achieve reductions in greenhouse gases as 
compared to the electric utility sector average.
    Section 182 of the bill will significantly accelerate the 
development of advanced natural gas technologies by authorizing 
EPA to provide grants for research and development of advanced 
natural gas technologies, including CO2 capture and 
sequestration from natural gas-fired power plants.

                           TITLE II--RESEARCH

                      SUBTITLE A--ENERGY RESEARCH

Section 201. Advanced energy research

    Authorizes EPA to carry out a program to provide grants to 
support research and development on innovative energy 
technologies that reduce US dependence on foreign energy 
sources and reduce greenhouse gas emissions.
            Discussion
    Increased funding for research on advanced energy 
technologies is critically important to achieving technological 
breakthroughs that will help the U.S. transition to a clean 
energy economy. The U.S. Government has a history of funding 
the basic research of technologies that have become central to 
our economy. Similarly, the basic research being conducted 
today will lead to the clean energy technologies of tomorrow. 
Federal research and sponsorship will be critically important 
to ensuring a substantial U.S. role in these industries. 
Section 201 creates a program that will direct appropriated 
funds to these vitally important research projects.

   SUBTITLE B--DRINKING WATER ADAPTATION, TECHNOLOGY, EDUCATION, AND 
                                RESEARCH

Section 211. Effects of climate change on drinking water utilities

    Requires EPA to establish and provide funding for a 
research program, to be conducted through a nonprofit water 
research foundation and sponsored by drinking water utilities, 
to assist utilities in adapting to the effects of climate 
change.
            Discussion
    This section directs funds to assist drinking water 
utilities in adapting to climate change impacts on our water 
and wastewater systems. Such impacts include extended and 
extreme drought, water scarcity and the need to develop new 
supplies, extreme flooding and sea level rise, costly energy 
and energy efficiency actions, and water quality degradation 
and increased treatment requirements.\80\
---------------------------------------------------------------------------
    \80\National Association of Clean Water Agencies, ``Confronting 
Climate Change: An Early Analysis of Water and Wastewater Adaptation 
Costs,'' October 2009, 1-2, http://www.
nacwa.org/images/stories/public/2009-10-28ccreport.pdf.
---------------------------------------------------------------------------
    A recent study by the National Association of Clean Water 
Agencies estimates that drinking water utilities will require 
$325-$692 billion to address climate change through 2050.\81\ 
Drinking water utilities will likely have to engage in costly 
adaptation strategies to respond to climate change impacts 
including: increasing conservation to extend existing sources 
of water; learning to tap new water sources, such as seawater 
desalination, lower quality groundwater and wastewater reuse; 
increasing storage and conveyance to accommodate changes in the 
timing and intensity of precipitation and runoff; increasing 
wastewater treatment; addressing flooding damage, particularly 
in coastal areas; and creating water management portfolios that 
add flexibility and support sustainability of the water 
supply.\82\
---------------------------------------------------------------------------
    \81\Id. at 3-7.
    \82\Id. at 3-5.
---------------------------------------------------------------------------
    Water and wastewater infrastructure planning operates 
within a 20- to 40-year timeframe, making timely action 
critical.\83\ Adaptation responses identified must continue to 
include innovative approaches and cooperation among water-
related organizations.\84\ This section will provide additional 
funds to research adaptation strategies and build partnerships 
as drinking water utilities face increasing challenges in 
securing and sustaining our nation's water supply.
---------------------------------------------------------------------------
    \83\Id. at 1-2.
    \84\Id. at 3-1.
---------------------------------------------------------------------------

                  TITLE III--TRANSITION AND ADAPTATION

              SUBTITLE A--GREEN JOBS AND WORKER TRANSITION

PART 1--GREEN JOBS

Section 301. Clean energy curriculum development grants

    Authorizes the Secretary of Education to award grants, on a 
competitive basis, to eligible partnerships to develop programs 
of study focused on emerging careers and jobs in the fields of 
clean energy, renewable energy, energy efficiency, climate 
change mitigation, and climate change adaptation.

Section 302. Development of information and resources clearinghouse for 
        vocational education and job training in renewable energy 
        sectors.

    Requires the Secretary of Labor, in collaboration with the 
Secretary of Energy and the Secretary of Education, to develop 
an internet-based information and resources clearinghouse to 
aid career and technical education and job training programs 
for the renewable energy sectors.

Section 303. Green construction careers demonstration project

    Requires the Secretary of Labor, in consultation with the 
Secretary of Energy, to establish a Green Construction Careers 
demonstration project to promote careers and quality employment 
practices in the green construction sector and to advance 
efficiency and performance on construction projects related to 
the Act.
            Discussion
    The Committee intends that the Secretary use the authority 
provided under the Demonstration Program to develop a national 
framework that would include benchmarks and standards to ensure 
that qualified pre-apprenticeship programs are effectively 
aligned and coordinated with appropriate apprenticeship or 
other training programs as defined in the Act. One critical 
area of alignment and coordination is the use of appropriate 
and industry recognized curriculum such as an approved multi-
craft core curriculum, that prepare participants for entry into 
appropriate apprenticeship or other training programs as 
defined in the Act and further post-secondary education.
    The Committee is also interested in the Secretary 
developing other standards to ensure that qualified pre-
apprenticeship programs are high quality and responsive to 
local labor market demand, including standards encouraging 
curriculum that provides an introduction to energy and water 
efficient construction and retrofitting and other renewable 
energy technologies, and responsive to the diverse needs of 
program participants--including limited English language 
proficient participants--and the specific training, support, 
and placement services they will require for successful entry 
into qualified apprenticeship programs.

PART 2--CLIMATE CHANGE WORKER ADJUSTMENT ASSISTANCE

Section 311-313. Petitions, eligibility requirements, and 
        determinations; Program benefits; General provisions

    Establishes a program to assist workers with transition to 
new careers by enabling workers to receive transition 
assistance and career-related training. Benefits include 156 
weeks of income supplement, 80% of monthly health care 
premiums, up to $1,500 for job search assistance, up to $1,500 
for moving assistance, and additional employment services for 
skills assessment, job counseling, training, and other 
services. Payments under the program cannot exceed the proceeds 
from the auction of allowances set aside for this purpose.
            Discussion
    These sections will create a program for climate change 
worker adjustment assistance, to be funded by a portion of the 
revenues from the auction of emission allowances. The program 
will be administered by the Department of Labor (DOL). America 
has a long tradition of investing in targeted assistance 
programs for workers who are affected by shifts in Federal 
policy and economic transitions. Like the GI Bill and 
provisions under the 1990 Clean Air Act amendments supporting 
affected coal miners, this program will result in a net 
economic benefit to our economy, helping workers gain the 
technical expertise needed in our changing economy.

           SUBTITLE B--INTERNATIONAL CLIMATE CHANGE PROGRAMS

Section 321. Strategic interagency board on international climate 
        investment

    Directs the President to establish the Strategic 
Interagency Board on International Climate Investment, composed 
of the Secretary of State, the Administrator of EPA, and other 
Federal officials, to assess, monitor and evaluate the progress 
and contributions of U.S. Government entities in supporting 
financing for international climate change activities.

Section 322. Emission reductions from reduced deforestation

    Amends Title VII of the Clean Air Act by inserting Part E, 
which includes the following new sections:

Part E--Supplemental Emission Reductions

Section 751. Definitions

    Defines forest carbon activities.

Section 752. Purposes

    States the purposes to develop and improve mitigation 
policies and actions that reduce deforestation and forest 
degradation or conserve or restore forest ecosystems in a 
measurable, verifiable, and reportable manner.

Section 753. Emission reductions from reduced deforestation

    Directs the Administrator of the United States Agency for 
International Development (U.S. AID), in consultation with the 
Administrator of EPA, the Secretary of Agriculture, and the 
heads of any other appropriate agencies to establish a program 
to build capacity in developing countries to reduce emissions 
from deforestation and to participate in international markets 
for offset credits, which will ensure a sufficient supply of 
offsets for American companies.

Section 323. International clean energy deployment program

    Directs the Secretary of State, in consultation with an 
interagency group designated by the President, to establish a 
program that supports activities in developing countries 
contributing to substantial, measurable, reportable and 
verifiable reductions, sequestrations or avoidance of 
greenhouse gas emissions.

Section 324. International climate change adaptation and global 
        security program

    Directs the Secretary of State, in consultation with the 
Administrator of U.S. AID, the Secretary of the Treasury, and 
EPA to establish a program to provide assistance to the most 
vulnerable developing countries to protect and promote the 
interests of the United States.

Section 325. Evaluation and reports

    Directs the Strategic Interagency Board to implement a 
system to monitor and evaluate the effectiveness and efficiency 
of assistance provided under this Act. Also directs the Board 
to prepare an annual report to Congress describing steps 
agencies have taken and the progress made toward accomplishing 
the objectives of this part, and the ramifications of any 
potentially destabilizing impacts climate change may have on 
the interests of the United States.

Section 326. Report on climate actions of major economies

    Requires the Secretary of State, working with the Strategic 
Interagency Board, to prepare annually an interagency report on 
the climate change and energy polices of the top five largest 
greenhouse gas emitting countries that are not members of the 
Organization for Economic Co-Operation and Development. 
Requires the report to provide Congress and the American public 
with a better understanding of the actions these countries are 
taking to reduce greenhouse gas emissions.
            Discussion
    The objectives of this subtitle are to establish a 
coordinated and strategic approach to providing international 
climate finance and provide a strong commitment to securing an 
international climate agreement that promotes the interests of 
the United States. This subtitle supports the key elements of 
such an agreement which include adaptation to climate change, 
deployment of clean energy technologies, and reducing rates of 
deforestation in developing countries.
    A key finding of the IPCC and other groups is that climate 
change will have its most severe impacts in many of the least 
developed parts of the world, often the same countries that 
have made the smallest contributions to the emissions of 
greenhouse gases. For example, people living in developing 
countries are more than 20 times as likely to be affected by 
climate-related disasters.\85\ Drought prone regions in Africa, 
low-lying countries in Southeast Asia, and glacier-water 
dependent parts of South America and Asia may be particularly 
vulnerable. Because many of these regions already suffer from 
instability and limited resources, climate change has the 
potential to greatly magnify instability, competition and 
conflict, which threatens the national security interests of 
the United States. The Center for Naval Analysis in a 2007 
report described climate change, its impact on developing 
countries, and the implications for U.S. national security as a 
``threat multiplier''.\86\ The background section of this 
report further describes how these changes have the potential 
to impact the national security of the U.S.
---------------------------------------------------------------------------
    \85\Oxfam America. Adaptation 101.
    \86\Center for Naval Analysis. 2007. National Security and the 
Threat of Climate Change. Available at: http://
securityandclimate.cna.org/report/ National%20Security%20 
and%20the%20Threat%20of%20Climate%20Change.pdf.
---------------------------------------------------------------------------
    Some impacts of climate change will occur even if global 
efforts to reduce emissions begin immediately and are highly 
successful. For example, World Health Organization estimates 
that climate change may already contribute to 150,000 deaths 
each year and the IPCC projects that by 2020, long before high 
concentrations of greenhouse gases are reached, 75 to 250 
million people in Africa will be exposed to increased water 
stress as a result of climate change.\87,\\88\ Assistance to 
reduce water scarcity, reduce impacts of flooding and sea-level 
rise, improve agricultural practices, and improve health 
systems to address climate-related health impacts will help 
least developed nations respond to the impacts of unavoidable 
climate change and reduce the degree to which climate change 
creates or exacerbates threats to national security.
---------------------------------------------------------------------------
    \87\WHO, ``Climate and health,'' Fact Sheet No. 266, August 2007, 
www.who.int/mediacentre/factsheets/fs266/en/index.html
    \88\IPCC AR4 Working Group II, Summary for Policymakers, at p.13. 
Available at: http://www1.ipcc.ch/pdf/assessment-report/ar4/wg2/ar4-
wg2-spm.pdf.
---------------------------------------------------------------------------
    By building capacity and providing powerful incentives to 
develop national efforts to reduce deforestation, the Committee 
intends that the program authorized under Section 322 will both 
achieve significant reductions in emissions from deforestation 
and allow many nations to participate in carbon markets, which 
will expand the supply of available offset credits and reduce 
costs for American companies. Deforestation is one of the 
largest sources of greenhouse gas emissions in developing 
countries, amounting to approximately 15 percent of overall 
emissions globally. Recent scientific analysis shows that it 
will be substantially more difficult to limit the increase in 
global temperatures to less than 2 degrees centigrade above 
preindustrial levels without reducing and ultimately halting 
net emissions from deforestation.
    This subtitle also establishes a program for development of 
clean energy technologies in developing countries. Investments 
in clean energy technology cooperation can substantially reduce 
global greenhouse gas emissions while also increasing demand 
for clean energy products, opening up new markets for United 
States companies, spurring innovation, and lowering costs.

                 SUBTITLE C--ADAPTING TO CLIMATE CHANGE

PART 1--DOMESTIC ADAPTATION

Subpart A--National Climate Change Adaptation Program

Section 341. National climate change adaptation program and services

    Requires the President to establish a National Climate 
Change Adaptation Program to increase the overall effectiveness 
of Federal climate change adaptation efforts.

Sections 342. Climate Services

    Directs the Secretary of Commerce to establish within the 
National Oceanic and Atmospheric Administration a National 
Climate Service to develop and disseminate climate information, 
data, forecasts, and warnings at national and regional scales.

              SUBPART B--PUBLIC HEALTH AND CLIMATE CHANGE

Sections 351. Sense of Congress on public health and climate change

    States the sense of Congress that the Federal Government 
should take all means and measures to prepare for and respond 
to the public health impacts of climate change.

Section 352. Relationship to other laws

    Clarifies that nothing in the subpart limits authorities or 
responsibilities conferred by other law.

Section 353. National strategic action plan

    Requires the Secretary of Health and Human Services to 
prepare and implement a national strategic action plan to 
assist health professionals in preparing for and responding to 
the impacts of climate change on public health, with disease 
surveillance, research, communications, education, and training 
programs, supported by a science advisory board and a needs 
assessment.

Section 354-356. Advisory board; Reports; Definitions

    Establishes a science advisory board to advise the 
Secretary on science related to the health effects of climate 
change. Requires a needs assessment for health effects of 
climate change and periodic reports on scientific developments 
and recommendations for updating the national strategy.
            Discussion
    Experts within the global public health community have 
reached a broad consensus that climate change poses a serious 
threat to public health. The IPCC's Fourth Assessment report 
described severe likely impacts on public health, including:
     Increased numbers of people suffering from death, 
disease, and injury from heat waves, floods, storms, fires and 
droughts.
     Increased cardio-respiratory diseases due to 
higher concentrations of ground-level ozone pollution related 
to climate change.
     Changes in the range of some infectious disease 
vectors.
     Increased malnutrition and consequent disorders, 
including those relating to child growth and development.\89\
---------------------------------------------------------------------------
    \89\Intergovernmental Panel on Climate Change, Climate Change 2007: 
Impacts, Adaptation and Vulnerability, at 12 (2007).
---------------------------------------------------------------------------
    The World Health Organization (WHO) estimates that climate 
change may already be causing more than 150,000 deaths each 
year.\90\
---------------------------------------------------------------------------
    \90\World Health Organization, Health and Environmental Linkages 
Initiative, Climate Change. Available at http://www.who.int/heli/risks/
climate/climatechange/en/
---------------------------------------------------------------------------
    Dr. Howard Frumkin, Director of the Centers for Disease 
Control (CDC) provided more detail in testimony before the 
Committee in February 2009, stating that ``CDC considers 
climate change a serious public health concern.''\91\ He 
described several categories of public health threats posed by 
climate change:
---------------------------------------------------------------------------
    \91\Testimony of Dr. Howard Frumkin before Senate Committee on 
Environment & Public Works, ``Update on the Latest Global Warming 
Science,'' Feb. 25, 2009, at 1.
---------------------------------------------------------------------------
           Direct effects of heat
           Health effects related to extreme weather 
        events
           Air pollution-related health effects
           Water- and food-borne infectious diseases
           Vector-borne and zoonotic diseases
           Emerging pathogens susceptible to weather 
        conditions
           Allergies
           Mental health problems\92\
---------------------------------------------------------------------------
    \92\Id. at 2-3.

    CDC has concluded that ``an effective public health 
response to climate change can prevent injuries, illnesses, and 
death while enhancing overall public health preparedness.''\93\ 
The U.S. Global Change Research Program has similarly concluded 
that: ``health impacts of climate change are related to heat 
stress, waterborne diseases, poor air quality, extreme weather 
events, and diseases transmitted by insects and rodents. Robust 
public health infrastructure can reduce the potential for 
negative impacts.''\94\
---------------------------------------------------------------------------
    \93\Id. at 14.
    \94\http://www.globalchange.gov/publications/reports/scientific-
assessments/us-impacts/key- findings;
---------------------------------------------------------------------------
    As Committee members have noted, among those State 
officials charged with protecting the public health, there is 
no partisan divide or disagreement on the need to take urgent 
action to address climate change. For example, the Association 
of State and Territorial Health Officials, representing all 50 
States, recently joined in a letter to the Committee saying:

          We are very concerned about the human health effects 
        of climate change. Global warming is expected to worsen 
        many health problems, including heat and other weather-
        related illness and injury, diarrheal and other 
        infectious diseases. Respiratory illness associated 
        with pollution and allergens in the air may be 
        exacerbated. To help prepare for these challenges, we 
        need to develop proactive global climate change 
        preparedness strategies now.
    Sections 351-356 provide for development of a comprehensive 
national strategic action plan to respond to these public 
health threats in the United States and an advisory board to 
develop and oversee these efforts.

SUBPART C--CLIMATE CHANGE SAFEGUARDS FOR NATURAL RESOURCES CONSERVATION

Section 361-363. Purposes; Natural Resources Climate Change Adaptation 
        Policy; Definitions

    States that the purpose of this subpart is to establish a 
program to address climate change impacts on natural resources. 
States that it is the policy of the Federal Government to use 
all practicable means and measures to assist natural resources 
to adapt to climate change.

Section 364. Council on Environmental Quality

    Directs the Council on Environmental Quality to advise the 
President and coordinate federal actions regarding strategies, 
plans, programs, and activities relating to protecting, 
restoring, and maintaining natural resources so that they are 
more resilient to the ongoing and expected impacts of climate 
change.

Section 365. Natural Resources Climate Change Adaptation Panel

    Establishes a Natural Resources Climate Change Adaptation 
Panel, chaired by the White House Council on Environmental 
Quality, as a forum for interagency coordination on natural 
resources adaptation.

Section 366. Natural Resources Climate Change Adaptation strategy

    Requires the Adaptation Panel to develop a strategy for 
making natural resources more resilient to the impacts of 
climate change and ocean acidification. The strategy is to 
assess likely impacts to natural resources, strategies for 
helping wildlife adapt, and specific actions that Federal 
agencies should take.

Section 367. Natural resources adaptation science and information

    Establishes a process through National Oceanic and 
Atmospheric Administration and the U.S. Geological Survey 
National Global Warming and Wildlife Science Center, to provide 
technical assistance, conduct research, and furnish decision 
tools, monitoring, and strategies for adaptation.

Section 368. Federal Natural Resource Agency adaptation plans

    Requires Federal agencies to develop natural resource 
adaptation plans, consistent with the National Adaptation 
Strategy, including prioritized goals and a schedule for 
implementation of adaptation programs within their respective 
jurisdictions.

Section 369. State Natural Resources Adaptation Plans

    Requires States to develop Natural Resources Adaptation 
Plans as a condition for receiving funds under the programs in 
this subtitle.

Section 370. Natural Resources Climate Change Adaptation Account.

    Provides that of the allowances devoted to state natural 
resources adaptation 84% be provided to State wildlife agencies 
and 16% to State coastal agencies. Funds placed in the Natural 
Resources Climate Change Adaptation Fund are to be distributed 
to Federal agencies in the following amounts: 28% to the 
Department of the Interior (DOI) for endangered species, bird, 
and Fish and Wildlife Service programs, wildlife refuges, and 
the Bureau of Reclamation; 8% to DOI for cooperative grant 
programs; 5% to DOI for tribal programs; 20% to the Land and 
Water Conservation Fund
(\1/6\ to DOI for competitive grants, \1/3\ for land 
acquisition under Sec. 7 of the Land and Water Conservation 
Fund Act, \1/6\ to U.S. Department of Agriculture (USDA) for 
the Forestry Assistance Act, and \1/3\ to the USDA for land 
acquisition,); 8% to USDA for the Forest Service; 12% to EPA 
for estuaries and freshwater ecosystems; 8% to the Army Corps 
of Engineers for freshwater ecosystems; and 11% to the 
Secretary of Commerce for coastal and marine ecosystems. All 
funds must be used for adaptation activities, and States shall 
ensure that a minimum of 10% of project costs are paid by non-
Federal sources.

Section 371. National fish and wildlife habitat and corridors 
        information program

    Establishes a program in the DOI to support States and 
tribes in the development of a geographical information system 
(GIS) of databases of fish and wildlife habitats and corridors. 
Facilitates the use of database tools in wildlife management 
programs.

Section 372. Additional provisions regarding Indian tribes

    Clarifies that nothing in this subpart amends Federal trust 
responsibilities to Indian tribes or exempts information on 
tribal sacred sites or cultural activities from the Freedom of 
Information Act, and clarifies that DOI may apply the 
provisions of the Indian Self-Determination and Education 
Assistance Act as appropriate.
            Discussion
    America's rich natural resources are estimated to provide 
the nation with billions of dollars of services each year: 
wetlands purify our water and protect our coasts, forests clean 
our air and water and provide income to the timber industry, 
and recreational opportunities like hunting and fishing fuel 
the economy of many rural areas. However, climate change places 
many of the nation's bountiful natural resources at risk. Even 
if legislation is enacted to cut global warming pollution 
today, climate change will drastically impact natural resources 
for many decades to come as wildlife and plant populations are 
subjected to changes in temperature, precipitation, stream 
flow, and the timing and frequency of severe weather events.
    The IPCC reports that 20-30% or potentially more plant and 
animal species will be placed at risk of extinction by climate 
change.\95\ For changes over 2.5+C, the IPCC predicts that 
there will be major changes in ecosystem structure and function 
with ``predominantly negative consequences for biodiversity and 
ecosystem goods and services, e.g., water and food 
supply.''\96\ Global warming could, for example, lead to the 
destruction of many wetlands, including up to 90% of wetlands 
in the prairie potholes region.\97\ Increased fire risk due to 
drought, seasonal shifts, and increased pest load can 
significantly increase fire risk in the western US.\98,\\99\ 
Water levels in Lake Erie, already below average, could 
decrease 4-5 feet by the end of this century, disrupting 
shoreline habitat.\100\
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    \95\IPCC AR4 Working Group 2, Section 4 ES, and Section 4.4.11.
    \96\IPCC AR4 Working Group 2, Summary for Policy Makers, p.11.
    \97\M.G. Anderson and L.G. Sorenson. 2001. ``Global Climate Change 
and Waterfowl: Adaptation in the Face of Uncertainty.'' Transaction of 
the 66th North American Wildlife and Natural Resources Conference 
(Washington, DC: Wildlife Management Institute, 300-319.
    \98\Westerling, A. L., H. G. Hidalgo, D. R. Cayan, and T. W. 
Swetnam. 2006. Warming and earlier spring increases Western U.S. forest 
wildfire activity. Science 313: 940-43.
    \99\http://www.usgcrp.gov/usgcrp/Library/nationalassessment/
overviewforests.htm.
    \100\Lofgren, B.M., Quinn, F.H., Clites, A.H., Assel, R.A., 
Eberhardt, A.J., Luukkonen, C.L. 2002. Evaluation of Potential Impacts 
on Great Lakes Water Resources Based on Climate Scenarios of Two GCMs, 
Journal of Great Lakes Research, 28(4):537-554.
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    This subpart invests critical funding to help our natural 
resources survive this period of climatic change. Investment 
now will help avoid impacts that will be difficult or 
impossible to reverse.\101\ Currently, resource managers are 
without the financial means to address the many challenges of 
climate change. The allowance value provided through the 
pollution reduction program in Division B will assist natural 
resource managers in safeguarding existing natural resources 
and wildlife and taking steps to increase resilience to climate 
change. Under this subpart, federal, state, and tribal agencies 
will receive funding to carry out natural resource adaptation 
activities that help with survival of fish and wildlife, fish 
and wildlife habitats, plants, and associated ecological 
processes threatened by climate change or ocean acidification.
---------------------------------------------------------------------------
    \101\National Wildlife Federation. 2008. Investing in America's 
Natural Resources--The Urgent Need for Global Warming Legislation. 
Reston, Virginia.
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        SUBPART D--ADDITIONAL CLIMATE CHANGE ADAPTATION PROGRAMS

Section 381. Water system mitigation and adaptation partnerships

    Requires the EPA Administrator to establish a water system 
mitigation and adaptation partnership program for distribution 
of funds under the Act by States as grants for water system 
adaptation projects.
    Identifies eligible parties and uses. Provides for a 
competitive process, prioritizing applications for water 
systems at the greatest and most immediate risk of facing 
significant climate-related negative impacts, and establishes 
requirements and goals to be met by States in awarding grants.
            Discussion
    Drinking, irrigation and wastewater systems will face 
significant challenges in adapting to climate change impacts. 
Such impacts are expected to include extreme flooding, extended 
and extreme drought, water scarcity, water quality degradation 
and increased treatment requirements.\102\ These impacts affect 
the function and operation of existing water infrastructure as 
well as water management practices.\103\ Furthermore, as water 
demand continues to grow because of population growth and 
increased affluence, so will the stress on the Nation's aging 
water infrastructure.\104\
---------------------------------------------------------------------------
    \102\National Association of Clean Water Agencies, ``Confronting 
Climate Change: An Early Analysis of Water and Wastewater Adaptation 
Costs,'' October 2009, 1-2, http://www.nacwa.org/images/stories/public/
2009-10-28ccreport.pdf.
    \103\Id. at 175.
    \104\Id.
---------------------------------------------------------------------------
    A recent study by the National Association of Clean Water 
Agencies estimates that wastewater and drinking water utilities 
will require $325-$692 billion to address climate change 
through 2050.\105\ Utilities will likely have to engage in 
costly adaptation strategies to respond to climate change 
impacts including: increasing conservation to extend existing 
sources of water; learning to tap new water sources, such as 
seawater desalination, lower quality groundwater and wastewater 
reuse; increasing storage and conveyance to accommodate changes 
in the timing and intensity of precipitation and runoff; 
increasing wastewater treatment; addressing flooding damage, 
particularly in coastal areas; and creating water management 
portfolios that add flexibility and support sustainability of 
the water supply.\106\
---------------------------------------------------------------------------
    \105\National Association of Clean Water Agencies, ``Confronting 
Climate Change: An Early Analysis of Water and Wastewater Adaptation 
Costs,'' October 2009, 1-2, http://www.nacwa.org/images/stories/public/
2009-10-28ccreport.pdf.
    \106\Id. at 3-5.
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    Water and wastewater infrastructure planning operates 
within a 20- to 40-year timeframe, making timely action 
critical.\107\ This section establishes a program that will 
provide additional funds to assist drinking water, wastewater, 
and irrigation systems to carry out the projects and activities 
necessary to secure and sustain the Nation's water supply in 
the face of climate change.
---------------------------------------------------------------------------
    \107\Id. at 1-2.
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Section 382. Flood control, protection, prevention and response.

    Requires the Administrator to establish a program for 
distribution of funds by States under the Act for flood 
control, protection, prevention and response projects. 
Establishes eligible uses, objectives and priorities, including 
projects that advance multiple objectives and utilize non-
structural approaches.
            Discussion
    According to the IPCC, ``[t]he impacts of climate change on 
freshwater systems and their management are mainly due to the 
observed and projected increases in temperature, sea level and 
precipitation variability.''\108\ Extreme flooding and drought 
are likely to occur due to increased precipitation intensity 
and variability.\109\ Warmer temperatures will very likely lead 
to higher precipitation extremes that ``directly affect the 
risk of flash flooding and urban flooding.''\110\ The program 
established by this section will provide funding to local 
governments to carry out projects that reduce flood risk and 
plan for increased flood risk associated with climate change.
---------------------------------------------------------------------------
    \108\Intergovernmental Panel on Climate Change (IPCC) Fourth 
Assessment Report, ``Climate Change 2007: Impacts, Adaptation and 
Vulnerability.'' Chapter 3: Fresh Water Resources and their Management, 
at 175.
    \109\Id.
    \110\Id. at 187
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Section 383. Wildfire

    Establishes a program to provide grants for education 
programs to raise awareness of homeowners and citizens about 
wildland fire protection practices, including FireWise or 
similar programs, training programs for local firefighters on 
wildland firefighting techniques and approaches, equipment 
acquisition to facilitate wildland fire preparedness, 
development and implementation of community wildfire protection 
plans, and forest restoration that accomplishes fuels 
reduction.
            Discussion
    Climate change also is a significant contributor to the 
increasing severity and duration of wildfires throughout the 
United States. Research indicates that in the last twenty years 
there has been a fourfold increase in the number of major 
wildfires.\111\ This increase in wildfire activity has in turn 
impacted the ability of federal land management agencies to 
adequately fund and address wildfire suppression and mitigation 
efforts. In 1991 the Forest Service spent 13% of its budget on 
wildfire. As of 2007, it spent 45% of its budget on 
wildfire.\112\ Further resources provided by the bill will 
assist in responding to these impacts.
---------------------------------------------------------------------------
    \111\Science Vol. 313. no. 5789, pp. 927-928 (Aug. 18, 2006).
    \112\New York Times, ``On Fringe of Forests, Homes and Fires 
Meet,'' June 26, 2007. Available at: http://www.nytimes.com/2007/06/26/
us/26fire.html.; Testimony of Phyllis K. Fong, Inspector General, U.S. 
Department of Agriculture, before Senate Committee on Energy and 
Natural Resources, ``Costs of Wildfire Suppression,'' January 30, 2007.
---------------------------------------------------------------------------

Section 384. Coastal and Great Lakes state adaptation program

    Requires the EPA Administrator to distribute annually 
funding for coastal State economic protection under the Act 
pursuant to a prescribed formula, for projects and activities 
addressing the impacts of climate change in coastal watersheds.
            Discussion
    Coastal areas will be particularly impacted by climate 
change. For example, water quality in coastal areas will be 
compromised in several ways. First, sea level rise will extend 
areas of salinization of groundwater and estuaries, resulting 
in a decrease in freshwater availability for humans and 
ecosystems.\113\ Second, higher surface temperatures will 
promote algal blooms and increase the concentration of 
pathogens in drinking water sources.\114\ Third, due to higher 
runoff and lower water levels, increasing nutrients and 
sediments will negatively impact water quality in general.\115\ 
Sea level rise will also impact infrastructure such as roads, 
levees, and wastewater and drinking water systems and require 
significant investment to modify and relocate these systems. 
The funding provided by this section will assist coastal 
communities in adapting to these impacts.
---------------------------------------------------------------------------
    \113\Id. at 175.
    \114\Id. at 188.
    \115\Id.
---------------------------------------------------------------------------

             DIVISION B--POLLUTION REDUCTION AND INVESTMENT

               Title I--Reducing Global Warming Pollution

             SUBTITLE A--REDUCING GLOBAL WARMING POLLUTION

    Amends the Clean Air Act to add Title VII to establish a 
declining limit on global warming pollution and to spur private 
investment in technologies to reduce global warming pollution.

Section 101. Reducing global warming pollution

    Creates a new Title VII in the Clean Air Act, which 
establishes a global warming pollution reduction and investment 
program.
            Discussion
    Subtitle A, which creates a new Title VII in the Clean Air 
Act, establishes a comprehensive market-based program for 
greenhouse gas reduction. This subtitle establishes the rules 
and creates the structure of the greenhouse gas emissions 
reduction market. By allowing sources to purchase and sell 
allowances, the bill permits the private sector to find and use 
the lowest-cost reductions for compliance with emissions 
limitations. The program creates an explicit economic value for 
emissions reductions, which also creates a financial incentive 
for, and financial return on, investment in innovations leading 
to emissions reductions.
    A market-based pollution reduction system was first 
introduced in the U.S. in 1989 by then-President, George H.W. 
Bush as an innovative strategy for reducing the pollutants that 
caused acid rain. With bipartisan support, the 101st Congress 
incorporated the Bush cap and trade proposal in the Clean Air 
Act Amendment of 1990. Since 1990, the cap and trade approach 
first used in the acid rain program has enjoyed continued 
bipartisan support, having been incorporated several times in 
legislative proposals and pollution control regulations put 
forward by both the Clinton administration and the second Bush 
administration. The pollution reduction program in the 
Committee-reported bill seeks to capture the benefits of the 
acid rain approach.
    The success of the cap and trade approach reflects several 
factors. First, imposing a cap on emissions ensures that the 
full measure of required emissions reductions specified by 
Congress will be achieved. Second, businesses can operate with 
far more flexibility under a cap and trade program than under 
more traditional pollution control programs. Third, under cap 
and trade, businesses can buy and sell the difference between 
their actual emissions and their legally mandated emissions 
levels. Cap and trade literally creates a market for emissions 
reductions and what markets do best is drive costs down. As a 
result, individual businesses can find the lowest cost way to 
reduce their emissions--including by purchasing surplus 
reductions from other sources that can achieve them at lower 
cost. The overall cost of the program, in turn, will be that 
much lower. At the same time, markets are the single most 
effective driver of innovation; thus, a market for greenhouse 
gas emissions reductions is certain to spur significant 
innovations in reducing emissions.
    Under the pollution reduction program established by the 
reported bill, EPA will distribute and auction to covered 
entities a fixed number of emissions ``allowances,'' each of 
which gives the owner the authorization to emit one ton of CO2-
equivalent in any one year. An entity may then sell the 
allowances to another covered entity provided that at the end 
of the year it surrenders to the EPA enough allowances to cover 
its emissions for that year. Allowances that are not used to 
cover emissions in one year may be saved for use in later 
years, an option known as ``banking.'' Because the number of 
emissions allowances the EPA distributes every year is fixed, 
then, by definition, an allowance remaining in excess of a 
plant's emissions represents an ``extra'' reduction that may be 
transferred to another plant to cover its incremental 
emissions. No matter how many or how few allowances are 
transferred total emissions always remain constrained by the 
cap, guaranteeing economy-wide emissions reductions.
    How businesses reduce their GHG emissions has been left 
completely to the discretion of the businesses themselves. As a 
result, it is up to them to manage the continually changing 
economic, technical, and other circumstances in which they are 
operating and to integrate their basic business activities with 
their obligation to meet their emissions cap. Through emissions 
trading, businesses have the means, as well as the incentive, 
to find the lowest-possible-cost ways of achieving compliance 
anywhere within the entire economy and to reap financial 
rewards for developing those means. Under this program, each 
business can choose between and among various compliance 
alternatives, ranging from energy-efficient technologies, to 
capturing CO2-emissions from smokestacks, to changing their 
materials or processes, to acquiring allowances or offsets from 
other businesses that can make reductions more cost-
effectively.
    Critical to the character and success of the program is the 
fact that the aggregate number of allowances circulated every 
year is fixed, or capped. As a result of this design, 
businesses must plan for economic growth and change while 
operating against a limit on their total greenhouse gas 
emissions. This cap and trade regime gives businesses a direct 
financial incentive to reduce emissions below required levels. 
Extra reductions, in the form of unused allowances, give 
companies flexibility to offset increases in emissions in one 
location with reductions in another. In addition, businesses, 
like electric utilities, can optimize control by reducing 
emissions when it is least expensive to do so and then bank the 
surplus allowances for future use or sale. Consequently, extra 
reductions give covered sources the flexibility needed to 
respond to economic demands and opportunities while meeting 
their compliance obligations under the cap.

  TITLE VII--GLOBAL WARMING POLLUTION REDUCTION AND INVESTMENT PROGRAM

      PART A--GLOBAL WARMING POLLUTION REDUCTION GOALS AND TARGETS

Section 701. Findings

Section 702. Economy-wide reduction goals

    States that the goals of Title VII and Title VIII are to 
reduce economy-wide global warming pollution to 97% of 2005 
levels by 2012, 80% by 2020, 58% by 2030, and 17% by 2050.

Section 703. Reduction targets for specified sources

    Requires that the regulations issued under Title VII reduce 
emissions of covered sources to 97% of 2005 levels by 2012, 80% 
by 2020, 58% by 2030, and 17% by 2050.

Section 704. Supplemental pollution reductions

    Directs the EPA Administrator to achieve additional low-
cost reductions in global warming pollution equal to an 
additional 10 percentage points of reductions from U.S. 
emissions in 2005 by using a small portion of the emissions 
allowances to provide incentives to reduce emissions from 
international deforestation.

Section 705. Review and program recommendations

    Directs the Administrator to submit a report to Congress 
every four years that includes an analysis of the latest 
science relevant to climate change, an analysis of capacity to 
monitor and verify greenhouse gas reductions, an analysis of 
worldwide and domestic progress in reducing global warming 
pollution, and additional measures that can be taken.

Section 706. National academy review

    Directs the EPA Administrator to commission reports from 
the National Academy of Sciences every four years, to evaluate 
the most recent EPA report submitted under Section 705, and 
provide recommendations for actions to avoid dangerous climate 
change.

Section 707. Presidential response and recommendations

    Directs the President to use existing authority to respond 
to recommendations in the reports issued under sections 705 and 
706. If the National Academy review confirms that further 
emission reductions are needed, either domestically or 
globally, the President may direct federal agencies to use 
existing statutory authority to meet National Academy 
recommendations, and must submit a report to Congress 
recommending additional steps (including legislation) necessary 
to achieve emissions reductions.
            Discussion
    Scientists continue to develop a deeper understanding of 
the causes and consequences of climate change. Because climate 
science is rapidly evolving, sections 705-707 are designed to 
ensure that Congress has access to the most current science 
possible when evaluating future climate-related legislation. 
The EPA and National Academy studies will update Congress on 
the latest science regarding the sources and concentrations of 
greenhouse gases, their anticipated impact on the climate, and 
the deployment of technologies to reduce emissions. They will 
also provide an unbiased, technical examination of the 
performance of this legislation and ways in which it might be 
improved.
    Section 708. Consultation With States. Requires the 
Administrator to consult with States involved with the Regional 
Greenhouse Gas Initiative, Mid-west Governor's Accord and the 
Western Climate Initiative in the development of any 
regulations required by this title.

        PART B--DESIGNATION AND REGISTRATION OF GREENHOUSE GASES

Section 711. Designation of greenhouse gases

    Establishes a list of greenhouse gases regulated under this 
title: carbon dioxide, methane, nitrous oxide, sulfur 
hexafluoride, hydrofluorocarbons (HFCs) emitted as a byproduct, 
perfluorocarbons, and nitrogen trifluoride. The EPA 
Administrator may designate additional anthropogenic greenhouse 
gases by rule.

Section 712. Carbon dioxide equivalent value of greenhouse gases

    Lists carbon dioxide equivalents for each gas. Requires 
periodic review of equivalence values by the Administrator.

Section 713. Greenhouse gas registry

    Directs EPA to establish a Federal greenhouse gas registry 
and comprehensive reporting system for greenhouse gas 
emissions.
            Discussion
    This section directs the Administrator to utilize 
continuous emissions monitoring systems or alternative systems 
and methodologies that provide precision, reliability, 
accessibility, and timeliness that is as similar as technically 
feasible to continuous emissions monitoring systems. The 
Committee recognizes that continuous emissions monitoring 
systems may not be technically feasible nor provide the 
greatest accuracy when monitoring emissions from certain 
industrial processes, particularly those with relatively small 
quantities of emissions of high global warming potential gases. 
The Committee encourages the Administrator to take both the 
variability of industrial processes and the accuracy of 
alternative systems and methodologies into account when 
determining the type of emissions monitoring system or 
methodology to require.

Section 714. Perfluorocarbon and other nonhydrofluorocarbon fluorinated 
        substance production regulation

    Provides the Administrator the discretion to regulate non-
hydrofluorocarbon fluorinated substances emitted during the 
production of perfluorocarbon either under the emissions limits 
established under Section 722 or through a mandatory best 
achievable performance standard that is revised to be more 
stringent every two years or consistently over a 10-year 
period.

                         PART C--PROGRAM RULES

Section 721. Emission allowances

    Establishes an annual tonnage limit on greenhouse gas 
emissions from specified activities. Directs the EPA 
Administrator to establish allowances equal to the tonnage 
limit for each year (with one allowance representing the 
permission to emit one ton of greenhouse gases, measured in 
tons of carbon dioxide equivalent).

Section 722. Prohibition of excess emissions

    Prohibits covered entities from emitting or having 
attributable greenhouse gases in excess of their allowable 
emissions level, which is determined by the number of emission 
allowances and offset credits they hold on the specified date. 
Electricity generators, entities that refine or import 
petroleum-based and other specified liquid fuels for 
introduction into interstate commerce, fluorinated gas 
manufacturers, and emitters of nitrogen trifluoride are covered 
entities starting with emissions in 2012. Specified industrial 
sources, including process emissions associated with petroleum 
refining, are covered starting with emissions in 2014. Process 
emissions from refineries that are small business refiners are 
covered starting with emissions in 2015. Local distribution 
companies that deliver natural gas are covered starting with 
emissions in 2016.
    Allows covered entities to use a total of up to two billion 
tons of domestic and international offset credits in lieu of 
allowances to demonstrate compliance for a portion of their 
emissions. The ability to use these offsets is divided pro rata 
among all covered entities. Of the two billion tons of offset 
credits, \3/4\ may be derived from domestic offsets and \1/4\ 
from international offsets. If the Administrator determines 
that an insufficient number of domestic offsets are available, 
the number of international offsets available may be increased 
by 750 million metric tons. Starting with the 2018 compliance 
obligation, covered entities using offset credits must submit 
five tons of international offset credits for every four tons 
of emissions being offset.
    Allows the use of term offset credits in lieu of domestic 
offset credits to demonstrate temporary compliance with the 
Act. When the crediting term of a term offset credit expires, 
the covered entity must either submit a term offset credit to 
continue to demonstrate compliance temporarily or submit an 
allowance or domestic offset credit to demonstrate final 
compliance.
    Covered entities may also submit an international emission 
allowance or compensatory allowance in place of a domestic 
emission allowance.

Section 723. Penalty for noncompliance

    Establishes penalties for parties that fail to comply with 
the requirements of Title VII.

Section 724. Trading

    Clarifies that Title VII as established by this section 
does not restrict who can hold an allowance, nor does it 
restrict the purchase, sale, or other transactions involving 
allowances.

Section 725. Banking and borrowing

    Permits unlimited banking of allowances for use during 
future compliance years. Establishes a two-year rolling 
compliance period by allowing covered entities to borrow an 
unlimited number of allowances from one year into the future. 
Covered entities may also satisfy up to 15% of their compliance 
obligations by submitting emission allowances with vintage 
years 2 to 5 years in the future, but must pay an 8% premium 
(in allowances) to do so.
            Discussion
    Allowing sources to ``bank'' reductions--by making more 
reductions than required and saving unused allowances for 
compliance in future years brings both economic and 
environmental benefits. Sources that create a supply of 
additional or excess reductions when they can achieve those 
reductions at lower cost, will, by using those banked 
allowances in later years, be able to curb their costs in later 
years should future reductions become more expensive. At the 
same time, the environment benefits from reductions are 
achieved earlier.
    Another feature of the greenhouse gas allowance trading 
market is the option afforded sources, under certain 
conditions, to ``borrow'' allowances or incremental reductions 
from future years to offset for purposes of compliance in a 
current year. This option grants sources additional flexibility 
to manage their financial and compliance demands in the most 
economically efficient way possible. Since ``borrowing'' 
allowances from future years represents a delay in achieving 
required reductions, the borrowing program in effect requires 
sources to achieve greater reductions in later years.

Section 726. Market stability reserve

    Directs the Administrator to create a ``market stability 
reserve'' of emission allowances that will be auctioned at a 
minimum set price ($28/ton in 2012) that increases annually. 
The auction of additional allowances will help contain the 
costs of meeting the annual greenhouse gas limits and minimize 
price fluctuations. The ``market stability reserve'' will be 
established by setting aside a number of allowances from each 
year's limit. Following an auction, the reserve will be 
refilled through the purchase and retirement of offset credits.
            Discussion
    The market stability reserve is designed to provide 
certainty in the price of allowances by preventing large price 
fluctuations. This also has the benefit of preventing 
speculation by dampening the ability to increase allowance 
prices above the pre-determined reserve price.
    At the start of the program, the Administrator is required 
to fill the reserve with allowances that are taken from each 
year of the program in amounts specified in section 771. Every 
quarter, the Administrator shall auction a specified number of 
allowances from the reserve with a minimum reserve price that 
begins at $28 and rises at a specified percentage plus 
inflation. The auction of additional allowances at a specified 
price will reduce the allowance price once the reserve price 
trigger is met.
    Proceeds from such auctions, if any, shall be used to 
refill the reserve. The Administrator shall accomplish this by 
using any such proceeds to purchase offset credits. The 
Administrator shall then retire those offset credits and 
establish four new allowances (in addition to those established 
under section 721) for every five tons of offset credits 
retired. The Administrator shall then refill the market 
stability reserve to its original level by placing the newly-
established allowances into the strategic reserve to the extent 
necessary to return the reserve to its original size.

Section 727. Permits

    Clarifies the obligations of operators of major stationary 
sources under the Clean Air Act's Title V operating permit 
program under the newly-established Title VII program.

Section 728. International emission allowances

    Establishes criteria that must be met before allowances 
from foreign programs can be used for compliance by covered 
entities.

                            PART D--OFFSETS

Section 731. Offsets Integrity Advisory Board

    Establishes an independent Offsets Integrity Advisory Board 
composed of scientists and others with relevant expertise, to 
review the offsets program and provide recommendations to the 
President on: Offset project eligibility, scientific 
uncertainty, quantification methodologies and related issues.

Section 732. Establishment of offsets program

    Directs the President to establish an offsets program and 
requires that regulations ensure offsets are verifiable, 
additional, and permanent. Directs the President to delegate to 
the Secretary of Agriculture elements of the program regarding 
agriculture and forestry offset projects and direct work with 
farmers, ranchers and foresters.

Section 733. Eligible project types

    Requires the President to establish and update a list of 
offset project types that are eligible under the program, 
taking into account the recommendations of the Offsets 
Integrity Advisory Board. Projects types for consideration 
include fugitive methane emissions from coal mines, landfills, 
and oil and gas distribution facilities; agricultural, 
grassland, and rangeland sequestration and management 
practices; and changes in carbon stocks attributed to land use 
change and forestry activities.

Section 734. Requirements for offset projects

    Requires that for each offset project type, the President 
establish standardized methodologies for: Determining 
additionality; establishing activity baselines; measuring 
performance; and accounting for and mitigating potential 
leakage. Establishes requirements regarding the permanence of 
offset projects and crediting periods, and procedures to 
address reversals, including penalties.

Section 735. Approval of offset projects

    Establishes procedures for approval of offset projects, 
including reporting and record-keeping requirements and a 
requirement that an offset project developer certify the 
accuracy of information provided in an approval petition.

Section 736. Verification of offset projects

    Directs the President to establish requirements for the 
verification of offset project performance, and requires that 
verification reports be prepared by accredited third-party 
verifiers. Allows the President to revoke the accreditation of 
any third-party verifier that the President finds fails to 
maintain professional qualifications or to avoid a conflict of 
interest.

Section 737. Issuance of offset credits

    Establishes procedures for the issuance of offset credits 
and directs the President to issue offset credits only if the 
emissions reduction or sequestration has already occurred and 
other specified conditions are met.

Section 738. Audits

    Requires the President to conduct, on an ongoing basis, 
random audits of offset projects, offset credits, and practices 
of third-party verifiers. Allows the President to delegate this 
responsibility to State governments.

Section 739. Program review and revision

    Requires the periodic evaluation and updating of specified 
areas and components of the offsets program.

Section 740. Early offset supply

    To ensure a supply of offset credits in the early years of 
the program, allows for the issuance of offset credits for 
offsets from State or other programs that meet specified 
criteria. Limits the issuance of offset credits under this 
section to reductions that occur between January 1, 2009, and 
three years after enactment or the effective date of Federal 
offset regulations, whichever is sooner.

Section 741. Environmental considerations

    Requires additional environmental considerations for 
forestry and other land management-related offset projects.

Section 742. Trading

    Provides that the trading provisions applicable to 
allowances are also applicable to offset credits.

Section 743. Office of offsets integrity

    Establishes an Office of Offsets Integrity within the 
Department of Justice to: supervise and coordinate 
investigations and civil enforcement of the carbon offsets 
program established in this part.

Section 744. International offset credits

    Allows the President to issue international offset credits 
for activities that take place in developing countries. 
Requires that all international offset credits meet the 
criteria established for all offsets under sections 732-742, as 
well as the requirements specific to international offsets 
established under this section. Requires that the U.S. be a 
party to a bilateral or multilateral agreement or arrangement 
with the country where an offset activity would take place 
before any international offset credits can be issued. 
Establishes procedures and requirements regarding the issuance 
of international offset credits for activities that reduce 
deforestation.

Section 102. Definitions

    Defines key terms for Titles VII and VIII of the Clean Air 
Act.

Section 103. Offset reporting requirements

    Amends Section 114 of the Clean Air Act to require any 
person who is an offset project developer to establish and 
maintain records for a period of not less than the offset 
project crediting period plus five years.
            Discussion
    Part D directs the President to promulgate regulations 
creating a program to verify offset projects and issue offset 
credits. Offset allowances are in addition to emission 
allowances and are created when a facility or entity that is 
not covered by the emissions cap can certify that it has either 
has reduced the number of carbon dioxide equivalents that the 
facility or entity otherwise would have emitted in that 
calendar year or has increased the number of carbon dioxide 
equivalents that the facility or entity otherwise would have 
captured from the atmosphere and stored in that calendar year. 
Capped sources may then purchase these offset allowances to 
help them meet their compliance obligations under the cap.
    Part D specifies procedures and standards that the 
President must use in certifying, monitoring, and enforcing 
offsets. The procedures and standards established in the 
subtitle are intended to ensure that the emission reductions 
and sequestration increases certified as offsets will be real, 
verified, monitored, permanent, enforced, and additional to 
what would have happened in the absence of the offset 
certification. Such certainty benefits both the purchasers of 
allowances (by ensuring valid offsets) and the suppliers of 
offsets (by providing a solid, reliable market).
    This part includes a provision requiring the President to 
delegate to the Secretary of Agriculture elements of the 
program related to oversight of agriculture and forestry 
projects and direct interaction with farmers, ranchers and 
forest landowners. The Committee recognizes the important role 
the U.S. Department of Agriculture will play in the offset 
program and intends for USDA and the Environmental Protection 
Agency to work collaboratively in the implementation of this 
program. There is substantial evidence that the agriculture 
sector, which has no emissions limitation obligations under the 
pollution reduction program established by this title, could 
achieve cost-effective reductions or carbon sequestration. This 
provision is aimed at facilitating participation by farmers, 
ranchers, and foresters in the offset market.
    In testimony before the Committee in legislative hearings 
on the bill, Thomas Vilsack, Secretary of the U.S. Department 
of Agriculture, stated that:

          The creation of an offset market will create new 
        opportunities for the agricultural sector. In 
        particular, our analysis indicates that annual returns 
        to farmers and ranchers range from about $1 billion per 
        year in 2015-20 to almost $15-20 billion in 2040-50, 
        not accounting for the costs of implementing offset 
        practices. In the short term, the economic benefits to 
        agriculture from cap-and-trade legislation will likely 
        outweigh the costs. In the long term, the economic 
        benefits from offsets markets easily trump increased 
        input costs from cap-and-trade legislation.\116\
---------------------------------------------------------------------------
    \116\Statement of Thomas J. Vilsack, Secretary of Agriculture, 
before Senate Committee on Environment & Public Works, ``Legislative 
Hearing on Clean Energy Jobs and American Power Act,'' Oct. 27, 2009.

    The Committee expects the President, or such agency as the 
President determines, to issue an initial list of offset 
project types and their associated methodologies under section 
733 as expeditiously as practicable, but in no case later than 
one year from the date of enactment. Additional project types, 
along with their associated methodologies, should be added to 
the list as expeditiously as practicable, but in no case later 
than two years from the date of enactment. In developing 
baselines, measurement, and monitoring methodologies for a 
broad range of offset project types as quickly as possible, the 
agencies should build on experience in programs already 
underway at the Environmental Protection Agency, such as 
Natural Gas STAR, Climate Leaders, and the Landfill Methane 
Outreach Program.
    The provisions for early offset supply under section 740 
would enable existing offset projects certified through state, 
tribal or voluntary programs to qualify for offset credits 
under the pollution reduction program authorized by this Title. 
It is the intent of the Committee for both programs established 
under state or tribal law as well as other voluntary programs 
with criteria and methodologies of equal stringency that meet 
the requirements of subsection (a)(2) to be eligible to provide 
offset credits under this section. To ensure an adequate supply 
of offsets and to enable early actors with verifiable offset 
projects to receive offset credits, the Committee encourages 
the President to expeditiously determine whether voluntary 
programs that petition for approval under subsection (e) meet 
the requirements of subsection (a)(2) and if so, approve these 
programs.

                 SUBTITLE B--DISPOSITION OF ALLOWANCES

Section 111. Disposition of allowances for global warming pollution 
        reduction program

    Provides for emission allowances to be distributed for 
three primary goals: to protect consumers from energy price 
increases, to assist industry in the transition to clean 
energy, and to spur energy efficiency and the deployment of 
clean energy technology. Allocates allowances to prevent 
deforestation and support national and international adaptation 
efforts and for other purposes.

                   PART H--DISPOSITION OF ALLOWANCES

Section 771. Allocation of emission allowances

    Provides for allocation and auction of allowances.
            Discussion
    This section provides for the distribution of allowances 
established by the pollution reduction program. The 
distribution of allowances are targeted towards four principal 
areas--consumer protection, transition to a clean energy 
economy, climate change adaptation, and investment in clean 
energy technologies. In the initial years of the program, a 
majority of allowances are distributed freely to covered 
entities to ease the transition to clean energy sources and 
reduce the overall cost to consumers of the emissions reduction 
program. This ensures that the major sectors covered by the 
pollution reduction program are able to accommodate their 
pollution reduction obligation. These allowances begin to 
decline after 2025 and by the year 2030 over 91% of allowances 
are auctioned or invested in public purposes, such as energy 
efficiency, renewable energy and climate change adaptation.
    A majority of the allowances are dedicated to consumer 
protection throughout the life of the bill. As much as 69% of 
allowances remaining after set-asides are applied are reserved 
for consumer rebates by the year 2035.

Section 772. Electricity consumers

    Directs distribution of allowances allocated for the 
benefit of consumers to local electricity distribution 
companies (LDCs), whose retail rates are regulated by States or 
other entities. Requires half of the allowances to be 
distributed based on historic emissions and half based on 
retail sales, but prohibits any electricity LDC from receiving 
allowances whose value exceeds the LDC's direct and indirect 
costs of complying with this Title. Requires that these 
allowances be used exclusively for the benefit of the LDC's 
retail ratepayers, and prohibits the Administrator from 
releasing an LDC's allowances until after a ratemaking or 
similar proceeding has been conducted regarding the appropriate 
use of the allowances.
    Directs distribution of allowances for merchant coal 
generators and for certain generators with long-term power 
purchase agreements and small LDCs and rural electric 
cooperatives and publicly owned utilities that are small LDCs 
to support renewable electricity deployment, energy efficiency 
programs, and consumer assistance for low-income ratepayers. 
Requires the Administrator to conduct an audit of LDCs 
receiving allowances under this section to ensure that emission 
allowances have been used exclusively for the benefit of retail 
ratepayers. Every three years, the U.S. Government 
Accountability Office is required to report on the integrity of 
the allowance program, and the Administrator is required to 
submit to Congress an evaluation of the disposition of emission 
allowances.
            Discussion
    Customers of electric utilities will receive approximately 
35% of allowances remaining after set-asides are distributed, 
representing a significant portion of current utility 
emissions. Local electric distribution companies (LDCs), whose 
rates are regulated by the States, will receive 30% of the 
allowances, which are required to be used to protect consumers. 
Merchant coal and long-term power purchase agreements will 
receive 5% of the allowances. The allowances will phase out 
over a five-year period from 2026 through 2030. For further 
consumer protection, small LDCs (including rural electric 
cooperatives) receive 0.5% of distributed allowances and will 
receive an additional 0.5% distribution of the supplemental 
allowance allocation described below each year from 2012 
through 2025, phasing out by 2030.
    These provisions are intended to protect consumers, 
especially low-income consumers. LDCs for electricity (also 
known as load serving entities) provide a convenient platform 
for distributing the economic benefits of a cap and trade 
system back to consumers, as they are the ones which deliver 
monthly electrical bills. They are also under the guidance and 
oversight of state public utility commissions--giving states 
oversight of how the funds directed through these provisions 
are spent. The section specifically requires LDCs to use the 
allowances for the benefit of consumers. However, this section 
does not prescribe the mechanism LDC's should use to benefit 
consumers; such as direct rebates or end-user energy efficiency 
improvements.
    This section further directs the EPA and the Federal Energy 
Regulatory Commission (FERC) to conduct and issue a study on 
whether the allocation formula for allowances provided to 
merchant coal generators is resulting in windfall profits to 
merchant coal generators or substantially disparate treatment 
of merchant coal generators operating in different markets or 
regions. This section also requires the EPA Administrator to 
find, based on the report, whether such impacts are occurring, 
and if so, adjust the allocation formula accordingly. The 
Committee does not intend for EPA to make such a determination 
and adjust the allocation formula prior to evaluating data on 
the impact of the allocation formula, but rather the Committee 
intends for EPA, in consultation with FERC, to base the 
determination on the analysis of data derived from multiple 
years of allowance allocations that have taken place.

Section 773. Natural gas consumers

    Directs the Administrator on how to distribute the 
allowances allocated for the benefit of consumers to local 
natural gas distribution companies, whose retail rates are 
regulated by States or other entities.
            Discussion
    Local natural gas distribution companies, whose rates are 
regulated by the States, will receive 9% of the distributed 
allowances, which are required to be used to protect consumers 
from natural gas price increases. These allowances will phase 
out over a five-year period from 2026 through 2030.

Section 774. Home heating oil and propane consumers

    Directs the Administrator on how to distribute allowances 
to States for programs to benefit residential and commercial 
users of home heating oil, propane, and kerosene.
    States will receive 1.5% of the distributed allowances for 
programs to benefit users of home heating oil and propane. 
These allowances will phase out over a five-year period from 
2026 through 2030.

Section 775. Domestic fuel production

    Oil refiners will receive 1.25% of allowances starting in 
2014 and ending in 2026, with an additional 1% allocated to 
small business refiners.

Section 776. Consumer protection

    Establishes two rebate programs to provide rebates to 
offset electricity and other cost impacts on consumers. The 
section establishes a low and moderate income rebate fund as 
well as a climate change consumer rebate fund to distribute 
proceeds from the sale of allowances.
    Fifteen percent of distributed allowances will be auctioned 
each year with the proceeds distributed to low- and moderate-
income families to protect against any energy cost increases. 
The allocation increases to 18.5% after 2029.

Section 777. Exchange for state-issued allowances

    Provides for fair compensation and exchange of allowances 
issued by the State of California, the Regional Greenhouse Gas 
Initiative and the Western Climate Initiative prior to 
commencement of federal program.

Section 778. Auction procedures

    Establishes single-round, sealed-bid, uniform-price auction 
procedures, which may be modified by the Administrator. 
Provides that a percentage of allowances will be made available 
for small business refiners to purchase for compliance for that 
year at the average auction price.

Section 779. Auctioning allowances for other entities

    Establishes rules by which the Administrator may auction 
allowances on behalf of other entities.

Section 780. Commercial deployment of carbon capture and permanent 
        sequestration technologies

    Directs the EPA Administrator to establish an incentive 
program to distribute allowances to support the commercial 
deployment of CCS technologies in both electric power 
generation and industrial applications. Entities that receive 
allowances are required to capture at least 50% of the carbon 
dioxide emitted.
            Discussion
    1.75% of distributed allowances from 2014 through 2017, 
4.75% in 2018 and 2019, and 5% in subsequent years will be 
allocated to help electric utilities cover the costs of 
installing and operating carbon capture and sequestration 
technologies.
    The allowance disbursement program is structured to provide 
greater incentives for facilities to deploy CCS technologies 
early in the program. Specifically, the program allows entities 
to receive payments in advance of completing the CCS project. 
Entities receiving advanced payments must meet certain 
milestones and achieve a 50% reduction in emissions within 18 
months of startup of the project. Penalties are established for 
failing to meet these standards including repayment of 
allowances received. In addition, the program provides 
incentives for facilities to capture and sequester larger 
amounts of carbon dioxide by linking the amount of bonus 
allowances provided to the amount of carbon captured.

Section 781. Oversight of allocations

    Requires the Comptroller General to prepare biannual 
reviews of the programs administered by the Federal Government 
that distribute emission allowances or funds from Federal 
auctions of allowances.

Section 782. Early action recognition

    Provides allowances for projects and activities that 
sequestered carbon or reduced greenhouse gas emissions prior to 
the beginning of the Pollution Reduction and Investment Program 
established in this Title. This includes projects that held a 
state, local, or voluntary offset credit prior to January 1, 
2009 or a project or process improvement for which the entity 
publicly stated greenhouse gas reduction goals and can 
demonstrate measurable reductions against those goals.
            Discussion
    Section 782(a)(2) directs the Administrator to distribute 
allowances to entities that do not hold offset credits from a 
state, local, or voluntary program but meet the following 
criteria for documented early reductions, avoidance, or 
sequestration of greenhouse gas emissions--(1) the entity 
publicly stated greenhouse gas reduction goals and publicly 
reported against those goals; (2) the entity demonstrated 
entity-wide net greenhouse gas reductions; and (3) the entity 
demonstrates the actual projects or process improvements 
undertaken to make reductions and documents the reductions 
(such as through documentation of engineering projects). The 
Committee intends these criteria to include emissions 
reductions made by entities pursuant to programs covered by a 
memorandum of understanding (MOU) or other agreement involving 
the U.S. Environmental Protection Agency, in which the entity's 
greenhouse gas reduction goals are described in such MOU or 
other agreement, and for which entities can demonstrate, with 
sufficient precision (e.g., through documentation of 
engineering projects), entity-wide net greenhouse gas 
reductions.

Section 783. Establishment of deficit reduction fund

    Establishes a deficit reduction fund in the U.S. Treasury.
            Discussion
    From 2012 through 2029, 10% of allowances annually will be 
auctioned with the proceeds used to reduce the Federal deficit, 
increasing to 22% in 2030 through 2039 and 25% from 2040 
through 2050. As a result of these provisions, the bill will 
not increase the Federal deficit in any decade over the life of 
the program.

            SUBTITLE C--ADDITIONAL GREENHOUSE GAS STANDARDS

Section 121. Greenhouse gas standards

    Establishes Title VIII of the Clean Air Act to set forth 
additional requirements related to greenhouse gases.

            TITLE VIII--ADDITIONAL GREENHOUSE GAS STANDARDS

Section 801. Definitions

    Defines terms used in Title VIII.

Section 811. Standards of performance

    Directs the Administrator to delay until January 1, 2020 
the establishment of standards of performance under section 111 
of the Clean Air Act for stationary sources whose emissions are 
not subject to the requirements of Section 721 and are eligible 
as offset projects under Section 733.

Section 122. HFC regulation

    Amends Title VI of the Clean Air Act by adding a new 
section 619 to phase down the consumption of hydrofluorocarbons 
(HFCs), many of which are extremely potent greenhouse gases, 
under a separate limit and reduction schedule. Using a market-
based regulatory approach, requires HFC consumption to be 
phased-down to 15% of the baseline by 2032. Requires allowances 
to be distributed through a combination of annual auctions and 
non-auction sales. Allows offset credits for destruction of 
chlorofluorocarbons (CFCs).

Section 123. Black carbon

    Directs the Administrator to conduct a study of black 
carbon emissions, report on existing efforts to reduce domestic 
black carbon pollution, and in coordination with the Secretary 
of State, to report to Congress on current and potential future 
assistance to foreign nations to help reduce black carbon 
pollution. Includes in Title III of the Clean Air Act a 
provision directing the Administrator to use existing authority 
to achieve further reductions.

Section 124. States

    Amends section 116 of the Clean Air Act to preserve States' 
existing authority to adopt and enforce standards or 
limitations on air pollutants under the Clean Air Act, 
including greenhouse gas emissions.

Section 125. State programs

    Includes in Title VIII of the Clean Air Act section 861, 
barring States from implementing or enforcing a Comprehensive 
Greenhouse Gas Emission Limitation program to control 
greenhouse gas emissions covered by Title VII. The moratorium 
begins in 2012 or 9 months after the first auction, whichever 
is earlier, and continues through the year 2017. Includes 
section 862, which authorizes the Administrator to make grants 
to air pollution control agencies under section 105 of the 
Clean Air Act to implement global warming programs established 
under the Clean Air Act.

Section 126. Enforcement

    Amends section 307 of the Clean Air Act to provide that in 
ruling on a petition for review under the Clean Air Act, the 
court may remand without overturning an action of the 
Administrator under specified circumstances. Sets deadline for 
the Administrator to respond to a court remand and take final 
action.

Section 127. Forestry sector greenhouse gas accounting

    Directs the Administrator in consultation with the 
Secretaries of Agriculture and the Interior, to provide an 
annual accounting of sequestration and emissions of greenhouse 
gases from forests and forest products. Requires that the 
accounting be based on existing sources of data.

Section 128. Conforming amendments

    Provides for conforming amendments to Clean Air Act 
enforcement and administrative provisions to incorporate Titles 
VII and VIII.
    This section includes provisions relating to the treatment 
of greenhouse gases under other Clean Air Act programs by 
providing that greenhouse gases may not be added to the list of 
criteria air pollutants under section 112 of the Clean Air Act 
or hazardous air pollutants under Section 108 of the Clean Air 
Act based on their effect on climate change, and further that 
section 115 of the Clean Air Act shall not apply to an air 
pollutant with respect to that pollutant's contribution to 
climate change. In addition, this section excludes sources 
below 25,000 tons of annual emissions of carbon dioxide 
equivalent from the definition of ``major emitting source'' 
under the Clean Air Act and therefore the New Source Review and 
Prevention of Significant Deterioration regulations for major 
emitting sources. Finally, this section excludes sources 
emitting less than 25,000 tons CO2 per year from the 
requirement to hold a permit under Title V, if such sources do 
not otherwise trigger the Title V requirements based on their 
emission of other pollutants.

Section 129. Davis-Bacon compliance

    Requires recipients of emission allowances or funding under 
this Act to provide reasonable assurances that all laborers and 
mechanics employed by contractors and subcontractors on 
projects funded directly by or assisted in whole or in part by 
the Federal Government pursuant to this Act will be paid at 
least prevailing wages as determined by the Secretary of Labor 
in accordance with what is commonly known as the Davis-Bacon 
Act (subchapter IV of chapter 31 of title 40, United States 
Code). Excludes application of these provisions to retrofitting 
of residential buildings (apart from large apartment buildings) 
and smaller nonresidential buildings.

                  SUBTITLE D--CARBON MARKET ASSURANCE

Sections 131. Carbon market assurance

    States the sense of the Senate that there shall be a carbon 
market oversight program to provide for effective and 
comprehensive market oversight and enforcement that lowers 
systemic risk and protects consumers.

      SUBTITLE E--ENSURING REAL REDUCTIONS IN INDUSTRIAL EMISSIONS

Section 141. Ensuring real reductions in industrial emissions

    Creates a program within Title VII of the Clean Air Act, as 
established by this Act, to ensure real reductions in 
industrial greenhouse gas emissions through emission allowance 
rebates.

        PART F--ENSURING REAL REDUCTIONS IN INDUSTRIAL EMISSIONS

Section 761-762. Purposes; Definitions

    Outlines purposes, including promoting a strong global 
effort to significantly reduce greenhouse gas emissions and 
preventing an increase in greenhouse gas emissions in foreign 
countries as a result of compliance costs incurred under Title 
VII of the Clean Air Act.

Section 763-764. Eligible industrial sectors; Distribution of emission 
        allowance rebates

    Establishes a program that rebates emission allowances to 
eligible industrial sectors to compensate these sectors for 
costs incurred as a result of compliance with Title VII of the 
Clean Air Act, as added by this Act. Requires the Administrator 
to determine which sectors and sub-sectors should be eligible 
for rebates through a rulemaking based on an assessment of the 
energy and greenhouse gas intensity of each sector and the 
trade intensity of each sector. This section also allows firms 
to petition the Administrator for relieve based upon evidence 
that the industrial subsector meets eligibility criteria even 
though the sector as a whole may not.
    Rebates are distributed to eligible facilities on a product 
output basis, with compensation provided for both direct and 
indirect compliance costs. For direct compliance costs, 
allowance distribution is calculated by multiplying a 
facility's product output by the sector average tonnage of 
greenhouse gas emissions per unit of product output. For 
indirect costs passed on by electric utilities, allowance 
distribution is calculated by multiplying a covered or 
uncovered facility's product output: (1) by the ``emissions 
intensity'' of each facility's electric power supplier; and (2) 
by the sector average electricity use per unit of product 
output. In calculating indirect costs, this section requires 
the Administrator to account for any benefit received by a 
facility through the distribution of allowances to the 
facility's electricity provider under Section 772.
    This section provides incentives for increased efficiency 
by limiting the calculation of greenhouse gas per unit of 
output, the electricity intensity factor, and the electricity 
efficiency factor to an amount less than the amount previously 
calculated. To accommodate for fluctuations in the business 
cycle, when calculating the greenhouse gas intensity and 
electricity efficiency, this section requires the Administrator 
to use the 5 most recent years of the best available data from 
up to 7 years prior to the year in which such calculations are 
made, excluding data from the highest and lowest year for both 
factors

Section 765. International trade

    States the sense of the Senate that there will be trade 
provisions, including a border measure that is consistent with 
international obligations of the United States and designed to 
work in conjunction with provisions that allocate allowances to 
energy-intensive and trade-exposed industries.

                     TITLE II--PROGRAM ALLOCATIONS

Section 201. Distribution of allowances for investment in clean 
        vehicles

    Provides that 3% of distributed allowances through 2017 and 
1% from 2018 through 2025 will be allocated for investments in 
electric vehicles and other advanced automobile technology 
development and deployment. Distributes emission allowances to 
vehicle manufacturers and component suppliers to re-equip or 
expand manufacturing facilities in the U.S. to produce 
qualified advanced technology vehicles or plug-in electric 
drive or hybrid-electric, hybrid hydraulic, plug-in hybrid, 
electric, fuel cell drive medium- and heavy-duty motor vehicles 
(including transit vehicles). Directs that the proceeds of the 
auction of allowances pursuant to section 771(b)(3) to be 
placed in a Clean Vehicle Technology Fund and used for the 
following purposes: 75% for the Black Carbon Reduction Grant 
Program authorized under Section 795A of the Energy Policy Act 
of 2005; 20% for the use and integration of domestically-
produced plug-in electric drive vehicles; and 5% for the 
development and demonstration of a national transportation low-
emission energy plan.

Section 202. State and local investment in energy efficiency and 
        renewable energy

    States will receive 10.35% of distributed allowances in 
2012 and 2013; 8.55% in 2014 and 2015; 5-6% in the years 2016-
2021 and more than 4% of allowances in 2022 and thereafter. 
These allocations are supplemented by 0.5% each year of the 
additional allowances described below under ``Supplemental 
Allowances.''
    Section 202 distributes emission allowances to States, 
Indian tribes, and local governments, for programs to reduce 
greenhouse gas emissions, promote energy efficiency and 
conservation, and accelerate the deployment of renewable energy 
sources. States receive 60 percent of allowances distributed 
under this section, of which not less than 40 percent shall be 
used for specified energy efficiency programs. Of the 40 
percent reserved for energy efficiency programs, not less than 
10 percent shall be used for thermal energy efficiency 
projects, not less than 5 percent for energy efficiency 
building retrofits pursuant to Section 164 of Division A, and 
not less than 35% to benefit persons of low income. States may 
also use their allocation allowances for other purposes 
including renewable energy programs, improvements in 
electricity transmission, retrofits and housing investments, 
and smart grid development.
    Local governments receive 25 percent of allowance 
allocations under this section for energy efficiency projects 
through the Energy Efficiency Community Block Grants program. 
Fifteen percent of allowances under this section are 
distributed directly to renewable energy generators for 
renewable energy facilities with a capacity of 10 megawatts or 
greater.

Section 203. Energy efficiency in building codes

    Provides 0.50% of distributed allowances will be allocated 
to support implementation of codes to reduce emissions of 
greenhouse gases from buildings. Distributes emission 
allowances to update and implement building codes pursuant to 
Section 163 of Division A.

Section 204. Energy Innovation Hubs

    Distributes emission allowances for research and 
development of clean technologies. Allowances are distributed 
through regional energy innovation hubs.

Section 205. ARPA-E research

    Distributes emission allowances to qualified research 
institutions to achieve the goals of the Advanced Research 
Projects Agency-Energy (ARPA-E) as described in section 5012(c) 
of the America COMPETES Act.
    The total for advanced energy research under sections 204 
and 205 equals 4% of distributed allowances in 2012 and 2013, 
2% in 2014 and 2015, and 1.7% of allowances in subsequent 
years.

Section 206. International clean energy deployment program

    Distributes emission allowances to provide assistance to 
developing countries for clean energy deployment pursuant to 
Section 323 of Division A.

Section 207. International climate change adaptation and global 
        security

    Distributes emission allowances to provide assistance to 
developing countries for climate change adaptation pursuant to 
Section 324 of Division A.

Section 208. Energy efficiency and renewable energy worker training

    Provides emission allowances to the Secretary of Energy to 
carry out the Energy Efficiency and Renewable Worker Training 
program authorized in the Workforce Investment Act of 1998.

Section 209. Worker transition

    Provides emission allowances for worker transition 
assistance pursuant to the program established in Sections 311-
313 of Division A. In 2012 and 2013, 1.5% of distributed 
allowances will be allocated for worker assistance, and to 
train workers for jobs in the areas of energy efficiency and 
renewable energy. This allocation will be 0.55% of allowances 
in 2014 and 2015, and 1% annually thereafter.

Section 210. State programs for greenhouse gas reduction and climate 
        adaptation

    Distributes proceeds of emission allowances for 
implementation of projects, programs, or measures to reduce 
emissions of greenhouse gases and build resilience to the 
impacts of climate change. Ten percent (10%) of allowance 
proceeds are reserved for funding of coastal and Great Lake 
State economic protection programs pursuant to the program in 
Section 384 of Division A. At least one percent (1%) of 
allowance proceeds are reserved to support climate change 
response programs administered by Indian tribes. Ten percent 
(10%) of allowance proceeds are dedicated to wildfire grants 
pursuant to Section 383 of Division A. The remaining proceeds 
are allocated to fund State and local programs, including; 
grants to fund water systems mitigation and adaptation 
partnerships; flood control and response; recycling programs; 
adverse impacts on agriculture and ranching activities; and 
programs addressing air pollution and air quality. States and 
tribes are required to prepare Climate Change Response Plans 
governing uses of funds and to report on such uses in detail 
every two years.
    In 2012 and 2013, 1.34% of distributed allowances will be 
allocated to the states to be used for domestic adaptation 
purposes, including water system adaptation, wildfire 
reduction, flood mitigation, and coastal adaptation, and for 
activities to reduce greenhouse gas emissions, including 
promoting state and local recycling programs. The number of 
allowances allocated for state adaptation and mitigation 
programs ranges from 0.5% to 1.3% from 2012 through 2026 and 
will increase to 2.18% thereafter.

Section 211. Climate change health protection and promotion fund

    Distributes proceeds of emission allowances for activities 
to prepare and respond to the impacts of climate change on 
public health pursuant to Sections 351-356 of Division A. 0.10% 
of distributed allowances will be auctioned annually with the 
proceeds used for protection of public health against the 
effects of climate change.

Section 212. Climate change safeguards for natural resources 
        conservation

    Distributes proceeds of emission allowances for activities 
to prepare and respond to the impacts of climate change on 
natural resources pursuant to Section 370 (a) of Division A. 1% 
of distributed allowances will support protection of natural 
resources each year from 2012 through 2021, increasing to 2% in 
2022 through 2026 and 4% annually in subsequent years.

Section 213. Nuclear worker training

    Distributes proceeds of emission allowances to provide 
assistance for training of workers that will be essential for 
the growth of safe domestic nuclear and nuclear-related 
industries pursuant to Section 132 of Division A.

Section 214. Supplemental agriculture, abandoned mine lands, renewable 
        energy, and forestry

    Provides allowances for investment in agriculture, 
abandoned mine lands, and forestry projects to sequester carbon 
and reduce greenhouse gas emissions pursuant to the program in 
Section 155 of Division A. 1% of allowances in 2012 and 2013 
and .28% in 2014 through 2016 will be allocated for investments 
in agriculture, abandoned mine lands, and renewable energy. 
These allocations are supplemented by 1% each year of the 
additional allowances described below under ``Supplemental 
Allowances.''

Section 215. Investment in greenhouse gas reductions from the 
        transportation sector

    A Climate Change Transportation Fund is established in the 
Treasury into which the proceeds of auctions under Section 
771(b)(10) of the Clean Air Act for the vintage years specified 
are deposited. These funds are available without further 
appropriation for the following purposes: 50 percent shall be 
used for the planning and competitive grant programs under 
Section 832 of the Clean Air Act; and 50 percent shall be 
distributed as formula grants for public transportation in 
accordance with Section 215(d) of this Act. The distribution 
formula to be used by USDOT for the public transportation 
grants under 215(d) is a composite of the purposes and formulas 
contained in current transit law: 80 percent based on 49 USC 
5307; 10 percent based on 49 USC 5311; and 10 percent based on 
49 USC 5340.
            Discussion
    Section 215 contains a transit set-aside. This funding is 
eligible, consistent with current transit law, for capital 
needs and preventative maintenance (as well as operating 
assistance in areas under 200,000). A three part distribution 
blends existing Federal Transit Administration formulas: to 
urbanized areas based on population under section 5307; to 
areas other than urbanized ones under 5311 (including the 15 
percent set-aside for rural intercity bus services); and also 
via the growing and high density states formula under 5340.

Section 216. State programs for natural resource adaptation activities

    Distributes proceeds of emission allowances for activities 
to prepare and respond to the impacts of climate change on 
natural resources pursuant to Section 370(b) of Division A.

                          Legislative History

    The Clean Energy Jobs and American Power Act (S. 1733) was 
introduced by Senator Kerry and co-sponsored by Senator Boxer 
on September 30, 2009. On November 5, 2009, the full Committee 
on Environment and Public Works considered and ordered 
favorably reported a substitute amendment.

                                Hearings

    In the 111th Congress the Committee on Environment and 
Public Works and its subcommittees held 15 hearings considering 
issues relating to clean energy jobs and global warming 
pollution reduction legislation. These hearings included:
    ``Investing in Green Technology as a Strategy for Economic 
Recovery,'' on January 7, 2009; ``Update on the Latest Global 
Warming Science,'' on February 25, 2009; ``Oversight--the 
Environmental Protection Agency's Renewable Fuel Standard,'' on 
April 1, 2009; ``Oversight of the GSA and Energy Efficiency in 
Public Buildings,'' on April 22, 2009; ``Business Opportunities 
and Climate Policy,'' on May 19, 2009; ``Moving America toward 
a Clean Energy Economy and Reducing Global Warming Pollution: 
Legislative Tools,'' on July 7, 2009; ``Economic Opportunities 
for Agriculture, Forestry Communities, and Others in Reducing 
Global Warming Pollution,'' on July 14, 2009; 
``Transportation's Role in Climate Change and Reducing 
Greenhouse Gases,'' on July 14, 2009; ``Ensuring and Enhancing 
U.S. Competitiveness while Moving toward a Clean Energy 
Economy,'' on July 16, 2009; ``Clean Energy Jobs, Climate-
Related Policies and Economic Growth--State and Local Views,'' 
on July 21, 2009; ``Climate Change and National Security,'' on 
July 30, 2009; ``Climate Change and Ensuring that America Leads 
the Clean Energy Transformation,'' on August 6, 2009.
    The Committee held three legislative hearings to consider 
S. 1733, the Clean Energy Jobs and American Power Act, on 
October 27, October 28, and October 29, 2009.

                            Roll Call Votes

    On November 5, 2009, the full Committee on Environment and 
Public Works considered and ordered favorably reported a 
substitute amendment by a vote of 11-1 (Senators Boxer, Carper, 
Lautenberg, Cardin, Sanders, Klobuchar, Whitehouse, T. Udall, 
Merkley, Gillibrand, and Specter voted yea, and Senator Baucus 
voted nay). Senators Inhofe, Voinovich, Vitter, Barrasso, 
Crapo, Bond, and Alexander did not record a vote.

                      Regulatory Impact Statement

    In compliance with section 11(b) of rule XXVI of the 
Standing Rules of the Senate, the committee notes, based on 
CBO's estimates discussed in detail below, that S. 1733 would 
require certain types of private entities to participate in the 
programs to reduce GHG emissions created by the bill. CBO 
estimates that the annual cost of this requirement would amount 
to tens of billions of dollars for private-sector entities.

                          Mandates Assessment

    Based upon the CBO cost estimate below, the Committee notes 
that S. 1733 contains several intergovernmental mandates as 
defined in the Unfunded Mandates Reform Act (UMRA).
    CBO estimates that the aggregate cost of mandates in the 
bill would significantly exceed the annual thresholds 
established in UMRA for intergovernmental and private-sector 
mandates ($69 million and $139 million in 2009, respectively, 
adjusted annually for inflation). CBO also estimates that 
States would receive at least $60 billion in allowances over 
the 2012-2016 period for specific purposes, offsetting mandate 
costs.

               Congressional Budget Office Cost Estimate

    In compliance with paragraph 11(a) of rule XXVI of the 
Standing Rules of the Senate and section 403 of the 
Congressional Budget Act of 1974, the Committee provides the 
following cost estimate, prepared by the Congressional Budget 
Office:

                                                 December 16, 2009.
Hon. Barbara Boxer,
Chairman, Committee on Environment and Public Works,
U.S. Senate, Washington, DC.
    Dear Madam Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for S. 1733, the Clean 
Energy Jobs and American Power Act.
    If you wish further details on these estimates, we will be 
pleased to provide them. The CBO staff contact is Susanne S. 
Mehlman.
            Sincerely,
                                              Douglas W. Elmendorf.
    Enclosure.

S. 1733--Clean Energy Jobs and American Power Act

    Summary: S. 1733 would make a number of changes in energy 
and environmental policies largely aimed at reducing emissions 
of gases that contribute to global warming. The bill would 
limit or cap the quantity of certain greenhouse gases (GHGs) 
emitted from facilities that generate electricity and from 
other industrial activities beginning in 2012. The 
Environmental Protection Agency (EPA) would establish two 
separate regulatory initiatives known as cap-and-trade 
programs--one covering emissions of most types of GHGs and one 
covering hydrofluorocarbons (HFCs). EPA would issue allowances 
to emit those gases under the cap-and-trade programs. Some of 
those allowances would be auctioned by the federal government, 
and the remainder would be distributed at no charge.
    The legislation also would authorize the establishment of a 
Carbon Storage Research Corporation to support research and 
development of carbon capture and sequestration (CCS) 
technology. Funding for the corporation would largely be 
derived from assessments on utilities enforced by the federal 
government.
    CBO and the Joint Committee on Taxation (JCT) estimate that 
over the 2010-2019 period enacting this legislation would:
           Increase federal revenues by about $854 
        billion; and
           Increase direct spending by about $833 
        billion.
    In total, those changes would reduce budget deficits (or 
increase future surpluses) by about $21 billion over the 2010-
2019 period. (All estimated effects would be on-budget.) In 
years after 2019, direct spending would be less than the net 
revenues attributable to the legislation in each of the 10-year 
periods following 2019. Therefore, CBO estimates that enacting 
S. 1733 would not increase the deficit in any of the four 10-
year periods following 2019.
    The legislation also would authorize appropriations for 
various programs under EPA, the Department of Energy (DOE), and 
other agencies. Assuming appropriation of the necessary 
amounts, CBO estimates that implementing S. 1733 would increase 
discretionary spending by about $29 billion over the 2010-2019 
period. Most of that funding would stem from spending auction 
proceeds associated with the HFC cap-and-trade program.
    S. 1733 contains intergovernmental and private-sector 
mandates as defined in the Unfunded Mandates Reform Act (UMRA). 
Several of those mandates would require utilities, 
manufacturers, and other entities to reduce greenhouse gas 
emissions through cap-and-trade programs and performance 
standards. CBO estimates that the cost of mandates in the bill 
would significantly exceed the annual thresholds established in 
UMRA for intergovernmental and private-sector mandates ($69 
million and $139 million in 2009, respectively, adjusted 
annually for inflation).

                            MAJOR PROVISIONS

    The major provisions of S. 1733 are described in the 
following sections.

Cap-and-trade programs for greenhouse gases

    This legislation would designate as GHGs: carbon dioxide 
(CO2), methane, nitrous oxide, sulfur hexafluoride, 
perfluorocarbons, nitrogen trifluoride, and HFCs from a 
chemical manufacturing process at a stationary industrial 
source. EPA would be required to establish two cap-and-trade 
programs aimed at reducing the emission of GHGs in the United 
States. One program would cover emissions of GHGs other than 
HFCs. A second program would cover the production and 
importation of HFCs and the importation of products containing 
HFCs. (Although HFCs are considered to be greenhouse gases, 
this cost estimate will subsequently refer to the larger 
program as the GHG cap-and-trade program and the smaller 
program specific to HFCs as the HFC cap-and-trade program.)
    A cap-and-trade program is a regulatory policy aimed at 
controlling pollution emissions from specific sources. The 
legislation would set a limit on total emissions for each year 
and would require regulated entities to hold rights, or 
allowances, to the emissions permitted under that cap. Each 
allowance would entitle companies to emit the equivalent of one 
metric ton of carbon dioxide equivalent (mtCO2e).\1\
---------------------------------------------------------------------------
    \1\A carbon dioxide equivalent is defined for each GHG as the 
quantity of that gas that makes the same contribution to global warming 
as one metric ton of carbon dioxide, as determined by EPA.
---------------------------------------------------------------------------

Entities covered by cap-and-trade programs

    Based on information from EPA, CBO estimates that about 
7,400 facilities would be affected by the cap-and-trade 
programs established by the bill. The specific details 
regarding coverage, attribution of emissions to covered 
entities, and the timing of implementation vary by type of 
entity and sector of the economy:
           Beginning in 2012, all electricity 
        generators would be required to submit allowances for 
        all GHG emissions from their sites, with the exception 
        of emissions from the combustion of liquid fuels, 
        petroleum coke, and renewable biomass;
           Also beginning in 2012, any facility or 
        entity that produces or imports petroleum- or coal-
        based liquids, petroleum coke, or natural gas liquids 
        would be required to submit allowances for the GHG 
        emissions that would result from the combustion of 
        those fuels, if combustion of the fuel resulted in the 
        emission of more than 25,000 mtCO2e per 
        year. Similarly, all facilities or entities that 
        produce or import GHGs for direct use would be required 
        to submit allowances for the emissions that would 
        result when those gases were released into the 
        atmosphere. Emissions from sites that geologically 
        sequester CO2 also would be covered 
        beginning in 2012;
           Beginning in 2014, industrial facilities 
        that manufacture a wide variety of products or that 
        burn fossil fuels would be required to submit 
        allowances for all GHG emissions from their sites--with 
        the exception of emissions from the combustion of 
        various types of liquid fuels, petroleum coke, and 
        renewable biomass--if their activities result in more 
        than 25,000 mtCO2e of emissions. Small 
        refineries eligible for the tax credit on low-sulphur 
        diesel-fuel production would need to submit allowances 
        for GHG emissions from their sites beginning in 2015;
           Beginning in 2016, natural gas distributors 
        that deliver at least 460 million cubic feet of natural 
        gas per year to customers that are not covered by the 
        cap-and-trade provisions of the bill would need to 
        submit allowances for the GHG emissions that would 
        result from the combustion of the gas delivered to 
        those customers; and
           Under a separate cap, beginning in 2012, 
        producers and importers of HFCs, and importers of 
        products containing HFCs, would be required to submit 
        allowances for each mtCO2e of HFC they 
        produce or import.
    According to CBO's estimates, the programs would cover 
about 72 percent of U.S. emissions of GHGs in 2012, about 78 
percent in 2015, and about 86 percent in 2020.

Operation of the GHG cap-and-trade program

    The cap for the GHG cap-and-trade program would take effect 
in 2012, and emission allowances would be either auctioned or 
distributed free of charge to covered entities, states, and 
other specified recipients, who could then retire, sell, or use 
such allowances to meet the annual obligation for their own 
emissions.
    S. 1733 would not restrict the types of entities or 
individuals who could purchase, hold, exchange, or retire 
emission allowances under the GHG cap-and-trade program. An 
unlimited number of allowances obtained in one year could be 
saved or ``banked'' by market participants indefinitely to be 
used or sold in future years. Limited borrowing of allowances 
(that is, the use in one year of an allowance that has been 
established for use in a future year) also would be permitted. 
The program would create 4,627 million mtCO2e 
allowances in 2012--about 97 percent of the amount of such 
emissions by covered entities in 2005. The number of allowances 
would increase to as high as 5,482 million mtCO2e in 
2016 to account for certain covered entities that would not 
begin compliance until that time, and then decline by about 100 
million to 200 million mtCO2e per year--falling to 
1,035 million mtCO2e in 2050 and thereafter, about 
14 percent of projected emissions from covered entities in the 
absence of legislation to regulate such emissions.\2\
---------------------------------------------------------------------------
    \2\In April 2009, EPA proposed a finding that GHGs contribute to 
air pollution and, consequently, may endanger public health or welfare. 
CBO's current baseline for GHG emissions does not take into 
consideration any regulations under the Clean Air Act that may result 
from this finding.
---------------------------------------------------------------------------
    Two-Part Distribution Scheme for Allowances. The 
legislation specifies the percentage of emission allowances 
that would be freely allocated (that is, distributed at no 
charge) to certain entities and what percentage of emission 
allowances would be auctioned by vintage year (that is, the 
calendar year for which an allowance is established). The 
distribution scheme for each year has two separate parts: the 
first part, referred to in the bill as the ``initial 
reservation,'' would allocate a specified portion of the 
allowances created by the GHG cap-and-trade program. A second 
distribution would be made following this initial reservation 
(see Table 1). Some of the allowances allocated as part of the 
initial reservation would be auctioned while others would be 
distributed at no charge for a variety of purposes, such as 
support for trade-exposed industries, investments in energy 
efficiency and renewable energy, and reducing GHGs in the 
transportation sector. Some of the proceeds from the allowances 
that would be auctioned would be deposited in the Treasury and 
would not be available for spending--thus, reducing the budget 
deficit.
    The initial reservation of allowances includes about 3.5 
billion allowances that would accumulate in a market stability 
fund over the 2012-2050 period. Under the bill, EPA could 
auction allowances in the market stability and if the market 
price of allowances rose to unexpectedly high levels. CBO's 
estimate assumes that sales from the market stability fund 
would not be triggered. However, because of the uncertainty 
inherent in this process, such sales could occur.
    After the first distributions were completed each year, the 
remaining allowances would be auctioned or freely allocated, as 
specified in the legislation, in a second round of allocations. 
Including auctions stemming from the initial reservation, 27 
percent to 30 percent of allowances would be auctioned over the 
2012-2019 period (see Table 1). The percentage of all 
allowances auctioned would increase to about 28 percent by 2025 
and gradually increase to about 80 percent in 2035 and remain 
at that level through 2050. Table 1 includes additional details 
concerning the percentage of emission allowances dedicated to 
auction and allocated free of charge.
    Use of Offsets in Lieu of Allowances. A portion of an 
entity's compliance obligation under the bill could be met by 
purchasing domestic or international ``offsets'' in lieu of 
purchasing an allowance. An offset would be created by 
certified activities that are not directly related to the 
emissions of the facilities covered under the bill, but would 
reduce GHG emissions or increase the amount of such gases that 
are captured from the atmosphere and stored (this process is 
referred to as sequestration). Examples of such offset 
activities include reducing emissions of methane gas from solid 
waste landfills, sequestering GHGs on agricultural lands, 
rangelands, and forests, and reducing the use of nitrogen 
fertilizer. Under the bill, such offsets could occur 
domestically or in a developing country if the United States is 
a party to a bilateral or multilateral agreement or arrangement 
with the relevant country. Those international agreements or 
arrangements would specify the types of qualifying projects and 
methods for verifying the validity of offset activities. 
Covered entities could also purchase GHG emission allowances 
established by other countries or international organizations 
if approved by EPA.

                      TABLE 1.--GHG ALLOWANCES AUCTIONED AND FREELY ALLOCATED UNDER S. 1733
----------------------------------------------------------------------------------------------------------------
                                                                 By vintage year--
                                 -------------------------------------------------------------------------------
                                    2012      2013      2014      2015      2016      2017      2018      2019
----------------------------------------------------------------------------------------------------------------
                          Quantity of Emission Allowances (In Millions of Metric Tons)

Total...........................     4,627     4,544     5,053     5,003     5,482     5,261     5,132     5,002
Initial Reservation of
 Allowances:
    Auctioned...................       555       545       606       600       658       631       616       600
    Freely Allocated............        81        80        88        88        96        92        90        88
    Market Stability Fund.......        93        91       101       100       110       105       103       100
                                 -------------------------------------------------------------------------------
        Subtotal................       729       716       796       788       863       829       808       788
Second Distribution of Remaining
 Allowances:
    Auctioned...................       853       838       792       784       841       795       754       735
    Freely Allocated............     3,045     2,990     3,465     3,431     3,778     3,637     3,570     3,479

                               Memorandum--Disposition of Allowances Under S. 1733

(In percentage of total emission
 allowances)
Auctioned.......................      30.4      30.4      27.7      27.7      27.3      27.1      26.7      26.7
Freely Allocated................      67.6      67.6      70.3      70.3      70.7      70.9      71.3      71.3
Market Stability Fund...........       2.0       2.0       2.0       2.0       2.0       2.0       2.0      2.0
----------------------------------------------------------------------------------------------------------------
Note: Vintage year is the calendar year for which an allowance is established. Components may not sum to totals
  because of rounding.

Operation of the HFC cap-and-trade program

    Beginning in 2012, producers and importers of HFCs as well 
as importers of products containing HFCs would be required to 
submit to EPA a consumption allowance or a destruction offset 
credit for mtCO2e of HFC. EPA would be authorized to 
issue destruction offset credits to producers and importers of 
HFCs if those entities perform or arrange for the recovery and 
destruction of chlorofluorocarbons (CFCs) from products or 
equipment already in use in the United States. The allowances 
available would steadily decline from 90 percent of the 
baseline use of HFCs (defined in the legislation as the average 
annual consumption of HFCs plus the average annual quantity of 
HFCs contained in imported products over the 2004-2006 period) 
to 15 percent of that baseline after 2032. Destruction offset 
credits could be used by producers and importers to satisfy a 
portion of the requirement to submit consumption allowances.
    The bill would allow entities to bank an unlimited number 
of HFC allowances for future use. In contrast to the GHG cap-
and-trade program, only those entities that produce and import 
HFCs or import products containing HFCs would be permitted to 
purchase an allowance directly from EPA, although EPA would 
have the authority to make certain exceptions. (The 
legislation, however, would not restrict which entities could 
hold, sell, transfer, exchange, or retire consumption 
allowances in any secondary market for HFC allowances.)
    All of the consumption allowances established for the HFC 
cap-and-trade program would be either auctioned or offered 
through a fixed-price sale to producers and importers of HFCs 
and products containing HFCs. The legislation specifies how the 
HFC allowance price would be calculated for certain auctions 
and for all fixed-price sales.

Carbon storage research corporation

    The legislation would authorize utilities that distribute 
electricity generated from fossil fuels to establish, subject 
to approval in a referendum by members of the electricity 
distribution industry, a Carbon Storage Research Corporation. 
The corporation would levy annual assessments on distribution 
utilities based on certain electricity deliveries to retail 
consumers. Assessments would total between $1.0 billion and 
$1.1 billion annually and would be used to support research and 
development of technologies related to CCS. Although formation 
of the corporation would be voluntary, once it was created, 
assessments would be compulsory, enforced by the federal 
government's sovereign authority. Therefore, CBO believes the 
corporation should be considered governmental in nature and the 
funds it collects and spends should be included in the federal 
budget.
    Estimated cost to the Federal Government: The estimated 
budgetary impact of S. 1733 is shown in Table 2. The costs of 
this legislation fall within budget functions 270 (energy), 300 
(natural resources and environment), 350 (agriculture), 370 
(commerce and housing credit), 400 (transportation), 500 
(education, training, employment, and social services), 550 
(health), and 600 (income security). For this estimate, CBO 
assumes that S. 1733 will be enacted in fiscal year 2010, that 
the amounts necessary to implement the bill will be 
appropriated each year, and that outlays will follow historical 
spending patterns for similar programs.

                                                     TABLE 2.--ESTIMATED BUDGETARY IMPACT OF S. 1733
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                        By fiscal year, in billions of dollars--
                               -------------------------------------------------------------------------------------------------------------------------
                                  2010      2011      2012      2013      2014      2015      2016      2017      2018      2019    2010-2014  2010-2019
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                   CHANGES IN REVENUES

Total Estimated Revenues......         0      10.0      70.2      78.6      95.0     105.3     111.6     122.0     128.2     133.3      253.9      854.2

                                                               4CHANGES IN DIRECT SPENDINGEstimated Budget Authority....         0       9.0      72.3      80.4      96.2     106.3     112.6     123.6     129.6     135.4      257.9      865.4
Estimated Outlays.............         0       0.6      61.1      76.7      93.9     104.0     110.7     122.8     128.6     134.4      232.4      832.8                                                          NET CHANGE IN THE BUDGET DEFICIT FROM
                                                         CHANGES IN REVENUES AND DIRECT SPENDINGImpact on Deficit\1\..........         0       9.3       9.1       1.9       1.1       1.3       0.9      -0.8      -0.4      -1.1       21.4       21.4                                                      CHANGES IN SPENDING SUBJECT TO APPROPRIATIONEstimated Authorization Level.       1.1       1.1       1.9       2.2       2.5       4.1       4.5       4.8       6.2       6.3        8.9       34.8
Estimated Outlays.............       0.1       0.6       1.3       1.8       2.3       3.1       4.0       4.5       5.2       6.0        6.1      28.9
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\Positive numbers indicate decreases in deficits; negative numbers indicate increases in deficits.
Note:  Components may not sum to totals because of rounding.

    Basis of estimate: CBO estimates that implementing this 
legislation would result in additional revenues, net of income 
and payroll tax offsets, of $254 billion over the 2010-2014 
period and $854 billion over the 2010-2019 period. We estimate 
that direct spending would increase by $232 billion and $833 
billion over the same periods, respectively. Those changes in 
revenues and direct spending would mainly stem from the process 
of auctioning and freely distributing allowances under the cap-
and-trade programs established under this legislation. In 
addition, CBO estimates that implementing this legislation 
would increase discretionary federal spending by $29 billion 
over the 2010-2019 period, assuming appropriation of the 
amounts estimated to be necessary.

Budgetary treatment of allowances

    Efforts to control GHG emissions in this legislation would 
be enforced through the federal government's sovereign powers 
and would alter the use of scarce economic resources. While 
similar in some ways to command-and-control approaches for 
regulating economic activities, the cap-and-trade system that 
would be established by the bill for GHG and HFC emissions is 
fundamentally different because it would create cash-like 
assets (allowances) whose supply and distribution would be 
determined by the federal government. As such, CBO believes it 
is appropriate to include all transactions involving GHG and 
HFC allowances (including those distributed at no cost) in the 
budget.
    Under S. 1733, both firms and individuals would be eligible 
to trade GHG and HFC allowances acquired from the federal 
government in a secondary market that would exceed $80 billion 
in value in 2012, CBO estimates. Within such a large and liquid 
market, allowances could be easily and immediately traded for 
cash. In addition, the legislation would allow the federal 
government to determine the supply of allowances by defining 
the scope of covered emissions and limiting the number of 
allowances to be issued. Under those circumstances, the free 
distribution of allowances by the federal government would be 
essentially equivalent to the distribution of cash grants, so 
CBO believes that such transactions should be treated as 
additional outlays. At the same time, those allowances would be 
valuable financial instruments, so CBO thinks that the creation 
of allowances by the federal government should be recorded as 
an increase in revenues.
    That logic does not hinge on whether the federal government 
sells or, instead, gives away the allowances. Allowances would 
have significant value even if given away because the 
recipients could sell them or, in the case of a covered entity, 
use them to avoid incurring the cost of compliance. In either 
case, the recipient receives an asset of equivalent value with 
no estimated change in the policy effect (i.e., total GHG 
emissions). For example, either the government could raise $100 
by selling allowances and then give that amount in cash to an 
entity, or it could simply give $100 worth of allowances to 
that same entity, which could immediately and easily transform 
the allowances into cash through the secondary market. Sound 
budgeting requires that the budget treat equivalent 
transactions in the same way, in CBO's view. Therefore, this 
estimate treats the creation of allowances and their 
disposition as budgetary transactions, regardless of whether 
the allowances would be sold or distributed at no cost.

Revenues resulting from cap-and-trade programs

    The impact of S. 1733 on net federal revenues would largely 
be determined by the value of allowances created by the bill 
less the resulting reductions in receipts from income and 
payroll taxes. Penalties for noncompliance and fees collected 
to administer the legislation would add a small amount to total 
revenues, and tax credits available for renewable energy 
production would reduce federal revenues. The following 
sections discuss how CBO estimated the allowance prices for GHG 
and HFC cap-and-trade programs and detail other revenue impacts 
of the bill.
    Estimating the Prices for Emission Allowances. CBO 
estimates that the price of GHG allowances would rise from 
about $17 per mtCO2e of emissions in 2011 to about 
$30 per mtCO2e in 2019. Table 3 provides CBO's 
estimate of annual allowance prices for the separate GHG and 
HFC cap-and-trade programs that would be created by the bill.

                            TABLE 3.--CBO ESTIMATES OF ALLOWANCE PRICES UNDER S. 1733
----------------------------------------------------------------------------------------------------------------
                                                               By fiscal year, in dollars--
                                         -----------------------------------------------------------------------
                                           2011    2012    2013    2014    2015    2016    2017    2018    2019
----------------------------------------------------------------------------------------------------------------
Estimated GHG Allowance Price...........      17      18      20      21      23      25      26      28      30
Estimated HFC Allowance Price...........  n.a.\1       2       3       4      10      11      13      18     19
                                               \
----------------------------------------------------------------------------------------------------------------
\1\Prices equal the weighted average of the estimated auction prices and fixed-price sales required under the
  legislation.
Note:  n.a. = not applicable.

    To estimate the marginal cost of reducing GHG emissions--
which ultimately would determine the price of allowances--CBO 
took several steps:
           First, CBO constructed a base case that 
        includes projections of future GHG emissions in the 
        absence of any federal policies to control them, as 
        well as projections of future prices of fossil fuels, 
        electricity, and other products and services closely 
        associated with such emissions;
           Next, we developed estimates of how firms 
        and households would respond to increases in prices for 
        fossil fuels and other sources of GHG emissions;
           Finally, CBO assessed the impact of 
        provisions of the legislation that would influence the 
        market price of allowances. Such other provisions 
        include regulations that would influence GHG emissions 
        and electricity consumption, subsidies for various GHG 
        emission-reducing activities, opportunities for firms 
        to bank allowances in one year and use them in another, 
        and the availability of domestic or international 
        offsets.\3\
---------------------------------------------------------------------------
    \3\For a more detailed discussion of the methods CBO used to 
estimate the price for carbon allowances for similar legislation, see 
How CBO Estimates the Costs of Reducing Greenhouse-Gas Emissions, CBO 
Background Paper (April 2009).
---------------------------------------------------------------------------
    Base Case Emission Projections. For its base case of GHG 
emissions, CBO relied primarily on projections of energy use, 
fossil fuel prices, and GHG emissions from the April 2009 
update of the Annual Energy Outlook 2009 (AEO 2009) published 
by the Energy Information Administration (EIA). EIA's inventory 
of emissions is based on a slightly different methodology than 
used by EPA, whose inventory is considered the official U.S. 
estimate for purposes of international negotiations and 
agreements.\4\ CBO adjusted the EIA data to align with EPA 
estimates for the most recent year where actual data is 
published, while retaining EIA's projected growth rates. CBO 
assumes that GHG emissions per dollar of the nation's gross 
domestic product (GDP) will grow (or decline) at the same rate 
beyond 2030 as they are projected to grow in the preceding 
decade.\5\
---------------------------------------------------------------------------
    \4\See U.S. Environmental Protection Agency, Inventory of U.S. 
Greenhouse Gas Emissions and Sinks: 1990-2007 (EPA 430-R-09-004, April 
2009). CBO also used information provided by EPA to project the 
consumption of HFCs.
    \5\EIA reports projections of GHG emissions in the AEO 2009 only 
through 2030.
---------------------------------------------------------------------------
    Response by Firms and Households. A key factor in 
determining the price of an allowance is how quickly and 
cheaply firms and households can decrease CO2 
emissions by reducing their use of fossil fuels (either 
directly or indirectly via the goods and services that they 
consume). The easier it is for firms and households to cut 
their emissions, the lower the allowance price would need to be 
to reach a given cap. Available economic models differ 
considerably in their estimates of how much emissions would 
decrease for a given allowance price (and its implied effect on 
fossil fuel prices) because they make different assumptions 
about the long-run ability of businesses to substitute low-
carbon fuels and more efficient technology for high-carbon 
fuels; the long-run sensitivity of energy usage to higher 
energy prices; and the speed at which those responses unfold. 
CBO generated a ``middle of the road'' response to allowance 
prices by examining available peer-reviewed models and 
calculating an average response, measured across multiple 
models and across different types of end users (such as 
households, electric utilities, and manufacturers).\6\
---------------------------------------------------------------------------
    \6\The models analyzed include the EIA's National Energy Modeling 
System (NEMS), the Emissions Prediction and Policy Analysis (EPPA) 
model used by climate researchers at the Massachusetts Institute of 
Technology, the Applied Dynamic Analysis of the Global Economy (ADAGE) 
model developed at RTI International and used by EPA, the Second 
Generation Model (SGM) and MiniCAM models developed and used by the 
Joint Global Change Research Institute, the Model for Evaluating the 
Regional and Global Effects of GHG Reduction Policies (MERGE) developed 
by Stanford University and the Electric Power Research Institute, and 
the Multi-region National-North American Electricity and Environment 
(MRN-NEEM) model developed and used by CRA International.
---------------------------------------------------------------------------
    Using those models, CBO concludes that the response to 
price increases (that is the decrease in emissions that would 
result from any given allowance price) would rise substantially 
over time as firms and households replace existing vehicles, 
equipment, structures, and electricity-generating capacity with 
newer items that use less energy or emit smaller quantities of 
carbon emissions.\7\ CBO's approach provides an estimate of the 
quantity of emission reductions that would occur at various 
allowance prices but does not specify how they would occur. 
That is, it does not provide detail about the timing or 
magnitude of the adoption of specific technologies, such as 
nuclear power or CCS, or the quantity of reductions in specific 
parts of the economy, such as the transportation sector.
---------------------------------------------------------------------------
    \7\For a more detailed discussion of the techniques CBO used to 
develop this assessment, see Mark Lasky, The Economic Costs of Reducing 
Emissions of Greenhouse Gases: A Survey of Economic Models, CBO 
Technical Paper (May 2003). See also How CBO Estimates the Costs of 
Reducing Greenhouse-Gas Emissions, CBO Background Paper (April 2009).
---------------------------------------------------------------------------
    Response to Opportunities for Banking of Emission 
Allowances. If entities covered by the legislation were 
required to use emission allowances only in the designated 
vintage year, the price of allowances would rise at a rate that 
reflected the increasing stringency of the cap as emissions. 
Such a requirement would yield an inflation-adjusted allowance 
price growing at a rate much greater than the rate of return 
that CBO estimates firms could obtain on alternative 
investments.
    Under S. 1733, firms would be allowed to bank unlimited 
numbers of allowances. CBO expects that the profit-maximizing 
behavior of firms would cause the price of an allowance to 
increase at the same rate as the return that firms might 
receive on alternative investments. Specifically, firms would 
have an incentive to exceed their emission reduction 
requirements in the initial years of the program (when the cost 
of meeting the annual caps would be relatively low) and to bank 
their excess allowances to use in future years (when the cost 
of meeting the cap would be much higher). Because banking would 
increase the demand for allowances in the early years (pushing 
up the allowance price) and increase the supply of allowances 
in later years (pushing down the allowance price), it would 
reduce the rate of increase in the price of allowances.
    CBO therefore expects that firms would continue to bank 
allowances up to the point where the rate of increase in the 
price of allowances equaled the rate of return that they might 
receive by making alternative investments. CBO believes that 
the appropriate rate of return that reflects investments of 
comparable riskiness is the after-tax, long-run, inflation-
adjusted rate of return to capital in the U.S. nonfinancial 
corporate sector, which CBO projects to be 5.6 percent.
    In the early years of the cap-and-trade program, the 
banking provision included in the bill would have a significant 
impact on the amount of emissions reductions, and thus on the 
allowance price. CBO estimates that by 2019, covered entities 
would undertake significantly more mitigation than necessary to 
meet their annual emission caps, banking about 2.5 billion 
mtCO2e of allowances and raising the allowance price 
in 2019 by about 5 percent, compared with a policy that 
prohibited banking.
    Response to Offset Credits. S. 1733 would allow entities 
covered by the legislation to meet their GHG reduction 
obligations by substituting offset credits in lieu of up to two 
billion GHG allowances each year. CBO expects that covered 
entities would take advantage of this provision whenever the 
cost of doing so is less than other methods of compliance. CBO 
estimates that this provision would have a significant effect 
on allowance prices. As discussed below, by reducing the cost 
of complying with the cap, offsets would probably lower the 
price of allowances by a substantial amount.\8\
---------------------------------------------------------------------------
    \8\For additional discussion of offset use in a cap-and-trade 
program for reducing GHG emissions see CBO (2009) The Use of Offsets to 
Reduce Greenhouse Gases. Economic and Budget Issue Brief (August 3).
---------------------------------------------------------------------------
    Under the bill, domestic offset credits could be used in 
lieu of up to 1.5 billion allowances per year. Based on EPA 
data on the available supply of domestic offsets at different 
prices, CBO estimates that covered entities would use domestic 
offsets to substitute for about 300 million allowances in 2012 
and nearly 400 million allowances by 2020.
    Covered entities could also use international offsets in 
lieu of at least 500 million allowances per year. If domestic 
offsets were not used to the maximum level, international 
offsets could substitute for up to 1.25 billion allowances a 
year. In no case could domestic and international offsets 
substitute for more than two billion allowances per year. CBO 
estimates that covered entities would use international offsets 
in lieu of about 200 million allowances in 2012 and in lieu of 
about 300 million allowances in 2020.
    To calculate the supply of offsets from international 
sources, CBO adjusted information from EPA on the supply of 
international offsets at different prices to account for 
certain provisions in the legislation, expected demand for 
offsets from other countries, and an estimate of the cost of 
verifying offsets and marketing them to potential users. Based 
on information from the Department of State, EPA, and outside 
experts, CBO expects that agreements with certain countries 
that would be necessary for them to supply valid offsets would 
take significant time to negotiate. CBO expects that the number 
of agreements and the scope of their coverage would increase as 
participants gained more experience with the program. CBO also 
anticipates that other developed countries (for example, those 
in the European Union) would seek offsets for their own 
emissions reduction programs, thereby pushing up the price of 
international offsets available to U.S. entities.
    Response to Emissions Allowances from Other Programs. S. 
1733 also would allow covered entities to submit an unlimited 
number of emissions allowances obtained from international 
programs of ``comparable stringency'' in lieu of GHG allowances 
issued by EPA. For this estimate, CBO assumed that a program of 
``comparable stringency'' would essentially be equivalent to a 
cap-and-trade market where allowances sell for a comparable 
price. Therefore, we expect that this provision would have no 
effect on the prices of allowances for GHG emissions in the 
United States.
    Sensitivity of Estimated Allowance Prices and Budget Impact 
to Changes in Assumptions. In cap-and-trade systems such as the 
one established by this legislation, the most important 
assumptions affecting the allowance price involve: the 
responsiveness of households and firms to changes in the prices 
associated with emissions; the discount rate that allowance 
holders apply to decisions about whether to bank allowances; 
and the availability of qualified offset credits from domestic 
and international sources. Differences in those assumptions can 
dramatically affect the estimated allowance price and the 
subsequent impact on the budget.
    For example, if the response of households and firms to 
allowance prices were 10 percent stronger (or weaker), on 
average, allowance prices would be roughly 9 percent lower or 9 
percent higher. If firms are more focused on present costs (by 
employing a higher discount rate than CBO estimated), they 
would be more likely to put off expenses associated with 
reducing emissions and bank fewer allowances. Use of a 6 
percent discount rate would decrease CBO's estimate of prices 
on 2012 by 8 percent and increase projected prices in 2050 by 7 
percent. Conversely, firms could be more concerned about the 
future (by employing a lower discount rate that CBO estimated) 
and choose to reduce more emissions in the short term, 
resulting in fewer necessary reductions in the future. Use of a 
5 percent rate would increase CBO's estimate of initial-year 
prices by about 10 percent and decrease projected prices in 
2050 by about 10 percent. Finally, allowance prices would be 
nearly three times higher if no offsets were made available to 
regulated entities. If either domestic or international offsets 
(but not both) were not available, allowance prices would be 
about 40 percent higher.
    Depending on the actual price of allowances, the budget 
impact of this legislation also would vary. For example, if the 
price of allowances were $1 higher beginning in 2012, the 
effect on the budget would be an additional surplus of $1.2 
billion over the 2012-2019 period. If instead, allowance prices 
were $1 lower beginning in 2012, the net gain over that same 
period would decrease by $1.1 billion.
    Estimating the Price of Consumption Allowances for HFCs. 
CBO estimates that the average price of consumption allowances 
for HFCs would be in the vicinity of $2 beginning in 2012 and 
would rise to approximately $19 by 2019. The cap would reduce 
HFC emissions by about 50 percent by 2020 from about 500 
million mtCO2e to about 250 million 
mtCO2e.
    For this estimate, CBO constructed a base-case projection 
of HFC consumption through 2025 similar to a base case produced 
by EPA. After consulting with industry sources, CBO concluded 
that the growth in HFC consumption after 2025 would be equal to 
the rate of population growth in the United States, an 
assumption similar to that made by the International Panel on 
Climate Change. Using engineering cost data for HFC 
alternatives provided by EPA, CBO estimated the supply of HFC 
reductions as a function of price and year. From this data, CBO 
concluded that the ability to replace HFCs with lower-cost 
chemical alternatives would increase over time.
    As prices for HFC allowances increase, firms would find it 
more profitable to recycle those chemicals and develop 
alternatives to these products. To the extent those changes 
occur, the price of HFC allowances would be different than 
would otherwise occur.
    Net Revenue Calculation. CBO estimates that gross receipts 
to the federal government from the auction and free allocation 
of allowances under the bill would total $291 billion over the 
2010-2014 period and $984 billion over the 2010-2019 period. 
This estimate is based on the projected prices of allowances 
for both the GHG and HFC cap-and-trade programs.
    However, the cost of purchasing allowances, whether from 
the government or from other entities that would receive 
allowances under the bill, would become an additional business 
expense for companies that would have to comply with that cap 
on emissions. Those additional expenses would result in a 
decrease in taxable income, resulting in a loss of government 
revenue from income and payroll taxes referred to as a 
``revenue offset.'' The amount of this revenue offset would be 
equal to 25 percent--an approximate marginal tax rate on 
overall economic activity--of the gross receipts from the 
auction and free allocation of allowances.\9\
---------------------------------------------------------------------------
    \9\Two previous letters on this subject can be found on CBO's Web 
site at: http://www.cbo.gov/ftpdocs/102xx/doc10236/
BartonCapnTradeLtr.pdf and http://www.cbo.gov/ftpdocs/102xx/doc10232/5-
15-WaxmanLetter.pdf
---------------------------------------------------------------------------
    Depending on the manner in which the proceeds or allowances 
are used by the government or conveyed to private entities, 
this reduction in taxable income (the revenue offset) might be 
accompanied by a matching increase in taxable income elsewhere 
in the economy. In such cases, CBO views the distribution of 
allowances or allowance proceeds as offsetting the revenue 
offset--that is, compensating for the initial loss of tax 
revenues associated with the acquisition of the allowances. In 
those cases, the distribution and use of the allowances or the 
auction proceeds would be budget neutral. For this estimate, 
CBO applied this offsetting offset to some of the revenues 
arising from the distribution of allowances, depending on who 
would receive those allowances (or auction proceeds) and what 
they would be used for.
    In general, allowances provided under section 111 of 
division B to businesses (merchant coal generators, generators 
with long-term power purchase agreements, petroleum refiners), 
and some of the allowances provided to natural gas distributors 
would fit in the category of transactions that would be budget 
neutral because they would generate taxable income. In 
contrast, allowances provided to nonbusiness entities--such as 
states to support specific activities, or to other countries to 
support efforts to reduce greenhouse gases--would not be budget 
neutral because they would not generate taxable income.
    CBO estimates that the auction of GHG and HFC allowances 
would generate revenues, net of income and payroll tax offsets, 
of about $76 billion over the 2010-2014 period and about $235 
billion over the next 10 years. We also estimate that the 
distribution of GHG allowances at no cost would generate 
revenues, net of income and payroll tax offsets, of about $175 
billion over the 2012-2014 period and about $625 billion over 
the 2012-2019 period (see memorandum to Table 4).

Other revenues

    Increased Use of Accelerated Tax Depreciation and Business 
Tax Credits. By encouraging electricity production using 
renewable resources, enacting S. 1733 would result in an 
increase in the use of certain federal tax incentives. Those 
incentives include both accelerated depreciation of certain 
assets and tax credits available to firms that invest in 
specific forms of renewable energy. When calculating taxable 
profits, businesses depreciate (that is, deduct over time) the 
cost of acquiring fixed investment property--namely, plant and 
equipment. For tax purposes, businesses are generally allowed a 
greater degree of accelerated depreciation--earlier deductions 
than would occur if they measured the actual wearing out of the 
property--for certain types of fixed investments used to 
produce electricity from renewable resources, such as wind and 
solar equipment, than they are allowed for investments to 
produce electricity from fossil fuels. By bringing about faster 
growth in the amount of electricity produced from renewable 
resources, S. 1733 would result in increased business tax 
deductions and reduced tax receipts.
    In addition, S. 1733 would result in firms claiming a 
greater amount of business tax credits for the renewable 
electricity production credit (section 45 of the Internal 
Revenue Code) and the energy credit that applies primarily to 
investments in solar and geothermal energy production (section 
48 of the Internal Revenue Code). JCT estimates that the 
increased use of accelerated depreciation and business tax 
credits would reduce revenues by about $14 billion over the 
2010-2019 period.
    Carbon Storage Research Corporation. Section 125 would 
authorize utilities that distribute fossil fuels to establish, 
by a referendum involving members of the electricity 
distribution industry, a Carbon Storage Research Corporation. 
The corporation would levy annual assessments on distribution 
utilities based on the volume of certain electricity deliveries 
to retail consumers. While formation of the corporation would 
be voluntary, once it was created, assessments would be 
compulsory, enforced by the federal government's sovereign 
authority. As such, CBO believes the corporation should be 
considered governmental in nature, amounts collected from the 
assessments should be recorded in the budget as revenues, and 
subsequent expenditures should be considered direct spending.

                                                            TABLE 4.--ESTIMATED CHANGES IN REVENUES AND DIRECT SPENDING UNDER S. 1733
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                          By fiscal year, in billions of dollars
                                                         ---------------------------------------------------------------------------------------------------------------------------------------
                                                            2010      2011      2012      2013      2014      2015      2016      2017      2018      2019        2010-2014         2010-2019
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                       CHANGES IN REVENUESNet Revenues Resulting from Cap-and-Trade Programs\1\...         0       9.1      69.3      78.0      94.7     105.4     112.4     123.5     130.6     136.5             251.1             859.5
Increased Use of Accelerated Tax Depreciation and                0         0      -0.1      -0.3      -0.7      -1.2      -1.8      -2.5      -3.4      -4.2              -1.1             -14.1
 Business Tax Credits...................................
Carbon Storage Research Corporation.....................         0       0.9       1.0       1.0       1.0       1.0       1.0       1.0       1.0       1.0               3.8               8.6
Penalties and Other Revenue Changes.....................         0         0         *         *         *         *         *         *         *         *               0.1               0.2
                                                         ---------------------------------------------------------------------------------------------------------------------------------------
    Total Changes in Revenues...........................         0      10.0      70.2      78.6      95.0     105.3     111.6     122.0     128.2     133.3             253.9             854.2                                                                                   CHANGES IN DIRECT SPENDING
Spending of Auction Proceeds\2\
    Estimated Budget Authority..........................         0       7.9      17.5      18.4      19.4      21.5      23.3      23.8      24.7      25.7              63.3             182.2
    Estimated Outlays...................................         0       0.3       6.7      14.8      17.2      19.2      21.3      23.0      23.7      24.6              39.1             150.9
Outlays Associated with Emission Allowances Freely
 Allocated:
    Estimated Budget Authority..........................         0         0      53.7      60.9      75.7      83.6      88.2      98.7     103.7     108.6             190.2             673.0
    Estimated Outlays...................................         0         0      53.7      60.9      75.7      83.6      88.2      98.7     103.7     108.6             190.2             673.0
Carbon Storage Research Corporation:
    Estimated Budget Authority..........................         0       1.0       1.1       1.1       1.2       1.2       1.2       1.2       1.2       1.2               4.4              10.2
    Estimated Outlays...................................         0       0.3       0.7       1.0       1.1       1.2       1.2       1.2       1.2       1.2               3.1               8.9
        Total Changes in Direct Spending:...............
            Estimated Budget Authority..................         0       9.0      72.3      80.4      96.2     106.3     112.6     123.6     129.6     135.4             257.9             865.4
            Estimated Outlays...........................         0       0.6      61.1      76.7      93.9     104.0     110.7     122.8     128.6     134.4             232.4             832.8                                                                                NET CHANGE IN THE BUDGET DEFICIT
                                                                          FROM CHANGES IN REVENUES AND DIRECT SPENDINGImpact on Deficit\3\....................................         0       9.3       9.1       1.9       1.1       1.3       0.9      -0.8      -0.4      -1.1              21.4              21.4
Memorandum--Details on Auction Revenues:
Gross Revenues from Auctioned Allowances................         0      12.1      27.3      29.5      32.0      37.2      40.5      41.8      44.6      46.4             100.9             311.4
Net Revenues from Auctioned Allowances..................         0       9.1      20.6      22.3      24.1      28.1      30.5      31.4      33.5      34.9              76.1             234.5
Gross Revenues from Allowances Freely Allocated.........         0         0      53.7      60.9      75.7      83.6      88.2      98.7     103.7     108.6             190.2             673.0
Net Revenues from Allowances Freely Allocated...........         0         0      48.7      55.7      70.5      77.4      81.9      92.1      97.1     101.6             175.0            625.0
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
\1\Revenues are net of income and payroll tax offsets.
\2\Includes $0.1 billion savings in unemployment benefits over the 2010-2019 period.
\3\Positive numbers indicate decreases in deficits; negative numbers indicate increases in deficits.
Notes:  * = between -$50 million and $50 million.
          Numbers may not sum to totals because of rounding.

    For this estimate, CBO assumes that the corporation would 
be created and would collect assessments totaling about $1.0 
billion (the minimum allowed under the bill) in 2011 and $1.1 
billion (the maximum allowed under the bill) each year 
thereafter. Authority to levy assessments and conduct 
operations would terminate 10 years and 6 months after 
enactment.
    The cost of those assessments would become an additional 
business expense for utilities, resulting in a loss of other 
federal tax revenue (primarily income and payroll taxes). The 
amount of this revenue loss would be equal to about 25 percent 
of the assessments. However, half of the funds collected by the 
corporation would go back to electric utilities in the form of 
grants to subsidize the operations of existing electricity 
generation units that use integrated CCS or conversion. Those 
grants would generate new taxable income which would increase 
federal revenues. Consequently, the net loss in tax revenue 
would equal about one-eighth of the income from the 
assessments, resulting in an overall increase in revenues from 
this provision of $3.8 billion over the 2010-2014 period and 
$8.6 billion over the next 10 years.
    Penalties. Under S. 1733, civil penalties would be assessed 
on those owners and operators who fail to meet their compliance 
obligation on time. The penalty would equal the volume of 
emissions generated by an entity in excess of the allowances it 
held multiplied by twice the fair market value of an emission 
allowance in the relevant year. In addition, the covered 
entities would be required to submit, in the following year or 
other time period determined by EPA, emission allowances to 
cover excess emissions from the previous year. The legislation 
also would establish penalties for those entities that violate 
any of the rules associated with the regulation of the 
allowance market. Such penalties could be as high $1 million 
per day under certain circumstances. This legislation also 
includes various other penalties, including penalties for 
nonpayment of allowances and for fraud.
    Because many of the penalties could be substantial, CBO 
expects most firms would comply with the requirements of the 
bill. However, the number of entities covered by this 
legislation is large, and thus it is likely that some entities 
would not comply. Penalties collected on emissions of sulfur 
dioxide and nitrogen oxides in excess of submitted allowances 
under EPA's Acid Rain Program, a similar program, are usually 
small, though there have been two large collections over the 
past few years totaling about $4 million. Based on that 
information, CBO estimates that penalty collections under S. 
1733 would total between $25 million and $50 million annually, 
beginning in 2012.
    Effect on Unemployment Compensation. The bill would create 
a program to compensate workers who lose their jobs as a result 
of the bill's provisions. That program would provide cash 
benefits, job training, and a subsidy for health care costs. 
Individuals who collect benefits under that program would not 
be eligible to receive unemployment compensation; consequently, 
outlays of that program would be reduced. Because such outlays 
are financed by state employment taxes, CBO estimates that 
states would reduce their taxes (which are recorded as revenues 
on the federal budget) accordingly. Over the 2012-2019 period, 
CBO estimates that the reduction in tax revenues would be less 
than $100 million.

Direct spending

    CBO estimates that enacting this legislation would increase 
direct spending by $833 billion over the 2010-2019 period. 
Outlays would primarily stem from spending of auction proceeds 
and giving GHG allowances to states and other entities free of 
charge.
    Spending of Auction Proceeds. Revenues from the auction of 
emission allowances for the GHG cap-and-trade program would be 
deposited into 10 new funds established by the legislation. 
Spending from those funds would not require any further 
appropriation action. CBO's estimate of direct spending by 
funds over the 2010-2019 period includes:
           The Energy Refund Account (outlays of $112 
        billion) would provide financial assistance to low- and 
        moderate-income households and is intended to offset 
        the impact of the bill on energy prices;
           The Climate Change Transportation Fund 
        (outlays of $16 billion) would enable the Department of 
        Transportation (DOT) to provide grants to states to 
        support activities that would reduce GHG emissions;
           The Supplemental Agriculture, Abandoned Mine 
        Land, Renewable Energy, and Forestry Fund (outlays of 
        $9 billion) would enable the Department of Agriculture 
        and the Department of the Interior (DOI) to establish 
        programs supporting agricultural and forestry projects 
        that reduce or sequester GHGs;
           The Worker Transition Fund (outlays of $4 
        billion) would enable the Department of Labor (DOL) to 
        provide assistance to workers who lose their jobs as a 
        result of the measures their employers take to comply 
        with the provisions of the bill;
           The Natural Resources Climate Change 
        Adaptation Account (outlays of $4 billion) would enable 
        DOI and other federal agencies to support state 
        adaptation activities, including activities to protect 
        fish and wildlife, reduce the risk of wildfires, and 
        maintain and restore coastal habitats and ecosystems;
           The Clean Vehicle Technology Fund (outlays 
        of $3 billion) would enable EPA to provide grants to 
        manufacturers and component suppliers to refurbish or 
        expand existing manufacturing facilities to produce 
        advanced technology vehicles and to support engineering 
        integration of certain vehicles and components, and to 
        enable DOE to provide support for a national 
        transportation low-emission energy plan;
           The Energy Efficiency and Renewable Energy 
        Worker Training Fund (outlays of $1 billion) would 
        enable DOE to provide funding for grants to support 
        training for jobs in the energy-efficiency industry and 
        a national research program;
           The Nuclear Worker Training Fund (outlays of 
        $1 billion) would enable DOE and DOL to provide grants 
        and other support for workforce development and 
        training related to nuclear energy;
           The Climate Change Health Protection and 
        Promotion Fund (outlays of $1 billion) would enable the 
        Department of Health and Human Services (HHS) to 
        implement a national strategic action plan to respond 
        to the impact of climate change on health; and
           The Consumer Rebate Fund (deposits would be 
        made to this fund beginning in 2026) would provide 
        financial relief to consumers affected by the bill's 
        provisions.
    Outlays Associated with Emission Allowances Freely 
Allocated. CBO estimates that direct spending would increase by 
$673 billion over the 2010-2019 period when the government 
distributes emission allowances free of charge to various 
recipients. Most of this distribution would begin in 2012. 
Recipients, such as states, natural gas distributers, and 
federal agencies, would use the allowances to fund programs to 
encourage energy efficiency and other types of government 
initiatives.
    Carbon Storage Research Corporation. As previously 
discussed in the section on revenues, S. 1733 would authorize a 
governmental corporation to levy and spend assessments on 
distribution utilities totaling between $1.0 billion and $1.1 
billion a year over the 2010-2019 period. Under the bill, the 
corporation could invest those assessments in interest-bearing 
securities, thereby generating additional funding for its 
activities. As a result, collections would total $10.2 billion 
over the 2010-2019 period. Expenditures of assessments and 
interest, which would be considered direct spending, would 
support research and development of technologies related to 
CCS. Based on historical spending patterns for similar 
activities, CBO estimates that expenditures by the proposed 
corporation would total $8.9 billion over the 2010-2019 period.

Spending subject to appropriation

    Assuming appropriation of the necessary amounts, CBO 
estimates that implementing this legislation would increase 
discretionary spending by about $29 billion over the 2010-2019 
period (see Table 5). Most of that amount would stem from 
spending of revenues from the HFC auction of consumption 
allowances. Additional spending would result from spending to 
support federal agencies' costs to administer programs 
established under the bill and to support various grant 
programs and other activities related to energy efficiency and 
clean energy technologies.
    Stratospheric Ozone and Climate Protection Fund. Under the 
legislation, about $22.9 billion in revenues from the auction 
of consumption allowances over the 2012-2019 period would be 
credited to the Stratospheric Ozone and Climate Protection 
Fund. CBO estimates that outlays from this fund would total 
about $19 billion over the 2012-2019 period. Those proceeds 
would be used to support DOE's best-in-class appliances 
deployment program, an EPA program to encourage the recovery, 
recycling, and reclamation of HFCs, and any multilateral 
agreement related to HFCs that includes the United States.

                                                               TABLE 5.--ESTIMATED SPENDING SUBJECT TO APPROPRIATION UNDER S. 1733
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                         By fiscal year, In billions of dollars--
                                                         ---------------------------------------------------------------------------------------------------------------------------------------
                                                            2010      2011      2012      2013      2014      2015      2016      2017      2018      2019        2010-2014         2010-2019
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                          CHANGES IN SPENDING SUBJECT TO APPROPRIATIONSpending of Proceeds from Stratospheric Ozone and
 Climate Protection Fund:
    Estimated Authorization Level.......................         0         0       0.6       1.0       1.3       3.0       3.3       3.6       5.0       5.0               2.9              22.9
    Estimated Outlays...................................         0         0       0.2       0.7       1.1       2.0       2.9       3.4       4.1       4.8               2.0              19.1
Administrative Costs to Federal Agencies:
    Estimated Authorization Level.......................       0.5       0.4       0.5       0.5       0.5       0.5       0.6       0.6       0.6       0.6               2.5               5.4
    Estimated Outlays...................................       0.1       0.3       0.5       0.5       0.5       0.5       0.5       0.6       0.6       0.6               1.9               4.7
Clean Energy and Energy-Efficiency Programs:
    Estimated Authorization Level.......................       0.6       0.7       0.7       0.7       0.7       0.6       0.6       0.6       0.6       0.7               3.4               6.5
    Estimated Outlays...................................       0.1       0.4       0.6       0.6       0.7       0.6       0.5       0.5       0.6       0.6               2.3               5.1
    Total Changes:
        Estimated Authorization Level...................       1.1       1.1       1.9       2.2       2.5       4.1       4.5       4.8       6.2       6.3               8.9              34.8
        Estimated Outlays...............................       0.1       0.6       1.3       1.8       2.3       3.1       4.0       4.5       5.2       6.0               6.1             28.9
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Note:  Numbers may not sum to totals because of rounding.

    Administrative Costs of Federal Agencies. Several federal 
agencies, including EPA, DOL, DOE, and others would be 
responsible for administering programs under S. 1733. In total, 
CBO estimates that fully funding administrative costs of 
federal agencies would require appropriations totaling about 
$500 million in 2010 and $5.4 billion over the 2010-2019 
period. A significant portion of the estimated costs would be 
incurred by EPA to administer the proposed GHG cap-and-trade 
program, including roughly a 5 percent increase in personnel. 
Such personnel would be responsible for developing regulations, 
preparing rulemakings, assessments, and studies, distributing 
proceeds generated from the auctions, and other activities 
related to the cap-and-trade program. Other agencies would be 
responsible for supporting various programs and activities 
funded by the distribution of revenues from the auction of 
allowances and the freely allocated allowances. Those programs 
include advanced energy research, international clean-energy 
programs, and worker transition assistance. The agencies 
supporting those types of programs would incur costs for 
additional personnel, contractors, and information technology. 
Those cost estimates are primarily based on information from 
EPA and other federal agencies and on historical information 
about how large regulatory programs have been implemented. CBO 
estimates that spending for administrative costs would total 
about $5 billion over the 2010-2019 period.
    Clean Energy and Energy-Efficiency Programs. S. 1733 would 
establish new programs and requirements aimed at promoting 
clean energy and supporting energy efficiency. CBO estimates 
that fully funding those activities, which would be implemented 
primarily by EPA would require appropriations totaling $6.5 
billion over the 2010-2019 period. That amount includes:
           $2.0 billion to support grants for reducing 
        emissions of black carbon;
           $500 million to fund grants for research and 
        development efforts and production of biofuels;
           $1.7 billion to support water-efficient 
        products, buildings, landscapes, and processes; and
           $2.3 billion for various studies and grant 
        programs related to climate change and renewable 
        energy.
    Assuming appropriation of the necessary amounts, CBO 
estimates that implementing clean energy and energy-efficiency 
programs under S. 1733 would cost about $5 billion over the 
2010-2019 period, with additional spending occurring in later 
years.

Budgetary impacts after 2019

    Under this legislation, both cap-and-trade programs would 
be permanent. The cap for the HFC cap-and-trade program would 
level off beginning in 2032, and that for the GHG cap-and-trade 
program would level off beginning in 2050. Most federal 
spending associated with the GHG cap-and-trade program would 
begin in the early years of the program and end by 2050 or 
earlier. Although spending from the energy refund account would 
be permanent, spending from the consumer rebate fund would 
begin in 2027 and end in 2050.
    Intergovernmental and private-sector impact: S. 1733 
contains intergovernmental and private-sector mandates as 
defined in the Unfunded Mandates Reform Act. Several of those 
mandates would require utilities, manufacturers, and other 
entities to reduce greenhouse gas emissions through cap-and-
trade programs and performance standards. CBO estimates that 
the aggregate cost of mandates in the bill would significantly 
exceed the annual thresholds established in UMRA for 
intergovernmental and private-sector mandates ($69 million and 
$139 million in 2009, respectively, adjusted annually for 
inflation).

Mandates that apply to both public and private entities

    Cap-and-Trade Program for Greenhouse Gases. The cap-and-
trade program for GHG emissions (excluding HFCs) would require 
covered facilities to submit one allowance per metric ton of 
carbon dioxide equivalent emitted beginning in 2012. The 
compliance costs for covered facilities would be the 
expenditures made in acquiring allowances, the cost of 
purchasing offset credits, and the cost of directly reducing 
their emissions of GHGs. Based on estimates of those costs and 
accounting for the initial allocation of free allowances, CBO 
estimates that the annual cost of this requirement would amount 
to tens of billions of dollars for private-sector entities and 
hundreds of millions of dollars for public entities.
    Although not available to cover the mandate costs of the 
cap-and-trade requirements, at least $60 billion in allowances 
would be provided to states over the 2012-2016 period for 
specific purposes, including programs for improving energy 
efficiency, implementing regulations, and supporting other 
climate change programs (see additional discussion under 
``Other Impacts on State and Local Governments'' below).
    Reporting Requirements. Public and private entities also 
would be required to report information on greenhouse gases to 
a federal registry. Most public entities and some private 
entities will be required to report similar information under 
current law, and therefore the public sector would incur 
minimal additional costs. However, more private-sector entities 
would be required to report information on greenhouse gases to 
the registry under the bill. Based on information about 
compliance costs from EPA's impact analysis of the current 
reporting requirement, CBO estimates that the cost for private 
entities could increase by about $30 million per year.
    The bill also would impose reporting requirements on public 
and private entities to assist with implementing the cap-and-
trade program. CBO estimates that the cost to comply with those 
mandates would be small.
    Carbon Capture and Sequestration Assessments. The bill 
would authorize the Carbon Storage Research Corporation to levy 
annual assessments on public and private utilities following a 
referendum by the affected utilities. The funds collected, 
along with an allocation of emission allowances, would be used 
to support the development of technologies related to CCS. The 
bill also would require state regulatory authorities to 
indicate whether they support or oppose the creation of the 
corporation. If the referendum is approved, all utilities would 
be required to pay the assessments. The assessments would be 
based on the amount of electricity delivered to retail 
customers, and would generate between $1.0 billion and $1.1 
billion annually. CBO estimates the annual cost would total 
$150 million for public utilities and $850 million for private 
utilities in the first year the mandate is in effect. CBO 
estimates that the annual cost of the assessments would 
increase to a total of $175 million for public utilities and 
$925 million for private utilities in subsequent years. The 
cost of the requirement to regulatory authorities would be 
small.
    Performance Standards for Coal-Fueled Power Plants. The 
bill would establish performance standards for new sources of 
power from coal power plants. Those requirements would compel 
owners and operators of new units of electric generation (EGUs) 
to reduce annual CO2 emissions and would apply to 
both public and private power plants. EGUs would be required to 
reduce annual emissions of CO2 by 50 percent or 65 
percent, depending on when the EGU received a preconstruction 
permit. Because CBO cannot determine how EGUs would comply with 
the mandate, CBO has no basis to estimate the cost.
    Energy Building Codes. The bill would give EPA the 
authority to issue new energy efficiency standards for state 
and local codes relating to residential and commercial 
buildings. If EPA were to issue such regulations, those 
requirements would be mandates on both public entities that 
would have to implement and enforce the new standards and 
private entities that would have to comply. Because most states 
already have processes to review and update their building 
codes, the costs of the new requirements are not expected to be 
large. Furthermore, the bill would provide about $2 billion in 
allowances to states over the first five years for implementing 
building codes. Because the stringency of the building codes 
would depend on future regulatory action, CBO has no basis for 
estimating the costs to the private sector of complying with 
this mandate.
    Other Mandates. The bill contains additional mandates that 
would affect both public and private entities. Those mandates 
include requirements governing the repair of air conditioners 
in motor vehicles and requirements for the geological storage 
of CO2. CBO estimates that the costs of those 
mandates would not be significant during the first five years 
the mandates are in effect. The bill would authorize EPA to 
propose regulations to reduce emissions of black carbon or to 
publish a finding that existing regulations adequately control 
such emissions. Because the costs to comply with the new 
standards would depend on future regulatory action, CBO has no 
basis for estimating the cost of the mandates.

Mandates that apply to public entities only

    Preemptions of State and Local Authority. S. 1733 contains 
preemptions of state and local authority. Because preemptions 
limit the authority of state and local governments, they are 
considered intergovernmental mandates under UMRA.
     Section 861 would preempt state authority to 
enforce a cap-and-trade program that covers any capped 
emissions during the years 2012 through 2017. The Regional 
Greenhouse Gas Initiative (RGGI) and the State of California 
plan to conduct allowance auctions during those years. Based on 
previous RGGI auction revenues, CBO estimates the cost of this 
preemption to be several hundred million dollars annually. 
Depending on the design of the California program, however, the 
cost of this preemption could be significantly higher.
     Section 619 would preempt state laws relating to 
the production and import of certain hydrofluorocarbons. CBO 
estimates the cost of this preemption to be small.
    Procurement of Water-Efficient Products. The bill would 
require the District of Columbia to purchase certain products 
and services designated to be water efficient by EPA or DOE. 
Because the District of Columbia is the only jurisdiction 
required to procure such products and the cost associated with 
the mandate would be the additional cost of the water-efficient 
products relative to the cost of the products already being 
purchased, CBO estimates the cost of the mandate to be small.

Other impacts on state and local governments

    The bill would provide allowances to state, local, and 
tribal governments for a number of specific purposes. The 
largest such allocation could be used for energy efficiency 
programs, retrofits for commercial and residential buildings, 
programs to deploy renewable energy facilities, constructing 
new electricity transmission lines, weatherization projects, 
and smart grid projects. Other allowance allocations would be 
available for natural resource and domestic adaptation, 
infrastructure improvements, transportation planning, worker 
training programs, building code adoption, and programs to 
benefit low-income consumers of home heating oil or propane. 
CBO estimates that the allowances would total at least $60 
billion through 2016.
    In addition, the bill would authorize several grant 
programs for renewable energy production, workforce training, 
research initiatives, and energy efficiency. Those grant 
programs would benefit participating state, local, and tribal 
governments, and any costs would be incurred voluntarily as a 
condition of receiving federal assistance.

Mandates that apply to private entities only

    Hydrofluorocarbon Restrictions. The cap-and-trade program 
for HFCs would require any entity that produces or imports 
HFCs, or imports a product containing HFCs, to submit one 
consumption allowance or destruction offset credit per 
mtCO2e of HFC beginning in 2012. The direct cost 
would be equal to the cost of purchasing allowances and offset 
credits, and the cost of reducing the use of HFCs. The bill 
also would impose several other requirements for the use of 
HFCs, including restrictions on HFCs used in refrigeration and 
labeling and reporting requirements.
    Based on the price of consumption allowances established in 
the bill, CBO estimates that the cost of purchasing allowances 
would amount to about $600 million in the first year the 
mandates are in effect and more in subsequent years.
    Mobile Emissions Standards. The bill would direct EPA to 
establish standards for greenhouse gas emissions from new 
heavy-duty vehicles and engines by December 31, 2010. The bill 
also would direct EPA to establish standards for classes of new 
nonroad vehicles and engines with significant emissions of 
greenhouse gases by December 31, 2012. The bill would direct 
EPA to issue standards that reflect the best available 
technology. Because the stringency of the standards would 
depend on future regulatory action, the costs of the mandates 
are uncertain.
    Previous CBO estimates: On June 5, 2009, CBO transmitted a 
cost estimate for H.R. 2454, the American Clean Energy and 
Security Act of 2009, as ordered reported by the House 
Committee on Energy and Commerce on May 21, 2009. H.R. 2454 
also would establish cap-and-trade programs for GHGs and HFCs. 
CBO and JCT estimate that over the 2010-2019 period enacting 
that version of H.R. 2454 would increase federal revenues by 
about $846 billion and increase direct spending by about $821 
billion, reducing the budget deficits over that period by about 
$24 billion. In addition, assuming appropriation of the 
necessary amounts, CBO estimates that implementing H.R. 2454 
would increase discretionary spending by about $50 billion over 
the 2010-2019 period.
    In addition, on June 26, 2009, CBO transmitted a cost 
estimate for H.R. 2454 as passed by the House of 
Representatives on the same day. CBO and JCT estimate that over 
the 2010-2019 period, that version of the legislation would 
increase federal revenues by about $873 billion and increase 
direct spending by about $864 billion, reducing budget deficits 
over that period by about $9 billion. For that version of the 
legislation, CBO did not complete an estimate of the 
legislation's estimated impact on discretionary spending.
    H.R. 2454, as passed by the House, is similar to S. 1733; 
however, there are some significant differences that result in 
the lower estimates of revenues and direct spending under S. 
1733. In addition, differences between the two versions of the 
legislation account for higher allowance prices under S. 1733. 
Significant differences between the pieces of legislation are 
addressed below.

Estimate of revenues

    Under H.R. 2454 as passed by the House, advance auctions of 
future emission allowances would occur beginning in 2014. Those 
auctions would result in the collection of additional revenues 
over the 2012-2019 period. S. 1733 does not include such 
advance auctions.

Estimate of direct spending

    Several energy-related provisions in H.R. 2454, as passed 
by the House, that CBO estimated would increase direct spending 
(such as the renewable-electricity standard and the 
establishment of a Clean Energy Deployment Administration) are 
not included in S. 1733. Also contributing to lower spending 
under the Senate bill are the different amounts of proceeds 
from allowance auctions that are not spent. Under S. 1733, over 
the 2010-2019 period, 10 percent of the allowances are 
auctioned annually as part of the initial reservation and 
proceeds stemming from those sales are deposited in the 
Treasury and are not available for spending. Under H.R. 2454, 
as passed by the House, auction proceeds from more than 10 
percent of the allowances available in each of the first two 
years of the program could not be spent. In the following eight 
years, however, the amount of allowance auction proceeds that 
could not be spent would drop to less than 1 percent.

Allowance prices

    CBO estimates that prices for emission allowances would be 
about 15 percent higher under S. 1733 than under H.R. 2454, as 
passed by the House, because S. 1733:
           Contains a more stringent emissions cap in 
        2014 and between 2017 and 2029;
           Contains different allocations for 
        distributing emission allowances and auction revenues; 
        and
           Places greater restrictions on the amount of 
        international offsets that can be used towards an 
        entity's compliance obligation.
    Emissions Cap. For most years, S. 1733 and H.R. 2454, as 
passed by the House, include identical emissions caps and 
generally cover the same entities. However, in 2014 and between 
2017 and 2029, S. 1733 has a more stringent cap that is between 
1 percent and 4 percent lower than the cap under the other 
legislation. Beginning in 2030, both versions of the 
legislation include the same cap on emissions. The tighter cap 
under S. 1733 would result in a slightly higher allowance 
price.
    Allocation of Emissions Allowances and Auction Revenues. 
Both H.R. 2454, as passed by the House, and S. 1733 would 
allocate allowances and auction revenue to support various 
programs. Although many of those programs and recipients of 
allowances are the same in each piece of legislation, the 
amounts of those allocations are in some cases larger or 
smaller. Under S. 1733, more allowances are set aside for a 
reserve fund in the event that allowance prices become 
volatile, which effectively tightens the cap further. Also, 
fewer allowances are dedicated to energy efficiency under S. 
1733, resulting in a slightly higher allowance price. In 
addition, the number of allowances allocated for CCS bonuses 
would be smaller, which slightly increases projected allowance 
prices under S. 1733.
    Offsets. The offset provisions in S. 1733 are different 
from those in H.R. 2454, as passed by the House. In both bills, 
offsets may substitute for 2 billion allowances. However, the 
use of international offsets would be more limited in S. 1733 
than in H.R. 2454. In S. 1733, international offsets could 
substitute for between 500 million and 1.25 billion of 
allowances per year depending on the use of domestic offsets. 
That difference raises projected allowance prices under S. 1733 
by about 10 percent above those under H.R. 2454.

Mandates

    H.R. 2454 would impose intergovernmental and private-sector 
mandates similar to those contained in S. 1733 by requiring 
utilities, manufacturers, and other entities to reduce 
greenhouse gas emissions through cap-and-trade programs and 
performance standards. H.R. 2454 also contains standards 
related to energy efficiency and renewable energy that are not 
contained in S. 1733. CBO estimates that the aggregate cost of 
mandates in both bills would significantly exceed the annual 
thresholds established in UMRA for intergovernmental and 
private-sector mandates ($69 million and $139 million in 2009, 
respectively, adjusted annually for inflation).
    Estimate prepared by: Federal revenues: Mark Booth, Pamela 
Greene, and Edward Harris. Federal costs; Susanne S. Mehlman 
and Daniel Hoople (cap-and-trade programs), Christi Hawley 
Anthony (Department of Labor); Allowance prices: Rob Johansson, 
Robert G. Shackleton Jr., Natalie Tawil, and Terry Dinan; 
Impact on state, local, and tribal governments: Ryan Miller; 
Impact on the private sector: Amy Petz and Brian Prest.
    Estimate approved by: Theresa Gullo, Deputy Assistant 
Director for Budget Analysis; Frank J. Sammartino, Assistant 
Director for Tax Analysis; Joseph Kile, Assistant Director for 
Microeconomic Studies.

MINORITY VIEWS OF SENATORS INHOFE, VOINOVICH, VITTER, BARRASSO, CRAPO, 
                          BOND, AND ALEXANDER

    S. 1733, the Clean Energy Jobs and American Power Act, 
should be opposed and returned to the Committee on Environment 
and Public Works by the full Senate. It is the view of all 
Minority Members that both Committee Rules and long established 
Committee precedent were violated when the Committee considered 
and favorably reported the substitute amendment to S. 1733 on 
November 4th 2009. In addition, we believe the Committee failed 
to address the important issues associated with a comprehensive 
cap-and-trade system to control greenhouse gases. By favorably 
reporting the substitute amendment without a full and complete 
economic or environmental analysis on the impacts the 
legislation will have on both the U.S. economy and global 
greenhouse gas emissions, Members did not have the ability to 
determine an accurate measure of the bill's costs or 
environmental impacts. Legislation of this magnitude should not 
go forward until the Committee and the Senate receives 
comprehensive analysis on its costs and benefits.
    We also object to the legislation advancing on procedural 
grounds. The procedural argument originates from the Standing 
Rules of the Senate. Under the Standing Rules for Committee 
Procedure, Rule XXVI Section 7(a)(1), each committee, and each 
subcommittee thereof, is authorized to fix the number of its 
members who shall constitute a quorum for the transaction of 
such business as may be considered. We note that the Committee 
on Environment and Public Works' Rule 2(a) has set the 
requirements for a quorum to include two minority members and 
that this rule is not inconsistent with the Rules of the 
Senate.\1\ Specifically, Rule 2(a) requires one third of the 
members of the Committee, at least two of whom are members of 
the minority party, to constitute a quorum. At the business 
meeting to consider S. 1733, only one Minority Member was in 
attendance at any given time, therefore prohibiting the 
Committee from conducting business.
---------------------------------------------------------------------------
    \1\Rules of the Committee on Environment and Public Works, United 
States Senate.
    RULE 2. QUORUMS.
    (a) BUSINESS MEETINGS: At committee business meetings, and for the 
purpose of approving the issuance of a subpoena or approving a 
committee resolution, one third of the members of the committee, at 
least two of whom are members of the minority party, constitute a 
quorum, except as provided in subsection (d).
    (b) SUBCOMMITTEE MEETINGS: At subcommittee business meetings, a 
majority of the subcommittee members, at least one of whom is a member 
of the minority party, constitutes a quorum for conducting business.
    (c) CONTINUING QUORUM: Once a quorum as prescribed in subsections 
(a) and (b) has been established, the committee or subcommittee may 
continue to conduct business.
    (d) REPORTING: No measure or matter may be reported to the Senate 
by the committee unless a majority of committee members cast votes in 
person.
    (e) HEARINGS: One member constitutes a quorum for conducting a 
hearing.
---------------------------------------------------------------------------
    In addition, although the Chairman indicated she could 
favorably report S. 1733 through her interpretation of 
Committee Rule 2(d) regarding reporting, her interpretation 
does not represent the long-established precedent of this 
Committee regarding both the letter and spirit of the Rules. 
The Minority members continue to interpret Rule 2(a) as 
defining a quorum for business meetings. While Rule 2(d) 
defines what is needed to report a matter, we note that this 
Rule has not been historically defined as expanding Rule 2(a). 
Rather, this Rule refers to final passage for reporting, rather 
than replacing the quorum requirement necessary to begin to 
conduct business or hold a business meeting. It is meant to 
modify the one-third requirement, not the two from the 
minority. If not, the tradition of protecting minority views is 
discarded and the ``two minority members'' language rendered 
meaningless.
    The requirement for each committee to adopt its own set of 
rules was passed in 1970. The rules of the EPW Committee for 
each Congress since then, beginning in the 92nd Congress (1971-
72), have required the presence of minority party members to 
constitute a quorum at business meetings. That first set of 
rules required one member. The next Congress required two, and 
most rules since then have been consistent with two. The rules 
of the 107th Congress actually required three. The language 
contained in Rule 2(d)--in which a majority of the committee 
must be physically present to report measures--first appeared 
in 1995 (104th Congress). Prior to that, the quorum requirement 
referred to exceptions to allow for fewer members to constitute 
a quorum at subcommittee meetings (still needing a minority 
party presence) and at hearings.
    Further, we believe the Majority violated their own 
interpretation of the Rules. Under the Chairman's 
interpretation, a bill could be introduced and passed without 
any minority member's participation, making the quorum 
requirement meaningless. However, we note that according to the 
Congressional Record from November 5th, and the legislative 
history in this Committee Report, the legislation that was 
reported out of Committee was an amendment in the nature of a 
substitute. Under the Chairman's interpretation, amendments 
could only be made at a business meeting. Since two minority 
members were not present, a business meeting could not take 
place and the only matter to be acted upon should have been a 
vote on S. 1733, as introduced.
    In addition to violating the Committee and Senate Rules, 
the act of reporting this bill without the requisite number of 
Minority Members present establishes a dangerous precedent for 
this Committee. Back in 2003, the minority at the time did not 
participate in the nomination hearing of Gov. Mike Leavitt. The 
minority argued that Gov. Leavitt had not answered questions 
for the record to their satisfaction, and they boycotted the 
hearing. The Majority at the time honored the Rules of this 
Committee and worked with the minority until an accommodation 
could be made. Despite its differences of opinion on both 
sides, the Committee operated in a fair and open manner. 
Another example is Clear Skies legislation. In that instance, 
the markup spanned two Congresses over two years and was 
delayed three times to accommodate the requests of the Minority 
seeking time for review of the impacts of the legislation--
which, it should be noted, are not nearly as comprehensive and 
economy wide as the effects of S. 1733.
    As noted earlier, EPA did not run the full economic 
modeling of S. 1733. The Administrator of the EPA, Lisa 
Jackson, clearly stated on October 27, 2009, in a legislative 
hearing of this committee on S. 1733, that ``we have not run 
the full economic modeling [of S. 1733]''. Rather it conducted 
a ``meta-analysis'' comparing the legislation to that of the 
analysis done on H.R. 2454, the House-passed legislation. We 
believe this meta-analysis is insufficient first and foremost 
because it rests upon a flawed analysis of HR. 2454. The H.R. 
2454 analysis did not make realistic assumption scenarios 
regarding the development and deployment of new nuclear power 
plants and carbon capture and sequestration technology, as well 
as the expected price of natural gas and the potential for 
biomass. That analysis also did not include the multiple 
mandates and requirements contained in the legislation. It also 
did not use in its reference case the Administration's 2009 
Budget that assumes 3.3% annual growth in GDP. Finally, it did 
not model various levels of CO2 reductions taken by 
developing countries such as China and India, and the effect 
they would have on global CO2 concentrations. 
(Further reasoning for the insufficiency of these brief 
modeling runs are outlined in Senator Voinovich's letter to 
Lisa Jackson dated November 3, 2009, attached to these views.)
    Further, we believe a full analysis would provide details 
that an EPA summary discussion paper does not. Among these are 
regional analysis, including costs to the Midwest, South, and 
Plains that will be different--and likely more expensive--than 
the national average because of regional dependence on coal-
fired generation; analysis of the effects on consumers from 
higher electricity, gasoline, and natural gas prices; analysis 
of impacts on jobs, especially in the manufacturing sector; 
analysis of fuel costs on farmers; and technology analysis 
exploring the availability of new technology such as carbon 
capture and sequestration or deployment of nuclear power.
    Finally, an analysis is warranted because of the 
substantial differences between S. 1733 and H.R. 2454, which 
include: a steeper target of 20% emissions cuts in 2020 
(instead of H.R. 2454's 17%); smaller consumer and worker 
protection programs; less protection against high program costs 
through offset programs; and less protection against high 
program costs through a reserve fund. For these and other 
reasons, EPA should conduct full modeling to provide members an 
accurate and comprehensive assessment of the bill's impacts on 
the economy.
    Again we urge that S. 1733 should be opposed and returned 
to the Committee on Environment and Public Works Committee by 
the full Senate until proper analysis is conducted and 
Committee rules are followed.
                                   James Inhofe.
                                   George V. Voinovich.
                                   David Vitter.
                                   John Barrasso.
                                   Mike Crapo.
                                   Kit Bond.
                                   Lamar Alexander.

                 ADDITIONAL VIEWS OF SENATOR MAX BAUCUS

    S. 1733, the Clean Energy Jobs and American Power Act, 
addresses one of the most challenging issues of our time--
global climate change. Climate change has the potential to 
severely impact our environment and our economy. The effects of 
climate change are visible in Montana, even today. Whether it 
is our green forests turned red by pine bark beetles, the 
namesake of Glacier National Park melting away, or sustained 
drought and increased wildfires, we are seeing the impacts 
firsthand.
    We will also see the impacts of climate legislation 
firsthand. Montana has much to gain and much to lose from the 
transition to a clean energy economy, if it is not properly 
structured. For example, the Department of Energy estimates 
that Montana's wind energy potential ranges from good to 
excellent to superb. But, we lack some of the transmission 
infrastructure required to carry that renewable resource to 
market. Our state's agriculture and tourism economies depend on 
healthy natural resources. S. 1733 includes a strong natural 
resource adaptation package that would provide resources to 
help sustain our tourism and recreation economy by protecting 
our outdoor heritage.
    Our state's vast coal reserves have been the lifeblood of 
our nation's electricity generation system for decades, 
providing low sulfur coal that allows coal-fired utilities to 
meet tough clean air standards. Coal is our nation's most 
plentiful, low-cost input for generating electricity, but 
unless we take steps to develop clean coal technology, we run 
the risk of excluding coal from our energy mix in the next 
century--a risk we cannot afford. S. 1733 would advance the 
development of clean coal technology. Specifically, the bill 
provides for advance payment of bonus allowances to a greater 
number of carbon capture and storage (CCS) projects, thus 
speeding the commercial deployment of this technology and 
reducing investment risk. It establishes a performance standard 
for new coal-fired power plants, and creates a reasonable early 
triggering mechanism for that standard to take effect based on 
the deployment of CCS technology.
    The reductions contemplated by S. 1733, particularly the 
mid-term reduction target, is too high given what we know 
today. That is why I offered an alternative that would create a 
17 percent target in 2020 with a trigger taking that target up 
to 20 percent, if certain conditions regarding emissions 
reductions in the international community were met. The offset 
provisions in this bill also take some steps forward in terms 
of providing incentives for agriculture providers to sequester 
carbon, but the structure of the system itself needs to be 
stronger. Finally, the EPA's authority under the Clean Air Act 
to regulate greenhouse gas emissions is partially addressed in 
S. 1733, but the full scope of that issue must be clarified to 
provide regulatory certainty.
    While I opposed S. 1733, as a member of the EPW and 
Agriculture Committees, as Chairman of the Senate Finance 
Committee, and most importantly, as a Montanan who wants our 
children and grandchildren to be able to enjoy the outdoors the 
way we can today, I'm going to work to get climate change 
legislation that can get 60 votes, get through the United 
States Senate, and signed into law. The Senate must craft a 
bill that will create jobs throughout the nation. We will craft 
a bill that will protect both Yosemite and Yellowstone. We will 
craft a bill that increases our national security by decreasing 
our dependence on foreign oil. And ultimately, we will craft a 
bill that will secure America's economic and environmental 
future for generations.
                                                        Max Baucus.

                        Changes in Existing Law

    In compliance with section 12 of rule XXVI of the Standing 
Rules of the Senate, changes in existing law made by the bill 
as reported are shown as follows: Existing law proposed to be 
omitted is enclosed in [black brackets], new matter is printed 
in italic, existing law in which no change is proposed is shown 
in roman:

           *       *       *       *       *       *       *

                              ----------                              

CLEAN AIR ACT

           *       *       *       *       *       *       *

             TITLE I--AIR POLLUTION PREVENTION AND CONTROL

              Part A--Air Quality and Emission Limitations

                         findings and purposes

    Sec. 101. (a) * * *

           *       *       *       *       *       *       *

    Sec. 108. (a)(1) For the purpose of establishing national 
primary and secondary ambient air quality standards, the 
Administrator shall within 30 days after the date of enactment 
of the Clean Air Amendments of 1970 publish, and shall from 
time to time thereafter revise, a list which includes each air 
pollutant--
          (A) emissions of which, in his judgment, cause or 
        contribute to air pollution which may reasonably be 
        anticipated to endanger public health or welfare;
          (B) the presence of which in the ambient air results 
        from numerous or diverse mobile or stationary sources; 
        and
          (C) for which air quality criteria had not been 
        issued before the date of enactment of the Clean Air 
        Amendments of 1970, but for which he plans to issue air 
        quality criteria under this section.
    (2) The Administrator shall issue air quality criteria for 
an air pollutant within 12 months after he has included such 
pollutant in a list under paragraph (1). Air quality criteria 
for an air pollutant shall accurately reflect the latest 
scientific knowledge useful in indicating the kind and extent 
of all identifiable effects on public health or welfare which 
may be expected from the presence of such pollutant in the 
ambient air, in varying quantities. The criteria for an air 
pollutant, to the extent practicable, shall include information 
on--
          (A) those variable factors (including atmospheric 
        conditions) which of themselves or in combination with 
        other factors may alter the effects on public health or 
        welfare of such air pollutant;
          (B) the types of air pollutants which, when present 
        in the atmosphere, may interact with such pollutant to 
        produce an adverse effect on public health or welfare; 
        and
          (C) any known or anticipated adverse effects on 
        welfare.
    (3) Prohibition on Listing of Greenhouse Gases.--On and 
after the date of enactment of this paragraph, the 
Administrator shall not include on the list of pollutants under 
this subsection any greenhouse gas on the basis of any effect 
the greenhouse gas may have on climate change.

SEC. 112. HAZARDOUS AIR POLLUTANTS.

  (a) Definitions.--For purposes of this section, except 
subsection (r)--
          (1) Major source.--The term ``major source'' means 
        any stationary source or group of stationary sources 
        located within a contiguous area and under common 
        control that emits or has the potential to emit 
        considering controls, in the aggregate, 10 tons per 
        year or more of any hazardous air pollutant or 25 tons 
        per year or more of any combination of hazardous air 
        pollutants. The Administrator may establish a lesser 
        quantity, or in the case of radionuclides different 
        criteria, for a major source than that specified in the 
        previous sentence, on the basis of the potency of the 
        air pollutant, persistence, potential for 
        bioaccumulation, other characteristics of the air 
        pollutant, or other relevant factors.
          (2)* * *

           *       *       *       *       *       *       *

          (20) Greenhouse gas limitation.--No greenhouse gas 
        may be added to the list of hazardous air pollutants 
        under this section unless the greenhouse gas meets the 
        criteria described in subsection (b) independent of the 
        effects of the greenhouse gas on climate change.

SEC. 113. FEDERAL ENFORCEMENT.

  (a) * * *

           *       *       *       *       *       *       *

          (3) EPA enforcement of other requirements.--Except 
        for a requirement or prohibition enforceable under the 
        preceding provisions of this subsection, whenever, on 
        the basis of any information available to the 
        Administrator, the Administrator finds that any person 
        has violated, or is in violation of, any other 
        requirement or prohibition of this title, section 303 
        of title III, title IV, title V, [or title VI]title VI, 
        title VII, or title VIII including, but not limited to, 
        a requirement or prohibition of any rule, plan, order, 
        waiver, or permit promulgated, issued, or approved 
        under those provisions or titles, or for the payment of 
        any fee owed to the United States under this Act (other 
        than title II), the Administrator may--

           *       *       *       *       *       *       *

  (b) Civil Judicial Enforcement.--The Administrator shall, as 
appropriate, in the case of any person that is the owner or 
operator of an affected source, a major emitting facility, [or 
a major stationary source]a major stationary source, or a 
covered EGU under title VIII, and may, in the case of any other 
person, commence a civil action for a permanent or temporary 
injunction, or to assess and recover a civil penalty of not 
more than $25,000 per day for each violation, or both, in any 
of the following instances:
          (1) Whenever such person has violated, or is in 
        violation of, any requirement or prohibition of an 
        applicable implementation plan or permit. Such an 
        action shall be commenced (A) during any period of 
        federally assumed enforcement, or (B) more than 30 days 
        following the date of the Administrator's notification 
        under subsection (a)(1) that such person has violated, 
        or is in violation of, such requirement or prohibition.
          (2) Whenever such person has violated, or is in 
        violation of, any other requirement or prohibition of 
        this title, section 303 of title III, title IV, title 
        V, [or title VI]title VI, title VII, or title VIII, 
        including, but not limited to, a requirement or 
        prohibition of any rule, order, waiver or permit 
        promulgated, issued, or approved under this Act, or for 
        the payment of any fee owed the United States under 
        this Act (other than title II).

           *       *       *       *       *       *       *

  (c) Criminal Penalties.--(1) Any person who knowingly 
violates any requirement or prohibition of an applicable 
implementation plan (during any period of federally assumed 
enforcement or more than 30 days after having been notified 
under subsection (a)(1) by the Administrator that such person 
is violating such requirement or prohibition), any order under 
subsection (a) of this section, requirement or prohibition of 
section 111(e) of this title (relating to new source 
performance standards), section 112 of this title, section 114 
of this title (relating to inspections, etc.), section 129 of 
this title (relating to solid waste combustion), section 165(a) 
of this title (relating to preconstruction requirements), an 
order under section 167 of this title (relating to 
preconstruction requirements), an order under section 303 of 
title III (relating to emergency orders), section 502(a) or 
503(c) of title V (relating to permits), or any requirement or 
prohibition of title IV (relating to acid deposition control), 
[or title VI (relating to stratospheric ozone control),]title 
VI, title VII, or title VIII, including a requirement of any 
rule, order, waiver, or permit promulgated or approved under 
such sections or titles, and including any requirement for the 
payment of any fee owed the United States under this Act (other 
than title II) shall, upon conviction, be punished by a fine 
pursuant to title 18 of the United States Code, or by 
imprisonment for not to exceed 5 years, or both. If a 
conviction of any person under this paragraph is for a 
violation committed after a first conviction of such person 
under this paragraph, the maximum punishment shall be doubled 
with respect to both the fine and imprisonment.
  (2) Any person who knowingly--
          (A)* * *

           *       *       *       *       *       *       *

  (3) Any person who knowingly fails to pay any fee owed the 
United States under this title, title III, IV, V, [or VI]VI, 
VII, or VIII shall, upon conviction, be punished by a fine 
pursuant to title 18 of the United States Code, or by 
imprisonment for not more than 1 year, or both. If a conviction 
of any person under this paragraph is for a violation committed 
after a first conviction of such person under this paragraph, 
the maximum punishment shall be doubled with respect to both 
the fine and imprisonment.

           *       *       *       *       *       *       *

  (d) Administrative Assessment of Civil Penalties.--(1) The 
Administrator may issue an administrative order against any 
person assessing a civil administrative penalty of up to 
$25,000, per day of violation, whenever, on the basis of any 
available information, the Administrator finds that such 
person--
          (A) has violated or is violating any requirement or 
        prohibition of an applicable implementation plan (such 
        order shall be issued (i) during any period of 
        federally assumed enforcement, or (ii) more than thirty 
        days following the date of the Administrator's 
        notification under subsection (a)(1) of this section of 
        a finding that such person has violated or is violating 
        such requirement or prohibition); or
          (B) has violated or is violating any other 
        requirement or prohibition of title I, III, IV, V, [or 
        VI]VI, VII, or VIII including, but not limited to, a 
        requirement or prohibition of any rule, order, waiver, 
        permit, or plan promulgated, issued, or approved under 
        this Act, or for the payment of any fee owed the United 
        States under this Act (other than title II); or

           *       *       *       *       *       *       *

  (f) Awards.--The Administrator may pay an award, not to 
exceed $10,000, to any person who furnishes information or 
services which lead to a criminal conviction or a judicial or 
administrative civil penalty for any violation of this title or 
title III, IV, V, [or VI]VI, VII, or VII of this Act enforced 
under this section. Such payment is subject to available 
appropriations for such purposes as provided in annual 
appropriation Acts. Any officer, or employee of the United 
States or any State or local government who furnishes 
information or renders service in the performance of an 
official duty is ineligible for payment under this subsection. 
The Administrator may, by regulation, prescribe additional 
criteria for eligibility for such an award.

                   inspections, monitoring, and entry

    Sec. 114. (a) For the purpose (i) of developing or 
assisting in the development of any implementation plan under 
section 110 or 111(d), any standard of performance under 
section 111,ANy emission standard under [section 112, or any 
regulation of solid waste combustion under section 129, or any 
regulation under section 129 (relating to solid waste 
combustion), (ii)]section 112, or any regulation of greenhouse 
gas emissions under title VII or VIII, (ii) of determining 
whether any person is in violation of any such standard or any 
requirement of such a plan, or (iii) carrying out any provision 
of this Act (except a provision of title II with respect to a 
manufacturer of new motor vehicles or new motor vehicle 
engines)--

           *       *       *       *       *       *       *

    (d)(1)* * *

           *       *       *       *       *       *       *

  (e) Recordkeeping for Carbon Offsets Program.--For the 
purpose of implementing the carbon offsets program set forth in 
subtitle D of title VII, the Administrator shall require any 
person who is an offset project developer, and may require any 
person who is a third party verifier, to establish and maintain 
records, for a period of not less than the crediting period 
under section 734(c) plus 5 years, relating to--
          (1) any offset project approval petition submitted to 
        the appropriate officials under section 735;
          (2) any reversals which occur with respect to an 
        offset project;
          (3) any verification reports; and
          (4) any other aspect of the offset project that the 
        appropriate officials determines is appropriate.

           *       *       *       *       *       *       *

    Sec. 115. (a) Whenever the Administrator, upon receipt of 
reports, surveys or studies from any duly constituted 
international agency has reason to believe that any air 
pollutant or pollutants emitted in the United States cause or 
contribute to air pollution which may reasonably be anticipated 
to endanger public health or welfare in a foreign country or 
whenever the Secretary of State requests him to do so with 
respect to such pollution which the Secretary of State alleges 
is of such a nature, the Administrator shall give formal 
notification thereof to the Governor of the State in which such 
emissions originate.
    (b) The notice of the Administrator shall be deemed to be a 
finding under section 110(a)(2)(H)(ii) which requires a plan 
revision with respect to so much of the applicable 
implementation plan as is inadequate to prevent or eliminate 
the endangerment referred to in subsection (a). Any foreign 
country so affected by such emission of pollutant or pollutants 
shall be invited to appear at any public hearing associated 
with any revision of the appropriate portion of the applicable 
implementation plan.
    [(c) This section]
          (3) Applicability.--
                  (A) Foreign countries.--This section shall 
                apply only to a foreign country which the 
                Administrator determines has given the United 
                States essentially the same rights with respect 
                to the prevention or control of air pollution 
                occurring in that country as is given that 
                country by this section.
                  (B) Greenhouse gases.--This section does not 
                apply to any greenhouse gas with respect to the 
                effects of the greenhouse gas on climate 
                change.

           *       *       *       *       *       *       *

                      retention of state authority

    Sec. 116. Except as otherwise provided in sections 119 (c), 
(e), and (f) (as in effect before the date of the enactment of 
the Clean Air Act Amendments of 1977), 209, 211(c)(4), [and 
233]233 (preempting certain State regulation [of moving 
sources)]of moving sources), and 861 (preempting certain State 
greenhouse gas programs for a limited time) nothing in this Act 
shall preclude or deny the right of any State or political 
subdivision thereof to adopt or enforce (1) any standard or 
limitation respecting emissions of air pollutants or (2) any 
requirement respecting control or abatement of air pollution; 
except that if an emission standard or limitation is in effect 
under an applicable implementation plan or under section 111 or 
112, such State or political subdivision may not adopt or 
enforce any emission standard or limitation which is less 
stringent than the standard or limitation under such plan or 
section. For the purposes of this section, the phrases 
`standard or limitation respecting emissions of air pollutants' 
and `requirements respecting control or abatement of air 
pollution' shall include any provision to: limit greenhouse gas 
emissions, require surrender to the State or a political 
subdivision thereof of emission allowances or offset credits 
established or issued under this Act, and require the use of 
such allowances or credits as a means of demonstrating 
compliance with requirements established by a State or 
political subdivision thereof.

           *       *       *       *       *       *       *

    Sec. 169. For purposes of this part--
          (1) The term ``major emitting facility'' means any of 
        the following stationary sources of air pollutants 
        which emit, or have the potential to emit, one hundred 
        tons per year or more of any air pollutant,(other than 
        any greenhouse gas), and 25,000 tons per year of carbon 
        dioxide equivalent for any greenhouse gas or 
        combination of greenhouse gases from the following 
        types of stationary sources: fossil-fuel fired steam 
        electric plants of more than two hundred and fifty 
        million British thermal units per hour heat input, coal 
        cleaning plants (thermal dryers), kraft pulp mills, 
        Portland Cement plants, primary zinc smelters, iron and 
        steel mill plants, primary aluminum ore reduction 
        plants, primary copper smelters, municipal incinerators 
        capable of charging more than fifty tons of refuse per 
        day, hydrofluoric, sulfuric, and nitric acid plants, 
        petroleum refineries, lime plants, phosphate rock 
        processing plants, coke oven batteries, sulfur recovery 
        plants, carbon black plants (furnace process) primary 
        lead smelters, fuel conversion plants, sintering 
        plants, secondary metal production facilities, chemical 
        process plants, fossil-fuel boilers of more than two 
        hundred and fifty million British thermal units per 
        hour heat input, petroleum storage and transfer 
        facilities with a capacity exceeding three hundred 
        thousand barrels, taconite ore processing facilities, 
        glass fiber processing plants, charcoal production 
        facilities. Such term also includes any other source 
        with the potential to emit two hundred and fifty tons 
        per year or more of any air pollutant(other than any 
        greenhouse gas), and 25,000 tons per year of carbon 
        dioxide equivalent for any greenhouse gas or 
        combination of greenhouse gases. This term shall not 
        include new or modified facilities which are nonprofit 
        health or education institutions which have been 
        exempted by the State.

           *       *       *       *       *       *       *

    Sec. 201

TITLE II--EMISSION STANDARDS FOR MOVING SOURCES

           *       *       *       *       *       *       *

    Sec. 202. (a) Except as otherwise provided in subsection 
(b)--
          (1)* * *

           *       *       *       *       *       *       *

    Sec. 209. (a) * * *

           *       *       *       *       *       *       *

  (f) Taxicabs.--(1) Notwithstanding subsection (a), a State or 
political subdivision thereof may adopt and enforce standards 
for the control of emissions from new motor vehicles that are 
taxicabs and other vehicles if such standards will be, in the 
aggregate, at least as protective of public health and welfare 
as applicable Federal standards and if such taxicabs and other 
vehicles--
          (A) are passenger motor vehicles that are capable of 
        transporting not more than 10 individuals, including 
        the driver;
          (B) are commercially available or are designed and 
        manufactured pursuant to a contract with such State or 
        political subdivision thereof;
          (C) are operated for hire pursuant to an operating or 
        regulatory license, permit, or other authorization 
        issued by such State or political subdivision thereof;
          (D) provide local transportation for a fare 
        determined on the basis of the time or distance 
        traveled or a combination of time and distance 
        traveled; and
          (E) do not exclusively provide transportation to and 
        from airports.
  (2) If each standard of a State or political subdivision 
thereof is at least as stringent as the comparable applicable 
Federal standard, such standard of such State or political 
subdivision thereof shall be deemed at least as protective of 
health and welfare as such Federal standards for purposes of 
this subsection.

           *       *       *       *       *       *       *

    Sec. 211. (a) * * *

           *       *       *       *       *       *       *

  (o) Renewable Fuel Program.--
          (1) Definitions.--In this section:
                  (A) Cellulosic biomass ethanol.--* * *

           *       *       *       *       *       *       *

                  (B) Advanced biofuel.--
                          (i) In general.--The term ``advanced 
                        biofuel'' means renewable fuel, other 
                        than ethanol derived from corn starch, 
                        that has lifecycle greenhouse gas 
                        emissions, as determined by the 
                        Administrator, after notice and 
                        opportunity for comment, that are at 
                        least 50 percent less than baseline 
                        lifecycle greenhouse gas emissions.
                          (ii) Inclusions.--The types of fuels 
                        eligible for consideration as 
                        ``advanced biofuel'' may include any of 
                        the following:
                                  (I) Ethanol derived from 
                                cellulose, hemicellulose, or 
                                lignin.
                                  (II) Ethanol derived from 
                                sugar or starch (other than 
                                corn starch).
                                  (III) Ethanol derived from 
                                waste material, including crop 
                                residue, other vegetative waste 
                                material, animal waste, and 
                                food waste and yard waste.
                                  (IV) Biomass-based diesel.
                                  (V) Biogas (including 
                                landfill gas and sewage waste 
                                treatment gas) produced through 
                                the conversion of organic 
                                matter from renewable biomass.
                                  (VI) Butanol or other 
                                alcohols produced through the 
                                conversion of organic matter 
                                from renewable biomass.
                                  (VII) Other fuel derived from 
                                [cellulosic biomass]advanced 
                                green.

           *       *       *       *       *       *       *

                  (C) Advanced green biofuel.--The term 
                `advanced green biofuel' means renewable fuel 
                that--
                          (i) is derived from renewable 
                        biomass; and
                          (ii) has lifecycle greenhouse gas 
                        emissions that are at least 60 percent 
                        less than the baseline lifecycle 
                        greenhouse gas emissions.
                  [(C)](D) Baseline lifecycle greenhouse gas 
                emissions.--The term ``baseline lifecycle 
                greenhouse gas emissions'' means the average 
                lifecycle greenhouse gas emissions, as 
                determined by the Administrator, after notice 
                and opportunity for comment, for gasoline or 
                diesel (whichever is being replaced by the 
                renewable fuel) sold or distributed as 
                transportation fuel in 2005.
                  [(D)](E) Biomass-based diesel.--The term 
                ``biomass-based diesel'' means renewable fuel 
                that is biodiesel as defined in section 312(f) 
                of the Energy Policy Act of 1992 (42 U.S.C. 
                13220(f)) and that has lifecycle greenhouse gas 
                emissions, as determined by the Administrator, 
                after notice and opportunity for comment, that 
                are at least 50 percent less than the baseline 
                lifecycle greenhouse gas emissions. 
                Notwithstanding the preceding sentence, 
                renewable fuel derived from co-processing 
                biomass with a petroleum feedstock shall be 
                advanced biofuel if it meets the requirements 
                of subparagraph (B), but is not biomass-based 
                diesel.
                  [(E) Cellulosic biofuel.--The term 
                ``cellulosic biofuel'' means renewable fuel 
                derived from any cellulose, hemicellulose, or 
                lignin that is derived from renewable biomass 
                and that has lifecycle greenhouse gas 
                emissions, as determined by the Administrator, 
                that are at least 60 percent less than the 
                baseline lifecycle greenhouse gas emissions.]
          (2) Renewable fuel program.--
                  (A) Regulations.--
                          (i) In general.--Not later than 1 
                        year after the date of enactment of 
                        this paragraph, the Administrator shall 
                        promulgate regulations to ensure that 
                        gasoline sold or introduced into 
                        commerce in the United States (except 
                        in noncontiguous States or 
                        territories), on an annual average 
                        basis, contains the applicable volume 
                        of renewable fuel determined in 
                        accordance with subparagraph (B). Not 
                        later than 1 year after the date of 
                        enactment of this sentence, the 
                        Administrator shall revise the 
                        regulations under this paragraph to 
                        ensure that transportation fuel sold or 
                        introduced into commerce in the United 
                        States (except in noncontiguous States 
                        or territories), on an annual average 
                        basis, contains at least the applicable 
                        volume of renewable fuel, advanced 
                        biofuel, [cellulosic]advanced green 
                        biofuel, and biomass-based diesel, 
                        determined in accordance with 
                        subparagraph (B) and, in the case of 
                        any such renewable fuel produced from 
                        new facilities that commence 
                        construction after the date of 
                        enactment of this sentence, achieves at 
                        least a 20 percent reduction in 
                        lifecycle greenhouse gas emissions 
                        compared to baseline lifecycle 
                        greenhouse gas emissions.

           *       *       *       *       *       *       *

                  (B) Applicable volumes.--
                          (i) Calendar years after 2005.--* * *

           *       *       *       *       *       *       *

                                  (III) [Cellulosic]Advanced 
                                Green biofuel.--For the purpose 
                                of subparagraph (A), of the 
                                volume of advanced biofuel 
                                required under subclause (II), 
                                the applicable volume of 
                                [cellulosic]advanced green 
                                biofuel for the calendar years 
                                2010 through 2022 shall be 
                                determined in accordance with 
                                the following table:

Applicable volume of [cellulosic]advanced green biofuel

           *       *       *       *       *       *       *

                          (ii) Other calendar years.--For the 
                        purposes of subparagraph (A), the 
                        applicable volumes of each fuel 
                        specified in the tables in clause (i) 
                        for calendar years after the calendar 
                        years specified in the tables shall be 
                        determined by the Administrator, in 
                        coordination with the Secretary of 
                        Energy and the Secretary of 
                        Agriculture, based on a review of the 
                        implementation of the program during 
                        calendar years specified in the tables, 
                        and an analysis of--
                                  (I) the impact of the 
                                production and use of renewable 
                                fuels on the environment, 
                                including on air quality, 
                                climate change, conversion of 
                                wetlands, ecosystems, wildlife 
                                habitat, water quality, and 
                                water supply;
                                  (II) the impact of renewable 
                                fuels on the energy security of 
                                the United States;
                                  (III) the expected annual 
                                rate of future commercial 
                                production of renewable fuels, 
                                including advanced biofuels in 
                                each category 
                                ([cellulosic]advanced green 
                                biofuel and biomass-based 
                                diesel);

           *       *       *       *       *       *       *

                          (iv) Applicable volume of 
                        [cellulosic]advanced green biofuel.--
                        For the purpose of making the 
                        determinations in clause (ii), for each 
                        calendar year, the applicable volume of 
                        [cellulosic]advanced green biofuel 
                        established by the Administrator shall 
                        be based on the assumption that the 
                        Administrator will not need to issue a 
                        waiver for such years under paragraph 
                        (7)(D).

           *       *       *       *       *       *       *

          (3) Applicable percentages.--
                  (A) Provision of estimate of volumes of 
                gasoline sales.--Not later than October 31 of 
                each of calendar years 2005 through 2021, the 
                Administrator of the Energy Information 
                Administration shall provide to the 
                Administrator of the Environmental Protection 
                Agency an estimate, with respect to the 
                following calendar year, of the volumes of 
                transportation fuel, biomass-based diesel, and 
                [cellulosic]advanced green biofuel projected to 
                be sold or introduced into commerce in the 
                United States.
                  (B) Determination of applicable 
                percentages.--
                          (i) * * *

           *       *       *       *       *       *       *

          (4) Modification of greenhouse gas reduction 
        percentages.--
                  (A) In general.--The Administrator may, in 
                the regulations under the last sentence of 
                paragraph (2)(A)(i), adjust the 20 percent, 50 
                percent, and 60 percent reductions in lifecycle 
                greenhouse gas emissions specified in 
                paragraphs (2)(A)(i) (relating to renewable 
                fuel), (1)(D) (relating to biomass-based 
                diesel), (1)(B)(i) (relating to advanced 
                biofuel), and (1)(E) (relating to 
                [cellulosic]advanced green biofuel) to a lower 
                percentage. For the 50 and 60 percent 
                reductions, the Administrator may make such an 
                adjustment only if he determines that generally 
                such reduction is not commercially feasible for 
                fuels made using a variety of feedstocks, 
                technologies, and processes to meet the 
                applicable reduction.
                  (B) Amount of adjustment.--In promulgating 
                regulations under this paragraph, the specified 
                50 percent reduction in greenhouse gas 
                emissions from advanced biofuel and in biomass-
                based diesel may not be reduced below 40 
                percent. The specified 20 percent reduction in 
                greenhouse gas emissions from renewable fuel 
                may not be reduced below 10 percent, and the 
                specified 60 percent reduction in greenhouse 
                gas emissions from [cellulosic]advanced green 
                biofuel may not be reduced below 50 percent.

           *       *       *       *       *       *       *

          (7) Waivers.--
                  (A) * * *

           *       *       *       *       *       *       *

                  (D) [Cellulosic]advanced green biofuel.--(i) 
                For any calendar year for which the projected 
                volume of [cellulosic]advanced green biofuel 
                production is less than the minimum applicable 
                volume established under paragraph (2)(B), as 
                determined by the Administrator based on the 
                estimate provided under paragraph (3)(A), not 
                later than November 30 of the preceding 
                calendar year, the Administrator shall reduce 
                the applicable volume of [cellulosic]advanced 
                green biofuel required under paragraph (2)(B) 
                to the projected volume available during that 
                calendar year. For any calendar year in which 
                the Administrator makes such a reduction, the 
                Administrator may also reduce the applicable 
                volume of renewable fuel and advanced biofuels 
                requirement established under paragraph (2)(B) 
                by the same or a lesser volume.
                  (ii)* * *

           *       *       *       *       *       *       *

    Sec. 301. (a)(1)* * *

           *       *       *       *       *       *       *

    Sec. 304.(a) * * *

           *       *       *       *       *       *       *

    (f) For purposes of this section, the term ``emission 
standard or limitation under this Act'' means--
          (1) a schedule or timetable of compliance, emission 
        limitation, standard of performance or emission 
        standard,
          (2) a control or prohibition respecting a motor 
        vehicle fuel or fuel additive, which is in effect under 
        this Act (including a requirement applicable by reason 
        of section 118) or under an applicable implementation 
        plan, or
          (3) any condition or requirement of a permit under 
        part C of title I (relating to significant 
        deterioration of air quality) or part D of title I 
        (relating to nonattainment),section 119 (relating to 
        primary nonferrous smelter orders), any condition or 
        requirement under an applicable implementation plan 
        relating to transportation control measures, air 
        quality maintenance plans, vehicle inspection and 
        maintenance programs or vapor recovery requirements, 
        section 211 (e) and (f) (relating to fuels and fuel 
        additives), section 169A (relating to visibility 
        protection), any condition or requirement under title 
        VI (relating to ozone protection), or any requirement 
        under section 111 or 112 (without regard to whether 
        such requirement is expressed as an emission standard 
        or otherwise)[; or],
          (4) any other standard, limitation, or schedule 
        established under any permit issued pursuant to title V 
        or under any applicable State implementation plan 
        approved by the Administrator, any permit term or 
        condition, and any requirement to obtain a permit as a 
        condition of operations[.]; or
          (5) any requirement of title VII or VIII.

           *       *       *       *       *       *       *

general provisions relating to administrative proceedings and judicial 
                                 review

general provisions relating to administrative proceedings and judicial 
                                 review

    Sec. 307. (a) In connection with any determination under 
section 110(f), or for purposes of obtaining information under 
section 202(b)(4) or 211(c)(3),,\1\ any investigation, 
monitoring, reporting requirement, entry, compliance 
inspection, or administrative enforcement proceeding under 
the\2\ Act (including but not limited to section 113, section 
114, section 120, section 129, section 167, section 205, 
section 206, section 208, section 303[, or section 306] section 
306, or title VII or VIII), the Administrator may issue 
subpenas for the attendance and testimony of witnesses and the 
production of relevant papers, books, and documents, and he may 
administer oaths. Except for emission data, upon a showing 
satisfactory to the Administrator by such owner or operator 
that such papers, books, documents, or information or 
particular part thereof, if made public, would divulge trade 
secrets or secret processes of such owner or operator, the 
Administrator shall consider such record, report, or 
information or particular portion thereof confidential in 
accordance with the purposes of section 1905 of title 18 of the 
United States Code, except that such paper, book, document, or 
information may be discussed to other officers, employees, or 
authorized representatives of the United States concerned with 
carrying out this Act, to persons carrying out the National 
Academy of Sciences' study and investigation provided for in 
section 202(c), or when relevant in any proceeding under this 
Act. Witnesses summoned shall be paid the same fees and mileage 
that are paid witnesses in the courts of the United States. In 
cases of contumacy or refusal to obey a subpena served upon any 
person under this subparagraph, the district court of the 
United States for any district in which such person is found or 
resides or transacts business, upon application by the United 
States and after notice to such person, shall have jurisdiction 
to issue an order requiring such person to appear and give 
testimony before the Administrator to appear and produce 
papers, books, and documents before the Administrator, or both, 
and any failure to obey such order of the court may be punished 
by such court as a contempt thereof.
---------------------------------------------------------------------------
    \1\Amendment made by section 703 of Public Law 101-549 (104 Stat. 
2681) resulted in double commas.
    \2\Probably should read ``this Act''.
---------------------------------------------------------------------------
    (b)(1) A petition for review of action of the Administrator 
in promulgating any national primary or secondary ambient air 
quality standard, any emission standard or requirement under 
section 112, any standard of performance or requirement under 
section 111[,,],\1\ any standard under section 202 (other than 
a standard required to be prescribed under section 202(b)(1)), 
any determination under section 202(b)(5), any control or 
prohibition under section 211, any standard under section 231, 
any rule issued under section 113, 119, or under [section 
120,]section 120, any final action under title VII or VIII, or 
any other nationally applicable regulations promulgated, or 
final action taken, by the Administrator under this Act may be 
filed only in the United States Court of Appeals for the 
District of Columbia. A petition for review of the 
Administrator's action in approving or promulgating any 
implementation plan under section 110 or section 111(d), any 
order under section 111(j), under section 112[,,],\2\ under 
section 119, or under section 120, or his action under section 
119(c)(2) (A), (B), or (C) (as in effect before the date of 
enactment of the Clean Air Act Amendments of 1977) or under 
regulations thereunder, or revising regulations for enhanced 
monitoring and compliance certification programs under section 
114(a)(3) of this Act, or any other final action of the 
Administrator under this Act (including any denial or 
disapproval by the Administrator under title I) which is local 
or regionally applicable may be filed only in the United States 
Court of Appeals for the appropriate circuit.Any person may 
file a petition for review of action by the Administrator as 
provided in this subsection. Notwithstanding the preceding 
sentence a petition for review of any action referred to in 
such sentence may be filed only in the United States Court of 
Appeals for the District of Columbia if such action is based on 
a determination of nationwide scope or effect and if in taking 
such action the Administrator finds and publishes that such 
action is based on such a determination. Any petition for 
review under this subsection shall be filed within sixty days 
from the date notice of such promulgation, approval, or action 
appears in the Federal Register, except that if such petition 
is based solely on grounds arising after such sixtieth day, 
then any petition for review under this subsection shall be 
filed within sixty days after such grounds arise. The filing of 
a petition for reconsideration by the Administrator of any 
otherwise final rule or action shall not affect the finality of 
such rule or action for purposes of judicial review nor extend 
the time within which a petition for judicial review of such 
rule or action under this section may be filed, and shall not 
postpone the effectiveness of such rule or action.
---------------------------------------------------------------------------
    \1\Public Law 95-95 inserted the additional comma after the words 
``under section 111''.
    \2\Section 706(2) of Public Law 101-549 (104 Stat. 2682) inserted 
the additional comma after the words ``under section 112,''.
---------------------------------------------------------------------------
    (2) Action of the Administrator with respect to which 
review could have been obtained under paragraph (1) shall not 
be subject to judicial review in civil or criminal proceedings 
for enforcement. Where a final decision by the Administrator 
defers performance of any nondiscretionary statutory action to 
a later time, any person may challenge the deferral pursuant to 
paragraph (1).
    (c) In any judicial proceeding in which review is sought of 
a determination under this Act required to be made on the 
record after notice and opportunity for hearing, if any party 
applies to the court for leave to adduce additional evidence, 
and shows to the satisfaction of the court that such additional 
evidence is material and that there were reasonable grounds for 
the failure to adduce such evidence in the proceeding before 
the Administrator, the court may order such additional evidence 
(and evidence in rebuttal thereof) to be taken before the 
Administrator, in such manner and upon such terms and 
conditions as to\1\ the court may deem proper. The 
Administrator may modify his findings as to the facts, or make 
new findings, by reason of the additional evidence so taken and 
he shall file such modified or new findings, and his 
recommendation, if any, for the modification or setting aside 
of his original determination, with the return of such 
additional evidence.
---------------------------------------------------------------------------
    \1\So in original. The word ``to'' probably should not appear.
---------------------------------------------------------------------------
    (3) If the court determines that any action of the 
Administrator is arbitrary, capricious, or otherwise unlawful, 
the court may remand such action, without vacatur, if vacatur 
would impair or delay protection of the environment or public 
health or otherwise undermine the timely achievement of the 
purposes of this Act.
          (4) If the court determines that any action of the 
        Administrator is arbitrary, capricious, or otherwise 
        unlawful, and remands the matter to the Administrator, 
        the Administrator shall complete final action on remand 
        within an expeditious time period not longer than the 
        time originally allowed for the action or 1 year, 
        whichever is less, unless the court on motion 
        determines that a shorter or longer period is 
        necessary, appropriate, and consistent with the 
        purposes of this Act. The court of appeals shall have 
        jurisdiction to enforce a deadline for action on remand 
        under this paragraph.

           *       *       *       *       *       *       *

    (d)(1) This subsection applies to--
          (A) * * *

           *       *       *       *       *       *       *

          [(S) the promulgation or revision of any regulation 
        under title IV (relating to acid deposition),]
          (S) the promulgation or revision of any regulation 
        under title VII or VIII,

           *       *       *       *       *       *       *

    (7)(A) The record for judicial review shall consist 
exclusively of the material referred to in paragraph (3), 
clause (i) of paragraph (4)(B), and subparagraphs (A) and (B) 
of paragraph (6).
    (B) Only an objection to a rule or procedure which was 
raised with reasonable specificity during the period for public 
comment (including any public hearing) may be raised during 
judicial review. If the person raising an objection can 
demonstrate to the Administrator that it was impracticable to 
raise such objection within such time or if the grounds for 
such objection arose after the period for public comment (but 
within the time specified for judicial review) and if such 
objection is of central relevance to the outcome of the rule, 
the Administrator shall convene a proceeding for 
reconsideration of the rule and provide the same procedural 
rights as would have been afforded had the information been 
available at the time the rule was proposed.If a petition for 
reconsideration is filed, the Administrator shall take final 
action on such petition, including promulgation of final action 
either revising or determining not to revise the action for 
which reconsideration is sought, within 150 days after the 
petition is received by the Administrator or the petition shall 
be deemed denied for the purpose of judicial review. Such 
person may seek judicial review of such denial, or of any other 
final action, by the Administrator, in response to a petition 
for reconsideration, in the United States court of appeals for 
the appropriate circuit (as provided in subsection (b)). If the 
Administrator refuses to convene such a proceeding, such person 
may seek review of such refusal in the United States court of 
appeals for the appropriate circuit (as provided in subsection 
(b)). Such reconsideration shall not postpone the effectiveness 
of the rule. The effectiveness of the rule may be stayed during 
such reconsideration, however, by the Administrator or the 
court for a period not to exceed three months.

                            TITLE V--PERMITS

Sec. 501. Definitions.
Sec. 502. Permit programs.
Sec. 503. Permit applications.
Sec. 504. Permit requirements and conditions.
Sec. 505. Notification to Administrator and contiguous States.
Sec. 506. Other authorities.
Sec. 507. Small business stationary source technical and environmental 
          compliance assistance program.

SEC. 501. DEFINITIONS.

           *       *       *       *       *       *       *

SEC. 508. EMISSIONS OF GREENHOUSE GASES.

  Notwithstanding any provision of this title or title III, no 
stationary source shall be required to apply for, or operate 
pursuant to, a permit under this title solely because the 
stationary source, including an agricultural source, emits less 
than 25,000 tons per year of any greenhouse gas or combination 
of greenhouse gases that are regulated solely because of the 
effect of those gases on climate change.

           *       *       *       *       *       *       *

                TITLE VI--STRATOSPHERIC OZONE PROTECTION

                           Table of Contents

Sec. 601.* * *
      * * * * * * *
Sec. 619. Hydrofluorocarbons (HFCs).
      * * * * * * *

SEC. 605. PHASE-OUT OF PRODUCTION AND CONSUMPTION OF CLASS II 
                    SUBSTANCES.

  (a) Restriction of Use of Class II Substances.--Effective 
January 1, 2015, it shall be unlawful for any person to 
introduce into interstate commerce or use any class II 
substance unless such substance--
          (1) has been used, recovered, and recycled;
          (2) is used and entirely consumed (except for trace 
        quantities) in the production of other chemicals; [or]
          (3) is used as a refrigerant in appliances 
        manufactured prior to January 1, 2020[.]; or
As used in this subsection, the term ``refrigerant'' means any 
class II substance used for heat transfer in a refrigerating 
system.
          (4) is listed as acceptable for use as a fire 
        suppression agent for nonresidential applications in 
        accordance with section 612(c).

SEC. 608. NATIONAL RECYCLING AND EMISSION REDUCTION PROGRAM.

  (a) In General.--(1) * * *

           *       *       *       *       *       *       *

  (c) Prohibitions.--(1) Effective July 1, 1992, it shall be 
unlawful for any person, in the course of maintaining, 
servicing, repairing, or disposing of an appliance or 
industrial process refrigeration, to knowingly vent or 
otherwise knowingly release or dispose of any class I or class 
II substance used as a refrigerant in such appliance (or 
industrial process refrigeration) in a manner which permits 
such substance to enter the environment. De minimis releases 
associated with good faith attempts to recapture and recycle or 
safely dispose of any such substance shall not be subject to 
the prohibition set forth in the preceding sentence.
  (2) Effective 5 years after the enactment of the Clean Air 
Act Amendments of 1990, paragraph (1) shall also apply to the 
venting, release, or disposal of any substitute substance for a 
class I or class II substance by any person maintaining, 
servicing, repairing, or disposing of an appliance or 
industrial process refrigeration which contains and uses as a 
refrigerant any such substance, unless the Administrator 
determines that venting, releasing, or disposing of such 
substance does not pose a threat to the environment. For 
purposes of this paragraph, the term ``appliance'' includes any 
device which contains and uses as a refrigerant a substitute 
substance and which is used for household or commercial 
purposes, including any air conditioner, refrigerator, chiller, 
or freezer.
    (3) Containers of Class I and Class II Substances.--
          (A) Definition of refillable container.--In this 
        paragraph, the term `refillable container' means a 
        container that is designed to be refilled.
          (B) Regulations.--Not later than 2 years after the 
        date of enactment of this paragraph, the Administrator 
        shall revise regulations promulgated under this section 
        to require that only a refillable container may be used 
        to hold 20 pounds or more of a class I substance or 
        class II substance.

SEC. 609. SERVICING OF MOTOR VEHICLE AIR CONDITIONERS.

  (a) Regulations.--Within 1 year after the enactment of the 
Clean Air Act Amendments of 1990, the Administrator shall 
promulgate regulations in accordance with this section 
establishing standards and requirements regarding the servicing 
of motor vehicle air conditioners.
  (b) * * *

           *       *       *       *       *       *       *

  (e) Small Containers of Class I or Class II, group I, group I 
Substances.--Effective 2 years after the date of the enactment 
of the Clean Air Act Amendments of 1990, it shall be unlawful 
for any person to sell or distribute, or offer for sale or 
distribution, in interstate commerce to any person (other than 
a person performing service for consideration on motor vehicle 
air-conditioning systems in compliance with this section) any 
class I or class II, group I substance that is suitable for use 
as a refrigerant in a motor vehicle air-conditioning system and 
that is in a container which contains less than 20 pounds of 
such refrigerant.
  (f) Class II, Group II Substances.--
          (1) Repair.--The Administrator may promulgate 
        regulations establishing requirements for repair of 
        motor vehicle air conditioners prior to adding a class 
        II, group II substance.
          (2) Small containers.--(A) The Administrator may 
        promulgate regulations establishing servicing practices 
        and procedures for recovery of class II, group II 
        substances from containers which contain less than 20 
        pounds of such class II, group II substances.
          (B) Not later than 18 months after enactment of this 
        subsection, the Administrator shall either promulgate 
        regulations requiring that containers which contain 
        less than 20 pounds of a class II, group II substance 
        be equipped with a device or technology that limits 
        refrigerant emissions and leaks from the container and 
        limits refrigerant emissions and leaks during the 
        transfer of refrigerant from the container to the motor 
        vehicle air conditioner or issue a determination that 
        such requirements are not necessary or appropriate.
          (C) Not later than 18 months after enactment of this 
        subsection, the Administrator shall promulgate 
        regulations establishing requirements for consumer 
        education materials on best practices associated with 
        the use of containers which contain less than 20 pounds 
        of a class II, group II substance and prohibiting the 
        sale or distribution, or offer for sale or 
        distribution, of any class II, group II substance in 
        any container which contains less than 20 pounds of 
        such class II, group II substance, unless consumer 
        education materials consistent with such requirements 
        are displayed and available at point-of-sale locations, 
        provided to the consumer, or included in or on the 
        packaging of the container which contain less than 20 
        pounds of a class II, group II substance.
          (D) The Administrator may, through rulemaking, extend 
        the requirements established under this paragraph to 
        containers which contain 30 pounds or less of a class 
        II, group II substance if the Administrator determines 
        that such action would produce significant 
        environmental benefits.
          (3) Restriction of sales.--Effective January 1, 2014, 
        no person may sell or distribute or offer to sell or 
        distribute or otherwise introduce into interstate 
        commerce any motor vehicle air conditioner refrigerant 
        in any size container unless the substance has been 
        found acceptable for use in a motor vehicle air 
        conditioner under section 612.

           *       *       *       *       *       *       *

SEC. 612. SAFE ALTERNATIVES POLICY.

  (a) * * *

           *       *       *       *       *       *       *

  (e) Studies and Notification.--The Administrator shall 
require any person who produces a chemical substitute for a 
class I or class IIsubstance to provide the Administrator with 
such person's unpublished health and safety studies on such 
substitute and require producers to notify the Administrator 
not less than 90 days before new or existing chemicals are 
introduced into interstate commerce for significant new uses as 
substitutes for a class I or class II substance. This 
subsection shall be subject to section 114(c).

           *       *       *       *       *       *       *

SEC. 618. MISCELLANEOUS PROVISIONS.

  For purposes of section 116, requirements concerning the 
areas addressed by this title for the protection of the 
stratosphere against ozone layer depletion shall be treated as 
requirements for the control and abatement of air pollution. 
For purposes of section 118, the requirements of this title and 
corresponding State, interstate, and local requirements, 
administrative authority, and process, and sanctions respecting 
the protection of the stratospheric ozone layer shall be 
treated as requirements for the control and abatement of air 
pollution within the meaning of section 118.

SEC. 619. HYDROFLUOROCARBONS (HFCS).

  (a) Treatment as Class II, Group II Substances.--Except as 
otherwise provided in this section, hydrofluorocarbons shall be 
treated as class II substances for purposes of applying the 
provisions of this title. The Administrator shall establish two 
groups of class II substances. Class II, group I substances 
shall include all hydrochlorofluorocarbons (HCFCs) listed 
pursuant to section 602(b). Class II, group II substances shall 
include each of the following:
          (1) Hydrofluorocarbon-23 (HFC-23).
          (2) Hydrofluorocarbon-32 (HFC-32).
          (3) Hydrofluorocarbon-41 (HFC-41).
          (4) Hydrofluorocarbon-125 (HFC-125).
          (5) Hydrofluorocarbon-134 (HFC-134).
          (6) Hydrofluorocarbon-134a (HFC-134a).
          (7) Hydrofluorocarbon-143 (HFC-143).
          (8) Hydrofluorocarbon-143a (HFC-143a).
          (9) Hydrofluorocarbon-152 (HFC-152).
          (10) Hydrofluorocarbon-152a (HFC-152a).
          (11) Hydrofluorocarbon-227ea (HFC-227ea).
          (12) Hydrofluorocarbon-236cb (HFC-236cb).
          (13) Hydrofluorocarbon-236ea (HFC-236ea).
          (14) Hydrofluorocarbon-236fa (HFC-236fa).
          (15) Hydrofluorocarbon-245ca (HFC-245ca).
          (16) Hydrofluorocarbon-245fa (HFC-245fa).
          (17) Hydrofluorocarbon-365mfc (HFC-365mfc).
          (18) Hydrofluorocarbon-43-10mee (HFC-43-10mee).
          (19) Hydrofluoroolefin-1234yf (HFO-1234yf).
          (20) Hydrofluoroolefin-1234ze (HFO-1234ze).
Not later than 6 months after the date of enactment of this 
title, the Administrator shall publish an initial list of class 
II, group II substances, which shall include the substances 
listed in this subsection. The Administrator may add to the 
list of class II, group II substances any other substance used 
as a substitute for a class I or II substance if the 
Administrator determines that 1 metric ton of the substance 
makes the same or greater contribution to global warming over 
100 years as 1 metric ton of carbon dioxide. Within 24 months 
after the date of enactment of this section, the Administrator 
shall amend the regulations under this title (including the 
regulations referred to in sections 603, 608, 609, 610, 611, 
612, and 613) to apply to class II, group II substances.
  (b) Consumption and Production of Class II, Group II 
Substances.--
          (1) In general.--
                  (A) Consumption phase down.--In the case of 
                class II, group II substances, in lieu of 
                applying section 605 and the regulations 
                thereunder, the Administrator shall promulgate 
                regulations phasing down the consumption of 
                class II, group II substances in the United 
                States, and the importation of products 
                containing any class II, group II substance, in 
                accordance with this subsection within 18 
                months after the date of enactment of this 
                section. Effective January 1, 2012, it shall be 
                unlawful for any person to produce any class 
                II, group II substance, import any class II, 
                group II substance, or import any product 
                containing any class II, group II substance 
                without holding one consumption allowance or 
                one destruction offset credit for each carbon 
                dioxide equivalent ton of the class II, group 
                II substance. Any person who exports a class 
                II, group II substance for which a consumption 
                allowance was retired may receive a refund of 
                that allowance from the Administrator following 
                the export.
                  (B) Production.--If the United States becomes 
                a party or otherwise adheres to a multilateral 
                agreement, including any amendment to the 
                Montreal Protocol on Substances That Deplete 
                the Ozone Layer, that restricts the production 
                of class II, group II substances, the 
                Administrator shall promulgate regulations 
                establishing a baseline for the production of 
                class II, group II substances in the United 
                States and phasing down the production of class 
                II, group II substances in the United States, 
                in accordance with such multilateral agreement 
                and subject to the same exceptions and other 
                provisions as are applicable to the phase down 
                of consumption of class II, group II substances 
                under this section (except that the 
                Administrator shall not require a person who 
                obtains production allowances from the 
                Administrator to make payment for such 
                allowances if the person is making payment for 
                a corresponding quantity of consumption 
                allowances of the same vintage year). Upon the 
                effective date of such regulations, it shall be 
                unlawful for any person to produce any class 
                II, group II substance without holding one 
                consumption allowance and one production 
                allowance, or one destruction offset credit, 
                for each carbon dioxide equivalent ton of the 
                class II, group II substance.
                  (C) Integrity of limits.--To maintain the 
                integrity of the class II, group II limits, the 
                Administrator may, through rulemaking, limit 
                the percentage of each person's compliance 
                obligation that may be met through the use of 
                destruction offset credits or banked 
                allowances.
                  (D) Counting of violations.--Each consumption 
                allowance, production allowance, or destruction 
                offset credit not held as required by this 
                section shall be a separate violation of this 
                section.
          (2) Schedule.--Pursuant to the regulations 
        promulgated pursuant to paragraph (1)(A), the number of 
        class II, group II consumption allowances established 
        by the Administrator for each calendar year beginning 
        in 2012 shall be the following percentage of the 
        baseline, as established by the Administrator pursuant 
        to paragraph (3):

----------------------------------------------------------------------------------------------------------------
                     Calendar Year                                         Percent of Baseline
----------------------------------------------------------------------------------------------------------------
2012                                                     90
----------------------------------------------------------------------------------------------------------------
2013                                                     87.5
----------------------------------------------------------------------------------------------------------------
2014                                                     85
----------------------------------------------------------------------------------------------------------------
2015                                                     82.5
----------------------------------------------------------------------------------------------------------------
2016                                                     80
----------------------------------------------------------------------------------------------------------------
2017                                                     77.5
----------------------------------------------------------------------------------------------------------------
2018                                                     75
----------------------------------------------------------------------------------------------------------------
2019                                                     71
----------------------------------------------------------------------------------------------------------------
2020                                                     67
----------------------------------------------------------------------------------------------------------------
2021                                                     63
----------------------------------------------------------------------------------------------------------------
2022                                                     59
----------------------------------------------------------------------------------------------------------------
2023                                                     54
----------------------------------------------------------------------------------------------------------------
2024                                                     50
----------------------------------------------------------------------------------------------------------------
2025                                                     46
----------------------------------------------------------------------------------------------------------------
2026                                                     42
----------------------------------------------------------------------------------------------------------------
2027                                                     38
----------------------------------------------------------------------------------------------------------------
2028                                                     34
----------------------------------------------------------------------------------------------------------------
2029                                                     30
----------------------------------------------------------------------------------------------------------------
2030                                                     25
----------------------------------------------------------------------------------------------------------------
2031                                                     21
----------------------------------------------------------------------------------------------------------------
2032                                                     17
----------------------------------------------------------------------------------------------------------------
after 2032                                               15
----------------------------------------------------------------------------------------------------------------

          (3) Baseline.--(A) Not later than 1 year after the 
        date of enactment of this section, the Administrator 
        shall promulgate regulations to establish the baseline 
        for purposes of paragraph (2). The baseline shall be 
        the sum, expressed in metric tons of carbon dioxide 
        equivalents, of--
                  (i) the annual average consumption of all 
                class II substances in calendar years 2004, 
                2005, and 2006; plus
                  (ii) the annual average quantity of all class 
                II substances contained in imported products in 
                calendar years 2004, 2005, and 2006.
          (B) Notwithstanding subparagraph (A), if the 
        Administrator determines that the baseline is higher 
        than 370 million metric tons of carbon dioxide 
        equivalents, then the Administrator shall establish the 
        baseline at 370 million metric tons of carbon dioxide 
        equivalents.
          (C) Notwithstanding subparagraph (A), if the 
        Administrator determines that the baseline is lower 
        than 280 million metric tons of carbon dioxide 
        equivalents, then the Administrator shall establish the 
        baseline at 280 million metric tons of carbon dioxide 
        equivalents.
          (4) Distribution of allowances.--
                  (A) In general.--Pursuant to the regulations 
                promulgated under paragraph (1)(A), for each 
                calendar year beginning in 2012, the 
                Administrator shall sell consumption allowances 
                in accordance with this paragraph.
                  (B) Establishment of pools.--The 
                Administrator shall establish two allowance 
                pools. Eighty percent of the consumption 
                allowances available for a calendar year shall 
                be placed in the producer-importer pool, and 20 
                percent of the consumption allowances available 
                for a calendar year shall be placed in the 
                secondary pool.
                  (C) Producer-importer pool.--
                          (i) Auction.--(I) For each calendar 
                        year, the Administrator shall offer for 
                        sale at auction the following 
                        percentage of the consumption 
                        allowances in the producer-importer 
                        pool:

----------------------------------------------------------------------------------------------------------------
                     Calendar Year                                    Percent Available for Auction
----------------------------------------------------------------------------------------------------------------
2012                                                     10
----------------------------------------------------------------------------------------------------------------
2013                                                     20
----------------------------------------------------------------------------------------------------------------
2014                                                     30
----------------------------------------------------------------------------------------------------------------
2015                                                     40
----------------------------------------------------------------------------------------------------------------
2016                                                     50
----------------------------------------------------------------------------------------------------------------
2017                                                     60
----------------------------------------------------------------------------------------------------------------
2018                                                     70
----------------------------------------------------------------------------------------------------------------
2019                                                     80
----------------------------------------------------------------------------------------------------------------
2020 and thereafter                                      90
----------------------------------------------------------------------------------------------------------------

                          (II) Any person who produced or 
                        imported any class II substance during 
                        calendar year 2004, 2005, or 2006 may 
                        participate in the auction. No other 
                        persons may participate in the auction 
                        unless permitted to do so pursuant to 
                        subclause (III).
                          (III) Not later than 3 years after 
                        the date of the initial auction and 
                        from time to time thereafter, the 
                        Administrator shall determine through 
                        rulemaking whether any persons who did 
                        not produce or import a class II 
                        substance during calendar year 2004, 
                        2005, or 2006 will be permitted to 
                        participate in future auctions. The 
                        Administrator shall base this 
                        determination on the duration, 
                        consistency, and scale of such person's 
                        purchases of consumption allowances in 
                        the secondary pool under subparagraph 
                        (D)(ii)(III), as well as economic or 
                        technical hardship and other factors 
                        deemed relevant by the Administrator.
                          (IV) The Administrator shall set a 
                        minimum bid per consumption allowance 
                        of the following:
                                  (aa) For vintage year 2012, 
                                $1.00.
                                  (bb) For vintage year 2013, 
                                $1.20.
                                  (cc) For vintage year 2014, 
                                $1.40.
                                  (dd) For vintage year 2015, 
                                $1.60.
                                  (ee) For vintage year 2016, 
                                $1.80.
                                  (ff) For vintage year 2017, 
                                $2.00.
                                  (gg) For vintage year 2018 
                                and thereafter, $2.00 adjusted 
                                for inflation after vintage 
                                year 2017 based upon the 
                                producer price index as 
                                published by the Department of 
                                Commerce.
                          (ii) Non-auction sale.--(I) For each 
                        calendar year, as soon as practicable 
                        after auction, the Administrator shall 
                        offer for sale the remaining 
                        consumption allowances in the producer-
                        importer pool at the following prices:
                                  (aa) A fee of $1.00 per 
                                vintage year 2012 allowance.
                                  (bb) A fee of $1.20 per 
                                vintage year 2013 allowance.
                                  (cc) A fee of $1.40 per 
                                vintage year 2014 allowance.
                                  (dd) For each vintage year 
                                2015 allowance, a fee equal to 
                                the average of $1.10 and the 
                                auction clearing price for 
                                vintage year 2014 allowances.
                                  (ee) For each vintage year 
                                2016 allowance, a fee equal to 
                                the average of $1.30 and the 
                                auction clearing price for 
                                vintage year 2015 allowances.
                                  (ff) For each vintage year 
                                2017 allowance, a fee equal to 
                                the average of $1.40 and the 
                                auction clearing price for 
                                vintage year 2016 allowances.
                                  (gg) For each allowance of 
                                vintage year 2018 and 
                                subsequent vintage years, a fee 
                                equal to the auction clearing 
                                price for that vintage year.
                          (II) The Administrator shall offer to 
                        sell the remaining consumption 
                        allowances in the producer-importer 
                        pool to producers of class II, group II 
                        substances and importers of class II, 
                        group II substances in proportion to 
                        their relative allocation share.
                          (III) Such allocation share for such 
                        sale shall be determined by the 
                        Administrator using such producer's or 
                        importer's annual average data on class 
                        II substances from calendar years 2004, 
                        2005, and 2006, on a carbon dioxide 
                        equivalent basis, and--
                                  (aa) shall be based on a 
                                producer's production, plus 
                                importation, plus acquisitions 
                                and purchases from persons who 
                                produced class II substances in 
                                the United States during 
                                calendar year 2004, 2005, or 
                                2006, less exportation, less 
                                transfers and sales to persons 
                                who produced class II 
                                substances in the United States 
                                during calendar year 2004, 
                                2005, or 2006; and
                                  (bb) for an importer of class 
                                II substances that did not 
                                produce in the United States 
                                any class II substance during 
                                calendar years 2004, 2005, and 
                                2006, shall be based on the 
                                importer's importation less 
                                exportation.
                        For purposes of item (aa), the 
                        Administrator shall account for 100 
                        percent of class II, group II 
                        substances and 60 percent of class II, 
                        group I substances. For purposes of 
                        item (bb), the Administrator shall 
                        account for 100 percent of class II, 
                        group II substances and 100 percent of 
                        class II, group I substances.
                          (IV) Any consumption allowances made 
                        available for nonauction sale to a 
                        specific producer or importer of class 
                        II, group II substances but not 
                        purchased by the specific producer or 
                        importer shall be made available for 
                        sale to any producer or importer of 
                        class II substances during calendar 
                        year 2004, 2005, or 2006. If demand for 
                        such consumption allowances exceeds 
                        supply of such consumption allowances, 
                        the Administrator shall develop and 
                        utilize criteria for the sale of such 
                        consumption allowances that may include 
                        pro rata shares, historic production 
                        and importation, economic or technical 
                        hardship, or other factors deemed 
                        relevant by the Administrator. If the 
                        supply of such consumption allowances 
                        exceeds demand, the Administrator may 
                        offer such consumption allowances for 
                        sale in the secondary pool as set forth 
                        in subparagraph (D).
                  (D) Secondary pool.--(i) For each calendar 
                year, as soon as practicable after the auction 
                required in subparagraph (C), the Administrator 
                shall offer for sale the consumption allowances 
                in the secondary pool at the prices listed in 
                subparagraph (C)(ii).
                  (ii) The Administrator shall accept 
                applications for purchase of secondary pool 
                consumption allowances from--
                          (I) importers of products containing 
                        class II, group II substances;
                          (II) persons who purchased any class 
                        II, group II substance directly from a 
                        producer or importer of class II, group 
                        II substances for use in a product 
                        containing a class II, group II 
                        substance, a manufacturing process, or 
                        a reclamation process;
                          (III) persons who did not produce or 
                        import a class II substance during 
                        calendar year 2004, 2005, or 2006, but 
                        who the Administrator determines have 
                        subsequently taken significant steps to 
                        produce or import a substantial 
                        quantity of any class II, group II 
                        substance; and
                          (IV) persons who produced or imported 
                        any class II substance during calendar 
                        year 2004, 2005, or 2006.
                  (iii) If the supply of consumption allowances 
                in the secondary pool equals or exceeds the 
                demand for consumption allowances in the 
                secondary pool as presented in the applications 
                for purchase, the Administrator shall sell the 
                consumption allowances in the secondary pool to 
                the applicants in the amounts requested in the 
                applications for purchase. Any consumption 
                allowances in the secondary pool not purchased 
                in a calendar year may be rolled over and added 
                to the quantity available in the secondary pool 
                in the following year.
                  (iv) If the demand for consumption allowances 
                in the secondary pool as presented in the 
                applications for purchase exceeds the supply of 
                consumption allowances in the secondary pool, 
                the Administrator shall sell the consumption 
                allowances as follows:
                          (I) The Administrator shall first 
                        sell the consumption allowances in the 
                        secondary pool to any importers of 
                        products containing class II, group II 
                        substances in the amounts requested in 
                        their applications for purchase. If the 
                        demand for such consumption allowances 
                        exceeds supply of such consumption 
                        allowances, the Administrator shall 
                        develop and utilize criteria for the 
                        sale of such consumption allowances 
                        among importers of products containing 
                        class II, group II substances that may 
                        include pro rata shares, historic 
                        importation, economic or technical 
                        hardship, or other factors deemed 
                        relevant by the Administrator.
                          (II) The Administrator shall next 
                        sell any remaining consumption 
                        allowances to persons identified in 
                        subclauses (II) and (III) of clause 
                        (ii) in the amounts requested in their 
                        applications for purchase. If the 
                        demand for such consumption allowances 
                        exceeds remaining supply of such 
                        consumption allowances, the 
                        Administrator shall develop and utilize 
                        criteria for the sale of such 
                        consumption allowances among subclauses 
                        (II) and (III) applicants that may 
                        include pro rata shares, historic use, 
                        economic or technical hardship, or 
                        other factors deemed relevant by the 
                        Administrator.
                          (III) The Administrator shall then 
                        sell any remaining consumption 
                        allowances to persons who produced or 
                        imported any class II substance during 
                        calendar year 2004, 2005, or 2006 in 
                        the amounts requested in their 
                        applications for purchase. If demand 
                        for such consumption allowances exceeds 
                        remaining supply of such consumption 
                        allowances, the Administrator shall 
                        develop and utilize criteria for the 
                        sale of such consumption allowances 
                        that may include pro rata shares, 
                        historic production and importation, 
                        economic or technical hardship, or 
                        other factors deemed relevant by the 
                        Administrator.
                          (IV) Each person who purchases 
                        consumption allowances in a non-auction 
                        sale under this subparagraph shall be 
                        required to disclose the person or 
                        entity sponsoring or benefitting from 
                        the purchases if such person or entity 
                        is, in whole or in part, other than the 
                        purchaser or the purchaser's employer.
                  (E) Discretion to withhold allowances.--
                Nothing in this paragraph prevents the 
                Administrator from exercising discretion to 
                withhold and retire consumption allowances that 
                would otherwise be available for auction or 
                nonauction sale, or to allocate such allowances 
                for essential uses pursuant to subsection (d). 
                Not later than 18 months after the date of 
                enactment of this section, the Administrator 
                shall promulgate regulations establishing 
                criteria for withholding and retiring 
                consumption allowances and governing the 
                allocation of withheld allowances for essential 
                uses subject to the criteria under subsection 
                (d).
          (5) Banking.--A consumption allowance or destruction 
        offset credit may be used to meet the compliance 
        obligation requirements of paragraph (1) in--
                  (A) the vintage year for the allowance or 
                destruction offset credit; or
                  (B) any calendar year subsequent to the 
                vintage year for the allowance or destruction 
                offset credit.
          (6) Auctions.--
                  (A) Initial regulations.--Not later than 18 
                months after the date of enactment of this 
                section, the Administrator shall promulgate 
                regulations governing the auction of allowances 
                under this section. Such regulations shall 
                include the following requirements:
                          (i) Frequency; first auction.--
                        Auctions shall be held one time per 
                        year at regular intervals, with the 
                        first auction to be held no later than 
                        October 31, 2011.
                          (ii) Auction format.--Auctions shall 
                        follow a single-round, sealed-bid, 
                        uniform price format.
                          (iii) Financial assurance.--The 
                        Administrator may establish financial 
                        assurance requirements to ensure that 
                        auction participants can and will 
                        perform on their bids.
                          (iv) Disclosure of beneficial 
                        ownership.--Each bidder in the auction 
                        shall be required to disclose the 
                        person or entity sponsoring or 
                        benefitting from the bidder's 
                        participation in the auction if such 
                        person or entity is, in whole or in 
                        part, other than the bidder.
                          (v) Publication of information.--
                        After the auction, the Administrator 
                        shall, in a timely fashion, publish the 
                        number of bidders, number of winning 
                        bidders, the quantity of allowances 
                        sold, and the auction clearing price.
                          (vi) Bidding limits in 2012.--In the 
                        vintage year 2012 auction, no auction 
                        participant may, directly or in concert 
                        with another participant, bid for or 
                        purchase more allowances offered for 
                        sale at the auction than the greater 
                        of--
                                  (I) the number of allowances 
                                which, when added to the number 
                                of allowances available for 
                                purchase by the participant in 
                                the producer-importer pool non-
                                auction sale, would equal the 
                                participant's annual average 
                                consumption of class II, group 
                                II substances in calendar years 
                                2004, 2005, and 2006; or
                                  (II) the number of allowances 
                                equal to the product of--
                                          (aa) 1.20 multiplied 
                                        by the participant's 
                                        allocation share of the 
                                        producer-importer pool 
                                        non-auction sale as 
                                        determined under 
                                        paragraph (4)(C)(ii); 
                                        and
                                          (bb) the number of 
                                        vintage year 2012 
                                        allowances offered at 
                                        auction.
                          (vii) Bidding limits in 2013.--In the 
                        vintage year 2013 auction, no auction 
                        participant may, directly or in concert 
                        with another participant, bid for or 
                        purchase more allowances offered for 
                        sale at the auction than the product 
                        of--
                                  (I) 1.15 multiplied by the 
                                ratio of the total number of 
                                vintage year 2012 allowances 
                                purchased by the participant 
                                from the auction and from the 
                                producer-importer pool non-
                                auction sale to the total 
                                number of vintage year 2012 
                                allowances in the producer-
                                importer pool; and
                                  (II) the number of vintage 
                                year 2013 allowances offered at 
                                auction.
                          (viii) Bidding limits in subsequent 
                        years.--In the auctions for vintage 
                        year 2014 and subsequent vintage years, 
                        no auction participant may, directly or 
                        in concert with another participant, 
                        bid for or purchase more allowances 
                        offered for sale at the auction than 
                        the product of--
                                  (I) 1.15 multiplied by the 
                                ratio of the highest number of 
                                allowances required to be held 
                                by the participant in any of 
                                the three prior vintage years 
                                to meet its compliance 
                                obligation under paragraph (1) 
                                to the total number of 
                                allowances in the producer-
                                importer pool for such vintage 
                                year; and
                                  (II) the number of allowances 
                                offered at auction for that 
                                vintage year.
                          (ix) Other requirements.--The 
                        Administrator may include in the 
                        regulations such other requirements or 
                        provisions as the Administrator 
                        considers necessary to promote 
                        effective, efficient, transparent, and 
                        fair administration of auctions under 
                        this section.
                  (B) Revision of regulations.--The 
                Administrator may, at any time, revise the 
                initial regulations promulgated under 
                subparagraph (A) based on the Administrator's 
                experience in administering allowance auctions 
                by promulgating new regulations. Such revised 
                regulations need not meet the requirements 
                identified in subparagraph (A) if the 
                Administrator determines that an alternative 
                auction design would be more effective, taking 
                into account factors including costs of 
                administration, transparency, fairness, and 
                risks of collusion or manipulation. In 
                determining whether and how to revise the 
                initial regulations under this paragraph, the 
                Administrator shall not consider maximization 
                of revenues to the Federal Government.
                  (C) Delegation or contract.--Pursuant to 
                regulations under this section, the 
                Administrator may, by delegation or contract, 
                provide for the conduct of auctions under the 
                Administrator's supervision by other 
                departments or agencies of the Federal 
                Government or by nongovernmental agencies, 
                groups, or organizations.
          (7) Payments for allowances.--
                  (A) Initial regulations.--Not later than 18 
                months after the date of enactment of this 
                section, the Administrator shall promulgate 
                regulations governing the payment for 
                allowances purchased in auction and non-auction 
                sales under this section. Such regulations 
                shall include the requirement that, in the 
                event that full payment for purchased 
                allowances is not made on the date of purchase, 
                equal payments shall be made one time per 
                calendar quarter with all payments for 
                allowances of a vintage year made by the end of 
                that vintage year.
                  (B) Revision of regulations.--The 
                Administrator may, at any time, revise the 
                initial regulations promulgated under 
                subparagraph (A) based on the Administrator's 
                experience in administering collection of 
                payments by promulgating new regulations. Such 
                revised regulations need not meet the 
                requirements identified in subparagraph (A) if 
                the Administrator determines that an 
                alternative payment structure or frequency 
                would be more effective, taking into account 
                factors including cost of administration, 
                transparency, and fairness. In determining 
                whether and how to revise the initial 
                regulations under this paragraph, the 
                Administrator shall not consider maximization 
                of revenues to the Federal Government.
                  (C) Penalties for non-payment.--Failure to 
                pay for purchased allowances in accordance with 
                the regulations promulgated pursuant to this 
                paragraph shall be a violation of the 
                requirements of subsection (b). Section 
                113(c)(3) shall apply in the case of any person 
                who knowingly fails to pay for purchased 
                allowances in accordance with the regulations 
                promulgated pursuant to this paragraph.
          (8) Imported products.--If the United States becomes 
        a party or otherwise adheres to a multilateral 
        agreement, including any amendment to the Montreal 
        Protocol on Substances That Deplete the Ozone Layer, 
        which restricts the production or consumption of class 
        II, group II substances--
                  (A) as of the date on which such agreement or 
                amendment enters into force, it shall no longer 
                be unlawful for any person to import from a 
                party to such agreement or amendment any 
                product containing any class II, group II 
                substance whose production or consumption is 
                regulated by such agreement or amendment 
                without holding one consumption allowance or 
                one destruction offset credit for each carbon 
                dioxide equivalent ton of the class II, group 
                II substance;
                  (B) the Administrator shall promulgate 
                regulations within 12 months of the date the 
                United States becomes a party or otherwise 
                adheres to such agreement or amendment, or the 
                date on which such agreement or amendment 
                enters into force, whichever is later, to 
                establish a new baseline for purposes of 
                paragraph (2), which new baseline shall be the 
                original baseline less the carbon dioxide 
                equivalent of the annual average quantity of 
                any class II substances regulated by such 
                agreement or amendment contained in products 
                imported from parties to such agreement or 
                amendment in calendar years 2004, 2005, and 
                2006;
                  (C) as of the date on which such agreement or 
                amendment enters into force, no person 
                importing any product containing any class II, 
                group II substance may, directly or in concert 
                with another person, purchase any consumption 
                allowances for sale by the Administrator for 
                the importation of products from a party to 
                such agreement or amendment that contain any 
                class II, group II substance restricted by such 
                agreement or amendment; and
                  (D) the Administrator may adjust the two 
                allowance pools established in paragraph (4) 
                such that up to 90 percent of the consumption 
                allowances available for a calendar year are 
                placed in the producer-importer pool with the 
                remaining consumption allowances placed in the 
                secondary pool.
          (9) Offsets.--
                  (A) Chlorofluorocarbon destruction.--Within 
                18 months after the date of enactment of this 
                section, the Administrator shall promulgate 
                regulations to provide for the issuance of 
                offset credits for the destruction, in the 
                calendar year 2012 or later, of 
                chlorofluorocarbons in the United States. The 
                Administrator shall establish and distribute to 
                the destroying entity a quantity of destruction 
                offset credits equal to 0.8 times the number of 
                metric tons of carbon dioxide equivalents of 
                reduction achieved through the destruction. No 
                destruction offset credits shall be established 
                for the destruction of a class II, group II 
                substance.
                  (B) Definition.--For purposes of this 
                paragraph, the term `destruction' means the 
                conversion of a substance by thermal, chemical, 
                or other means to another substance with little 
                or no carbon dioxide equivalent value and no 
                ozone depletion potential.
                  (C) Regulations.--The regulations promulgated 
                under this paragraph shall include standards 
                and protocols for project eligibility, 
                certification of destroyers, monitoring, 
                tracking, destruction efficiency, 
                quantification of project and baseline 
                emissions and carbon dioxide equivalent value, 
                and verification. The Administrator shall 
                ensure that destruction offset credits 
                represent real and verifiable destruction of 
                chlorofluorocarbons or other class I or class 
                II, group I, substances authorized under 
                subparagraph (D).
                  (D) Other substances.--The Administrator may 
                promulgate regulations to add to the list of 
                class I and class II, group I, substances that 
                may be destroyed for destruction offset 
                credits, taking into account a candidate 
                substance's carbon dioxide equivalent value, 
                ozone depletion potential, prevalence in banks 
                in the United States, and emission rates, as 
                well as the need for additional cost 
                containment under the class II, group II limits 
                and the integrity of the class II, group II 
                limits. The Administrator shall not add a class 
                I or class II, group I substance to the list if 
                the consumption of the substance has not been 
                completely phased-out internationally (except 
                for essential use exemptions or other similar 
                exemptions) pursuant to the Montreal Protocol.
                  (E) Extension of offsets.--(i) At any time 
                after the Administrator promulgates regulations 
                pursuant to subparagraph (A), the Administrator 
                may, pursuant to the requirements of part D of 
                title VII and based on the carbon dioxide 
                equivalent value of the substance destroyed, 
                add the types of destruction projects 
                authorized to receive destruction offset 
                credits under this paragraph to the list of 
                types of projects eligible for offset credits 
                under section 733. If such projects are added 
                to the list under section 733, the issuance of 
                offset credits for such projects under part D 
                of title VII shall be governed by the 
                requirements of such part D, while the issuance 
                of offset credits for such projects under this 
                paragraph shall be governed by the requirements 
                of this paragraph. Nothing in this paragraph 
                shall affect the issuance of offset credits 
                under section 740.
                  (ii) The Administrator shall not make the 
                addition under clause (i) unless the 
                Administrator finds that insufficient 
                destruction is occurring or is projected to 
                occur under this paragraph and that the 
                addition would increase destruction.
                  (iii) In no event shall more than one 
                destruction offset credit be issued under title 
                VII and this section for the destruction of the 
                same quantity of a substance.
          (10) Legal status of allowances and credits.--None of 
        the following constitutes a property right:
                  (A) A production or consumption allowance.
                  (B) A destruction offset credit.
  (c) Deadlines for Compliance.--Notwithstanding the deadlines 
specified for class II substances in sections 608, 609, 610, 
612, and 613 that occur prior to January 1, 2009, the deadline 
for promulgating regulations under those sections for class II, 
group II substances shall be January 1, 2012.
  (d) Exceptions for Essential Uses.--Notwithstanding the 
provisions of this section regarding auction and nonauction 
sale of allowances, to the extent consistent with any 
applicable multilateral agreement to which the United States is 
a party or otherwise adheres, the Administrator may allocate 
(and in the case of medical devices, shall determine whether to 
allocate) allowances withheld from auction or nonauction sale 
under subsection (b)(4)(E) for essential uses pursuant to the 
following requirements:
          (1) Medical devices.--The Administrator, after notice 
        and opportunity for public comment, and in consultation 
        with the Commissioner of Food and Drugs, shall 
        determine whether to allocate withheld allowances for 
        the production and consumption of class II, group II 
        substances solely for use in medical devices approved 
        and determined to be essential by the Commissioner. Not 
        later than 20 months after the date of enactment of 
        this title, the Commissioner shall approve and 
        determine essential medical devices. For purposes of 
        this section, section 601(8)(A) shall not apply to 
        metered dose inhalers.
          (2) Aviation and space vehicle safety.--The 
        Administrator, after notice and opportunity for public 
        comment, and in consultation with the Administrator of 
        the Federal Aviation Administration or the 
        Administrator of the National Aeronautics and Space 
        Administration, may allocate withheld allowances for 
        the production and consumption of class II, group II 
        substances solely for aviation and space flight safety 
        purposes.
          (3) Fire suppression.--The Administrator, after 
        notice and opportunity for public comment, may allocate 
        withheld allowances for the production and consumption 
        of class II, group II substances solely for fire 
        suppression purposes. Paragraphs (1) and (2) of 
        subsection (g) of section 604 shall apply to class II, 
        group II substances in the same manner and to the same 
        extent as such provisions apply to the substances 
        specified in such subsection.
          (4) National security.--The Administrator, after 
        notice and opportunity for public comment, and in 
        consultation with the Secretary of Defense, may 
        allocate withheld allowances for the production and 
        consumption of class II, group II substances for use as 
        may be necessary to protect the national security 
        interests of the United States if the Administrator, in 
        consultation with the Secretary of Defense, finds that 
        adequate substitutes are not available and that the 
        production or consumption of such substance is 
        necessary to protect such national security interest.
  (e) Developing Countries.--Notwithstanding any phase down of 
production required by this section, the Administrator, after 
notice and opportunity for public comment, may authorize the 
production of limited quantities of class II, group II 
substances in excess of the amounts otherwise allowable under 
this section solely for export to, and use in, developing 
countries. Any production authorized under this subsection 
shall be solely for purposes of satisfying the basic domestic 
needs of such countries as provided in applicable international 
agreements, if any, to which the United States is a party or 
otherwise adheres.
  (f) National Security; Fire Suppression, etc.--The provisions 
of subsection (f) and paragraphs (1) and (2) of subsection (g) 
of section 604 shall apply to any consumption and production 
phase down of class II, group II substances in the same manner 
and to the same extent, consistent with any applicable 
international agreement to which the United States is a party 
or otherwise adheres, as such provisions apply to the 
substances specified in such subsection.
  (g) Accelerated Schedule.--In lieu of section 606, the 
provisions of paragraphs (1), (2), and (3) of this subsection 
shall apply in the case of class II, group II substances.
          (1) In general.--The Administrator shall promulgate 
        initial regulations not later than 18 months after the 
        date of enactment of this section, and revised 
        regulations any time thereafter, which establish a 
        schedule for phasing down the consumption (and, if the 
        condition in subsection (b)(1)(B) is met, the 
        production) of class II, group II substances that is 
        more stringent than the schedule set forth in this 
        section if, based on the availability of substitutes, 
        the Administrator determines that such more stringent 
        schedule is practicable, taking into account 
        technological achievability, safety, and other factors 
        the Administrator deems relevant, or if the Montreal 
        Protocol, or any applicable international agreement to 
        which the United States is a party or otherwise 
        adheres, is modified or established to include a 
        schedule or other requirements to control or reduce 
        production, consumption, or use of any class II, group 
        II substance more rapidly than the applicable schedule 
        under this section.
          (2) Petition.--Any person may submit a petition to 
        promulgate regulations under this subsection in the 
        same manner and subject to the same procedures as are 
        provided in section 606(b).
          (3) Inconsistency.--If the Administrator determines 
        that the provisions of this section regarding banking, 
        allowance rollover, or destruction offset credits 
        create a significant potential for inconsistency with 
        the requirements of any applicable international 
        agreement to which the United States is a party or 
        otherwise adheres, the Administrator may promulgate 
        regulations restricting the availability of banking, 
        allowance rollover, or destruction offset credits to 
        the extent necessary to avoid such inconsistency.
  (h) Exchange.--Section 607 shall not apply in the case of 
class II, group II substances. Production and consumption 
allowances for class II, group II substances may be freely 
exchanged or sold but may not be converted into allowances for 
class II, group I substances.
  (i) Labeling.--(1) In applying section 611 to products 
containing or manufactured with class II, group II substances, 
in lieu of the words `destroying ozone in the upper atmosphere' 
on labels required under section 611 there shall be substituted 
the words `contributing to global warming'.
  (2) The Administrator may, through rulemaking, exempt from 
the requirements of section 611 products containing or 
manufactured with class II, group II substances determined to 
have little or no carbon dioxide equivalent value compared to 
other substances used in similar products.
  (j) Nonessential Products.--For the purposes of section 610, 
class II, group II substances shall be regulated under section 
610(b), except that in applying section 610(b) the word 
`hydrofluorocarbon' shall be substituted for the word 
`chlorofluorocarbon' and the term `class II, group II' shall be 
substituted for the term `class I'. Class II, group II 
substances shall not be subject to the provisions of section 
610(d).
  (k) International Transfers.--In the case of class II, group 
II substances, in lieu of section 616, this subsection shall 
apply. To the extent consistent with any applicable 
international agreement to which the United States is a party 
or otherwise adheres, including any amendment to the Montreal 
Protocol, the United States may engage in transfers with other 
parties to such agreement or amendment under the following 
conditions:
          (1) The United States may transfer production 
        allowances to another party to such agreement or 
        amendment if, at the time of the transfer, the 
        Administrator establishes revised production limits for 
        the United States accounting for the transfer in 
        accordance with regulations promulgated pursuant to 
        this subsection.
          (2) The United States may acquire production 
        allowances from another party to such agreement or 
        amendment if, at the time of the transfer, the 
        Administrator finds that the other party has revised 
        its domestic production limits in the same manner as 
        provided with respect to transfers by the United States 
        in the regulations promulgated pursuant to this 
        subsection.
  (l) Relationship to Other Laws.--
          (1) State laws.--For purposes of section 116, the 
        requirements of this section for class II, group II 
        substances shall be treated as requirements for the 
        control and abatement of air pollution.
          (2) Multilateral agreements.--Section 614 shall apply 
        to the provisions of this section concerning class II, 
        group II substances, except that for the words 
        `Montreal Protocol' there shall be substituted the 
        words `Montreal Protocol, or any applicable 
        multilateral agreement to which the United States is a 
        party or otherwise adheres that restricts the 
        production or consumption of class II, group II 
        substances,' and for the words `Article 4 of the 
        Montreal Protocol' there shall be substituted `any 
        provision of such multilateral agreement regarding 
        trade with non-parties'.
          (3) Federal facilities.--For purposes of section 118, 
        the requirements of this section for class II, group II 
        substances and corresponding State, interstate, and 
        local requirements, administrative authority, and 
        process and sanctions shall be treated as requirements 
        for the control and abatement of air pollution within 
        the meaning of section 118.
  (m) Carbon Dioxide Equivalent Value.--(1) In lieu of section 
602(e), the provisions of this subsection shall apply in the 
case of class II, group II substances. Simultaneously with 
establishing the list of class II, group II substances, and 
simultaneously with any addition to that list, the 
Administrator shall publish the carbon dioxide equivalent value 
of each listed class II, group II substance, based on a 
determination of the number of metric tons of carbon dioxide 
that makes the same contribution to global warming over 100 
years as 1 metric ton of each class II, group II substance.
  (2) Not later than February 1, 2017, and not less than every 
5 years thereafter, the Administrator shall--
          (A) review, and if appropriate, revise the carbon 
        dioxide equivalent values established for class II, 
        group II substances based on a determination of the 
        number of metric tons of carbon dioxide that makes the 
        same contributions to global warming over 100 years as 
        1 metric ton of each class II, group II substance; and
          (B) publish in the Federal Register the results of 
        that review and any revisions.
  (3) A revised determination published in the Federal Register 
under paragraph (2)(B) shall take effect for production of 
class II, group II substances, consumption of class II, group 
II substances, and importation of products containing class II, 
group II substances starting on January 1 of the first calendar 
year starting at least 9 months after the date on which the 
revised determination was published.
  (4) The Administrator may decrease the frequency of review 
and revision under paragraph (2) if the Administrator 
determines that such decrease is appropriate in order to 
synchronize such review and revisions with any similar review 
process carried out pursuant to the United Nations Framework 
Convention on Climate Change, an agreement negotiated under 
that convention, The Vienna Convention for the Protection of 
the Ozone Layer, or an agreement negotiated under that 
convention, except that in no event shall the Administrator 
carry out such review and revision any less frequently than 
every 10 years.
  (n) Reporting Requirements.--In lieu of subsections (b) and 
(c) of section 603, paragraphs (1) and (2) of this subsection 
shall apply in the case of class II, group II substances:
          (1) In general.--On a quarterly basis, or such other 
        basis (not less than annually) as determined by the 
        Administrator, each person who produced, imported, or 
        exported a class II, group II substance, or who 
        imported a product containing a class II, group II 
        substance, shall file a report with the Administrator 
        setting forth the carbon dioxide equivalent amount of 
        the substance that such person produced, imported, or 
        exported, as well as the amount that was contained in 
        products imported by that person, during the preceding 
        reporting period. Each such report shall be signed and 
        attested by a responsible officer. If all other 
        reporting is complete, no such report shall be required 
        from a person after April 1 of the calendar year after 
        such person permanently ceases production, importation, 
        and exportation of the substance, as well as 
        importation of products containing the substance, and 
        so notifies the Administrator in writing. If the United 
        States becomes a party or otherwise adheres to a 
        multilateral agreement, including any amendment to the 
        Montreal Protocol on Substances That Deplete the Ozone 
        Layer, that restricts the production or consumption of 
        class II, group II substances, then, if all other 
        reporting is complete, no such report shall be required 
        from a person with respect to importation from parties 
        to such agreement or amendment of products containing 
        any class II, group II substance restricted by such 
        agreement or amendment, after April 1 of the calendar 
        year following the year during which such agreement or 
        amendment enters into force.
          (2) Baseline reports for class ii, group ii 
        substances.--
                  (A) In general.--Unless such information has 
                been previously reported to the Administrator, 
                on the date on which the first report under 
                paragraph (1) of this subsection is required to 
                be filed, each person who produced, imported, 
                or exported a class II, group II substance, or 
                who imported a product containing a class II 
                substance, (other than a substance added to the 
                list of class II, group II substances after the 
                publication of the initial list of such 
                substances under this section), shall file a 
                report with the Administrator setting forth the 
                amount of such substance that such person 
                produced, imported, exported, or that was 
                contained in products imported by that person, 
                during each of calendar years 2004, 2005, and 
                2006.
                  (B) Producers.--In reporting under 
                subparagraph (A), each person who produced in 
                the United States a class II substance during 
                calendar year 2004, 2005, or 2006 shall--
                          (i) report all acquisitions or 
                        purchases of class II substances during 
                        each of calendar years 2004, 2005, and 
                        2006 from all other persons who 
                        produced in the United States a class 
                        II substance during calendar year 2004, 
                        2005, or 2006, and supply evidence of 
                        such acquisitions and purchases as 
                        deemed necessary by the Administrator; 
                        and
                          (ii) report all transfers or sales of 
                        class II substances during each of 
                        calendar years 2004, 2005, and 2006 to 
                        all other persons who produced in the 
                        United States a class II substance 
                        during calendar year 2004, 2005, or 
                        2006, and supply evidence of such 
                        transfers and sales as deemed necessary 
                        by the Administrator.
                  (C) Added substances.--In the case of a 
                substance added to the list of class II, group 
                II substances after publication of the initial 
                list of such substances under this section, 
                each person who produced, imported, exported, 
                or imported products containing such substance 
                in calendar year 2004, 2005, or 2006 shall file 
                a report with the Administrator within 180 days 
                after the date on which such substance is added 
                to the list, setting forth the amount of the 
                substance that such person produced, imported, 
                and exported, as well as the amount that was 
                contained in products imported by that person, 
                in calendar years 2004, 2005, and 2006.
  (o) Stratospheric Ozone and Climate Protection Fund.--
          (1) In general.--There is established in the Treasury 
        of the United States a Stratospheric Ozone and Climate 
        Protection Fund.
          (2) Deposits.--The Administrator shall deposit all 
        proceeds from the auction and non-auction sale of 
        allowances under this section into the Stratospheric 
        Ozone and Climate Protection Fund.
          (3) Use.--Amounts deposited into the Stratospheric 
        Ozone and Climate Protection Fund shall be available, 
        subject to appropriations, exclusively for the 
        following purposes:
                  (A) Recovery, recycling, and reclamation.--
                The Administrator may use funds to establish a 
                program to incentivize the recovery, recycling, 
                and reclamation of any Class II substances in 
                order to reduce emissions of such substances.
                  (B) Multilateral fund.--If the United States 
                becomes a party or otherwise adheres to a 
                multilateral agreement, including any amendment 
                to the Montreal Protocol on Substances That 
                Deplete the Ozone Layer, which restricts the 
                production or consumption of class II, group II 
                substances, the Administrator may use funds to 
                meet any related contribution obligation of the 
                United States to the Multilateral Fund for the 
                Implementation of the Montreal Protocol or 
                similar multilateral fund established under 
                such multilateral agreement.
                  (C) Best-in-class appliances deployment 
                program.--The Secretary of Energy may use funds 
                to establish and carry out a program, to be 
                known as the `Best-in-Class Appliances 
                Deployment Program'--
                          (i) to provide bonus payments to 
                        retailers or distributors for sales of 
                        best-in-class high-efficiency household 
                        appliance models, high-efficiency 
                        installed building equipment, and high-
                        efficiency consumer electronics, with 
                        the goals of--
                                  (I) accelerating the 
                                reduction in consumption of 
                                hydrochlorofluorocarbons 
                                (measured on a global warming 
                                potential-weighted basis);
                                  (II) reducing life-cycle 
                                costs for consumers;
                                  (III) encouraging innovation; 
                                and
                                  (IV) maximizing energy 
                                savings and public benefit;
                          (ii) to provide bounties to retailers 
                        and manufacturers for the replacement, 
                        retirement, and recycling of old, 
                        inefficient, and environmentally 
                        harmful products; and
                          (iii) to provide premium awards to 
                        manufacturers for developing and 
                        producing new super-efficient best-in-
                        class products.
                  (D) Low global warming product transition 
                assistance program.--
                          (i) In general.--The Administrator, 
                        in consultation with the Secretary of 
                        Energy, may utilize funds in fiscal 
                        years 2012 through 2022 to establish a 
                        program to provide financial assistance 
                        to manufacturers of products containing 
                        class II, group II substances to 
                        facilitate the transition to products 
                        that contain or utilize alternative 
                        substances with no or low carbon 
                        dioxide equivalent value and no ozone 
                        depletion potential.
                          (ii) Definition of products.--In this 
                        subparagraph, the term `products' means 
                        refrigerators, freezers, dehumidifiers, 
                        air conditioners, foam insulation, 
                        technical aerosols, fire protection 
                        systems, and semiconductors.
                          (iii) Financial assistance.--The 
                        Administrator may provide financial 
                        assistance to manufacturers pursuant to 
                        clause (i) for--
                                  (I) the design and 
                                configuration of new products 
                                that use alternative substances 
                                with no or low carbon dioxide 
                                equivalent value and no ozone 
                                depletion potential; and
                                  (II) the redesign and 
                                retooling of facilities for the 
                                manufacture of products in the 
                                United States that use 
                                alternative substances with no 
                                or low carbon dioxide 
                                equivalent value and no ozone 
                                depletion potential.
                          (iv) Reports.--For any fiscal year 
                        during which the Administrator provides 
                        financial assistance pursuant to this 
                        subparagraph, the Administrator shall 
                        submit a report to the Congress within 
                        3 months of the end of such fiscal year 
                        detailing the amounts, recipients, 
                        specific purposes, and results of the 
                        financial assistance provided.

           *       *       *       *       *       *       *

  TITLE VII--GLOBAL WARMING POLLUTION REDUCTION AND INVESTMENT PROGRAM

SEC. 700. DEFINITIONS.

  In this title:
          (1) Additional.--The term `additional', when used 
        with respect to reductions or avoidance of greenhouse 
        gas emissions, or to sequestration of greenhouse gases, 
        means reductions, avoidance, or sequestration that 
        result in a lower level of net greenhouse gas emissions 
        or atmospheric concentrations than would occur in the 
        absence of an offset credit.
          (2) Additionality.--The term `additionality' means 
        the extent to which reductions or avoidance of 
        greenhouse gas emissions, or sequestration of 
        greenhouse gases, are additional.
          (3) Advisory board.--The term `Advisory Board' means 
        the Offsets Integrity Advisory Board established under 
        section 731.
          (4) Affiliated.--The term `affiliated'--
                  (A) when used in relation to an entity, means 
                owned or controlled by, or under common 
                ownership or control with, another entity, as 
                determined by the Administrator; and
                  (B) when used in relation to a natural gas 
                local distribution company, means owned or 
                controlled by, or under common ownership or 
                control with, another natural gas local 
                distribution company, as determined by the 
                Administrator.
          (5) Allowance.--The term `allowance' means a limited 
        authorization to emit, or have attributable greenhouse 
        gas emissions in an amount of, 1 ton of carbon dioxide 
        equivalent of a greenhouse gas in accordance with this 
        title; it includes an emission allowance, a 
        compensatory allowance, or an international emission 
        allowance.
          (6) Attributable greenhouse gas emissions.--The term 
        `attributable greenhouse gas emissions' means--
                  (A) for a covered entity that is a fuel 
                producer or importer described in paragraph 
                (13)(B), greenhouse gases that would be emitted 
                from the combustion of any petroleum-based or 
                coal-based liquid fuel, petroleum coke, or 
                natural gas liquid, produced or imported by 
                that covered entity for sale or distribution in 
                interstate commerce, assuming no capture and 
                sequestration of any greenhouse gas emissions;
                  (B) for a covered entity that is an 
                industrial gas producer or importer described 
                in paragraph (13)(C), the tons of carbon 
                dioxide equivalent of fossil fuel-based carbon 
                dioxide, nitrous oxide, any fluorinated gas, 
                other than nitrogen trifluoride, that is a 
                greenhouse gas, or any combination thereof--
                          (i) produced or imported by such 
                        covered entity during the previous 
                        calendar year for sale or distribution 
                        in interstate commerce; or
                          (ii) released as fugitive emissions 
                        in the production of fluorinated gas; 
                        and
                  (C) for a natural gas local distribution 
                company described in paragraph (13)(J), 
                greenhouse gases that would be emitted from the 
                combustion of the natural gas, and any other 
                gas meeting the specifications for commingling 
                with natural gas for purposes of delivery, that 
                such entity delivered during the previous 
                calendar year to customers that are not covered 
                entities, assuming no capture and sequestration 
                of that greenhouse gas.
          (7) Biological sequestration; biologically 
        sequestered.--The terms `biological sequestration' and 
        `biologically sequestered' mean the removal of 
        greenhouse gases from the atmosphere by terrestrial 
        biological means, such as by growing plants, and the 
        storage of those greenhouse gases in plants or soils.
          (8) Capped emissions.--The term `capped emissions' 
        means greenhouse gas emissions to which section 722 
        applies, including emissions from the combustion of 
        natural gas, petroleum-based or coal-based liquid fuel, 
        petroleum coke, or natural gas liquid to which section 
        722(b)(2) or (8) applies.
          (9) Capped source.--The term `capped source' means a 
        source that directly emits capped emissions.
          (10) Carbon dioxide equivalent.--The term `carbon 
        dioxide equivalent' means the unit of measure, 
        expressed in metric tons, of greenhouse gases as 
        provided under section 711 or 712.
          (11) Carbon stock.--The term `carbon stock' means the 
        quantity of carbon contained in a biological reservoir 
        or system which has the capacity to accumulate or 
        release carbon.
          (12) Compensatory allowance.--The term `compensatory 
        allowance' means an allowance issued under section 
        721(f).
          (13) Covered entity.--The term `covered entity' means 
        each of the following:
                  (A) Any electricity source.
                  (B)(i) Any stationary source that produces 
                petroleum-based or coal-based liquid fuel, 
                petroleum coke, or natural gas liquid, the 
                combustion of which would emit 25,000 or more 
                tons of carbon dioxide equivalent, as 
                determined by the Administrator.
                  (ii) Any entity that (or any group of 2 or 
                more affiliated entities that, in the 
                aggregate) imports petroleum-based or coal-
                based liquid fuel, petroleum coke, or natural 
                gas liquid, the combustion of which would emit 
                25,000 or more tons of carbon dioxide 
                equivalent, as determined by the Administrator.
                  (C) Any stationary source that produces, and 
                any entity that (or any group of two or more 
                affiliated entities that, in the aggregate) 
                imports, for sale or distribution in interstate 
                commerce, in bulk, or in products designated by 
                the Administrator, in 2008 or any subsequent 
                year more than 25,000 tons of carbon dioxide 
                equivalent of--
                          (i) fossil fuel-based carbon dioxide;
                          (ii) nitrous oxide;
                          (iii) perfluorocarbons;
                          (iv) sulfur hexafluoride;
                          (v) any other fluorinated gas, except 
                        for nitrogen trifluoride, that is a 
                        greenhouse gas, as designated by the 
                        Administrator under section 711(b) or 
                        (c); or
                          (vi) any combination of greenhouse 
                        gases described in clauses (i) through 
                        (v).
                  (D) Any stationary source that has emitted 
                25,000 or more tons of carbon dioxide 
                equivalent of nitrogen trifluoride in 2008 or 
                any subsequent year.
                  (E) Any geologic sequestration site.
                  (F) Any stationary source in the following 
                industrial sectors:
                          (i) Adipic acid production.
                          (ii) Primary aluminum production.
                          (iii) Ammonia manufacturing.
                          (iv) Cement production, excluding 
                        grinding-only operations.
                          (v) Hydrochlorofluorocarbon 
                        production.
                          (vi) Lime manufacturing.
                          (vii) Nitric acid production.
                          (viii) Petroleum refining.
                          (ix) Phosphoric acid production.
                          (x) Silicon carbide production.
                          (xi) Soda ash production.
                          (xii) Titanium dioxide production.
                          (xiii) Coal-based liquid or gaseous 
                        fuel production.
                  (G) Any stationary source in the chemical or 
                petrochemical sector that, in 2008 or any 
                subsequent year--
                          (i) produces acrylonitrile, carbon 
                        black, ethylene, ethylene dichloride, 
                        ethylene oxide, or methanol; or
                          (ii) produces a chemical or 
                        petrochemical product if producing that 
                        product results in annual combustion 
                        plus process emissions of 25,000 or 
                        more tons of carbon dioxide equivalent.
                  (H) Any stationary source that--
                          (i) is in one of the following 
                        industrial sectors: ethanol production; 
                        ferroalloy production; fluorinated gas 
                        production; food processing; glass 
                        production; hydrogen production; 
                        beneficiation or other processing 
                        (including agglomeration) of metal 
                        ores; iron and steel production; lead 
                        production; pulp and paper 
                        manufacturing; and zinc production; and
                          (ii) has emitted 25,000 or more tons 
                        of carbon dioxide equivalent in 2008 or 
                        any subsequent year.
                  (I) Any fossil fuel-fired combustion device 
                (such as a boiler) or grouping of such devices 
                that--
                          (i) is all or part of an industrial 
                        source not specified in subparagraph 
                        (D), (F), (G), or (H); and
                          (ii) has emitted 25,000 or more tons 
                        of carbon dioxide equivalent in 2008 or 
                        any subsequent year.
                  (J) Any natural gas local distribution 
                company that (or any group of 2 or more 
                affiliated natural gas local distribution 
                companies that, in the aggregate) in 2008 or 
                any subsequent year, delivers 460,000,000 cubic 
                feet or more of natural gas to customers that 
                are not covered entities.
          (14) Crediting period.--The term `crediting period' 
        means the period with respect to which an offset 
        project is eligible to earn offset credits under part 
        D, as determined under section 734(c).
          (15) Designated representative.--The term `designated 
        representative' means, with respect to a covered 
        entity, a reporting entity, an offset project 
        developer, or any other entity receiving or holding 
        allowances or offset credits under this title, an 
        individual authorized, through a certificate of 
        representation submitted to the Administrator by the 
        owners and operators or similar entity official, to 
        represent the owners and operators or similar entity 
        official in all matters pertaining to this title 
        (including the holding, transfer, or disposition of 
        allowances or offset credits), and to make all 
        submissions to the Administrator under this title.
          (16) Developing country.--The term `developing 
        country' means a country eligible to receive official 
        development assistance according to the income 
        guidelines of the Development Assistance Committee of 
        the Organization for Economic Cooperation and 
        Development.
          (17) Domestic offset credit.--
                  (A) In general.--The term `domestic offset 
                credit' means an offset credit issued under 
                part D, other than an international offset 
                credit.
                  (B) Exclusion.--The term `domestic offset 
                credit' does not include a term offset credit.
          (18) Electricity source.--The term `electricity 
        source' means a stationary source that includes one or 
        more utility units.
          (19) Emission.--The term `emission' means the release 
        of a greenhouse gas into the ambient air. Such term 
        does not include gases that are captured and 
        sequestered, except to the extent that they are later 
        released into the atmosphere, in which case compliance 
        must be demonstrated pursuant to section 722(b)(5).
          (20) Emission allowance.--The term `emission 
        allowance' means an allowance established under section 
        721(a) or 726(g)(2).
          (21) Fair market value.--The term `fair market value' 
        means the average daily closing price on registered 
        exchanges or, if such a price is unavailable, the 
        average price as determined by the Administrator, 
        during a specified time period, of an emission 
        allowance.
          (22) Federal land.--The term `Federal land' means 
        land that is owned by the United States, other than 
        land held in trust for an Indian or Indian tribe.
          (23) Fossil fuel.--The term `fossil fuel' means 
        natural gas, petroleum, or coal, or any form of solid, 
        liquid, or gaseous fuel derived from such material, 
        including consumer products that are derived from such 
        materials and are combusted.
          (24) Fossil fuel-fired.--The term `fossil fuel-fired' 
        means powered by combustion of fossil fuel, alone or in 
        combination with any other fuel, regardless of the 
        percentage of fossil fuel consumed.
          (25) Fugitive emissions.--The term `fugitive 
        emissions' means emissions from leaks, valves, joints, 
        or other small openings in pipes, ducts, or other 
        equipment, or from vents.
          (26) Geologic sequestration; geologically 
        sequestered.--The terms `geologic sequestration' and 
        `geologically sequestered' mean the sequestration of 
        greenhouse gases in subsurface geologic formations for 
        purposes of permanent storage.
          (27) Geologic sequestration site.--The term `geologic 
        sequestration site' means a site where carbon dioxide 
        is geologically sequestered.
          (28) Greenhouse gas.--The term `greenhouse gas' means 
        any gas described in section 711(a) or designated under 
        section 711(b), (c), or (e), except to the extent that 
        it is regulated under title VI.
          (29) High conservation priority land.--The term `high 
        conservation priority land' means land that is not 
        Federal land and is--
                  (A) globally or State ranked as critically 
                imperiled or imperiled under a State Natural 
                Heritage Program; or
                  (B) old-growth or late-successional forest, 
                as identified by the office of the State 
                Forester or relevant State agency with 
                regulatory jurisdiction over forestry 
                activities.
          (30) Hold.--The term `hold' means, with respect to an 
        allowance, offset credit, or term offset credit, to 
        have in the appropriate account in the allowance 
        tracking system, or submit to the Administrator for 
        recording in such account.
          (31) Industrial source.--The term `industrial source' 
        means any stationary source that--
                  (A) is not an electricity source; and
                  (B) is in--
                          (i) the manufacturing sector (as 
                        defined in North American Industrial 
                        Classification System codes 31, 32, and 
                        33); or
                          (ii) the natural gas processing or 
                        natural gas pipeline transportation 
                        sector (as defined in North American 
                        Industrial Classification System codes 
                        211112 or 486210).
          (32) International emission allowance.--The term 
        `international emission allowance' means a tradable 
        authorization to emit 1 ton of carbon dioxide 
        equivalent of greenhouse gas that is issued by a 
        national or supranational foreign government pursuant 
        to a qualifying international program designated by the 
        Administrator pursuant to section 728(a).
          (33) International offset credit.--The term 
        `international offset credit' means an offset credit 
        issued by the Administrator under section 744.
          (34) Leakage.--The term `leakage' means a significant 
        increase in greenhouse gas emissions, or significant 
        decrease in sequestration, which is caused by an offset 
        project and occurs outside the boundaries of the offset 
        project.
          (35) Market stability reserve allowance.--The term 
        `market stability reserve allowance' means an emission 
        allowance reserved for, transferred to, or deposited in 
        the market stability reserve, or established, under 
        section 726.
          (36) Mineral sequestration.--The term `mineral 
        sequestration' means sequestration of carbon dioxide 
        from the atmosphere by capturing carbon dioxide into a 
        permanent mineral, such as the aqueous precipitation of 
        carbonate minerals that results in the storage of 
        carbon dioxide in a mineral form.
          (37) Natural gas liquid.--The term `natural gas 
        liquid' means ethane, butane, isobutane, natural 
        gasoline, and propane which is ready for commercial 
        sale or use.
          (38) Natural gas local distribution company.--The 
        term `natural gas local distribution company' has the 
        meaning given the term `local distribution company' in 
        section 2(17) of the Natural Gas Policy Act of 1978 (15 
        U.S.C. 3301(17)).
          (39) Offset credit.--
                  (A) In general.--The term `offset credit' 
                means an offset credit issued under part D.
                  (B) Exclusion.--The term `offset credit' does 
                not include a term offset credit.
          (40) Offset project.--The term `offset project' means 
        a project or activity that reduces or avoids greenhouse 
        gas emissions, or sequesters greenhouse gases, and for 
        which offset credits are or may be issued under part D.
          (41) Offset project developer.--The term `offset 
        project developer' means the individual or entity 
        designated as the offset project developer in an offset 
        project approval petition under section 735(c)(1).
          (42) Qualified r&d facility.--The term `qualified R&D 
        facility' means a facility that conducts research and 
        development, that was in operation as of the date of 
        enactment of this title, and that is part of a covered 
        entity subject to paragraphs (1) through (8) of section 
        722(b).
          (43) Petroleum.--The term `petroleum' includes crude 
        oil, tar sands, oil shale, and heavy oils.
          (44) Repeated intentional reversals.--The term 
        `repeated intentional reversals' means at least 3 
        intentional reversals, as determined by the 
        Administrator or a court under section 
        734(b)(3)(B)(ii).
          (45) Research and development.--The term `research 
        and development' means activities--
                  (A) that are conducted in process units or at 
                laboratory bench-scale settings;
                  (B) whose purpose is to conduct research and 
                development for new processes, technologies, or 
                products that contribute to lower greenhouse 
                gas emissions; and
                  (C) that do not manufacture products for 
                sale.
          (46) Renewable biomass.--The term `renewable biomass' 
        means any of the following:
                  (A) Plant material, including waste material, 
                harvested or collected from actively managed 
                agricultural land that was in cultivation, 
                cleared, or fallow and nonforested on January 
                1, 2009.
                  (B) Plant material, including waste material, 
                harvested or collected from pastureland that 
                was nonforested on January 1, 2009.
                  (C) Nonhazardous vegetative matter derived 
                from waste, including separated yard waste, 
                landscape right-of-way trimmings, construction 
                and demolition debris, or food waste (but not 
                municipal solid waste, recyclable waste paper, 
                painted, treated or pressurized wood, or wood 
                contaminated with plastic or metals).
                  (D) Animal waste or animal byproducts, 
                including products of animal waste digesters.
                  (E) Algae.
                  (F) Trees, brush, slash, residues, or any 
                other vegetative matter removed from within 600 
                feet of any building, campground, or route 
                designated for evacuation by a public official 
                with responsibility for emergency preparedness, 
                or from within 300 feet of a paved road, 
                electric transmission line, utility tower, or 
                water supply line.
                  (G) Residues from or byproducts of milled 
                logs.
                  (H) Any of the following removed from 
                forested land that is not Federal and is not 
                high conservation priority land:
                          (i) Trees, brush, slash, residues, 
                        interplanted energy crops, or any other 
                        vegetative matter removed from an 
                        actively managed tree plantation 
                        established--
                                  (I) prior to January 1, 2009; 
                                or
                                  (II) on land that, as of 
                                January 1, 2009, was cultivated 
                                or fallow and non-forested.
                          (ii) Trees, logging residue, 
                        thinnings, cull trees, pulpwood, and 
                        brush removed from naturally 
                        regenerated forests or other non-
                        plantation forests, including for the 
                        purposes of hazardous fuel reduction or 
                        preventative treatment for reducing or 
                        containing insect or disease 
                        infestation.
                          (iii) Logging residue, thinnings, 
                        cull trees, pulpwood, brush, and 
                        species that are non-native and 
                        noxious, from stands that were planted 
                        and managed after January 1, 2009, to 
                        restore or maintain native forest 
                        types.
                          (iv) Dead or severely damaged trees 
                        removed within 5 years of fire, 
                        blowdown, or other natural disaster, 
                        and badly infested trees.
                  (I) Materials, pre-commercial thinnings, or 
                removed invasive species from National Forest 
                System land and public lands (as defined in 
                section 103 of the Federal Land Policy and 
                Management Act of 1976 (43 U.S.C. 1702)), 
                including those that are byproducts of 
                preventive treatments (such as trees, wood, 
                brush, thinnings, chips, and slash), that are 
                removed as part of a federally recognized 
                timber sale, or that are removed to reduce 
                hazardous fuels, to reduce or contain disease 
                or insect infestation, or to restore ecosystem 
                health, and that are--
                          (i) not from components of the 
                        National Wilderness Preservation 
                        System, Wilderness Study Areas, 
                        Inventoried Roadless Areas, old growth 
                        or mature forest stands, components of 
                        the National Landscape Conservation 
                        System, National Monuments, National 
                        Conservation Areas, Designated 
                        Primitive Areas; or Wild and Scenic 
                        Rivers corridors;
                          (ii) harvested in environmentally 
                        sustainable quantities, as determined 
                        by the appropriate Federal land 
                        manager; and
                          (iii) are harvested in accordance 
                        with Federal and State law, and 
                        applicable land management plans.
          (47) Retire.--The term `retire', with respect to an 
        allowance, offset credit, or term offset credit 
        established or issued under this title, means to 
        disqualify such allowance or offset credit for any 
        subsequent use under this title, regardless of whether 
        the use is a sale, exchange, or submission of the 
        allowance, offset credit, or term offset credit to 
        satisfy a compliance obligation.
          (48) Reversal.--The term `reversal' means an 
        intentional or unintentional loss of sequestered 
        greenhouse gases to the atmosphere.
          (49) Sequestered and sequestration.--The terms 
        `sequestered' and `sequestration' mean the separation, 
        isolation, or removal of greenhouse gases from the 
        atmosphere, as determined by the Administrator. The 
        terms include biological, geologic, and mineral 
        sequestration, but do not include ocean fertilization 
        techniques.
          (50) Small business refiner.--
                  (A) In general.--The term `small business 
                refiner' means a refiner that meets the 
                applicable Federal refinery capacity and 
                employee limitations criteria described in 
                section 45H(c)(1) of the Internal Revenue Code 
                of 1986 (as in effect on the date of enactment 
                of this section and without regard to section 
                45H(d)).
                  (B) Eligibility.--Eligibility of a small 
                business refiner under this paragraph shall not 
                be recalculated or disallowed on account of--
                          (i) a merger of the small business 
                        refiner with 1 or more other small 
                        business refiners after December 31, 
                        2002; or
                          (ii) the acquisition by a small 
                        business refiner of another small 
                        business refiner (or refinery of such 
                        refiner) after December 31, 2002.
          (51) Stationary source.--The term `stationary source' 
        means any integrated operation comprising any plant, 
        building, structure, or stationary equipment, including 
        support buildings and equipment, that is located within 
        one or more contiguous or adjacent properties, is under 
        common control of the same person or persons, and emits 
        or may emit a greenhouse gas.
          (52) Ton.--The term `ton' means a metric ton.
          (53) Uncapped emissions.--The term `uncapped 
        emissions' means emissions of greenhouse gases emitted 
        after December 31, 2011, that are not capped emissions.
          (54) United states greenhouse gas emissions.--The 
        term `United States greenhouse gas emissions' means the 
        total quantity of annual greenhouse gas emissions from 
        the United States, as calculated by the Administrator 
        and reported to the United Nations Framework Convention 
        on Climate Change Secretariat.
          (55) Utility unit.--The term `utility unit' means a 
        combustion device that, on January 1, 2009, or any date 
        thereafter, is fossil fuel-fired and serves a generator 
        that produces electricity for sale, unless such 
        combustion device, during the 12-month period starting 
        the later of January 1, 2009, or the commencement of 
        commercial operation and each calendar year starting 
        after such later date--
                  (A) is part of an integrated cycle system 
                that cogenerates thermal energy and electricity 
                during normal operation and that supplies \1/3\ 
                or less of its potential electric output 
                capacity and 25 megawatts or less of electrical 
                output for sale; or
                  (B) combusts materials of which more than 95 
                percent is municipal solid waste on a heat 
                input basis.
          (56) Vintage year.--The term `vintage year' means the 
        calendar year for which an emission allowance is 
        established under section 721(a) or which is assigned 
        to an emission allowance under section 726(g)(3)(A), 
        except that the vintage year for a market stability 
        reserve allowance shall be the year in which such 
        allowance is purchased at auction.

      PART A--GLOBAL WARMING POLLUTION REDUCTION GOALS AND TARGETS

SEC. 701. FINDINGS.

  Congress finds that--
          (1) global warming poses a significant threat to the 
        national security, economy, public health and welfare, 
        and environment of the United States, as well as of 
        other countries;
          (2) reviews of scientific studies, including by the 
        Intergovernmental Panel on Climate Change and the 
        National Academy of Sciences, demonstrate that global 
        warming is the result of the combined anthropogenic 
        greenhouse gas emissions from numerous sources of all 
        types and sizes;
          (3) each increment of emission, when combined with 
        other emissions, causes or contributes materially to 
        the acceleration and extent of global warming and its 
        adverse effects for the lifetime of such gas in the 
        atmosphere;
          (4) accordingly, controlling emissions in small as 
        well as large quantities is essential to prevent, slow 
        the pace of, reduce the threats from, and mitigate 
        global warming and its adverse effects;
          (5) because they induce global warming, greenhouse 
        gas emissions cause or contribute to injuries to 
        persons in the United States, including--
                  (A) adverse health effects, such as disease 
                and loss of life;
                  (B) displacement of human populations;
                  (C) damage to property and other interests 
                relating to ocean levels, acidification, and 
                ice changes;
                  (D) severe weather and seasonal changes;
                  (E) disruption, costs, and losses to 
                business, trade, employment, farms, 
                subsistence, aesthetic enjoyment of the 
                environment, recreation, culture, and tourism;
                  (F) damage to plants, forests, lands, and 
                waters;
                  (G) harm to wildlife and habitat;
                  (H) scarcity of water and the decreased 
                abundance of other natural resources;
                  (I) worsening of tropospheric air pollution;
                  (J) substantial threats of similar damage; 
                and
                  (K) other harm;
          (6) the fact that many of those effects and risks of 
        future effects of global warming are widely shared does 
        not minimize the adverse effects individual persons 
        have suffered, will suffer, and are at risk of 
        suffering because of global warming;
          (7) the fact that some of the adverse and potentially 
        catastrophic effects of global warming are at risk of 
        occurring and not a certainty does not negate the harm 
        persons suffer from actions that increase the 
        likelihood, extent, and severity of such future 
        impacts;
          (8) countries of the world look to the United States 
        for leadership in addressing the threat of and harm 
        from global warming;
          (9) full implementation of this title is critical to 
        engage other countries in an international effort to 
        mitigate the threat of and harm from global warming; 
        and
          (10) global warming and its adverse effects are 
        occurring and are likely to continue and increase in 
        magnitude, and to do so at a greater and more harmful 
        rate, unless the this title is fully implemented and 
        enforced in an expeditious manner.

SEC. 702. ECONOMYWIDE REDUCTION GOALS.

  The goals of this title, and the Clean Energy Jobs and 
American Power Act (and the amendments made by that Act), are 
to reduce steadily the quantity of United States greenhouse gas 
emissions such that--
          (1) in 2012, the quantity of United States greenhouse 
        gas emissions does not exceed 97 percent of the 
        quantity of United States greenhouse gas emissions in 
        2005;
          (2) in 2020, the quantity of United States greenhouse 
        gas emissions does not exceed 80 percent of the 
        quantity of United States greenhouse gas emissions in 
        2005;
          (3) in 2030, the quantity of United States greenhouse 
        gas emissions does not exceed 58 percent of the 
        quantity of United States greenhouse gas emissions in 
        2005; and
          (4) in 2050, the quantity of United States greenhouse 
        gas emissions does not exceed 17 percent of the 
        quantity of United States greenhouse gas emissions in 
        2005.

SEC. 703. REDUCTION TARGETS FOR SPECIFIED SOURCES.

  (a) In General.--The regulations issued under section 721 
shall limit and reduce annually the greenhouse gas emissions of 
capped sources each calendar year beginning in 2012 such that--
          (1) in 2012, the quantity of greenhouse gas emissions 
        from capped sources does not exceed 97 percent of the 
        quantity of greenhouse gas emissions from such sources 
        in 2005;
          (2) in 2020, the quantity of greenhouse gas emissions 
        from capped sources does not exceed 80 percent of the 
        quantity of greenhouse gas emissions from such sources 
        in 2005;
          (3) in 2030, the quantity of greenhouse gas emissions 
        from capped sources does not exceed 58 percent of the 
        quantity of greenhouse gas emissions from such sources 
        in 2005; and
          (4) in 2050, the quantity of greenhouse gas emissions 
        from capped sources does not exceed 17 percent of the 
        quantity of greenhouse gas emissions from such sources 
        in 2005.
  (b) Definition of Greenhouse Gas Emissions From Such Sources 
in 2005.--For purposes of this section, the term `greenhouse 
gas emissions from such sources in 2005' means emissions to 
which section 722 would have applied if the requirements of 
this title for the specified year had been in effect for 2005.

SEC. 704. SUPPLEMENTAL POLLUTION REDUCTIONS.

  For the purposes of decreasing the likelihood of catastrophic 
climate change, preserving tropical forests, building capacity 
to generate offset credits, and facilitating international 
action on global warming, the Administrator shall set aside a 
percentage specified in section 771(c) of the quantity of 
emission allowances established under section 721(a) for each 
year, to be used to achieve a reduction of greenhouse gas 
emissions from deforestation in developing countries in 
accordance with part E. In 2020, activities supported under 
part E shall provide greenhouse gas reductions in an amount 
equal to an additional 10 percentage points of reductions from 
United States greenhouse gas emissions in 2005. The 
Administrator shall distribute these allowances with respect to 
activities in countries that enter into and implement 
agreements or arrangements relating to reduced deforestation as 
described in section 753(a)(2).

SEC. 705. REVIEW AND PROGRAM RECOMMENDATIONS.

  (a) In General.--The Administrator shall, in consultation 
with appropriate Federal agencies, submit to Congress a report 
not later than July 1, 2013, and every 4 years thereafter, that 
includes--
          (1) an analysis of key findings based on up-to-date 
        scientific information and data relevant to global 
        climate change;
          (2) an analysis of capabilities to monitor and verify 
        greenhouse gas reductions on a worldwide basis, 
        including for the United States, as required under the 
        Clean Energy Jobs and American Power Act (and the 
        amendments made by that Act);
          (3) an analysis of the status of worldwide greenhouse 
        gas reduction efforts, including implementation of the 
        Clean Energy Jobs and American Power Act and other 
        policies, both domestic and international, for reducing 
        greenhouse gas emissions, preventing dangerous 
        atmospheric concentrations of greenhouse gases, 
        preventing significant irreversible consequences of 
        climate change, and reducing vulnerability to the 
        impacts of climate change; and
          (4) an analysis, to be conducted by the Secretary of 
        Energy in accordance with subsection (f) and submitted 
        to the Administrator for inclusion in each report under 
        this subsection, of the technological feasibility of 
        achieving additional reductions in greenhouse gas 
        emissions.
  (b) Exception.--Subsection (a)(3) shall not apply to the 
first report submitted under subsection (a).
  (c) Latest Scientific Information.--The analysis required 
under subsection (a)(1) shall--
          (1) address existing scientific information and 
        reports, considering, to the greatest extent possible, 
        the most recent assessment report of the 
        Intergovernmental Panel on Climate Change, reports by 
        the United States Global Change Research Program, the 
        Natural Resources Climate Change Adaptation Panel 
        established under section 365 of the Clean Energy Jobs 
        and American Power Act, and Federal agencies, and the 
        European Union's global temperature data assessment;
          (2) review trends and projections for--
                  (A) global and country-specific annual 
                emissions of greenhouse gases, and cumulative 
                greenhouse gas emissions produced between 1850 
                and the present, including--
                          (i) global cumulative emissions of 
                        anthropogenic greenhouse gases;
                          (ii) global annual emissions of 
                        anthropogenic greenhouse gases; and
                          (iii) by country, annual total, 
                        annual per capita, and cumulative 
                        anthropogenic emissions of greenhouse 
                        gases for the top 50 emitting nations;
                  (B) significant changes, both globally and by 
                region, in annual net non-anthropogenic 
                greenhouse gas emissions from natural sources, 
                including permafrost, forests, or oceans;
                  (C) global atmospheric concentrations of 
                greenhouse gases, expressed in annual 
                concentration units as well as carbon dioxide 
                equivalents based on 100-year global warming 
                potentials;
                  (D) major climate forcing factors, such as 
                aerosols;
                  (E) global average temperature, expressed as 
                seasonal and annual averages in land, ocean, 
                and land-plus-ocean averages; and
                  (F) sea level rise;
          (3) assess the current and potential impacts of 
        global climate change on--
                  (A) human populations, including impacts on 
                public health, economic livelihoods, 
                subsistence, tribal culture, human 
                infrastructure, and displacement or permanent 
                relocation due to flooding, severe weather, 
                extended drought, erosion, or other ecosystem 
                changes;
                  (B) freshwater systems, including water 
                resources for human consumption and agriculture 
                and natural and managed ecosystems, flood and 
                drought risks, and relative humidity;
                  (C) the carbon cycle, including impacts 
                related to the thawing of permafrost, the 
                frequency and intensity of wildfire, and 
                terrestrial and ocean carbon sinks;
                  (D) ecosystems and animal and plant 
                populations, including impacts on species 
                abundance, phenology, and distribution;
                  (E) oceans and ocean ecosystems, including 
                effects on sea level, ocean acidity, ocean 
                temperatures, coral reefs, ocean circulation, 
                fisheries, and other indicators of ocean 
                ecosystem health;
                  (F) the cryosphere, including effects on ice 
                sheet mass balance, mountain glacier mass 
                balance, and sea-ice extent and volume;
                  (G) changes in the intensity, frequency, or 
                distribution of severe weather events, 
                including precipitation, tropical cyclones, 
                tornadoes, and severe heat waves;
                  (H) agriculture and forest systems; and
                  (I) any other indicators the Administrator 
                deems appropriate;
          (4) summarize any significant socioeconomic impacts 
        of climate change in the United States, including the 
        territories of the United States, drawing on work by 
        Federal agencies and the academic literature, including 
        impacts on--
                  (A) public health;
                  (B) economic livelihoods, subsistence, and 
                tribal culture;
                  (C) displacement or permanent relocation due 
                to flooding, severe weather, extended drought, 
                or other ecosystem changes;
                  (D) human infrastructure, including coastal 
                infrastructure vulnerability to extreme events 
                and sea level rise, river floodplain 
                infrastructure, and sewer and water management 
                systems;
                  (E) agriculture and forests, including 
                effects on potential growing season, 
                distribution, and yield;
                  (F) water resources for human consumption, 
                agriculture and natural and managed ecosystems, 
                flood and drought risks, and relative humidity;
                  (G) energy supply and use; and
                  (H) transportation;
          (5) in assessing risks and impacts, use a risk 
        management framework, including both qualitative and 
        quantitative measures, to assess the observed and 
        projected impacts of current and future climate change, 
        accounting for--
                  (A) both monetized and non-monetized losses;
                  (B) potential nonlinear, abrupt, or 
                essentially irreversible changes in the climate 
                system;
                  (C) potential nonlinear increases in the cost 
                of impacts;
                  (D) potential low-probability, high impact 
                events; and
                  (E) whether impacts are transitory or 
                essentially permanent; and
          (6) based on the findings of the Administrator under 
        this section, as well as assessments produced by the 
        Intergovernmental Panel on Climate Change, the United 
        States Global Change Research program, and other 
        relevant scientific entities--
                  (A) describe increased risks to natural 
                systems and society that would result from an 
                increase in global average temperature 3.6 
                degrees Fahrenheit (2 degrees Celsius) above 
                the pre-industrial average or an increase in 
                atmospheric greenhouse gas concentrations above 
                450 parts per million carbon dioxide 
                equivalent; and
                  (B) identify and assess--
                          (i) significant residual risks not 
                        avoided by the thresholds described in 
                        subparagraph (A);
                          (ii) alternative thresholds or 
                        targets that may more effectively limit 
                        the risks identified pursuant to clause 
                        (i); and
                          (iii) thresholds above those 
                        described in subparagraph (A) which 
                        significantly increase the risk of 
                        certain impacts or render them 
                        essentially permanent.
  (d) Status of Monitoring and Verification Capabilities to 
Evaluate Greenhouse Gas Reduction Efforts.--The analysis 
required under subsection (a)(2) shall evaluate the 
capabilities of the monitoring, reporting, and verification 
systems used to quantify progress in achieving reductions in 
greenhouse gas emissions both globally and in the United States 
(as described in section 702), including--
          (1) quantification of emissions and emission 
        reductions by entities participating in the pollution 
        reduction and investment program under this title;
          (2) quantification of emissions and emission 
        reductions by entities participating in the offset 
        program under this title;
          (3) quantification of emission and emission 
        reductions by entities regulated by performance 
        standards;
          (4) quantification of aggregate net emissions and 
        emission reductions by the United States; and
          (5) quantification of global changes in net emissions 
        and in sources and sinks of greenhouse gases.
  (e) Status of Greenhouse Gas Reduction Efforts.--The analysis 
required under subsection (a)(3) shall address--
          (1) whether the programs under the Clean Energy Jobs 
        and American Power Act (and the amendments made by that 
        Act) and other Federal statutes are resulting in 
        sufficient United States greenhouse gas emission 
        reductions to meet the emissions reduction goals 
        described in section 702, taking into account the use 
        of offsets; and
          (2) whether United States actions, taking into 
        account international actions, commitments, and trends, 
        and considering the range of plausible emissions 
        scenarios, are sufficient to avoid--
                  (A) atmospheric greenhouse gas concentrations 
                above 450 parts per million carbon dioxide 
                equivalent;
                  (B) global average surface temperature 3.6 
                degrees Fahrenheit (2 degrees Celsius) above 
                the pre-industrial average, or such other 
                temperature thresholds as the Administrator 
                deems appropriate; and
                  (C) other temperature or greenhouse gas 
                thresholds identified pursuant to subsection 
                (c)(6)(B).
  (f) Technological Information.--The analysis required under 
subsection (a)(4) shall--
          (1) review existing technological information and 
        reports, including the most recent reports by the 
        Department of Energy, the United States Global Change 
        Research Program, the Intergovernmental Panel on 
        Climate Change, and the International Energy Agency, 
        and any other relevant information on technologies or 
        practices that reduce or limit greenhouse gas 
        emissions;
          (2) include the participation of technical experts 
        from relevant private industry sectors;
          (3) review the current and future projected 
        deployment of technologies and practices in the United 
        States that reduce or limit greenhouse gas emissions, 
        including--
                  (A) technologies for capture and 
                sequestration of greenhouse gases;
                  (B) technologies to improve energy 
                efficiency;
                  (C) low- or zero-greenhouse gas emitting 
                energy technologies;
                  (D) low- or zero-greenhouse gas emitting 
                fuels;
                  (E) biological sequestration practices and 
                technologies; and
                  (F) any other technologies the Secretary 
                determines to be relevant; and
          (4) review and compare the emission reduction 
        potential, commercial viability, market penetration, 
        investment trends, and deployment of the technologies 
        described in paragraph (3), including--
                  (A) the need for additional research and 
                development, including publicly funded research 
                and development;
                  (B) the extent of commercial deployment, 
                including, where appropriate, a comparison to 
                the cost and level of deployment of 
                conventional fossil fuel-fired energy 
                technologies and devices; and
                  (C) an evaluation of any substantial 
                technological, legal, or market-based barriers 
                to commercial deployment.
  (g) Recommendations.--
          (1) Latest scientific information.--Based on the 
        analysis described in subsection (a)(1), each report 
        under subsection (a) shall identify actions that could 
        be taken to--
                  (A) improve the characterization of changes 
                in the earth-climate system and impacts of 
                global climate change;
                  (B) better inform decision making and actions 
                related to global climate change;
                  (C) mitigate risks to natural and social 
                systems; and
                  (D) design policies to better account for 
                climate risks.
          (2) Monitoring, reporting and verification.--Based on 
        the analysis described in subsection (a)(2), each 
        report under subsection (a) shall identify key gaps in 
        measurement, reporting, and verification capabilities 
        and make recommendations to improve the accuracy and 
        reliability of those capabilities.
          (3) Status of greenhouse gas reduction efforts.--
        Based on the analysis described in subsection (a)(3), 
        taking into account international actions, commitments, 
        and trends, and considering the range of plausible 
        emissions scenarios, each report under subsection (a) 
        shall identify--
                  (A) the quantity of additional reductions 
                required to meet the emissions reduction goals 
                in section 702;
                  (B) the quantity of additional reductions in 
                global greenhouse gas emissions needed to avoid 
                the concentration and temperature thresholds 
                identified in subsection (e); and
                  (C) possible strategies and approaches for 
                achieving additional reductions.
  (h) Authorization of Appropriations.--There are authorized to 
be appropriated to carry out this section such sums as may be 
necessary.

SEC. 706. NATIONAL ACADEMY REVIEW.

  (a) In General.--Not later than 1 year after the date of 
enactment of this title, the Administrator shall offer to enter 
into a contract with the National Academy of Sciences (in this 
section referred to as the `Academy') under which the Academy 
shall, not later than July 1, 2014, and every 4 years 
thereafter, submit to Congress and the Administrator a report 
that includes--
          (1) a review of the most recent report and 
        recommendations issued under section 705; and
          (2) an analysis of technologies to achieve reductions 
        in greenhouse gas emissions.
  (b) Failure to Issue a Report.--In the event that the 
Administrator has not issued all or part of the most recent 
report required under section 705, the Academy shall conduct 
its own review and analysis of the required information.
  (c) Recommendations.--
          (1) Latest scientific information.--Based on the 
        review described in subsection (a)(1), the Academy 
        shall identify actions that could be taken to--
                  (A) improve the characterization of changes 
                in the earth-climate system and impacts of 
                global climate change;
                  (B) better inform decision making and actions 
                related to global climate change;
                  (C) mitigate risks to natural and social 
                systems;
                  (D) design policies to better account for 
                climate risks; and
                  (E) improve the accuracy and reliability of 
                capabilities to monitor, report, and verify 
                greenhouse gas emissions reduction efforts.
          (2) Technological information.--Based on the analysis 
        described in subsection (a)(2), the Academy shall 
        identify--
                  (A) additional emission reductions that may 
                be possible as a result of technologies 
                described in the analysis;
                  (B) barriers to the deployment of such 
                technologies; and
                  (C) actions that could be taken to speed 
                deployment of such technologies.
          (3) Status of greenhouse gas reduction efforts.--
        Based on the review described in subsection (a)(1), the 
        Academy shall identify--
                  (A) the quantity of additional reductions 
                required to meet the emissions reduction goals 
                described in section 702; and
                  (B) the quantity of additional reductions in 
                global greenhouse gas emissions needed to avoid 
                the concentration and temperature thresholds 
                described in section 705(c)(6)(A) or identified 
                pursuant to section 705(c)(6)(B).
  (d) Authorization of Appropriations.--There are authorized to 
be appropriated to carry out this section such sums as may be 
necessary.

SEC. 707. PRESIDENTIAL RESPONSE AND RECOMMENDATIONS.

  Not later than July 1, 2015, and every 4 years thereafter--
          (1) the President shall direct relevant Federal 
        agencies to use existing statutory authority to take 
        appropriate actions identified in the reports submitted 
        under sections 705 and 706 and to address any 
        shortfalls identified in such reports; and
          (2) in the event that the National Academy of 
        Sciences has concluded, in the most recent report 
        submitted under section 706, that the United States 
        will not achieve the necessary domestic greenhouse gas 
        emission reductions, or that global actions will not 
        maintain safe global average surface temperature and 
        atmospheric greenhouse gas concentration thresholds, 
        the President shall submit to Congress a plan 
        identifying domestic and international actions that 
        will achieve necessary additional greenhouse gas 
        reductions, including any recommendations for 
        legislative action.

SEC. 708. CONSULTATION WITH STATES.

  In the development of any regulations required to implement 
the global warming pollution and reduction investment program 
pursuant to this title, and in the implementation of that 
program, the Administrator shall consult with the States in the 
Regional Greenhouse Gas Initiative, the Western Climate 
Initiative, and the Mid-West Governors Accord.

        PART B--DESIGNATION AND REGISTRATION OF GREENHOUSE GASES

SEC. 711. DESIGNATION OF GREENHOUSE GASES.

  (a) Greenhouse Gases.--For purposes of this title, the 
following are greenhouse gases:
          (1) Carbon dioxide.
          (2) Methane.
          (3) Nitrous oxide.
          (4) Sulfur hexafluoride.
          (5) Hydrofluorocarbons from a chemical manufacturing 
        process at an industrial stationary source.
          (6) Any perfluorocarbon that is an anthropogenic gas 
        1 metric ton of which makes the same or greater 
        contribution to global warming over 100 years as 1 
        metric ton of carbon dioxide.
          (7) Nitrogen trifluoride.
          (8) Any other anthropogenic gas designated as a 
        greenhouse gas by the Administrator under this section.
  (b) Determination on Administrator's Initiative.--The 
Administrator shall, by rule--
          (1) determine whether 1 metric ton of another 
        anthropogenic gas makes the same or greater 
        contribution to global warming over 100 years as 1 
        metric ton of carbon dioxide;
          (2) determine the carbon dioxide equivalent value for 
        each gas with respect to which the Administrator makes 
        an affirmative determination under paragraph (1);
          (3) for each gas with respect to which the 
        Administrator makes an affirmative determination under 
        paragraph (1) and that is used as a substitute for a 
        class I or class II substance under title VI, determine 
        the extent to which to regulate that gas under section 
        619 and specify appropriate compliance obligations 
        under section 619;
          (4) designate as a greenhouse gas for purposes of 
        this title each gas for which the Administrator makes 
        an affirmative determination under paragraph (1), to 
        the extent that it is not regulated under section 619; 
        and
          (5) specify the appropriate compliance obligations 
        under this title for each gas designated as a 
        greenhouse gas under paragraph (4).
  (c) Petitions to Designate a Greenhouse Gas.--
          (1) In general.--Any person may petition the 
        Administrator to designate as a greenhouse gas any 
        anthropogenic gas 1 metric ton of which makes the same 
        or greater contribution to global warming over 100 
        years as 1 metric ton of carbon dioxide.
          (2) Contents of petition.--The petitioner shall 
        provide sufficient data, as specified by rule by the 
        Administrator, to demonstrate that the gas is likely to 
        be a greenhouse gas and is likely to be produced, 
        imported, used, or emitted in the United States. To the 
        extent practicable, the petitioner shall also identify 
        producers, importers, distributors, users, and emitters 
        of the gas in the United States.
          (3) Review and action by the administrator.--Not 
        later than 90 days after receipt of a petition under 
        paragraph (2), the Administrator shall determine 
        whether the petition is complete and notify the 
        petitioner and the public of the decision.
          (4) Additional information.--The Administrator may 
        require producers, importers, distributors, users, or 
        emitters of the gas to provide information on the 
        contribution of the gas to global warming over 100 
        years compared to carbon dioxide.
          (5) Treatment of petition.--For any substance used as 
        a substitute for a class I or class II substance under 
        title VI, the Administrator may elect to treat a 
        petition under this subsection as a petition to list 
        the substance as a class II, group II substance under 
        section 619, and may require the petition to be amended 
        to address listing criteria promulgated under that 
        section.
          (6) Determination.--Not later than 2 years after 
        receipt of a complete petition, the Administrator 
        shall, after notice and an opportunity for comment--
                  (A) issue and publish in the Federal 
                Register--
                          (i) a determination that 1 metric ton 
                        of the gas does not make a contribution 
                        to global warming over 100 years that 
                        is equal to or greater than that made 
                        by 1 metric ton of carbon dioxide; and
                          (ii) an explanation of the decision; 
                        or
                  (B) determine that 1 metric ton of the gas 
                makes a contribution to global warming over 100 
                years that is equal to or greater than that 
                made by 1 metric ton of carbon dioxide, and 
                take the actions described in subsection (b) 
                with respect to such gas.
          (7) Grounds for denial.--The Administrator may not 
        deny a petition under this subsection solely on the 
        basis of inadequate Environmental Protection Agency 
        resources or time for review.
  (d) Science Advisory Board Consultation.--
          (1) Consultation.--The Administrator shall--
                  (A) give notice to the Science Advisory Board 
                prior to making a determination under 
                subsection (b)(1), (c)(6), or (e)(2)(B);
                  (B) consider the written recommendations of 
                the Science Advisory Board under paragraph (2) 
                regarding the determination; and
                  (C) consult with the Science Advisory Board 
                regarding such determination, including 
                consultation subsequent to receipt of such 
                written recommendations.
          (2) Formulation of recommendations.--Upon receipt of 
        notice under paragraph (1)(A) regarding a pending 
        determination under subsection (b)(1), (c)(6), or 
        (e)(2)(B), the Science Advisory Board shall--
                  (A) formulate recommendations regarding such 
                determination, subject to a peer review 
                process; and
                  (B) submit such recommendations in writing to 
                the Administrator.
  (e) Manufacturing and Emission Notices.--
          (1) Notice requirement.--
                  (A) In general.--Effective 24 months after 
                the date of enactment of this title, no person 
                may manufacture or introduce into interstate 
                commerce a fluorinated gas, or emit in a 
                calendar year a significant quantity, as 
                determined by the Administrator (which in no 
                case shall be less than \1/2\ ton of such 
                fluorinated gas), of any fluorinated gas that 
                is generated as a byproduct during the 
                production or use of another fluorinated gas, 
                unless--
                          (i) the gas is designated as a 
                        greenhouse gas under this section or is 
                        an ozone-depleting substance listed as 
                        a class I or class II substance under 
                        title VI;
                          (ii) the Administrator has determined 
                        that 1 metric ton of such gas does not 
                        make a contribution to global warming 
                        that is equal to or greater than that 
                        made by 1 metric ton of carbon dioxide; 
                        or
                          (iii) the person manufacturing or 
                        importing the gas for distribution into 
                        interstate commerce, or emitting the 
                        gas, has submitted to the 
                        Administrator, at least 90 days before 
                        the start of such manufacture, 
                        introduction into commerce, or 
                        emission, a notice of such person's 
                        manufacture, introduction into 
                        commerce, or emission of such gas, and 
                        the Administrator has not determined 
                        that notice or a substantially similar 
                        notice is incomplete.
                  (B) Alternative compliance.--For a gas that 
                is a substitute for a class I or class II 
                substance under title VI and either has been 
                listed as acceptable for use under section 612 
                or is currently subject to evaluation under 
                section 612, the Administrator may accept the 
                notice and information provided pursuant to 
                that section as fulfilling the obligation under 
                clause (iii) of subparagraph (A).
          (2) Review and action by the administrator.--
                  (A) Completeness.--Not later than 90 days 
                after receipt of notice under paragraph 
                (1)(A)(iii) or (B), the Administrator shall 
                determine whether the notice is complete.
                  (B) Determination.--If the Administrator 
                determines that the notice is complete, the 
                Administrator shall, after notice and an 
                opportunity for comment, not later than 12 
                months after receipt of the notice--
                          (i) issue and publish in the Federal 
                        Register a determination that 1 metric 
                        ton of the gas does not make a 
                        contribution to global warming over 100 
                        years that is equal to or greater than 
                        that made by 1 metric ton of carbon 
                        dioxide and an explanation of the 
                        decision; or
                          (ii) determine that 1 metric ton of 
                        the gas makes a contribution to global 
                        warming over 100 years that is equal to 
                        or greater than that made by 1 metric 
                        ton of carbon dioxide, and take the 
                        actions described in subsection (b) 
                        with respect to such gas.
  (f) Regulations.--Not later than one year after the date of 
enactment of this title, the Administrator shall promulgate 
regulations to carry out this section. Such regulations shall 
include--
          (1) requirements for the contents of a petition 
        submitted under subsection (c);
          (2) requirements for the contents of a notice 
        required under subsection (e); and
          (3) methods and standards for evaluating the carbon 
        dioxide equivalent value of a gas.
  (g) Gases Regulated Under Title VI.--The Administrator shall 
not designate a gas as a greenhouse gas under this section to 
the extent that the gas is regulated under title VI.
  (h) Savings Clause.--Nothing in this section shall be 
interpreted to relieve any person from complying with the 
requirements of section 612.

SEC. 712. CARBON DIOXIDE EQUIVALENT VALUE OF GREENHOUSE GASES.

  (a) Measure of Quantity of Greenhouse Gases.--Any provision 
of this title or title VIII that refers to a quantity or 
percentage of a quantity of greenhouse gases shall mean the 
quantity or percentage of the greenhouse gases expressed in 
carbon dioxide equivalents.
  (b) Initial Value.--Except as provided by the Administrator 
under this section or section 711--
          (1) the carbon dioxide equivalent value of greenhouse 
        gases for purposes of this Act shall be as follows:

                        `` CARBON DIOXIDE EQUIVALENT OF 1 TON OF LISTED GREENHOUSE GASES              Greenhouse gas (1 metric ton)                       Carbon dioxide equivalent (metric tons)Carbon dioxide                                            1
----------------------------------------------------------------------------------------------------------------
Methane                                                   25
----------------------------------------------------------------------------------------------------------------
Nitrous oxide                                             298
----------------------------------------------------------------------------------------------------------------
HFC-23                                                    14,800
----------------------------------------------------------------------------------------------------------------
HFC-125                                                   3,500
----------------------------------------------------------------------------------------------------------------
HFC-134a                                                  1,430
----------------------------------------------------------------------------------------------------------------
HFC-143a                                                  4,470
----------------------------------------------------------------------------------------------------------------
HFC-152a                                                  124
----------------------------------------------------------------------------------------------------------------
HFC-227ea                                                 3,220
----------------------------------------------------------------------------------------------------------------
HFC-236fa                                                 9,810
----------------------------------------------------------------------------------------------------------------
HFC-4310mee                                               1,640
----------------------------------------------------------------------------------------------------------------
CF4                                                       7,390
----------------------------------------------------------------------------------------------------------------
C2F6                                                      12,200
----------------------------------------------------------------------------------------------------------------
C4F10                                                     8,860
----------------------------------------------------------------------------------------------------------------
C6F14                                                     9,300
----------------------------------------------------------------------------------------------------------------
SF6                                                       22,800
----------------------------------------------------------------------------------------------------------------
NF3                                                       17,200
        ; and
          (2) the carbon dioxide equivalent value for purposes 
        of this Act for any greenhouse gas not listed in the 
        table under paragraph (1) shall be the 100-year Global 
        Warming Potentials provided in the Intergovernmental 
        Panel on Climate Change Fourth Assessment Report.
  (c) Periodic Review.--
          (1) Not later than February 1, 2017, and (except as 
        provided in paragraph (3)) not less than every 5 years 
        thereafter, the Administrator shall--
                  (A) review and, if appropriate, revise the 
                carbon dioxide equivalent values established 
                under this section or section 711(b)(2), based 
                on a determination of the number of metric tons 
                of carbon dioxide that makes the same 
                contribution to global warming over 100 years 
                as 1 metric ton of each greenhouse gas; and
                  (B) publish in the Federal Register the 
                results of that review and any revisions.
          (2) A revised determination published in the Federal 
        Register under paragraph (1)(B) shall take effect for 
        greenhouse gas emissions starting on January 1 of the 
        first calendar year starting at least 9 months after 
        the date on which the revised determination was 
        published.
          (3) The Administrator may decrease the frequency of 
        review and revision under paragraph (1) if the 
        Administrator determines that such decrease is 
        appropriate in order to synchronize such review and 
        revision with any similar review process carried out 
        pursuant to the United Nations Framework Convention on 
        Climate Change, done at New York on May 9, 1992, or to 
        an agreement negotiated under that convention, except 
        that in no event shall the Administrator carry out such 
        review and revision any less frequently than every 10 
        years.
  (d) Methodology.--In setting carbon dioxide equivalent 
values, for purposes of this section or section 711, the 
Administrator shall take into account publications by the 
Intergovernmental Panel on Climate Change or a successor 
organization under the auspices of the United Nations 
Environmental Programme and the World Meteorological 
Organization.

SEC. 713. GREENHOUSE GAS REGISTRY.

  (a) Definitions.--For purposes of this section:
          (1) Climate registry.--The term `Climate Registry' 
        means the greenhouse gas emissions registry jointly 
        established and managed by more than 40 States and 
        Indian tribes in 2007 to collect high-quality 
        greenhouse gas emission data from facilities, 
        corporations, and other organizations to support 
        various greenhouse gas emission reporting and reduction 
        policies for the member States and Indian tribes.
          (2) Reporting entity.--The term `reporting entity' 
        means--
                  (A) a covered entity;
                  (B) an entity that--
                          (i) would be a covered entity if it 
                        had emitted, produced, imported, 
                        manufactured, or delivered in 2008 or 
                        any subsequent year more than the 
                        applicable threshold level in the 
                        definition of covered entity in 
                        paragraph (13) of section 700; and
                          (ii) has emitted, produced, imported, 
                        manufactured, or delivered in 2008 or 
                        any subsequent year more than the 
                        applicable threshold level in the 
                        definition of covered entity in 
                        paragraph (13) of section 700, provided 
                        that the figure of 25,000 tons of 
                        carbon dioxide equivalent is read 
                        instead as 10,000 tons of carbon 
                        dioxide equivalent and the figure of 
                        460,000,000 cubic feet is read instead 
                        as 184,000,000 cubic feet;
                  (C) any other entity that emits a greenhouse 
                gas, or produces, imports, manufactures, or 
                delivers material whose use results or may 
                result in greenhouse gas emissions if the 
                Administrator determines that reporting under 
                this section by such entity will help achieve 
                the purposes of this title or title VIII;
                  (D) any vehicle fleet with emissions of more 
                than 25,000 tons of carbon dioxide equivalent 
                on an annual basis, if the Administrator 
                determines that the inclusion of such fleet 
                will help achieve the purposes of this title or 
                title VIII; or
                  (E) any entity that delivers electricity to 
                an energy-intensive facility in an industrial 
                sector that meets the energy or greenhouse gas 
                intensity criteria in section 764(b)(3)(B)(i).
  (b) Regulations.--
          (1) In general.--Not later than 6 months after the 
        date of enactment of this title, the Administrator 
        shall issue regulations establishing a Federal 
        greenhouse gas registry. Such regulations shall--
                  (A) require reporting entities to submit to 
                the Administrator data on--
                          (i) greenhouse gas emissions in the 
                        United States;
                          (ii) the production and manufacture 
                        in the United States, importation into 
                        the United States, and, at the 
                        discretion of the Administrator, 
                        exportation from the United States, of 
                        fuels and industrial gases the uses of 
                        which result or may result in 
                        greenhouse gas emissions;
                          (iii) deliveries in the United States 
                        of natural gas, and any other gas 
                        meeting the specifications for 
                        commingling with natural gas for 
                        purposes of delivery, the combustion of 
                        which result or may result in 
                        greenhouse gas emissions; and
                          (iv) the capture and sequestration of 
                        greenhouse gases;
                  (B) require covered entities and, where 
                appropriate, other reporting entities to submit 
                to the Administrator data sufficient to ensure 
                compliance with or implementation of the 
                requirements of this title;
                  (C) require reporting of electricity 
                delivered to industrial sources in energy-
                intensive industries;
                  (D) ensure the completeness, consistency, 
                transparency, accuracy, precision, and 
                reliability of such data;
                  (E) take into account the best practices from 
                the most recent Federal, State, tribal, and 
                international protocols for the measurement, 
                accounting, reporting, and verification of 
                greenhouse gas emissions, including protocols 
                from the Climate Registry and other mandatory 
                State or multistate authorized programs;
                  (F) take into account the latest scientific 
                research;
                  (G) require that, for covered entities with 
                respect to greenhouse gases to which section 
                722 applies, and, to the extent determined to 
                be appropriate by the Administrator, for 
                covered entities with respect to other 
                greenhouse gases and for other reporting 
                entities, submitted data are based on--
                          (i) continuous monitoring systems for 
                        fuel flow or emissions, such as 
                        continuous emission monitoring systems;
                          (ii) alternative systems that are 
                        demonstrated as providing data with the 
                        same precision, reliability, 
                        accessibility, and timeliness, or, to 
                        the extent the Administrator determines 
                        is appropriate for reporting small 
                        amounts of emissions, the same 
                        precision, reliability, and 
                        accessibility and similar timeliness, 
                        as data provided by continuous 
                        monitoring systems for fuel flow or 
                        emissions; or
                          (iii) alternative methodologies that 
                        are demonstrated to provide data with 
                        precision, reliability, accessibility, 
                        and timeliness, or, to the extent the 
                        Administrator determines is appropriate 
                        for reporting small amounts of 
                        emissions, precision, reliability, and 
                        accessibility, as similar as is 
                        technically feasible to that of data 
                        generally provided by continuous 
                        monitoring systems for fuel flow or 
                        emissions, if the Administrator 
                        determines that, with respect to a 
                        reporting entity, there is no 
                        continuous monitoring system or 
                        alternative system described in clause 
                        (i) or (ii) that is technically 
                        feasible;
                  (H) require that the Administrator, in 
                determining the extent to which the requirement 
                to use systems or methodologies in accordance 
                with subparagraph (G) is appropriate for 
                reporting entities other than covered entities 
                or for greenhouse gases to which section 722 
                does not apply, consider the cost of using such 
                systems and methodologies, and of using other 
                systems and methodologies that are available 
                and suitable, for quantifying the emissions 
                involved in light of the purposes of this 
                title, including the goal of collecting 
                consistent entity-wide data;
                  (I) include methods for minimizing double 
                reporting and avoiding irreconcilable double 
                reporting of greenhouse gas emissions;
                  (J) establish measurement protocols for 
                carbon capture and sequestration systems, 
                taking into consideration the regulations 
                promulgated under section 813;
                  (K) require that reporting entities provide 
                the data required under this paragraph in 
                reports submitted electronically to the 
                Administrator, in such form and containing such 
                information as may be required by the 
                Administrator;
                  (L) include requirements for keeping records 
                supporting or related to, and protocols for 
                auditing, submitted data;
                  (M) establish consistent policies for 
                calculating carbon content and greenhouse gas 
                emissions for each type of fossil fuel with 
                respect to which reporting is required;
                  (N) subsequent to implementation of policies 
                developed under subparagraph (M), provide for 
                immediate dissemination, to States, Indian 
                tribes, and on the Internet, of all data 
                reported under this section as soon as 
                practicable after electronic audit by the 
                Administrator and any resulting correction of 
                data, except that data shall not be 
                disseminated under this subparagraph if--
                          (i) its nondissemination is vital to 
                        the national security of the United 
                        States, as determined by the President; 
                        or
                          (ii) it is confidential business 
                        information that cannot be derived from 
                        information that is otherwise publicly 
                        available and disclosure of which would 
                        likely cause substantial harm to the 
                        competitive position of the person from 
                        which the information was obtained, 
                        except that--
                                  (I) data relating to 
                                greenhouse gas emissions, 
                                including any upstream or 
                                verification data from 
                                reporting entities, shall not 
                                be considered to be 
                                confidential business 
                                information; and
                                  (II) data that is 
                                confidential business 
                                information shall be provided 
                                to a State or Indian tribe 
                                within whose jurisdiction the 
                                reporting entity is located, 
                                if--
                                          (aa) the State or 
                                        Indian tribe has first 
                                        provided to the 
                                        Administrator a written 
                                        opinion from the chief 
                                        legal officer or 
                                        counsel of the 
                                        requesting State 
                                        agency, or comparable 
                                        tribal legal counsel, 
                                        stating that under 
                                        applicable State or 
                                        tribal law, the State 
                                        or Indian tribe has the 
                                        authority to compel a 
                                        business that possesses 
                                        such information to 
                                        disclose the 
                                        information to the 
                                        State or Indian tribe; 
                                        or
                                          (bb) each affected 
                                        business is informed of 
                                        disclosures under this 
                                        part that pertain to 
                                        the business, and the 
                                        State or Indian tribe 
                                        has demonstrated to the 
                                        chief legal officer of 
                                        the Environmental 
                                        Protection Agency that 
                                        the use and disclosure 
                                        by the State or Indian 
                                        tribe, as applicable, 
                                        of such information 
                                        will be governed by 
                                        State or tribal law and 
                                        procedures that will 
                                        provide adequate 
                                        protection to the 
                                        interests of affected 
                                        businesses;
                  (O) prescribe methods by which the 
                Administrator shall, in cases in which 
                satisfactory data are not submitted to the 
                Administrator for any period of time, estimate 
                emission, production, importation, manufacture, 
                or delivery levels--
                          (i) for covered entities with respect 
                        to greenhouse gas emissions, 
                        production, importation, manufacture, 
                        or delivery regulated under this title 
                        to ensure that emissions, production, 
                        importation, manufacture, or deliveries 
                        are not underreported, and to create a 
                        strong incentive for meeting data 
                        monitoring and reporting requirements--
                                  (I) with a conservative 
                                estimate of the highest 
                                emission, production, 
                                importation, manufacture, or 
                                delivery levels that may have 
                                occurred during the period for 
                                which data are missing; or
                                  (II) to the extent the 
                                Administrator considers 
                                appropriate, with an estimate 
                                of such levels assuming the 
                                unit is emitting, producing, 
                                importing, manufacturing, or 
                                delivering at a maximum 
                                potential level during the 
                                period, in order to ensure that 
                                such levels are not 
                                underreported and to create a 
                                strong incentive for meeting 
                                data monitoring and reporting 
                                requirements; and
                          (ii) for covered entities with 
                        respect to greenhouse gas emissions to 
                        which section 722 does not apply and 
                        for other reporting entities, with a 
                        reasonable estimate of the emission, 
                        production, importation, manufacture, 
                        or delivery levels that may have 
                        occurred during the period for which 
                        data are missing;
                  (P) require the designation of a designated 
                representative for each reporting entity;
                  (Q) require an appropriate certification, by 
                the designated representative for the reporting 
                entity, of accurate and complete accounting of 
                greenhouse gas emissions, as determined by the 
                Administrator; and
                  (R) include requirements for other data 
                necessary for accurate and complete accounting 
                of greenhouse gas emissions, as determined by 
                the Administrator, including data for quality 
                assurance of monitoring systems, monitors and 
                other measurement devices, and other data 
                needed to verify reported emissions, 
                production, importation, manufacture, or 
                delivery.
          (2) Timing.--
                  (A) Calendar years 2007 through 2010.--For a 
                base period of calendar years 2007 through 
                2010, each reporting entity shall submit annual 
                data required under this section to the 
                Administrator not later than March 31, 2011. 
                The Administrator may waive or modify reporting 
                requirements for calendar years 2007 through 
                2010 for categories of reporting entities to 
                the extent that the Administrator determines 
                that the reporting entities did not keep data 
                or records necessary to meet reporting 
                requirements. The Administrator may, in 
                addition to or in lieu of such requirements, 
                collect information on energy consumption and 
                production.
                  (B) Subsequent calendar years.--For calendar 
                year 2011 and each subsequent calendar year, 
                each reporting entity shall submit quarterly 
                data required under this section to the 
                Administrator not later than 60 days after the 
                end of the applicable quarter, except when the 
                data is already being reported to the 
                Administrator on an earlier timeframe for 
                another program.
          (3) Waiver of reporting requirements.--The 
        Administrator may waive reporting requirements under 
        this section for specific entities to the extent that 
        the Administrator determines that sufficient and 
        equally or more reliable verified and timely data are 
        available to the Administrator and the public on the 
        Internet under other mandatory statutory requirements.
          (4) Alternative threshold.--The Administrator may, by 
        rule, establish applicability thresholds for reporting 
        under this section using alternative metrics and 
        levels, provided that such metrics and levels are 
        easier to administer and cover the same size and type 
        of sources as the threshold defined in this section.
  (c) Interrelationship With Other Systems.--In developing the 
regulations issued under subsection (b), the Administrator 
shall take into account the work done by the Climate Registry 
and other mandatory State or multistate programs. Such 
regulations shall include an explanation of any major 
differences in approach between the system established under 
the regulations and such registries and programs.

SEC. 714. PERFLUOROCARBON AND OTHER NONHYDROFLUOROCARBON FLUORINATED 
                    SUBSTANCE PRODUCTION REGULATION.

  (a) Definitions.--In this section:
          (1) Best achievable performance standard.--The term 
        `best achievable performance standard' means a 
        limitation on total emissions based on the maximum 
        degree of reduction of fluorinated gases that are 
        greenhouse gases subject to regulation under this Act 
        emitted during the production of nonhydrofluorocarbon 
        fluorinated substances at covered entities that the 
        Administrator, taking into consideration energy, 
        environmental, economic impacts, and other costs, 
        determines to be achievable for covered entities 
        through application of production process optimization 
        and available methods, control technologies or systems, 
        and management techniques or practices.
          (2) Nonhydrofluorocarbon fluorinated substance.--The 
        term `nonhydrofluorocarbon fluorinated substance' means 
        a substance included on the list under subsection (d) 
        that--
                  (A) is not listed as a class I or class II 
                substance under title VI; and
                  (B) is not--
                          (i) sulfur hexafluoride; or
                          (ii) nitrogen trifluoride.
  (b) Determination by Administrator.--
          (1) In general.--Not later than 1 year after the date 
        of enactment of this section, the Administrator shall 
        determine, based on the criteria described in paragraph 
        (2), whether fluorinated gases that are greenhouse 
        gases emitted during the production of 
        nonhydrofluorocarbon fluorinated substances should be 
        regulated in accordance with--
                  (A) subsection (c); or
                  (B) the applicable requirements of section 
                722 relating to emissions of greenhouse gases 
                during fluorinated substance production at 
                covered entities.
          (2) Criteria for determination.--In making the 
        determination under paragraph (1), the Administrator 
        shall take into consideration--
                  (A) whether an equivalent or greater level of 
                total emissions reductions could be achieved 
                under subsection (c), as compared to the 
                emissions reductions that would be achieved 
                under the applicable requirements of section 
                722 relating to emissions of greenhouse gases 
                during fluorinated substance production at 
                covered entities; and
                  (B) such other criteria as the Administrator 
                determines to be appropriate.
  (c) Greenhouse Gas Emissions From Nonhydrofluorocarbon 
Fluorinated Substance Production.--
          (1) In general.--If the Administrator makes the 
        determination described in subsection (b)(1)(A), not 
        later than 18 months after the date of enactment of 
        this section, the Administrator shall promulgate 
        regulations applicable to covered entities that require 
        fluorinated gases that are greenhouse gases emitted 
        during the production of nonhydrofluorocarbon 
        fluorinated substances at those covered entities to 
        meet the best achievable performance standard.
          (2) Best achievable performance standard review.--The 
        Administrator shall, at the discretion of the 
        Administrator--
                  (A) not later than 2 years after the date of 
                establishment of a best achievable performance 
                standard, and every 2 years thereafter--
                          (i) review the best achievable 
                        performance standard; and
                          (ii) as necessary, establish a more 
                        stringent best available performance 
                        standard that reduces emissions, to the 
                        maximum extent practicable, in 
                        accordance with the economy-wide 
                        reduction goals referred to in section 
                        702; or
                  (B) not later than 2 years after the date of 
                establishment of a best achievable performance 
                standard, and every 10 years thereafter, 
                establish a 10-year schedule under which each 
                applicable covered entity shall incrementally 
                implement a more stringent best achievable 
                performance standard that reduces, to the 
                maximum extent practicable, emissions in 
                accordance with the economy-wide reduction 
                goals referred to in section 702.
          (3) Exclusivity.--If the Administrator makes the 
        determination described in subsection (b)(1)(A), the 
        requirements of this subsection relating to control of 
        emissions of fluorinated gases that are greenhouse 
        gases during the production of nonhydrofluorocarbon 
        fluorinated substances shall apply in lieu of the 
        requirements of section 722 relating to emissions of 
        fluorinated gases that are greenhouse gases during 
        fluorinated substance production at covered entities.
  (d) List of Nonhydrofluorocarbon Fluorinated Substances.--
          (1) Initial list.--If the Administrator makes the 
        determination described in subsection (b)(1)(A), not 
        later than 2 years after the date of enactment of this 
        section, the Administrator shall publish a list of 
        nonhydrofluorocarbon fluorinated substances subject to 
        regulation under this section.
          (2) Additions to list.--The Administrator may include 
        on the list published under paragraph (1) any substance 
        that meets the requirements described in subsection 
        (a)(2).

                         PART C--PROGRAM RULES

SEC. 721. EMISSION ALLOWANCES.

  (a) In General.--The Administrator shall establish a separate 
quantity of emission allowances for each calendar year starting 
in 2012, in the quantities prescribed under subsection (e).
  (b) Identification Numbers.--The Administrator shall assign 
to each emission allowance established under subsection (a) a 
unique identification number that includes the vintage year for 
that emission allowance.
  (c) Legal Status of Emission Allowances.--
          (1) In general.--An allowance established by the 
        Administrator under this title does not constitute a 
        property right.
          (2) Termination or limitation.--Nothing in this Act 
        or any other provision of law shall be construed to 
        limit or alter the authority of the United States, 
        including the Administrator acting pursuant to 
        statutory authority, to terminate or limit allowances, 
        offset credits, or term offset credits.
          (3) Other provisions unaffected.--Except as otherwise 
        specified in this Act, nothing in this Act relating to 
        allowances, offset credits, or term offset credits 
        established or issued under this title shall affect the 
        application of any other provision of law to a covered 
        entity, or the responsibility for a covered entity to 
        comply with any such provision of law.
  (d) Savings Provision.--Nothing in this part shall be 
construed as requiring a change of any kind in any State or 
tribal law regulating electric utility rates and charges, or as 
affecting any State or tribal law regarding such State 
regulation, or as limiting State or tribal regulation 
(including any prudency review) under such a State or tribal 
law. Nothing in this part shall be construed as modifying the 
Federal Power Act (16 U.S.C. 791a et seq.) or as affecting the 
authority of the Federal Energy Regulatory Commission under 
that Act. Nothing in this part shall be construed to interfere 
with or impair any program for competitive bidding for power 
supply in a State in which such program is established.
  (e) Allowances for Each Calendar Year.--
          (1) In general.--Except as provided in paragraph (2), 
        the number of emission allowances established by the 
        Administrator under subsection (a) for each calendar 
        year shall be as provided in the following table:

Calendar Year                            Emission Allowances (MtCO2e)
  2012.................................  4,627
  2013.................................  4,544
  2014.................................  5,053
  2015.................................  5,003
  2016.................................  5,482
  2017.................................  5,261
  2018.................................  5,132
  2019.................................  5,002
  2020.................................  4,873
  2021.................................  4,739
  2022.................................  4,605
  2023.................................  4,471
  2024.................................  4,337
  2025.................................  4,203
  2026.................................  4,069
  2027.................................  3,935
  2028.................................  3,801
  2029.................................  3,667
  2030.................................  3,533
  2031.................................  3,408
  2032.................................  3,283
  2033.................................  3,158
  2034.................................  3,033
  2035.................................  2,908
  2036.................................  2,784
  2037.................................  2,659
  2038.................................  2,534
  2039.................................  2,409
  2040.................................  2,284
  2041.................................  2,159
  2042.................................  2,034
  2043.................................  1,910
  2044.................................  1,785
  2045.................................  1,660
  2046.................................  1,535
  2047.................................  1,410
  2048.................................  1,285
  2049.................................  1,160
  2050 and each calendar year            1,035
   thereafter.
          (2) Revision.--
                  (A) In general.--The Administrator may 
                adjust, in accordance with subparagraph (B), 
                the number of emission allowances established 
                pursuant to paragraph (1) if, after notice and 
                an opportunity for public comment, the 
                Administrator determines that--
                          (i) United States greenhouse gas 
                        emissions in 2005 were other than 7,206 
                        million metric tons carbon dioxide 
                        equivalent;
                          (ii) if the requirements of this 
                        title for 2012 had been in effect in 
                        2005, section 722 would have required 
                        emission allowances to be held for 
                        other than 66.2 percent of United 
                        States greenhouse gas emissions in 
                        2005;
                          (iii) if the requirements of this 
                        title for 2014 had been in effect in 
                        2005, section 722 would have required 
                        emission allowances to be held for 
                        other than 75.7 percent of United 
                        States greenhouse gas emissions in 
                        2005; or
                          (iv) if the requirements of this 
                        title for 2016 had been in effect in 
                        2005, section 722 would have required 
                        emission allowances to be held for 
                        other than 84.5 percent United States 
                        greenhouse gas emissions in 2005.
                  (B) Adjustment formula.--
                          (i) In general.--If the Administrator 
                        adjusts under this paragraph the number 
                        of emission allowances established 
                        pursuant to paragraph (1), the number 
                        of emission allowances the 
                        Administrator establishes for any given 
                        calendar year shall equal the product 
                        of--
                                  (I) United States greenhouse 
                                gas emissions in 2005, 
                                expressed in tons of carbon 
                                dioxide equivalent;
                                  (II) the percent of United 
                                States greenhouse gas emissions 
                                in 2005, expressed in tons of 
                                carbon dioxide equivalent, that 
                                would have been subject to 
                                section 722 if the requirements 
                                of this title for the given 
                                calendar year had been in 
                                effect in 2005; and
                                  (III) the percentage set 
                                forth for that calendar year in 
                                section 703(a), or determined 
                                under clause (ii) of this 
                                subparagraph.
                          (ii) Targets.--In applying the 
                        portion of the formula in clause 
                        (i)(III) of this subparagraph, for 
                        calendar years for which a percentage 
                        is not listed in section 703(a), the 
                        Administrator shall use a uniform 
                        annual decline in the amount of 
                        emissions between the years that are 
                        specified.
                          (iii) Carbon dioxide equivalent 
                        value.--If the Administrator adjusts 
                        under this paragraph the number of 
                        emission allowances established 
                        pursuant to paragraph (1), the 
                        Administrator shall use the carbon 
                        dioxide equivalent values established 
                        pursuant to section 712.
                          (iv) Limitation on adjustment 
                        timing.--Once a calendar year has 
                        started, the Administrator may not 
                        adjust the number of emission 
                        allowances to be established for that 
                        calendar year.
                  (C) Limitation on adjustment authority.--The 
                Administrator may adjust under this paragraph 
                the number of emission allowances to be 
                established pursuant to paragraph (1) only 
                once.
  (f) Compensatory Allowance.--
          (1) In general.--The regulations promulgated under 
        subsection (h) shall provide for the establishment and 
        distribution of compensatory allowances for--
                  (A) the destruction, in 2012 or later, of 
                fluorinated gases that are greenhouse gases 
                if--
                          (i) allowances or offset credits were 
                        retired for their production or 
                        importation; and
                          (ii) such gases are not required to 
                        be destroyed under any other provision 
                        of law;
                  (B) the nonemissive use, in 2012 or later, of 
                petroleum-based or coal-based liquid or gaseous 
                fuel, petroleum coke, natural gas liquid, or 
                natural gas as a feedstock, if allowances or 
                offset credits were retired for the greenhouse 
                gases that would have been emitted from their 
                combustion; and
                  (C) the conversionary use, in 2012 or later, 
                of fluorinated gases in a manufacturing 
                process, including semiconductor research or 
                manufacturing, if allowances or offset credits 
                were retired for the production or importation 
                of such gas.
          (2) Establishment and distribution.--
                  (A) In general.--Not later than 90 days after 
                the end of each calendar year, the 
                Administrator shall establish and distribute to 
                the entity taking the actions described in 
                subparagraph (A), (B), or (C) of paragraph (1) 
                a quantity of compensatory allowances 
                equivalent to the number of tons of carbon 
                dioxide equivalent of avoided emissions 
                achieved through such actions. In establishing 
                the quantity of compensatory allowances, the 
                Administrator shall take into account the 
                carbon dioxide equivalent value of any 
                greenhouse gas resulting from such action.
                  (B) Source of allowances.--Compensatory 
                allowances established under this subsection 
                shall not be emission allowances established 
                under subsection (a).
                  (C) Identification numbers.--The 
                Administrator shall assign to each compensatory 
                allowance established under subparagraph (A) a 
                unique identification number.
          (3) Definitions.--For purposes of this subsection--
                  (A) the term `destruction' means the 
                conversion of a greenhouse gas by thermal, 
                chemical, or other means to another gas or set 
                of gases with little or no carbon dioxide 
                equivalent value;
                  (B) the term `nonemissive use' means the use 
                of fossil fuel as a feedstock in an industrial 
                or manufacturing process to the extent that 
                greenhouse gases are not emitted from such 
                process, and to the extent that the products of 
                such process are not intended for use as, or to 
                be contained in, a fuel; and
                  (C) the term `conversionary use' means the 
                conversion during research or manufacturing of 
                a fluorinated gas into another greenhouse gas 
                or set of gases with a lower carbon dioxide 
                equivalent value.
          (4) Feedstock emissions study.--
                  (A) The Administrator may conduct a study to 
                determine the extent to which petroleum-based 
                or coal-based liquid or gaseous fuel, petroleum 
                coke, natural gas liquid, or natural gas are 
                used as feedstocks in manufacturing processes 
                to produce products and the greenhouse gas 
                emissions resulting from such uses.
                  (B) If as a result of such a study, the 
                Administrator determines that the use of such 
                products by noncovered sources results in 
                substantial emissions of greenhouse gases or 
                their precursors and that such emissions have 
                not been adequately addressed under other 
                requirements of this Act, the Administrator 
                may, after notice and comment rulemaking, 
                promulgate a regulation reducing compensatory 
                allowances commensurately if doing so will not 
                result in leakage.
  (g) Fluorinated Gases Assessment.--
          (1) In general.--Not later than March 31, 2014, the 
        Administrator shall conduct an assessment of the 
        regulation of non-hydrofluorocarbon fluorinated gases 
        under this title to determine whether the most 
        appropriate point of regulation of those gases is at--
                  (A) the gas manufacturer or importer level; 
                or
                  (B) the downstream source of the emissions.
          (2) Modification of definition.--If the Administrator 
        determines, based on consideration of environmental 
        effectiveness, cost-effectiveness, administrative 
        feasibility, extent of coverage of emissions, and 
        competitiveness considerations, that emissions of non-
        hydrofluorocarbon fluorinated gases can best be 
        regulated by designating downstream emission sources as 
        covered entities with compliance obligations under 
        section 722, the Administrator shall--
                  (A) after providing notice and an opportunity 
                for comment, modify the definition of the term 
                `covered entity' with respect to fluorinated 
                gases (other than hydrofluorocarbons) 
                accordingly; and
                  (B) establish such requirements as are 
                necessary to ensure compliance by the covered 
                entities with the requirements of this title.
  (h) Regulations.--Not later than 24 months after the date of 
enactment of this title, the Administrator shall promulgate 
regulations to carry out the provisions of this title.

SEC. 722. PROHIBITION OF EXCESS EMISSIONS.

  (a) Prohibition.--Except as provided in subsection (c), 
effective January 1, 2012, each covered entity is prohibited 
from emitting greenhouse gases, and having attributable 
greenhouse gas emissions, in combination, in excess of its 
allowable emissions level. A covered entity's allowable 
emissions level for each calendar year is the number of 
emission allowances (or credits or other allowances as provided 
in subsection (d)) it holds as of 12:01 a.m. on April 1 (or a 
later date established by the Administrator under subsection 
(j)) of the following calendar year.
  (b) Methods of Demonstrating Compliance.--Except as otherwise 
provided in this section, the owner or operator of a covered 
entity shall not be considered to be in compliance with the 
prohibition in subsection (a) unless, as of 12:01 a.m. on April 
1 (or a later date established by the Administrator under 
subsection (j)) of each calendar year starting in 2013, the 
owner or operator holds a quantity of emission allowances (or 
credits or other allowances as provided in subsection (d)) at 
least as great as the quantity calculated as follows:
          (1) Electricity sources.--For a covered entity 
        described in section 700(13)(A), 1 emission allowance 
        for each ton of carbon dioxide equivalent of greenhouse 
        gas that such covered entity emitted in the previous 
        calendar year, excluding emissions resulting from the 
        combustion of--
                  (A) petroleum-based or coal-based liquid 
                fuel;
                  (B) natural gas liquid;
                  (C) renewable biomass or gas derived from 
                renewable biomass; or
                  (D) petroleum coke.
          (2) Fuel producers and importers.--For a covered 
        entity described in section 700(13)(B), 1 emission 
        allowance for each ton of carbon dioxide equivalent of 
        greenhouse gas that would be emitted from the 
        combustion of any petroleum-based or coal-based liquid 
        fuel, petroleum coke, or natural gas liquid, produced 
        or imported by such covered entity during the previous 
        calendar year for sale or distribution in interstate 
        commerce, assuming no capture and sequestration of any 
        greenhouse gas emissions.
          (3) Industrial gas producers and importers.--For a 
        covered entity described in section 700(13)(C), 1 
        emission allowance for each ton of carbon dioxide 
        equivalent of fossil fuel-based carbon dioxide, nitrous 
        oxide, or any other fluorinated gas that is a 
        greenhouse gas (except for nitrogen trifluoride), or 
        any combination thereof, produced or imported by such 
        covered entity during the previous calendar year for 
        sale or distribution in interstate commerce.
          (4) Nitrogen trifluoride sources.--For a covered 
        entity described in section 700(13)(D), 1 emission 
        allowance for each ton of carbon dioxide equivalent of 
        nitrogen trifluoride that such covered entity emitted 
        in the previous calendar year.
          (5) Geological sequestration sites.--For a covered 
        entity described in section 700(13)(E), 1 emission 
        allowance for each ton of carbon dioxide equivalent of 
        greenhouse gas that such covered entity emitted in the 
        previous calendar year.
          (6) Industrial stationary sources.--For a covered 
        entity described in section 700(13)(F), (G), or (H), 1 
        emission allowance for each ton of carbon dioxide 
        equivalent of greenhouse gas that such covered entity 
        emitted in the previous calendar year, excluding 
        emissions resulting from--
                  (A) the combustion of petroleum-based or 
                coal-based liquid fuel;
                  (B) the combustion of natural gas liquid;
                  (C) the combustion of renewable biomass or 
                gas derived from renewable biomass;
                  (D) the combustion of petroleum coke; or
                  (E) the use of any fluorinated gas that is a 
                greenhouse gas purchased for use at that 
                covered entity, except for nitrogen 
                trifluoride.
          (7) Industrial fossil fuel-fired combustion 
        devices.--For a covered entity described in section 
        700(13)(I), 1 emission allowance for each ton of carbon 
        dioxide equivalent of greenhouse gas that the devices 
        emitted in the previous calendar year, excluding 
        emissions resulting from the combustion of--
                  (A) petroleum-based or coal-based liquid 
                fuel;
                  (B) natural gas liquid;
                  (C) renewable biomass or gas derived from 
                renewable biomass; or
                  (D) petroleum coke.
          (8) Natural gas local distribution companies.--For a 
        covered entity described in section 700(13)(J), 1 
        emission allowance for each ton of carbon dioxide 
        equivalent of greenhouse gas that would be emitted from 
        the combustion of the natural gas, and any other gas 
        meeting the specifications for commingling with natural 
        gas for purposes of delivery, that such entity 
        delivered during the previous calendar year to 
        customers that are not covered entities, assuming no 
        capture and sequestration of that greenhouse gas.
          (9) R&D facilities.--
                  (A) In general.--For a qualified R&D facility 
                that emitted 25,000 tons per year or more 
                carbon dioxide equivalent in the previous 
                calendar year, 1 emission allowance for each 
                ton of carbon dioxide equivalent of greenhouse 
                gas that such facility emitted in the previous 
                calendar year.
                  (B) Treatment.--A qualified R&D facility 
                shall be treated as a separate covered entity 
                solely for purposes of applying the 
                requirements of this subsection.
          (10) Algae-based fuels.--Where carbon dioxide (or 
        another greenhouse gas) generated by a covered entity 
        is used as an input in the production of algae-based 
        fuels, the Administrator shall ensure that emission 
        allowances are required to be held either for the 
        carbon dioxide generated by a covered entity used to 
        grow the algae or for the portion of the carbon dioxide 
        emitted from combustion of the fuel produced from such 
        algae that is attributable to carbon dioxide generated 
        by a covered entity, but not for both.
          (11) Fugitive emissions.--The greenhouse gas 
        emissions to which paragraphs (1), (4), (6), and (7) 
        apply shall not include fugitive emissions of 
        greenhouse gas, except to the extent the Administrator 
        determines that data on the carbon dioxide equivalent 
        value of greenhouse gas in the fugitive emissions can 
        be provided with sufficient precision, reliability, 
        accessibility, and timeliness to ensure the integrity 
        of emission allowances, the allowance tracking system, 
        and the limits on emissions.
          (12) Export exemption.--This section shall not apply 
        to any petroleum-based or coal-based liquid fuel, 
        petroleum coke, natural gas liquid, fossil fuel-based 
        carbon dioxide, nitrous oxide, or fluorinated gas that 
        is exported for sale or use.
          (13) Natural gas liquids.--Notwithstanding subsection 
        (a), if the owner or operator of a covered entity 
        described in section 700(13)(B) that produces natural 
        gas liquids does not take ownership of the liquids, and 
        is not responsible for the distribution or use of the 
        liquids in commerce, the owner of the liquids shall be 
        responsible for compliance with this section, section 
        723, and other relevant sections of this title with 
        respect to such liquids. In the regulations promulgated 
        under section 721, the Administrator shall include such 
        provisions with respect to such liquids as the 
        Administrator determines are appropriate to determine 
        and ensure compliance, and to penalize noncompliance. 
        In such a case, the owner of the covered entity shall 
        provide to the Administrator, in a manner to be 
        determined by the Administrator, information regarding 
        the quantity and ownership of liquids produced at the 
        covered entity.
          (14) Application of multiple paragraphs.--For a 
        covered entity to which more than 1 of paragraphs (1) 
        through (8) apply, all applicable paragraphs shall 
        apply, except that not more than 1 emission allowance 
        shall be required for the same emission.
  (c) Phase-in of Prohibition.--
          (1) Industrial stationary sources.--The prohibition 
        under subsection (a) shall first apply to a covered 
        entity described in section 700(13)(D), (F), (G), (H), 
        or (I), with respect to emissions occurring during 
        calendar year 2014.
          (2) Small business refiners.--The prohibition under 
        subsection (a) shall first apply to a covered entity 
        described in section 700(13)(F)(viii) that is a small 
        business refiner with respect to emissions during 
        calendar year 2015.
          (3) Natural gas local distribution companies.--The 
        prohibition under subsection (a) shall first apply to a 
        covered entity described in section 700(13)(J) with 
        respect to deliveries occurring during calendar year 
        2016.
  (d) Additional Methods.--In addition to using the method of 
compliance described in subsection (b), a covered entity may do 
the following:
          (1) Offset credits.--
                  (A) Credits.--
                          (i) In general.--Covered entities 
                        collectively may, in accordance with 
                        this paragraph, use offset credits to 
                        demonstrate compliance for up to a 
                        maximum of 2,000,000,000 tons of 
                        greenhouse gas emissions annually.
                          (ii) Demonstration of compliance.--In 
                        any calendar year, a covered entity may 
                        demonstrate compliance by holding 1 
                        domestic offset credit or 1.25 
                        international offset credits in lieu of 
                        an emission allowance, except as 
                        provided in subparagraph (D), up to a 
                        total number of offset credits 
                        described in subparagraph (B).
                  (B) Applicable percentage.--
                          (i) In general.--The total number of 
                        offset credits referred to in 
                        subparagraph (A)(ii) for a covered 
                        entity for a given calendar year shall 
                        be determined by--
                                  (I) dividing--
                                          (aa) the tons of 
                                        carbon dioxide 
                                        equivalent of 
                                        greenhouse gas 
                                        emissions of the 
                                        covered entity (except 
                                        for the types of 
                                        emissions excluded 
                                        under subparagraphs (A) 
                                        through (D) of 
                                        subsection (b)(1), 
                                        subparagraphs (A) 
                                        through (E) of 
                                        subsection (b)(6), and 
                                        subparagraphs (A) 
                                        through (D) of 
                                        subsection (b)(7)) and 
                                        attributable greenhouse 
                                        gas emissions for the 
                                        year before the 
                                        preceding calendar 
                                        year; by
                                          (bb) the sum of the 
                                        tons of carbon dioxide 
                                        equivalent of 
                                        greenhouse gas 
                                        emissions of all 
                                        covered entities 
                                        (except for the types 
                                        of emissions excluded 
                                        under subparagraphs (A) 
                                        through (D) of 
                                        subsection (b)(1), 
                                        subparagraphs (A) 
                                        through (E) of 
                                        subsection (b)(6), and 
                                        subparagraphs (A) 
                                        through (D) of 
                                        subsection (b)(7)) and 
                                        attributable greenhouse 
                                        gas emissions for the 
                                        year before the 
                                        preceding calendar 
                                        year; and
                                  (II) multiplying the quotient 
                                obtained under subclause (I) by 
                                2,000,000,000.
                          (ii) Applicability.--Clause (i) shall 
                        apply to a covered entity (including a 
                        covered entity that commenced operation 
                        during the preceding calendar year) 
                        even if the covered entity had no 
                        greenhouse gas emissions or 
                        attributable greenhouse gas emissions 
                        described in that clause.
                          (iii) Offset credits.--Not more than 
                        \3/4\ of the applicable percentage 
                        under this paragraph may be used by 
                        holding domestic offset credits, and 
                        not more than \1/4\ of the applicable 
                        percentage under this paragraph may be 
                        used by holding international offset 
                        credits, except as provided in 
                        subparagraph (C).
                  (C) Modified percentages.--If the 
                Administrator determines that domestic offset 
                credits available for use in demonstrating 
                compliance in any calendar year at domestic 
                offset prices generally equal to or less than 
                allowance prices, are likely to offset less 
                than 900,000,000 tons of greenhouse gas 
                emissions (measured in tons of carbon dioxide 
                equivalents), the Administrator shall increase 
                the percent of emissions that can be offset 
                through the use of international offset credits 
                (and decrease the percent of emissions that can 
                be allowed through the use of domestic offset 
                credits by the same amount) to reflect the 
                amount that 1,500,000,000 exceeds the number of 
                domestic offset credits the Administrator 
                determines is available for that year, up to a 
                maximum of 750,000,000 tons of greenhouse gas 
                emissions.
                  (D) International offset credits.--
                Notwithstanding subparagraph (A), to 
                demonstrate compliance prior to calendar year 
                2018, a covered entity may use 1 international 
                offset credit in lieu of an emission allowance 
                up to the amount permitted under this 
                paragraph.
                  (E) President's recommendation.--The 
                President may make a recommendation to Congress 
                as to whether the number 2,000,000,000 
                specified in subparagraphs (A) and (B) should 
                be increased or decreased.
          (2) Term offset credits.--
                  (A) In general.--Covered entities may, in 
                accordance with this paragraph, use non-expired 
                term offset credits instead of domestic offset 
                credits for purposes of temporarily 
                demonstrating compliance with this section.
                  (B) Amount.--The combined quantity of term 
                offset credits and domestic offset credits used 
                by a covered entity to demonstrate compliance 
                for its emissions or attributable greenhouse 
                gas emissions in any given year shall not 
                exceed the quantity of domestic offset credits 
                that a covered entity is entitled to use for 
                that year to demonstrate compliance in 
                accordance with paragraph (1).
                  (C) Expiration.--A term offset credit shall 
                expire in the year after its term ends. The 
                term of a term offset credit shall be 
                calculated by adding to the year of issuance 
                the number of years equal to the length of the 
                crediting period for the practice or project 
                for which the term offset credit was issued, 
                but in no case shall be later than the date 5 
                years from the date of issuance.
                  (D) Demonstrating compliance upon expiration 
                of term offset credit.--With respect to the 
                emissions for which a covered entity is using 
                term offset credits to demonstrate compliance 
                temporarily with this section, the owner or 
                operator of a covered entity shall not be 
                considered to be in compliance with the 
                prohibition in subsection (a) unless, as of 
                12:01 a.m. on April 1 (or a later date 
                established by the Administrator under 
                subsection (j)) of the calendar year in which a 
                term offset credit expires, the owner or 
                operator holds--
                          (i) for purposes of finally 
                        demonstrating compliance, an allowance 
                        or a domestic offset credit; or
                          (ii) for purposes of temporarily 
                        demonstrating compliance, a non-expired 
                        term offset credit.
                  (E) Inapplicability of percentage 
                limitations.--Domestic offset credits used for 
                purposes of finally demonstrating compliance 
                under this subparagraph shall not be subject to 
                the percentage limitations in subparagraph (B).
                  (F) Financial assurance.--A covered entity 
                may not use a term offset credit to demonstrate 
                compliance temporarily unless it simultaneously 
                provides to the Administrator financial 
                assurance that, at the end of the term offset 
                credit`s crediting term, the covered entity 
                will have sufficient resources to obtain the 
                quantity of allowances or credits necessary to 
                demonstrate final compliance. The Administrator 
                shall issue regulations establishing 
                requirements for such financial assurance, 
                which shall take into account the increased 
                risk associated with longer crediting terms. 
                These regulations shall take into account the 
                total number of tons of carbon dioxide 
                equivalent of greenhouse gas emissions for 
                which a covered entity is demonstrating 
                compliance temporarily, and may set a limit on 
                this amount. In the event that a covered entity 
                that used term offset credits to demonstrate 
                compliance temporarily fails to meet the 
                requirements of subparagraph (D) at the end of 
                the term offset credits' crediting term, if the 
                financial assurance mechanism fails to provide 
                to the Administrator the number of allowances 
                or offset credits for which the crediting term 
                has expired, then the Administrator shall 
                retire that number of allowances with the 
                vintage year 2 years after the year in which 
                the term offset credit expires in the same 
                amount. Allowances so retired shall not be 
                counted as emission allowances established for 
                that calendar year under section 721(a).
          (3) International emission allowances.--To 
        demonstrate compliance, a covered entity may hold an 
        international emission allowance in lieu of an emission 
        allowance, except as modified under section 728(d).
          (4) Compensatory allowances.--To demonstrate 
        compliance, a covered entity may hold a compensatory 
        allowance obtained under section 721(f) in lieu of an 
        emission allowance.
  (e) Retirement of Allowances and Credits.--As soon as 
practicable after a deadline established for covered entities 
to demonstrate compliance with this title, the Administrator 
shall retire the quantity of allowances or credits required to 
be held under this title.
  (f) Alternative Metrics.--For categories of covered entities 
described in subparagraph (B), (C), (D), (G), (H), or (I) of 
section 700(13), the Administrator may, by rule, establish an 
applicability threshold for inclusion under those subparagraphs 
using an alternative metric and level, provided that such 
metric and level are easier to administer and cover the same 
size and type of sources as the threshold defined in such 
subparagraphs.
  (g) Threshold Review.--For each category of covered entities 
described in subparagraph (B), (C), (D), (G), (H), or (I) of 
section 700(13), the Administrator shall, in 2020 and once 
every 8 years thereafter, review the carbon dioxide equivalent 
emission thresholds that are used to define covered entities. 
After consideration of--
          (1) emissions from covered entities in each such 
        category, and from other entities of the same type that 
        emit less than the threshold amount for the category 
        (including emission sources that commence operation 
        after the date of enactment of this title that are not 
        covered entities); and
          (2) whether greater greenhouse gas emission 
        reductions can be cost-effectively achieved by lowering 
        the applicable threshold,
the Administrator may by rule lower such threshold to not less 
than 10,000 tons of carbon dioxide equivalent emissions. In 
determining the cost effectiveness of potential reductions from 
lowering the threshold for covered entities, the Administrator 
shall consider alternative regulatory greenhouse gas programs, 
including setting standards under other titles of this Act.
  (h) Designated Representatives.--The regulations promulgated 
under section 721(h) shall require that each covered entity, 
and each entity holding allowances or credits or receiving 
allowances or credits from the Administrator under this title, 
select a designated representative.
  (i) Education and Outreach.--
          (1) In general.--The Administrator shall establish 
        and carry out a program of education and outreach to 
        assist covered entities, especially entities having 
        little experience with environmental regulatory 
        requirements similar or comparable to those under this 
        title, in preparing to meet the compliance obligations 
        of this title. Such program shall include education 
        with respect to using markets to effectively achieve 
        such compliance.
          (2) Failure to receive information.--A failure to 
        receive information or assistance under this subsection 
        may not be used as a defense against an allegation of 
        any violation of this title.
  (j) Adjustment of Deadline.--The Administrator may, by rule, 
establish a deadline for demonstrating compliance, for a 
calendar year, later than the date provided in subsection (a), 
as necessary to ensure the availability of emissions data, but 
in no event shall the deadline be later than June 1.
  (k) Notice Requirement for Covered Entities Receiving Natural 
Gas From Natural Gas Local Distribution Companies.--The owner 
or operator of a covered entity that takes delivery of natural 
gas from a natural gas local distribution company shall, not 
later than September 1 of each calendar year, notify such 
natural gas local distribution company in writing that such 
entity will qualify as a covered entity under this title for 
that calendar year.
  (l) Compliance Obligation.--For purposes of this title, the 
year of a compliance obligation is the year in which compliance 
is determined, not the year in which the greenhouse gas 
emissions occur or the covered entity has attributable 
greenhouse gas emissions.

SEC. 723. PENALTY FOR NONCOMPLIANCE.

  (a) Enforcement.--A violation of any prohibition of, 
requirement of, or regulation promulgated pursuant to this 
title shall be a violation of this Act. It shall be a violation 
of this Act for a covered entity to emit greenhouse gases, and 
have attributable greenhouse gas emissions, in combination, in 
excess of its allowable emissions level as provided in section 
722(a). Each ton of carbon dioxide equivalent for which a 
covered entity fails to demonstrate compliance under section 
722(b) shall be a separate violation. In the event that a 
covered entity fails to demonstrate compliance at the 
expiration of a term of offset credits crediting term as 
required by section 722(d)(2)(D), the year of the violation 
shall be the year in which the term offset credit expires.
  (b) Excess Emissions Penalty.--
          (1) In general.--The owner or operator of any covered 
        entity that fails for any year to comply, on the 
        deadline described in section 722(a) or (j), shall be 
        liable for payment to the Administrator of an excess 
        emissions penalty in the amount described in paragraph 
        (2).
          (2) Amount.--The amount of an excess emissions 
        penalty required to be paid under paragraph (1) shall 
        be equal to the product obtained by multiplying--
                  (A) the tons of carbon dioxide equivalent of 
                greenhouse gas emissions or attributable 
                greenhouse gas emissions for which the owner or 
                operator of a covered entity failed to comply 
                under section 722(b) on the deadline; by
                  (B) twice the fair market value of emission 
                allowances established for emissions occurring 
                in the calendar year for which the emission 
                allowances were due.
          (3) Timing.--An excess emissions penalty required 
        under this subsection shall be immediately due and 
        payable to the Administrator, without demand, in 
        accordance with regulations promulgated by the 
        Administrator, which shall be issued not later than 2 
        years after the date of enactment of this title.
          (4) No effect on liability.--An excess emissions 
        penalty due and payable by the owners or operators of a 
        covered entity under this subsection shall not diminish 
        the liability of the owners or operators for any fine, 
        penalty, or assessment against the owners or operators 
        for the same violation under any other provision of 
        this Act or any other law.
  (c) Excess Emissions Allowances.--The owner or operator of a 
covered entity that fails for any year to comply on the 
deadline described in section 722(a) or (j) shall be liable to 
offset the covered entity's excess combination of greenhouse 
gases emitted and attributable greenhouse gas emissions by an 
equal quantity of emission allowances during the following 
calendar year, or such longer period as the Administrator may 
prescribe. During the year in which the covered entity failed 
to comply, or any year thereafter, the Administrator may deduct 
the emission allowances required under this subsection to 
offset the covered entity's excess actual or attributable 
emissions.

SEC. 724. TRADING.

  (a) Permitted Transactions.--Except as otherwise provided in 
this title, the lawful holder of an emission allowance, 
compensatory allowance, or offset credit may, without 
restriction, sell, exchange, transfer, hold for compliance in 
accordance with section 722, or request that the Administrator 
retire the emission allowance, compensatory allowance, or 
offset credit.
  (b) No Restriction on Transactions.--The privilege of 
purchasing, holding, selling, exchanging, transferring, and 
requesting retirement of emission allowances, compensatory 
allowances, or offset credits shall not be restricted to the 
owners and operators of covered entities, except as otherwise 
provided in this title.
  (c) Effectiveness of Allowance Transfers.--No transfer of an 
allowance or offset credit shall be effective for purposes of 
this title until a certification of the transfer, signed by the 
designated representative of the transferor, is received and 
recorded by the Administrator in accordance with regulations 
promulgated under section 721(h).
  (d) Allowance Tracking System.--The regulations promulgated 
under section 721(h) shall include a system for issuing, 
recording, holding, and tracking allowances, offset credits, 
and term offset credits that shall specify all necessary 
procedures and requirements for an orderly and competitive 
functioning of the allowance and offset credit markets. Such 
regulations shall provide for appropriate publication of the 
information in the system on the Internet.

SEC. 725. BANKING AND BORROWING.

  (a) Banking.--An emission allowance may be used to comply 
with section 722 or 723 for emissions in--
          (1) the vintage year for the allowance; or
          (2) any calendar year subsequent to the vintage year 
        for the allowance.
  (b) Expiration.--
          (1) Regulations.--The Administrator may establish by 
        regulation criteria and procedures for determining 
        whether, and for implementing a determination that, the 
        expiration of an allowance, credit, or term offset 
        credit established or issued by the Administrator under 
        this title, or expiration of the ability to use an 
        international emission allowance to comply with section 
        722, is necessary to ensure the authenticity and 
        integrity of allowances, credits, or term offset 
        credits or the allowance tracking system.
          (2) General rule.--An allowance, credit, or term 
        offset credit established or issued by the 
        Administrator under this title shall not expire 
        unless--
                  (A) it is retired by the Administrator as 
                required under this title; or
                  (B) it is determined to expire or to have 
                expired by a specific date by the Administrator 
                in accordance with regulations promulgated 
                under paragraph (1).
          (3) International emission allowances.--The ability 
        to use an international emission allowance to comply 
        with section 722 shall not expire unless--
                  (A) the allowance is retired by the 
                Administrator as required by this title; or
                  (B) the ability to use such allowance to meet 
                such compliance obligation requirements is 
                determined to expire or to have expired by a 
                specific date by the Administrator in 
                accordance with regulations promulgated under 
                paragraph (1).
  (c) Borrowing Future Vintage Year Allowances.--
          (1) Borrowing without interest.--In addition to the 
        uses described in subsection (a), an emission allowance 
        may be used to comply with section 722(a) or 723 for 
        emissions, production, importation, manufacture, or 
        deliveries in the calendar year immediately preceding 
        the vintage year for the allowance.
          (2) Borrowing with interest.--
                  (A) In general.--A covered entity may 
                demonstrate compliance under subsection (b) in 
                a specific calendar year for up to 15 percent 
                of its emissions by holding emission allowances 
                with a vintage year 1 to 5 years later than 
                that calendar year.
                  (B) Limitations.--An emission allowance 
                borrowed pursuant to this paragraph shall be an 
                emission allowance that is established by the 
                Administrator for a specific future calendar 
                year under section 721(a) and that is held by 
                the borrower.
                  (C) Prepayment of interest.--For each 
                emission allowance that an owner or operator of 
                a covered entity borrows pursuant to this 
                paragraph, such owner or operator shall, at the 
                time it borrows the allowance, hold for 
                retirement by the Administrator a quantity of 
                emission allowances that is equal to the 
                product obtained by multiplying--
                          (i) 0.08; by
                          (ii) the number of years between the 
                        calendar year in which the allowance is 
                        being used to satisfy a compliance 
                        obligation and the vintage year of the 
                        allowance.

SEC. 726. MARKET STABILITY RESERVE.

  (a) Market Stability Reserve Auctions.--
          (1) In general.--Once each quarter of each calendar 
        year for which allowances are established under section 
        721(a), the Administrator shall auction market 
        stability reserve allowances.
          (2) Restriction to covered entities.--In each auction 
        conducted under paragraph (1), only covered entities 
        that the Administrator expects will be required to 
        comply with section 722 in the following calendar year 
        shall be eligible to make purchases.
  (b) Pool of Emission Allowances for Market Stability Reserve 
Auctions.--
          (1) Filling the market stability reserve initially.--
        The Administrator shall, not later than 2 years after 
        the date of enactment of this title, establish a market 
        stability reserve account, and shall place in that 
        account a quantity of emission allowances established 
        under section 771(d)(9).
          (2) Supplementing the market stability reserve.--The 
        Administrator shall also--
                  (A) at the end of each calendar year, 
                transfer to the market stability reserve 
                account each emission allowance that was 
                offered for sale but not sold at any auction 
                conducted under section 778; and
                  (B) transfer emission allowances established 
                under subsection (g) from auction proceeds, and 
                deposit them into the market stability reserve, 
                to the extent necessary to maintain the reserve 
                at its original size.
  (c) Minimum Market Stability Reserve Auction Price.--
          (1) In general.--At each market stability reserve 
        auction, the Administrator shall offer emission 
        allowances for sale beginning at a minimum price per 
        emission allowance, which shall be known as the 
        `minimum market stability reserve auction price'.
          (2) Initial minimum market stability reserve auction 
        prices.--The minimum market stability reserve auction 
        price shall be $28 (in constant 2005 dollars) for the 
        market stability reserve auctions held in 2012. For the 
        market stability reserve auctions held in 2013 through 
        2017, the minimum market stability reserve auction 
        price shall be the market stability reserve auction 
        price for the previous year increased by 5 percent plus 
        the rate of inflation (as measured by the Consumer 
        Price Index for All Urban Consumers).
          (3) Minimum market stability reserve auction price in 
        subsequent years.--For each market stability reserve 
        auction held in 2018 and each year thereafter, the 
        minimum market stability reserve auction price shall be 
        the market stability reserve auction price for the 
        previous year increased by 7 percent, plus the rate of 
        inflation (as measured by the Consumer Price Index for 
        All Urban Consumers).
  (d) Quantity of Emission Allowances Released From the Market 
Stability Reserve.--
          (1) Initial limits.--Subject to paragraph (4), for 
        each of calendar years 2012 through 2016, the annual 
        limit on the number of emission allowances from the 
        market stability reserve account that may be auctioned 
        is an amount equal to 15 percent of the emission 
        allowances established for that calendar year under 
        section 721(a). This limit does not apply to offset 
        credits sold on consignment pursuant to subsection (h).
          (2) Limits in subsequent years.--Subject to paragraph 
        (4), for calendar year 2017 and each year thereafter, 
        the annual limit on the number of emission allowances 
        from the market stability reserve account that may be 
        auctioned is an amount equal to 25 percent of the 
        emission allowances established for that calendar year 
        under section 721(a). This limit does not apply to 
        offset credits sold on consignment pursuant to 
        subsection (h).
          (3) Allocation of limitation.--One-fourth of each 
        year's annual market stability reserve auction limit 
        under this subsection shall be made available for 
        auction in each quarter. Any allowances from the market 
        stability reserve account that are made available for 
        sale in a quarterly auction and not sold shall be 
        rolled over and added to the quantity available for 
        sale in the following quarter, except that allowances 
        not sold at auction in the fourth quarter of a year 
        shall not be rolled over to the following calendar 
        year's auctions, but shall be returned to the market 
        stability reserve account.
          (4) Authority to adjust limitation.--The 
        Administrator may adjust the limits in paragraphs (1) 
        or (2) if the Administrator determines an adjustment is 
        required to prevent disruptively high prices or to 
        preserve the integrity of the market stability reserve.
  (e) Purchase Limit.--
          (1) In general.--Except as provided in paragraph (2) 
        or (3), the annual number of emission allowances that a 
        covered entity may purchase at the market stability 
        reserve auctions in each calendar year shall not exceed 
        20 percent of the covered entity's emissions during the 
        most recent year for which allowances or credits were 
        retired under section 722.
          (2) 2012 limit.--For calendar year 2012, the maximum 
        aggregate number of emission allowances that a covered 
        entity may purchase from that year's market stability 
        reserve auctions shall be 20 percent of the covered 
        entity's greenhouse gas emissions that the covered 
        entity reported to the registry established under 
        section 713 for 2011 and that would be subject to 
        section 722(a) if occurring in later calendar years.
          (3) New entrants.--The Administrator shall, by 
        regulation, establish a separate purchase limit 
        applicable to entities that expect to become a covered 
        entity in the year of the auction, permitting them to 
        purchase emission allowances at the market stability 
        reserve auctions in their first calendar year of 
        operation in an amount of at least 20 percent of their 
        expected combined emissions and attributable greenhouse 
        gas emissions for that year.
  (f) Delegation or Contract.--Pursuant to regulations under 
this section, the Administrator may, by delegation or contract, 
provide for the conduct of market stability reserve auctions 
under the Administrator's supervision by other departments or 
agencies of the Federal Government or by nongovernmental 
agencies, groups, or organizations.
  (g) Use of Auction Proceeds.--
          (1) Deposit in market stability reserve fund.--The 
        proceeds from market stability reserve auctions shall 
        be placed in the Market Stability Reserve Fund 
        established by subsection (j), and shall be available 
        without further appropriation or fiscal year limitation 
        for the purposes described in this subsection.
          (2) Offset credits.--The Administrator shall use the 
        proceeds from each market stability reserve auction to 
        purchase offset credits, including domestic offset 
        credits and international offset credits issued 
        pursuant to section 744. The Administrator shall retire 
        those offset credits and establish a number of emission 
        allowances equal to the number of international offset 
        credits so retired. Emission allowances established 
        under this paragraph shall be in addition to those 
        established under section 721(a).
          (3) Emission allowances.--The Administrator shall 
        deposit emission allowances established under paragraph 
        (2) in the market stability reserve, except that, with 
        respect to any such emission allowances in excess of 
        the amount necessary to fill the market stability 
        reserve to its original size, the Administrator shall--
                  (A) except as provided in subparagraph (B), 
                assign a vintage year to the emission 
                allowance, which shall be no earlier than the 
                year in which the allowance is established 
                under paragraph (2) and shall treat such 
                allowances as ones that are not designated for 
                distribution or auction; and
                  (B) to the extent any such allowances cannot 
                be assigned a vintage year because of the 
                limitation in paragraph (4), retire the 
                allowances.
          (4) Limitation.--In no case may the Administrator 
        assign under paragraph (3)(A) more emission allowances 
        to a vintage year than the number of emission 
        allowances from that vintage year that were placed in 
        the market stability reserve account under subsection 
        (b)(1).
  (h) Availability of Offset Credits for Auction.--
          (1) In general.--The regulations promulgated under 
        section 721(h) shall allow any entity holding offset 
        credits to request that the Administrator include such 
        offset credits in an upcoming market stability reserve 
        auction. The regulations shall provide that--
                  (A) upon sale of such offset credits, the 
                Administrator shall retire those offset 
                credits, and establish and provide to the 
                purchasers a number of emission allowances 
                equal to the number of offset credits so 
                retired, which allowances shall be in addition 
                to those established under section 721(a); and
                  (B) for offset credits sold pursuant to this 
                subsection, the proceeds for the entity that 
                offered the offset credits for sale shall be 
                the lesser of--
                          (i) the average daily closing price 
                        for offset credits sold on registered 
                        exchanges (or if such price is 
                        unavailable, the average price as 
                        determined by the Administrator) during 
                        the six months prior to the market 
                        stability reserve auction at which they 
                        were auctioned, with the remaining 
                        funds collected upon the sale of the 
                        offset credits deposited in the 
                        Treasury; and
                          (ii) the amount received for the 
                        offset credits at the auction.
          (2) Proceeds.--For offset credits sold pursuant to 
        this subsection, notwithstanding section 3302 of title 
        31, United States Code, or any other provision of law, 
        within 90 days of receipt, the United States shall 
        transfer the proceeds from the auction, as defined in 
        paragraph (1)(D), to the entity that offered the offset 
        credits for sale. No funds transferred from a purchaser 
        to a seller of offset credits under this paragraph 
        shall be held by any officer or employee of the United 
        States or treated for any purpose as public monies.
          (3) Pricing.--When the Administrator acts under this 
        subsection as the agent of an entity in possession of 
        offset credits, the Administrator is not obligated to 
        obtain the highest price possible for the offset 
        credits, and instead shall auction such offset credits 
        in the same manner and pursuant to the same rules 
        (except as modified in paragraph (1)) as set forth for 
        auctioning market stability reserve allowances. 
        Entities requesting that such offset credits be offered 
        for sale at a market stability reserve auction may not 
        set a minimum reserve price for their offset credits 
        that is different than the minimum market stability 
        reserve auction price set pursuant to subsection (c).
  (i) Initial Regulations.--Not later than 24 months after the 
date of enactment of this title, the Administrator shall 
promulgate regulations, in consultation with other appropriate 
agencies, governing the auction of allowances under this 
section. Such regulations shall include the following 
requirements:
          (1) Frequency; first auction.--Auctions shall be held 
        four times per year at regular intervals, with the 
        first auction to be held no later than March 31, 2012.
          (2) Auction format.--Auctions shall follow a single-
        round, sealed-bid, uniform price format.
          (3) Participation; financial assurance.--Auctions 
        shall be open to any covered entity eligible to 
        purchase emission allowances at the auction under 
        subsection (a)(2), except that the Administrator may 
        establish financial assurance requirements to ensure 
        that auction participants can and will perform on their 
        bids.
          (4) Disclosure of beneficial ownership.--Each bidder 
        in an auction shall be required to disclose the person 
        or entity sponsoring or benefitting from the bidder's 
        participation in the auction if such person or entity 
        is, in whole or in part, other than the bidder.
          (5) Purchase limits.--No person may, directly or in 
        concert with another participant, purchase more than 20 
        percent of the allowances offered for sale at any 
        quarterly auction.
          (6) Publication of information.--After the auction, 
        the Administrator shall, in a timely fashion, publish 
        the identities of winning bidders, the quantity of 
        allowances obtained by each winning bidder, and the 
        auction clearing price.
          (7) Other requirements.--The Administrator may 
        include in the regulations such other requirements or 
        provisions as the Administrator, in consultation with 
        other agencies as appropriate, considers appropriate to 
        promote effective, efficient, transparent, and fair 
        administration of auctions under this section.
  (j) Market Stability Reserve Fund.--There are established in 
the Treasury of the United States a fund to be known as the 
`Market Stability Reserve Fund'.
  (k) Revision of Regulations.--The Administrator may, at any 
time, in consultation with other agencies as appropriate, 
revise the initial regulations promulgated under subsection 
(i). Such revised regulations need not meet the requirements 
identified in subsection (i) if the Administrator determines 
that an alternative auction design would be more effective, 
taking into account factors including costs of administration, 
transparency, fairness, and risks of collusion or manipulation. 
In determining whether and how to revise the initial 
regulations under this subsection, the Administrator shall not 
consider maximization of revenues to the Federal Government.

SEC. 727. PERMITS.

  (a) Permit Program.--For stationary sources subject to title 
V of this Act, that are covered entities, the provisions of 
this title shall be implemented by permits issued to such 
covered entities (and enforced) in accordance with the 
provisions of title V, as modified by this title. Any such 
permit issued by the Administrator, or by a State with an 
approved permit program, shall require the owner or operator of 
a covered entity to hold emission allowances or offset credits 
at least equal to the total annual amount of carbon dioxide 
equivalents for its combined emissions and attributable 
greenhouse gas emissions to which section 722 applies. No such 
permit shall be issued that is inconsistent with the 
requirements of this title, and title V as applicable. Nothing 
in this section regarding compliance plans or in title V shall 
be construed as affecting allowances or offset credits. 
Submission of a statement by the owner or operator, or the 
designated representative of the owners and operators, of a 
covered entity that the owners and operators will hold emission 
allowances or offset credits for the entity's combined 
emissions and attributable greenhouse gas emissions to which 
section 722 applies shall be deemed to meet the proposed and 
approved planning requirements of title V. Recordation by the 
Administrator of transfers of emission allowances shall amend 
automatically all applicable proposed or approved permit 
applications, compliance plans, and permits.
  (b) Multiple Owners.--No permit shall be issued under this 
section and no allowances or offset credits shall be disbursed 
under this title to a covered entity or any other person until 
the designated representative of the owners or operators has 
filed a certificate of representation with regard to matters 
under this title, including the holding and distribution of 
emission allowances and the proceeds of transactions involving 
emission allowances. Where there are multiple holders of a 
legal or equitable title to, or a leasehold interest in, such a 
covered entity or other entity or where a utility or industrial 
customer purchases power under a long-term power purchase 
contract from an independent power production facility that is 
a covered entity, the certificate shall state--
          (1) that emission allowances and the proceeds of 
        transactions involving emission allowances will be 
        deemed to be held or distributed in proportion to each 
        holder's legal, equitable, leasehold, or contractual 
        reservation or entitlement; or
          (2) if such multiple holders have expressly provided 
        for a different distribution of emission allowances by 
        contract, that emission allowances and the proceeds of 
        transactions involving emission allowances will be 
        deemed to be held or distributed in accordance with the 
        contract.
A passive lessor, or a person who has an equitable interest 
through such lessor, whose rental payments are not based, 
either directly or indirectly, upon the revenues or income from 
the covered entity or other entity shall not be deemed to be a 
holder of a legal, equitable, leasehold, or contractual 
interest for the purpose of holding or distributing emission 
allowances as provided in this subsection, during either the 
term of such leasehold or thereafter, unless expressly provided 
for in the leasehold agreement. Except as otherwise provided in 
this subsection, where all legal or equitable title to or 
interest in a covered entity, or other entity, is held by a 
single person, the certificate shall state that all emission 
allowances received by the entity are deemed to be held for 
that person.
  (c) Prohibition.--It shall be unlawful for any person to 
operate any stationary source subject to the requirements of 
this section except in compliance with the terms and 
requirements of a permit issued by the Administrator or a State 
with an approved permit program in accordance with this 
section. For purposes of this subsection, compliance, as 
provided in section 504(f), with a permit issued under title V 
which complies with this title for covered entities shall be 
deemed compliance with this subsection as well as section 
502(a).
  (d) Reliability.--Nothing in this section or title V shall be 
construed as requiring termination of operations of a 
stationary source that is a covered entity for failure to have 
an approved permit, or compliance plan, that is consistent with 
the requirements in the second and fifth sentences of 
subsection (a) concerning the holding of emission allowances, 
compensatory allowances, international emission allowances, or 
offset allowances, except that any such covered entity may be 
subject to the applicable enforcement provision of section 113.
  (e) Regulations.--The Administrator shall promulgate 
regulations to implement this section. To provide for permits 
required under this section, each State in which one or more 
stationary sources and that are covered entities are located 
shall submit, in accordance with this section and title V, 
revised permit programs for approval.

SEC. 728. INTERNATIONAL EMISSION ALLOWANCES.

  (a) Qualifying Programs.--The Administrator, in consultation 
with the Secretary of State, may by rule designate an 
international climate change program as a qualifying 
international program if--
          (1) the program is run by a national or supranational 
        foreign government, and imposes a mandatory absolute 
        tonnage limit on greenhouse gas emissions from 1 or 
        more foreign countries, or from 1 or more economic 
        sectors in such a country or countries; and
          (2) the program is at least as stringent as the 
        program established by this title, including provisions 
        to ensure at least comparable monitoring, compliance, 
        enforcement, quality of offsets, and restrictions on 
        the use of offsets.
  (b) Disqualified Allowances.--An international emission 
allowance may not be held under section 722(d)(3) if it is in 
the nature of an offset instrument or allowance awarded based 
on the achievement of greenhouse gas emission reductions or 
avoidance, or greenhouse gas sequestration, that are not 
subject to the mandatory absolute tonnage limits referred to in 
subsection (a)(1).
  (c) Retirement.--
          (1) Entity certification.--The owner or operator of 
        an entity that holds an international emission 
        allowance under section 722(d)(3) shall certify to the 
        Administrator that such international emission 
        allowance has not previously been used to comply with 
        any foreign, international, or domestic greenhouse gas 
        regulatory program.
          (2) Retirement.--
                  (A) Foreign and international regulatory 
                entities.--The Administrator, in consultation 
                with the Secretary of State, shall seek, by 
                whatever means appropriate, including 
                agreements and technical cooperation on 
                allowance tracking, to ensure that any relevant 
                foreign, international, and domestic regulatory 
                entities--
                          (i) are notified of the use, for 
                        purposes of compliance with this title, 
                        of any international emission 
                        allowance; and
                          (ii) provide for the disqualification 
                        of such international emission 
                        allowance for any subsequent use under 
                        the relevant foreign, international, or 
                        domestic greenhouse gas regulatory 
                        program, regardless of whether such use 
                        is a sale, exchange, or submission to 
                        satisfy a compliance obligation.
                  (B) Disqualification from further use.--The 
                Administrator shall ensure that, once an 
                international emission allowance has been 
                disqualified or otherwise used for purposes of 
                compliance with this title, such allowance 
                shall be disqualified from any further use 
                under this title.
  (d) Use Limitations.--The Administrator may, by rule, modify 
the percentage applicable to international emission allowances 
under section 722(d)(3), consistent with the purposes of the 
Clean Energy Jobs and American Power Act.

                            PART D--OFFSETS

SEC. 731. OFFSETS INTEGRITY ADVISORY BOARD.

  (a) Establishment.--Not later than 30 days after the date of 
enactment of this title, the President shall establish an 
independent Offsets Integrity Advisory Board. The Advisory 
Board shall make recommendations to the President for use in 
promulgating and revising regulations under this part, and for 
ensuring the overall environmental integrity of the programs 
established pursuant to those regulations.
  (b) Membership.--The Advisory Board shall be comprised of at 
least nine members. Each member shall be qualified by 
education, training, and experience to evaluate scientific and 
technical information on matters referred to the Board under 
this section. The President shall appoint Advisory Board 
members, including a chair and vice-chair of the Advisory 
Board. Terms shall be 3 years in length, except for initial 
terms, which may be up to 5 years in length to allow 
staggering. Members may be reappointed only once for an 
additional 3-year term, and such second term may follow 
directly after a first term.
  (c) Activities.--The Advisory Board established pursuant to 
subsection (a) shall--
          (1) provide recommendations, not later than 90 days 
        after the Advisory Board's establishment and 
        periodically thereafter, to the President regarding 
        offset project types that should be considered for 
        eligibility under section 733, taking into 
        consideration relevant scientific and other issues, 
        including--
                  (A) the availability of a representative data 
                set for use in developing the activity 
                baseline;
                  (B) the potential for accurate quantification 
                of greenhouse gas reduction, avoidance, or 
                sequestration for an offset project type;
                  (C) the potential level of scientific and 
                measurement uncertainty associated with an 
                offset project type;
                  (D) any beneficial or adverse environmental, 
                public health, welfare, social, economic, or 
                energy effects associated with an offset 
                project type;
                  (E) the extent to which, as of the date of 
                submission of the report, the project or 
                activity types within each category--
                          (i) are required by law (including a 
                        regulation); or
                          (ii) represent business-as-usual 
                        (absent funding from offset credits) 
                        practices for a relevant land area, 
                        industry sector, or forest, soil or 
                        facility type;
          (2) make available to the President its advice and 
        comments on offset methodologies that should be 
        considered under regulations promulgated pursuant to 
        subsection (a) and (b) of section 734, including 
        methodologies to address the issues of additionality, 
        activity baselines, measurement, leakage, uncertainty, 
        permanence, and environmental integrity;
          (3) make available to the President, and other 
        relevant Federal agencies, its advice and comments 
        regarding scientific, technical, and methodological 
        issues specific to the issuance of international offset 
        credits under section 744;
          (4) make available to the President, and other 
        relevant Federal agencies, its advice and comments 
        regarding scientific, technical, and methodological 
        issues associated with the implementation of this part;
          (5) make available to the President its advice and 
        comments on areas in which further knowledge is 
        required to appraise the adequacy of existing, revised, 
        or proposed methodologies for use under this part, and 
        describe the research efforts necessary to provide the 
        required information; and
          (6) make available to the President its advice and 
        comments on other ways to improve or safeguard the 
        environmental integrity of programs established under 
        this part.
  (d) Scientific Review of Offset and Deforestation Reduction 
Programs.--Not later than January 1, 2017, and at five-year 
intervals thereafter, the Advisory Board shall submit to the 
President and make available to the public an analysis of 
relevant scientific and technical information related to this 
part. The Advisory Board shall review approved and potential 
methodologies, scientific studies, offset project monitoring, 
offset project verification reports, and audits related to this 
part, and evaluate the net emissions effects of implemented 
offset projects. The Advisory Board shall recommend changes to 
offset methodologies, protocols, or project types, or to the 
overall offset program under this part, to ensure that offset 
credits issued by the President do not compromise the integrity 
of the annual emission reductions established under section 
703, and to avoid or minimize adverse effects to human health 
or the environment.

SEC. 732. ESTABLISHMENT OF OFFSETS PROGRAM.

  (a) Regulations.--Not later than 2 years after the date of 
enactment of this title, the President, in consultation with 
appropriate Federal agencies and taking into consideration the 
recommendations of the Advisory Board, shall promulgate 
regulations establishing a program for the issuance of offset 
credits in accordance with the requirements of this part. The 
President shall periodically revise these regulations as 
necessary to meet the requirements of this part.
  (b) Requirements.--The regulations described in subsection 
(a) shall--
          (1) authorize the issuance of offset credits with 
        respect to qualifying offset projects that result in 
        reductions or avoidance of greenhouse gas emissions, or 
        sequestration of greenhouse gases;
          (2) ensure that such offset credits represent 
        verifiable and additional greenhouse gas emission 
        reductions or avoidance, or increases in sequestration;
          (3) ensure that offset credits issued for 
        sequestration offset projects are only issued for 
        greenhouse gas reductions that are permanent;
          (4) provide for the implementation of the 
        requirements of this part;
          (5) include as reductions in greenhouse gases 
        reductions achieved through the destruction of methane 
        and its conversion to carbon dioxide, and reductions 
        achieved through destruction of chlorofluorocarbons or 
        other ozone depleting substances, if permitted by the 
        President under section 619(b)(9) and subject to the 
        conditions specified in section 619(b)(9), based on the 
        carbon dioxide equivalent value of the substance 
        destroyed; and
          (6) establish a process to accept and respond to 
        comments from third parties regarding programs 
        established under this part in a timely manner.
  (c) Coordination to Minimize Negative Effects.--In 
promulgating and implementing regulations under this part, the 
President shall act (including by rejecting projects, if 
necessary) to avoid or minimize, to the maximum extent 
practicable, adverse effects on human health or the environment 
resulting from the implementation of offset projects under this 
part.
  (d) Offset Registry.--The President shall establish within 
the allowance tracking system established under section 724(d) 
an Offset Registry for qualifying offset projects and offset 
credits issued with respect thereto under this part.
  (e) Legal Status of Offset Credit.--An offset credit does not 
constitute a property right.
  (f) Fees.--The President shall assess fees payable by offset 
project developers in an amount necessary to cover the 
administrative costs and the enforcement costs to the 
Environmental Protection Agency and the Department of Justice 
of carrying out the activities under this part. Amounts 
collected for such fees shall be available to the President and 
the Attorney General for carrying out the activities under this 
part to the extent provided in advance in appropriations Acts.
  (g) Secretary of Agriculture.--The President shall designate 
the Secretary of Agriculture to serve as the lead agency in--
          (1) the implementation of elements of the offset 
        program, in coordination with the Administrator, for 
        agriculture and forestry projects in the United States 
        authorized under this part, including project types and 
        methodologies; and
          (2) working directly with farmers, ranchers, and 
        foresters to implement agriculture and forestry 
        projects.

SEC. 733. ELIGIBLE PROJECT TYPES.

  (a) List of Eligible Project Types.--
          (1) In general.--As part of the regulations 
        promulgated under section 732(a), the President shall 
        establish, and may periodically revise, a list of types 
        of projects eligible to generate offset credits, 
        including international offset credits, under this 
        part.
          (2) Advisory board recommendations.--In determining 
        the eligibility of project types, the President shall 
        take into consideration the recommendations of the 
        Advisory Board. If a list established under this 
        section differs from the recommendations of the 
        Advisory Board, the regulations promulgated under 
        section 732(a) shall include a justification for the 
        discrepancy.
          (3) Initial determination.--The President shall 
        establish the initial eligibility list under paragraph 
        (1) not later than one year after the date of enactment 
        of this title for which there are well developed 
        methodologies that the President determines would meet 
        the criteria of section 734.
          (4) Project types to be considered for initial 
        list.--In determining the initial list, the President 
        shall give priority to consideration of offset project 
        types that are recommended by the Advisory Board, and 
        shall consider--
                  (A) methane collection and combustion 
                projects at active coal mines;
                  (B) methane collection and combustion 
                projects at landfills;
                  (C) capture of venting, flaring, and fugitive 
                emissions from oil and natural gas systems;
                  (D) nonlandfill methane collection, 
                combustion and avoidance projects involving 
                organic waste streams that would have otherwise 
                emitted methane in the atmosphere, including 
                manure management and biogas capture and 
                combustion;
                  (E) projects involving afforestation or 
                reforestation of acreage not forested as of 
                January 1, 2009;
                  (F) forest management resulting in an 
                increase in forest carbon stores, including 
                harvested wood products;
                  (G) agricultural, grassland, and rangeland 
                sequestration and management practices, 
                including--
                          (i) altered tillage practices, 
                        including avoided abandonment of such 
                        practices;
                          (ii) winter cover cropping, 
                        continuous cropping, and other means to 
                        increase biomass returned to soil in 
                        lieu of planting followed by fallowing;
                          (iii) reduction of nitrogen 
                        fertilizer use or increase in nitrogen 
                        use efficiency;
                          (iv) reduction in the frequency and 
                        duration of flooding of rice paddies;
                          (v) reduction in carbon emissions 
                        from organic soils;
                          (vi) reduction in greenhouse gas 
                        emissions from manure and effluent;
                          (vii) reduction in greenhouse gas 
                        emissions due to changes in animal 
                        management practices, including dietary 
                        modifications;
                          (viii) planting and cultivation of 
                        permanent tree crops;
                          (ix) greenhouse gas emission 
                        reductions from improvements and 
                        upgrades to mobile or stationary 
                        equipment (including engines);
                          (x) practices to reduce and eliminate 
                        soil tillage;
                          (xi) reductions in greenhouse gas 
                        emissions through restoration of 
                        wetlands, forestland, and grassland; 
                        and
                          (xii) sequestration of greenhouse 
                        gases through management of tree crops; 
                        and
                  (H) changes in carbon stocks attributed to 
                land use change and forestry activities, 
                including--
                          (i) management of peatland or 
                        wetland;
                          (ii) conservation of grassland and 
                        forested land;
                          (iii) improved forest management, 
                        including accounting for carbon stored 
                        in wood products;
                          (iv) reduced deforestation or avoided 
                        forest conversion;
                          (v) urban tree-planting and 
                        maintenance;
                          (vi) agroforestry; and
                          (vii) adaptation of plant traits or 
                        new technologies that increase 
                        sequestration by forests.
          (5) Methodologies.--In issuing methodologies pursuant 
        to section 734, the President shall give priority to 
        methodologies for offset types included on the initial 
        eligibility list.
  (b) Modification of List.--The President--
          (1) shall add additional project types to the list 
        not later than 2 years after the date of enactment of 
        this title;
          (2) may at any time, by rule, add a project type to 
        the list established under subsection (a) if the 
        President, in consultation with appropriate Federal 
        agencies and taking into consideration the 
        recommendations of the Advisory Board, determines that 
        the project type can generate additional reductions or 
        avoidance of greenhouse gas emissions, or sequestration 
        of greenhouse gases, subject to the requirements of 
        this part;
          (3) may at any time, by rule, determine that a 
        project type on the list does not meet the requirements 
        of this part, and remove a project type from the list 
        established under subsection (a), in consultation with 
        appropriate Federal agencies and taking into 
        consideration any recommendations of the Advisory 
        Board; and
          (4) shall consider adding to or removing from the 
        list established under subsection (a), at a minimum, 
        project types proposed to the President--
                  (A) by petition pursuant to subsection (c); 
                or
                  (B) by the Advisory Board.
  (c) Petition Process.--Any person may petition the President 
to modify the list established under subsection (a) by adding 
or removing a project type pursuant to subsection (b). Any such 
petition shall include a showing by the petitioner that there 
is adequate data to establish that the project type does or 
does not meet the requirements of this part. Not later than 12 
months after receipt of such a petition, the President shall 
either grant or deny the petition and publish a written 
explanation of the reasons for the President's decision. The 
President may not deny a petition under this subsection on the 
basis of inadequate agency resources or time for review.

SEC. 734. REQUIREMENTS FOR OFFSET PROJECTS.

  (a) Methodologies.--As part of the regulations promulgated 
under section 732(a), the President shall establish, for each 
type of offset project listed as eligible under section 733, 
the following:
          (1) Additionality.--A standardized methodology for 
        determining the additionality of greenhouse gas 
        emission reductions or avoidance, or greenhouse gas 
        sequestration, achieved by an offset project of that 
        type. Such methodology shall ensure, at a minimum, that 
        any greenhouse gas emission reduction or avoidance, or 
        any greenhouse gas sequestration, is considered 
        additional only to the extent that it results from 
        activities that--
                  (A) are not required by or undertaken to 
                comply with any law, including any regulation 
                or consent order;
                  (B) were not commenced prior to January 1, 
                2009, except in the case of--
                          (i) offset project activities that 
                        commenced after January 1, 2001, and 
                        were registered as of the date of 
                        enactment of this title under an offset 
                        program with respect to which the 
                        President has made an affirmative 
                        determination under section 740(a)(2); 
                        or
                          (ii) activities that are readily 
                        reversible, with respect to which the 
                        President may set an alternative 
                        earlier date under this subparagraph 
                        that is not earlier than January 1, 
                        2001, where the President determines 
                        that setting such an alternative date 
                        may produce an environmental benefit by 
                        removing an incentive to cease and then 
                        reinitiate activities that began prior 
                        to January 1, 2009;
                  (C) are not receiving support under section 
                323 of division A, or section 206 of division 
                B, of the Clean Energy Jobs and American Power 
                Act; and
                  (D) exceed the activity baseline established 
                under paragraph (2).
          (2) Activity baselines.--A standardized methodology 
        for establishing activity baselines for offset projects 
        of that type. The President shall set activity 
        baselines to reflect a conservative estimate of 
        business-as-usual performance or practices for the 
        relevant type of activity such that the baseline 
        provides an adequate margin of safety to ensure the 
        environmental integrity of offsets calculated in 
        reference to such baseline.
          (3) Quantification methods.--A standardized 
        methodology for determining the extent to which 
        greenhouse gas emission reductions or avoidance, or 
        greenhouse gas sequestration, achieved by an offset 
        project of that type exceed a relevant activity 
        baseline, including protocols for monitoring and 
        accounting for uncertainty.
          (4) Leakage.--A standardized methodology for 
        accounting for and mitigating potential leakage, if 
        any, from an offset project of that type, taking 
        uncertainty into account.
  (b) Accounting for Reversals.--
          (1) Accounting.--
                  (A) In general.--After issuance of offset 
                credits for a project, pursuant to section 733, 
                the offset project developer shall, in a timely 
                manner, report any reversal that occurs.
                  (B) Intentional reversals.--An offset project 
                developer shall not engage in repeated 
                intentional reversals.
          (2) Regulations.--As part of the regulations 
        promulgated under section 732(a), for each type of 
        sequestration project listed under section 733, the 
        President shall establish requirements to account for 
        and address reversals, including--
                  (A) a requirement to report any reversal with 
                respect to an offset project for which offset 
                credits have been issued under this part;
                  (B) provisions to require emission allowances 
                to be held in amounts to fully compensate for 
                greenhouse gas emissions attributable to 
                reversals, and to assign responsibility for 
                holding such emission allowances;
                  (C) provisions to discourage repeated 
                intentional reversals by offset project 
                developers, including but not limited to the 
                assessment of administrative fees, temporary 
                suspension, or disqualification of an offset 
                project developer from the program; and
                  (D) any other provisions the President 
                determines necessary to account for and address 
                reversals.
          (3) Mechanisms.--The President shall prescribe 
        mechanisms to ensure that any sequestration with 
        respect to which an offset credit is issued under this 
        part results in a permanent net increase in 
        sequestration, and that full account is taken of any 
        actual or potential reversal of such sequestration, 
        with an adequate margin of safety. The President shall 
        prescribe at least one of the following mechanisms to 
        meet the requirements of this paragraph:
                  (A) An offsets reserve, pursuant to paragraph 
                (4).
                  (B) Insurance that provides for purchase and 
                provision to the President for retirement of an 
                amount of offset credits or emission allowances 
                equal in number to the tons of carbon dioxide 
                equivalents of greenhouse gas emissions 
                released due to reversal.
                  (C) Another mechanism that the President 
                determines satisfies the requirements of this 
                part.
          (4) Offsets reserve.--
                  (A) In general.--An offsets reserve referred 
                to in paragraph (3)(A) is a program under 
                which, before issuance of offset credits under 
                this part, the President shall subtract and 
                reserve from the quantity to be issued a 
                quantity of offset credits based on the risk of 
                reversal. The President shall--
                          (i) hold these reserved offset 
                        credits in the offsets reserve; and
                          (ii) register the holding of the 
                        reserved offset credits in the Offset 
                        Registry established under section 
                        732(d).
                  (B) Project reversal.--
                          (i) In general.--If a reversal has 
                        occurred with respect an offset project 
                        for which offset credits are reserved 
                        under this paragraph, the President 
                        shall remove offset credits or emission 
                        allowances from the offsets reserve and 
                        cancel them to fully account for the 
                        tons of carbon dioxide equivalent that 
                        are no longer sequestered.
                          (ii) Intentional reversals.--If the 
                        President determines that a reversal 
                        was intentional, the offset project 
                        developer for the relevant offset 
                        project shall place into the offsets 
                        reserve a quantity of offset credits, 
                        or combination of offset credits and 
                        emission allowances, equal in number to 
                        the number of reserve offset credits 
                        that were canceled due to the reversal 
                        pursuant to clause (i).
                          (iii) Unintentional reversals.--If 
                        the President determines that a 
                        reversal was unintentional, the offset 
                        project developer for the relevant 
                        offset project shall place into the 
                        offsets reserve a quantity of offset 
                        credits, or combination of offset 
                        credits and emission allowances, equal 
                        in number to half the number of offset 
                        credits that were reserved for that 
                        offset project, or half the number of 
                        reserve offset credits that were 
                        canceled due to the reversal pursuant 
                        to clause (i), whichever is less.
                          (iv) Petition.--Any person may 
                        petition the President for a 
                        determination that an offsets reversal 
                        has occurred. Any such petition shall 
                        include a showing by the petitioner 
                        that there is adequate data or other 
                        evidence to support the petition. Not 
                        later than 90 days after the date of 
                        receipt of the petition, the President 
                        shall take final action determining 
                        either that the reversal has occurred 
                        or that the reversal has not occurred. 
                        Such determination shall be accompanied 
                        by a statement of the basis for the 
                        determination.
                  (C) Use of reserved offset credits.--Offset 
                credits placed into the offsets reserve under 
                this paragraph may not be used to comply with 
                section 722.
          (5) Term offset credits.--
                  (A) Applicability.--With respect to a 
                practice listed under section 733 that 
                sequesters greenhouse gases and has a crediting 
                period of not more than 5 years, the President 
                may address reversals pursuant to this 
                paragraph in lieu of permanently accounting for 
                reversals pursuant to paragraphs (2) and (3).
                  (B) Accounting for reversals.--For such 
                practices or projects implementing the 
                practices described in subparagraph (A), the 
                President shall require only reversals that 
                occur during the crediting period to be 
                accounted for and addressed pursuant to 
                paragraphs (2) and (3).
                  (C) Credits issued.--For practices or 
                projects regulated pursuant to subparagraph 
                (B), the President shall issue under section 
                737 a term offset credit, in lieu of an offset 
                credit, for each ton of carbon dioxide 
                equivalent that has been sequestered.
  (c) Crediting Periods.--
          (1) In general.--As part of the regulations 
        promulgated under section 732(a), for each offset 
        project type, the President shall specify a crediting 
        period, and establish provisions for petitions for new 
        crediting periods, in accordance with this subsection.
          (2) Duration.--
                  (A) In general.--The crediting period shall 
                be not less than 5 and not greater than 10 
                years for any project type other than those 
                involving sequestration or term offsets.
                  (B) Forestry projects.--The crediting period 
                for a forestry offset project shall not exceed 
                20 years.
                  (C) Term offset credits.--The crediting 
                period for a term offset credit issued shall 
                not exceed 5 years.
          (3) Eligibility.--An offset project shall be eligible 
        to generate offset credits under this part only during 
        the project's crediting period. During such crediting 
        period, the project shall remain eligible to generate 
        offset credits, subject to the methodologies and 
        project type eligibility list that applied as of the 
        date of project approval under section 735, except as 
        provided in paragraph (4).
          (4) Petition for new crediting period.--An offset 
        project developer may petition for a new crediting 
        period to commence after termination of a crediting 
        period, subject to the methodologies and project type 
        eligibility list in effect at the time when such 
        petition is submitted. A petition may not be submitted 
        under this paragraph more than 18 months before the end 
        of the pending crediting period. The President may 
        grant such petition after public notice and opportunity 
        for comment. The President may limit the number of new 
        crediting periods available for projects of particular 
        project types.
  (d) Environmental Integrity.--In establishing the 
requirements under this section, the President shall apply 
conservative assumptions or methods to maximize the certainty 
that the environmental integrity of the greenhouse gas 
limitations established under section 703 is not compromised.
  (e) Pre-existing Methodologies.--In promulgating requirements 
under this section, the President shall give due consideration 
to methodologies for offset projects existing as of the date of 
enactment of this title.
  (f) Added Project Types.--The President shall establish 
methodologies described in subsection (a), and, as applicable, 
requirements and mechanisms for reversals as described in 
subsection (b), for any project type that is added to the list 
pursuant to section 733.

SEC. 735. APPROVAL OF OFFSET PROJECTS.

  (a) Approval Petition.--An offset project developer shall 
submit an offset project approval petition signed by a 
responsible official (who shall certify the accuracy of the 
information submitted) and providing such information as the 
President requires to determine whether the offset project is 
eligible for issuance of offset credits under rules promulgated 
pursuant to this part.
  (b) Timing.--An approval petition shall be submitted to the 
President under subsection (a) not later than the time at which 
an offset project's first verification report is submitted 
under section 736.
  (c) Approval Petition Requirements.--As part of the 
regulations promulgated under section 732, the President shall 
include provisions for, and shall specify, the required 
components of an offset project approval petition required 
under subsection (a), which shall include--
          (1) designation of an offset project developer;
          (2) designation of a party who is authorized to 
        provide access to the appropriate officials or an 
        authorized representative to the offset project; and
          (3) any other information that the President 
        considers to be necessary to achieve the purposes of 
        this part.
  (d) Approval and Notification.--Not later than 90 days after 
receiving a complete approval petition under subsection (a), 
the President shall make the approval petition publicly 
available on the internet, approve or deny the petition in 
writing, and, if the petition is denied, provide the reasons 
for the denial and make the President's decision publicly 
available on the internet. After an offset project is approved, 
the offset project developer shall not be required to resubmit 
an approval petition during the offset project's crediting 
period, except as provided in section 734(c)(4).
  (e) Appeal.--The President shall establish procedures for 
appeal and review of determinations made under subsection (d).
  (f) Voluntary Preapproval Review.--The President may 
establish a voluntary preapproval review procedure, to allow an 
offset project developer to request the President to conduct a 
preliminary eligibility review for an offset project. Findings 
of such reviews shall not be binding upon the President. The 
voluntary preapproval review procedure--
          (1) shall require the offset project developer to 
        submit such basic project information as the President 
        requires to provide a meaningful review; and
          (2) shall require a response from the President not 
        later than 6 weeks after receiving a request for review 
        under this subsection.

SEC. 736. VERIFICATION OF OFFSET PROJECTS.

  (a) In General.--As part of the regulations promulgated under 
section 732(a), the President shall establish requirements, 
including protocols, for verification of the quantity of 
greenhouse gas emission reductions or avoidance, or 
sequestration of greenhouse gases, resulting from an offset 
project. The regulations shall require that an offset project 
developer shall submit a report, prepared by a third-party 
verifier accredited under subsection (d), providing such 
information as the President requires to determine the quantity 
of greenhouse gas emission reductions or avoidance, or 
sequestration of greenhouse gas, resulting from the offset 
project.
  (b) Schedule.--The President shall prescribe a schedule for 
the submission of verification reports under subsection (a).
  (c) Verification Report Requirements.--The President shall 
specify the required components of a verification report 
required under subsection (a), which shall include--
          (1) the name and contact information for a designated 
        representative for the offset project developer;
          (2) the quantity of greenhouse gas reduced, avoided, 
        or sequestered;
          (3) the methodologies applicable to the project 
        pursuant to section 734;
          (4) a certification that the project meets the 
        applicable requirements;
          (5) a certification establishing that the conflict of 
        interest requirements in the regulations promulgated 
        under subsection (d)(1) have been complied with; and
          (6) any other information that the President 
        considers to be necessary to achieve the purposes of 
        this part.
  (d) Verifier Accreditation.--
          (1) In general.--As part of the regulations 
        promulgated under section 732(a), the President shall 
        establish a process and requirements for periodic 
        accreditation of third-party verifiers to ensure that 
        such verifiers are professionally qualified and have no 
        conflicts of interest with offset project developers.
          (2) Standards.--
                  (A) American national standards institute 
                accreditation.--The President may accredit, or 
                accept for purposes of accreditation under this 
                subsection, verifiers accredited under the 
                American National Standards Institute (ANSI) 
                accreditation program in accordance with ISO 
                14065. The President shall accredit, or accept 
                for accreditation, verifiers under this 
                subparagraph only if the President finds that 
                the American National Standards Institute 
                accreditation program provides sufficient 
                assurance that the requirements of this part 
                will be met.
                  (B) EPA accreditation.--As part of the 
                regulations promulgated under section 732(a), 
                the President may establish accreditation 
                standards for verifiers under this subsection, 
                and may establish related training and testing 
                programs and requirements.
          (3) Public accessibility.--Each verifier meeting the 
        requirements for accreditation in accordance with this 
        subsection shall be listed in a publicly accessible 
        database, which shall be maintained and updated by the 
        President.
          (4) Revocation.--The regulations concerning 
        accreditation of third-party verifiers required under 
        paragraph (1) shall establish a process for the 
        President to revoke the accreditation of any third-
        party verifier that the President finds fails to 
        maintain professional qualifications or to avoid a 
        conflict of interest, or for other good cause.

SEC. 737. ISSUANCE OF OFFSET CREDITS.

  (a) Determination and Notification.--Not later than 90 days 
after receiving a complete verification report under section 
736, the President shall--
          (1) make the report publicly available on the 
        Internet;
          (2) make a determination of the quantity of 
        greenhouse gas emissions reduced or avoided, or 
        greenhouse gases sequestered, resulting from an offset 
        project approved under section 735; and
          (3) notify the offset project developer in writing of 
        such determination and make such determination publicly 
        available on the Internet.
  (b) Issuance of Offset Credits.--The President shall issue 
one offset credit to an offset project developer for each ton 
of carbon dioxide equivalent that the President has determined 
has been reduced, avoided, or sequestered during the period 
covered by a verification report submitted in accordance with 
section 736, only if--
          (1) the President has approved the offset project 
        pursuant to section 735; and
          (2) the relevant emissions reduction, avoidance, or 
        sequestration has--
                  (A) already occurred, during the offset 
                project's crediting period; and
                  (B) occurred after January 1, 2009.
  (c) Appeal.--The President shall establish procedures for 
appeal and review of determinations made under subsection (a).
  (d) Timing.--Offset credits meeting the criteria established 
in subsection (b) shall be issued not later than 2 weeks 
following the verification determination made by the President 
under subsection (a).
  (e) Registration.--The President shall assign a unique serial 
number to and register each offset credit to be issued in the 
Offset Registry established under section 732(d).

SEC. 738. AUDITS.

  (a) In General.--The President shall, on an ongoing basis, 
conduct random audits of offset projects and offset credits. 
The President shall conduct audits of the practices of third-
party verifiers. In each year, the President shall conduct 
audits, at minimum, for a representative sample of project 
types and geographic areas.
  (b) Delegation.--The President may delegate to a State or 
Indian tribe the responsibility for conducting audits under 
this section if the President finds that the program proposed 
by the State or Indian tribe provides assurances equivalent to 
those provided by the auditing program of the President, and 
that the integrity of the offset program under this part will 
be maintained. Nothing in this subsection shall prevent the 
President from conducting any audit the President considers 
necessary and appropriate.
  (c) Audit Requirements.--As part of the regulations 
promulgated under section 732(a), the President shall establish 
requirements and protocols for an auditing program, whether 
undertaken by the President or an authorized representative, 
concerning project developers, third party verifiers, and 
reports submitted by those persons, including the offset 
project approval petition and verification report. Such 
regulations shall include--
          (1) the components of the offset project, which shall 
        be evaluated against the offset approval petition and 
        the verification report;
          (2) the minimum experience or training of the 
        auditors;
          (3) the form in which reports shall be completed;
          (4) requirements for delegating auditing functions to 
        States or Indian tribes, including requiring periodic 
        reports from States or Indian tribes on their auditing 
        activities and findings; and
          (5) any other information that the appropriate 
        officials considers to be necessary to achieve the 
        purpose of the Act.

SEC. 739. PROGRAM REVIEW AND REVISION.

  At least once every 5 years, the President shall review and, 
based on new or updated information and taking into 
consideration the recommendations of the Advisory Board, update 
and revise--
          (1) the list of eligible project types established 
        under section 733;
          (2) the methodologies established, including specific 
        activity baselines, under section 734(a);
          (3) the reversal requirements and mechanisms 
        established or prescribed under section 734(b);
          (4) measures to improve the accountability of the 
        offsets program; and
          (5) any other requirements established under this 
        part to ensure the environmental integrity and 
        effective operation of this part.

SEC. 740. EARLY OFFSET SUPPLY.

  (a) Projects Registered Under Other Government-recognized 
Programs.--Except as provided in subsection (b) or (c), after 
public notice and opportunity for comment, the President shall 
issue one offset credit for each ton of carbon dioxide 
equivalent emissions reduced, avoided, or sequestered--
          (1) under an offset project that was started after 
        January 1, 2001;
          (2) for which a credit was issued under any 
        regulatory or voluntary greenhouse gas emission offset 
        program that the President determines--
                  (A) was established under State or tribal law 
                or regulation prior to January 1, 2009, or has 
                been approved by the President pursuant to 
                subsection (e);
                  (B) has developed offset project type 
                standards, methodologies, and protocols through 
                a public consultation process or a peer review 
                process;
                  (C) has made available to the public 
                standards, methodologies, and protocols that 
                require that credited emission reductions, 
                avoidance, or sequestration are permanent, 
                additional, verifiable, and enforceable;
                  (D) requires that all emission reductions, 
                avoidance, or sequestration be verified by a 
                State regulatory agency or an accredited third-
                party independent verification body;
                  (E) requires that all credits issued are 
                registered in a publicly accessible registry, 
                with individual serial numbers assigned for 
                each ton of carbon dioxide equivalent emission 
                reductions, avoidance, or sequestration; and
                  (F) ensures that no credits are issued for 
                activities for which the entity administering 
                the program, or a program administrator or 
                representative, has funded, solicited, or 
                served as a fund administrator for the 
                development of, the project or activity that 
                caused the emission reduction, avoidance, or 
                sequestration; and
          (3) for which the credit described in paragraph (2) 
        is transferred to the President.
  (b) Ineligible Credits.--Subsection (a) shall not apply to 
offset credits that have expired or have been retired, 
canceled, or used for compliance under a program established 
under State or tribal law or regulation.
  (c) Limitation.--Notwithstanding subsection (a)(1), offset 
credits shall be issued under this section--
          (1) only for reductions or avoidance of greenhouse 
        gas emissions, sequestration of greenhouse gases, or 
        destruction of chlorofluorocarbons (subject to the 
        conditions specified in section 619(b)(9) and based on 
        the carbon dioxide equivalent value of the substance 
        destroyed), that occur after January 1, 2009; and
          (2) only until the date that is 3 years after the 
        date of enactment of this title, or the date that 
        regulations promulgated under section 732(a) take 
        effect, whichever occurs sooner.
  (d) Retirement of Credits.--The President shall seek to 
ensure that offset credits described in subsection (a)(2) are 
retired for purposes of use under a program described in 
subsection (b).
  (e) Other Programs.--
          (1) In general.--Offset programs that either--
                  (A) were not established under State or 
                tribal law; or
                  (B) were not established prior to January 1, 
                2009;
        but that otherwise meet all of the criteria of 
        subsection (a)(2) may apply to the President to be 
        approved under this subsection as an eligible program 
        for early offset credits under this section.
          (2) Approval.--The President shall approve any such 
        program that the President determines has criteria and 
        methodologies of at least equal stringency to the 
        criteria and methodologies of the programs established 
        under State or tribal law that the President determines 
        meet the criteria of subsection (a)(2). The President 
        shall approve types of offsets under any such program 
        that are subject to criteria and methodologies of at 
        least equal stringency to the criteria and 
        methodologies for such types of offsets applied under 
        the programs established under State or tribal law that 
        the President determines meet the criteria of 
        subsection (a)(2). The President shall make a 
        determination on any application received under this 
        subsection by not later than 180 days from the date of 
        receipt of the application.

SEC. 741. ENVIRONMENTAL CONSIDERATIONS.

  If the President lists forestry or other relevant land 
management-related offset projects as eligible offset project 
types under section 733, the President, in consultation with 
appropriate Federal agencies, shall promulgate regulations to 
establish criteria for such offset projects--
          (1) to ensure that native species are given primary 
        consideration in such projects;
          (2) to enhance biological diversity in such projects;
          (3) to prohibit the use of federally designated or 
        State-designated noxious weeds;
          (4) to prohibit the use of a species listed by a 
        regional, State, or tribal invasive plant authority 
        within the applicable region, State, or land of Indian 
        tribes;
          (5) in the case of forestry offset projects, in 
        accordance with widely accepted, environmentally 
        sustainable forestry practices;
          (6) to ensure that the offset project area was not 
        converted from native ecosystems, such as a forest, 
        grassland, scrubland or wetland, to generate offsets, 
        unless such conversation took place at least 10 years 
        prior to the date of enactment of this title or before 
        January 1, 2009, whichever date is earlier; and
          (7) to the maximum extent practicable, ensure that 
        the use of offset credits would be eligible to satisfy 
        emission reduction commitments made by the United 
        States in multilateral agreements, such as the United 
        Nations Framework Convention on Climate Change, done at 
        New York on May 9, 1992 (or any successor agreement).

SEC. 742. TRADING.

  Section 724 shall apply to the trading of offset credits.

SEC. 743. OFFICE OF OFFSETS INTEGRITY.

  (a) Establishment.--There is established within the Office of 
the Assistant Attorney General of the Environment and Natural 
Resources Division in the Department of Justice a Carbon 
Offsets Integrity Unit, to be headed by a Special Counsel 
(hereinafter referred to as the `Special Counsel'). The Carbon 
Offsets Integrity Unit and the Special Counsel shall be 
responsible to and shall report directly to the Assistant 
Attorney General of the Environment and Natural Resources 
Division.
  (b) Appointment.--The Special Counsel shall be appointed by 
the President, by and with the advice and consent of the 
Senate.
  (c) Responsibilities.--The Special Counsel shall--
          (1) supervise and coordinate investigations and civil 
        enforcement within the Department of Justice of the 
        carbon offsets program under this part;
          (2) ensure that Federal law relating to civil 
        enforcement of the carbon offsets program is used to 
        the fullest extent authorized; and
          (3) ensure that adequate resources are made available 
        for the investigation and enforcement of civil 
        violations of the carbon offsets program.
  (d) Compensation.--The Special Counsel shall be paid at the 
basic pay payable for level V of the Executive Schedule under 
section 5316 of title 5, United States Code.
  (e) Assignment of Personnel.--There shall be assigned to the 
Carbon Offsets Integrity Unit such personnel as the Attorney 
General determines to be necessary to provide an appropriate 
level of enforcement activity in the area of carbon offsets.

SEC. 744. INTERNATIONAL OFFSET CREDITS.

  (a) In General.--The Administrator, in consultation with the 
Secretary of State and the Administrator of the United States 
Agency for International Development, may issue, in accordance 
with this section, international offset credits based on 
activities that reduce or avoid greenhouse gas emissions, or 
increase sequestration of greenhouse gases, in a developing 
country. Such credits may be issued for projects pursuant to 
the requirements of this part or as provided in subsection (c), 
(d), or (e).
  (b) Issuance.--
          (1) Regulations.--Not later than 2 years after the 
        date of enactment of this title, the Administrator, in 
        consultation with the Secretary of State, the 
        Administrator of the United States Agency for 
        International Development, and any other appropriate 
        Federal agency, and taking into consideration the 
        recommendations of the Advisory Board, shall promulgate 
        regulations for implementing this section, taking into 
        consideration specific factors relevant to the 
        determination of eligible international offset project 
        types and the implementation of international 
        methodologies for each offset type approved. Except as 
        otherwise provided in this section, the issuance of 
        international offset credits under this section shall 
        be subject to the requirements of this part.
          (2) Requirements for international offset credits.--
        The Administrator may issue international offset 
        credits only if--
                  (A) the United States is a party to a 
                bilateral or multilateral agreement or 
                arrangement that includes the country in which 
                the project or measure achieving the relevant 
                greenhouse gas emission reduction or avoidance, 
                or greenhouse gas sequestration, has occurred;
                  (B) such country is a developing country; and
                  (C) such agreement or arrangement--
                          (i) ensures that all of the 
                        requirements of this part apply to the 
                        issuance of international offset 
                        credits under this section;
                          (ii) provides for the appropriate 
                        distribution of international offset 
                        credits issued; and
                          (iii) provides that the offset 
                        project developer be eligible to 
                        receive service of process in the 
                        United States for the purpose of all 
                        civil and regulatory actions in Federal 
                        courts, if such service is made in 
                        accordance with the Federal rules for 
                        service of process in the States in 
                        which the case or regulatory action is 
                        brought.
          (3) Supplemental international offset categories.--
                  (A) In general.--In order to ensure a 
                sufficient supply of international offsets and 
                to reduce the cost of compliance with this 
                title, the Administrator may establish 
                categories of international offsets in addition 
                to those described in subsections (c), (d), and 
                (e), if--
                          (i) for 2 consecutive years, the 
                        auction price for allowances reaches 
                        the market stability reserve auction 
                        price under section 726(c); and
                          (ii) the Administrator determines 
                        that the total amount of international 
                        offsets held by covered entities for 
                        each of the 2 years referred to in 
                        clause (i) does not exceed the limit on 
                        international offsets established under 
                        section 722(d)(1)(B)(iii).
                  (B) Supplemental categories.--
                          (i) In general.--Any supplemental 
                        categories of international offsets 
                        established pursuant to subparagraph 
                        (A) shall--
                                  (I) satisfy all applicable 
                                provisions of this part, 
                                including subsection (b)(2) of 
                                this section and sections 733 
                                and 734; and
                                  (II) meet the criteria 
                                described in clause (ii).
                          (ii) Criteria.--The criteria referred 
                        to in clause (i)(II) are that--
                                  (I) the country in which the 
                                activities in the offset 
                                category would take place has 
                                developed and is implementing a 
                                low carbon development plan 
                                that includes provisions for 
                                the activities described in the 
                                offset category;
                                  (II) the activities in the 
                                offset category are not 
                                activities included under 
                                subsection (c), (d) or (e); and
                                  (III) the activities in the 
                                offset category satisfy 
                                specific criteria relevant to 
                                methodologies and institutional 
                                and technical capacities 
                                associated with developing 
                                country contexts to ensure 
                                adequate treatment of leakage, 
                                additionality, and permanence.
  (c) Sector-based Credits.--
          (1) In general.--In order to minimize the potential 
        for leakage and to encourage countries to take 
        nationally appropriate mitigation actions to reduce or 
        avoid greenhouse gas emissions, or sequester greenhouse 
        gases, the Administrator, in consultation with the 
        Secretary of State and the Administrator of the United 
        States Agency for International Development, shall--
                  (A) identify sectors, or combinations of 
                sectors, within specific countries with respect 
                to which the issuance of international offset 
                credits on a sectoral basis is appropriate; and
                  (B) issue international offset credits for 
                such sectors only on a sectoral basis.
          (2) Identification of sectors.--
                  (A) General rule.--For purposes of paragraph 
                (1)(A), a sectoral basis shall be appropriate 
                for activities--
                          (i) in countries that have 
                        comparatively high greenhouse gas 
                        emissions, or comparatively greater 
                        levels of economic development; and
                          (ii) that, if located in the United 
                        States, would be within a sector 
                        subject to the compliance obligation 
                        under section 722.
                  (B) Factors.--In determining the sectors and 
                countries for which international offset 
                credits should be awarded only on a sectoral 
                basis, the Administrator, in consultation with 
                the Secretary of State and the Administrator of 
                the United States Agency for International 
                Development, shall consider the following 
                factors:
                          (i) The country's gross domestic 
                        product.
                          (ii) The country's total greenhouse 
                        gas emissions.
                          (iii) Whether the comparable sector 
                        of the United States economy is covered 
                        by the compliance obligation under 
                        section 722.
                          (iv) The heterogeneity or homogeneity 
                        of sources within the relevant sector.
                          (v) Whether the relevant sector 
                        provides products or services that are 
                        sold in internationally competitive 
                        markets.
                          (vi) The risk of leakage if 
                        international offset credits were 
                        issued on a project-level basis, 
                        instead of on a sectoral basis, for 
                        activities within the relevant sector.
                          (vii) The capability of accurately 
                        measuring, monitoring, reporting, and 
                        verifying the performance of sources 
                        across the relevant sector.
                          (viii) Such other factors as the 
                        Administrator, in consultation with the 
                        Secretary of State and the 
                        Administrator of the United States 
                        Agency for International Development, 
                        determines are appropriate to--
                                  (I) ensure the integrity of 
                                the United States greenhouse 
                                gas emissions limitations 
                                established under section 703; 
                                and
                                  (II) encourage countries to 
                                take nationally appropriate 
                                mitigation actions to reduce or 
                                avoid greenhouse gas emissions, 
                                or sequester greenhouse gases.
                          (ix) The issuance of offsets for 
                        activities that are--
                                  (I) in addition to nationally 
                                appropriate mitigation actions 
                                taken by developing countries 
                                pursuant to the low-carbon 
                                development plans of the 
                                countries; and
                                  (II) on a sectoral basis.
          (3) Sectoral basis.--
                  (A) Definition.--In this subsection, the term 
                `sectoral basis' means the issuance of 
                international offset credits only for the 
                quantity of sector-wide reductions or avoidance 
                of greenhouse gas emissions, or sector-wide 
                increases in sequestration of greenhouse gases, 
                achieved across the relevant sector or sectors 
                of the economy relative to a baseline level of 
                emissions established in an agreement or 
                arrangement described in subsection (b)(2)(A) 
                for the sector.
                  (B) Baseline.--The baseline for a sector 
                shall--
                          (i) be established at levels of 
                        greenhouse gas emissions lower than 
                        would occur under a business-as-usual 
                        scenario, taking into account relevant 
                        domestic or international policies or 
                        incentives to reduce greenhouse gas 
                        emissions;
                          (ii) be used to determine 
                        additionality and performance;
                          (iii) account for all significant 
                        sources of emissions from a sector;
                          (iv) be adjusted over time to reflect 
                        changing circumstances;
                          (v) be developed taking into 
                        consideration such factors as--
                                  (I) any established emissions 
                                performance level for the 
                                sector;
                                  (II) the current performance 
                                of the sector in the country;
                                  (III) expected future trends 
                                of the sector in the country; 
                                and
                                  (IV) historical data and 
                                other factors to ensure 
                                additionality; and
                          (vi) be designed to produce 
                        significant deviations from business-
                        as-usual emissions, consistent with 
                        nationally appropriate mitigation 
                        commitments or actions, in a way that 
                        equitably contributes to meeting 
                        thresholds identified in section 
                        705(e)(2).
  (d) Credits Issued by an International Body.--
          (1) In general.--The Administrator, in consultation 
        with the Secretary of State, may issue international 
        offset credits in exchange for instruments in the 
        nature of offset credits that are issued by an 
        international body established pursuant to the United 
        Nations Framework Convention on Climate Change, to a 
        protocol to such Convention, or to a treaty that 
        succeeds such Convention. The Administrator may issue 
        international offset credits under this subsection only 
        if, in addition to the requirements of subsection (b), 
        the Administrator has determined that the international 
        body that issued the instruments has implemented 
        substantive and procedural requirements for the 
        relevant project type that provide equal or greater 
        assurance of the integrity of such instruments as is 
        provided by the requirements of this part. Beginning on 
        January 1, 2016, the Administrator shall issue no 
        offset credit pursuant to this subsection if the 
        activity generating the greenhouse gas emission 
        reductions or avoidance, or greenhouse gas 
        sequestration, occurs in a country and sector 
        identified by the Administrator under subsection (c), 
        unless the offset credit issued by the international 
        body is consistent with section 744(c).
          (2) Retirement.--The Administrator, in consultation 
        with the Secretary of State, shall seek, by whatever 
        means appropriate, including agreements, arrangements, 
        or technical cooperation with the international issuing 
        body described in paragraph (1), to ensure that such 
        body--
                  (A) is notified of the Administrator's 
                issuance, under this subsection, of an 
                international offset credit in exchange for an 
                instrument issued by such international body; 
                and
                  (B) provides, to the extent feasible, for the 
                disqualification of the instrument issued by 
                such international body for subsequent use 
                under any relevant foreign or international 
                greenhouse gas regulatory program, regardless 
                of whether such use is a sale, exchange, or 
                submission to satisfy a compliance obligation.
  (e) Offsets From Reduced Deforestation.--
          (1) Requirements.--The Administrator, in accordance 
        with the regulations promulgated under subsection 
        (b)(1) and an agreement or arrangement described in 
        subsection (b)(2)(A), shall issue international offset 
        credits for greenhouse gas emission reductions achieved 
        through activities to reduce deforestation only if, in 
        addition to the requirements of subsection (b)--
                  (A) the activity occurs in--
                          (i) a country listed by the 
                        Administrator pursuant to paragraph 
                        (2);
                          (ii) a state or province listed by 
                        the Administrator pursuant to paragraph 
                        (5); or
                          (iii) a country listed by the 
                        Administrator pursuant to paragraph 
                        (6);
                  (B) except as provided in paragraph (5) or 
                (6), the quantity of the international offset 
                credits is determined by comparing the national 
                emissions from deforestation relative to a 
                national deforestation baseline for that 
                country established, in accordance with an 
                agreement or arrangement described in 
                subsection (b)(2)(A), pursuant to paragraph 
                (4);
                  (C) the reduction in emissions from 
                deforestation has occurred before the issuance 
                of the international offset credit and, taking 
                into consideration relevant international 
                standards, has been demonstrated using ground-
                based inventories, remote sensing technology, 
                and other methodologies to ensure that all 
                relevant carbon stocks are accounted;
                  (D) the Administrator has made appropriate 
                adjustments, such as discounting for any 
                additional uncertainty, to account for 
                circumstances specific to the country, 
                including its technical capacity described in 
                paragraph (2)(A);
                  (E) the Administrator has determined that the 
                country within which the activity occurs has in 
                place a publicly available strategic plan that 
                includes the criteria listed in paragraph 
                (2)(C);
                  (F) the activity is designed, carried out, 
                and managed--
                          (i) in accordance with forest 
                        management practices that--
                                  (I) improve the livelihoods 
                                of forest communities;
                                  (II) maintain the natural 
                                biodiversity, resilience, and 
                                carbon storage capacity of 
                                forests; and
                                  (III) do not adversely impact 
                                the permanence of forest carbon 
                                stocks or emission reductions;
                          (ii) to promote or restore native 
                        forest species and ecosystems where 
                        practicable, and to avoid the 
                        introduction of invasive nonnative 
                        species;
                          (iii) in a manner that gives due 
                        regard to the rights and interests of 
                        local communities, indigenous peoples, 
                        forest-dependent communities, and 
                        vulnerable social groups;
                          (iv) with consultations with, and 
                        full participation of, local 
                        communities, indigenous peoples, and 
                        forest-dependent communities, in 
                        affected areas, as partners and primary 
                        stakeholders, prior to and during the 
                        design, planning, implementation, and 
                        monitoring and evaluation of 
                        activities;
                          (v) with transparent and equitable 
                        sharing of profits and benefits derived 
                        from offset credits with local 
                        communities, indigenous peoples, and 
                        forest-dependent communities;
                          (vi) with full transparency, third-
                        party independent oversight, and public 
                        dissemination of related financial and 
                        contractual arrangements, and
                          (vii) so that the social and 
                        environmental impacts of these 
                        activities are monitored and reported 
                        in sufficient detail to allow 
                        appropriate officials to determine 
                        compliance with the requirements of 
                        this section;
                  (G) the reduction otherwise satisfies and is 
                consistent with any relevant requirements 
                established by an agreement reached under the 
                auspices of the United Nations Framework 
                Convention on Climate Change, done at New York 
                on May 9, 1992; and
                  (H) in the case that offsets are determined 
                by comparing the national emissions from 
                deforestation relative to a national, state-
                level, or province-level deforestation baseline 
                as provided in paragraph (4) or (5)--
                          (i) a list of activities to reduce 
                        deforestation is provided to the 
                        Administrator and made publicly 
                        available;
                          (ii) the social and environmental 
                        impacts of these activities are 
                        monitored and reported in sufficient 
                        detail to allow the Administrator to 
                        determine compliance with the 
                        requirements of this section; and
                          (iii) the distribution of revenues 
                        for activities to reduce deforestation 
                        is transparent, subject to independent 
                        third-party oversight, and publicly 
                        disseminated.
          (2) Eligible countries.--The Administrator, in 
        consultation with the Secretary of State and the 
        Administrator of the United States Agency for 
        International Development, and in accordance with an 
        agreement or arrangement described in subsection 
        (b)(2)(A), shall establish, and periodically review and 
        update, a list of the developing countries that have 
        the capacity to participate in deforestation reduction 
        activities at a national level, including--
                  (A) the technical capacity to monitor, 
                measure, report, and verify forest carbon 
                fluxes for all significant sources of 
                greenhouse gas emissions from deforestation 
                with an acceptable level of uncertainty, as 
                determined taking into account relevant 
                internationally accepted methodologies, such as 
                those established by the Intergovernmental 
                Panel on Climate Change;
                  (B) the institutional capacity to reduce 
                emissions from deforestation, including strong 
                forest governance and mechanisms to ensure 
                transparency and third-party independent 
                oversight of offset activities and revenues, 
                and the transparent and equitable distribution 
                of offset revenues for local actions; and
                  (C) a land use or forest sector strategic 
                plan that--
                          (i) assesses national and local 
                        drivers of deforestation and forest 
                        degradation and identifies reforms to 
                        national policies needed to address 
                        them;
                          (ii) estimates the country's 
                        emissions from deforestation and forest 
                        degradation;
                          (iii) identifies improvements in and 
                        a timeline for data collection, 
                        monitoring, and institutional capacity 
                        necessary to implement an effective 
                        national deforestation reduction 
                        program that meets the criteria set 
                        forth in this section (including a 
                        national deforestation baseline);
                          (iv) establishes a timeline for 
                        implementing the program and 
                        transitioning forest-based economies to 
                        low-emissions development pathways with 
                        respect to emissions from forest and 
                        land use activities;
                          (v) includes a national policy for 
                        consultations with, and full 
                        participation of, all stakeholders, 
                        especially indigenous and forest-
                        dependent communities, in its design, 
                        planning, and implementation of 
                        activities, whether at the national or 
                        local level, to reduce deforestation in 
                        the country (including a national 
                        process for addressing grievances if 
                        stakeholders have been caused social, 
                        environmental, or economic harm);
                          (vi) provides for the distribution of 
                        revenues for activities to reduce 
                        deforestation transparently and 
                        publicly, subject to independent third-
                        party oversight; and
                          (vii) includes a national platform or 
                        a type of registry for information 
                        relating to deforestation and 
                        degradation policy and program 
                        implementation processes, including a 
                        mechanism for the monitoring and 
                        reporting of the social and 
                        environmental impacts of those 
                        activities.
          (3) Protection of interests.--With respect to an 
        agreement or arrangement described in subsection 
        (b)(2)(A) with a country that addresses international 
        offset credits under this subsection, the 
        Administrator, in consultation with the Secretary of 
        State and the Administrator of the United States Agency 
        for International Development, shall undertake due 
        diligence to ensure the establishment and enforcement 
        by such country of legal regimes, processes, standards, 
        and safeguards that--
                  (A) give due regard to the rights and 
                interests of local communities, indigenous 
                peoples, forest-dependent communities, and 
                vulnerable social groups;
                  (B) promote consultations with, and full 
                participation of, forest-dependent communities 
                and indigenous peoples in affected areas, as 
                partners and primary stakeholders, prior to and 
                during the design, planning, implementation, 
                and monitoring and evaluation of activities; 
                and
                  (C) encourage transparent and equitable 
                sharing of profits and benefits derived from 
                international offset credits with local 
                communities, indigenous peoples, and forest-
                dependent communities.
          (4) National deforestation baseline.--A national 
        deforestation baseline established under this 
        subsection shall--
                  (A) be national in scope;
                  (B) be consistent with nationally appropriate 
                mitigation commitments or actions with respect 
                to deforestation, taking into consideration the 
                average annual historical deforestation rates 
                of the country during a period of at least 5 
                years, the applicable drivers of deforestation, 
                and other factors to ensure that only 
                reductions that are in addition to such 
                commitments or actions will generate offsets;
                  (C) establish a trajectory that would result 
                in zero net deforestation by not later than 20 
                years after the national deforestation baseline 
                has been established, including a spatially 
                explicit land use plan that identifies intact 
                and primary forest areas and managed forest 
                areas that are to remain while the country is 
                reaching the zero net deforestation trajectory;
                  (D) be adjusted over time to take account of 
                changing national circumstances;
                  (E) be designed to account for all 
                significant sources of greenhouse gas emissions 
                from deforestation in the country; and
                  (F) be consistent with the national 
                deforestation baseline, if any, established for 
                such country under section 753.
          (5) State-level or province-level activities.--
                  (A) Eligible states or provinces.--The 
                Administrator, in consultation with the 
                Secretary of State and the Administrator of the 
                United States Agency for International 
                Development, shall establish, and periodically 
                review and update, a list of states or 
                provinces in developing countries where--
                          (i) the developing country is not 
                        included on the list of countries 
                        established pursuant to paragraph 
                        (6)(A);
                          (ii) the State or province is 
                        undertaking deforestation reduction 
                        activities;
                          (iii) the state or province has the 
                        capacity to engage in deforestation 
                        reduction activities at the state or 
                        province level, including--
                                  (I) the technical capacity to 
                                monitor and measure forest 
                                carbon fluxes for all 
                                significant sources of 
                                greenhouse gas emissions from 
                                deforestation with an 
                                acceptable amount of 
                                uncertainty, including a 
                                spatially explicit land use 
                                plan that identifies intact and 
                                primary forest areas and 
                                managed forest areas that are 
                                to remain while the country is 
                                reaching the zero net 
                                deforestation trajectory; and
                                  (II) the institutional 
                                capacity to reduce emissions 
                                from deforestation, including 
                                strong forest governance and 
                                mechanisms to deliver forest 
                                conservation resources for 
                                local actions;
                          (iv) the state or province meets the 
                        eligibility criteria in paragraphs (2) 
                        and (3) for the geographic area under 
                        its jurisdiction; and
                          (v) the country--
                                  (I) demonstrates that efforts 
                                are underway to transition to a 
                                national program within 5 
                                years; or
                                  (II) in the determination of 
                                the Administrator, is making a 
                                good-faith effort to develop a 
                                land use or forest sector 
                                strategic national plan or 
                                program that meets the criteria 
                                described in paragraph (2)(C).
                  (B) Activities.--The Administrator may issue 
                international offset credits for greenhouse gas 
                emission reductions achieved through activities 
                to reduce deforestation at a state or 
                provincial level that meet the requirements of 
                this section. Such credits shall be determined 
                by comparing the emissions from deforestation 
                within that state or province relative to the 
                state or province deforestation baseline for 
                that state or province established, in 
                accordance with an agreement or arrangement 
                described in subsection (b)(2)(A), pursuant to 
                subparagraph (C) of this paragraph.
                  (C) State-level or province-level 
                deforestation baseline.--A state-level or 
                province-level deforestation baseline shall--
                          (i) be consistent with any existing 
                        nationally appropriate mitigation 
                        commitments or actions for the country 
                        in which the activity is occurring, so 
                        that only reductions that are in 
                        addition to those commitments or 
                        actions will generate offsets;
                          (ii) be developed taking into 
                        consideration the average annual 
                        historical deforestation rates of the 
                        state or province during a period of at 
                        least 5 years, relevant drivers of 
                        deforestation, and other factors to 
                        ensure additionality;
                          (iii) establish a trajectory that 
                        would result in zero net deforestation 
                        by not later than 20 years after the 
                        state-level or province-level 
                        deforestation baseline has been 
                        established; and
                          (iv) be designed to account for all 
                        significant sources of greenhouse gas 
                        emissions from deforestation in the 
                        state or province and adjusted to fully 
                        account for emissions leakage outside 
                        the state or province through 
                        monitoring of major forested areas in 
                        the host country and other areas of the 
                        host country susceptible to leakage.
                  (D) Phase out.--Beginning 5 years after the 
                first calendar year for which a covered entity 
                must demonstrate compliance with section 
                722(a), the Administrator shall issue no 
                further international offset credits for 
                eligible state-level or province-level 
                activities to reduce deforestation pursuant to 
                this paragraph.
          (6) Projects and programs to reduce deforestation.--
                  (A) Eligible countries.--The Administrator, 
                in consultation with the Secretary of State and 
                the Administrator of the United States Agency 
                for International Development, shall establish, 
                and periodically review and update, a list of 
                developing countries that--
                          (i) the Administrator determines, 
                        based on recent, credible, and reliable 
                        emissions data, account for less than 1 
                        percent of global greenhouse gas 
                        emissions and less than 3 percent of 
                        global forest-sector and land use 
                        change greenhouse gas emissions;
                          (ii) have, or in the determination of 
                        the Administrator are making a good 
                        faith effort to develop, a land use or 
                        forest sector strategic plan that meets 
                        the criteria described in paragraph 
                        (2)(C); and
                          (iii) has made, or in the 
                        determination of the Administrator, is 
                        making, a good-faith effort to develop, 
                        through the implementation of 
                        activities under this section, a 
                        monitoring program for major forested 
                        areas in a host country and other areas 
                        in a host country susceptible to 
                        leakage, including a spatially explicit 
                        land use plan that identifies intact 
                        and primary forest areas and managed 
                        forest areas that are to remain while 
                        country is reaching the zero net 
                        deforestation trajectory.
                  (B) Activities.--The Administrator may issue 
                international offset credits for greenhouse gas 
                emission reductions achieved through project or 
                program level activities to reduce 
                deforestation in countries listed under 
                subparagraph (A) that meet the requirements of 
                this section. The quantity of international 
                offset credits shall be determined by comparing 
                the project-level or program-level emissions 
                from deforestation to a deforestation baseline 
                for such project or program established 
                pursuant to subparagraph (C).
                  (C) Project-level or program-level 
                baseline.--A project-level or program-level 
                deforestation baseline shall--
                          (i) be consistent with any existing 
                        nationally appropriate mitigation 
                        commitments or actions for the country 
                        in which the project or program is 
                        occurring, so that only reductions that 
                        are in addition to such commitments or 
                        actions will generate offsets;
                          (ii) be developed taking into 
                        consideration the average annual 
                        historical deforestation rates in the 
                        project or program boundary during a 
                        period of at least 5 years, applicable 
                        drivers of deforestation, and other 
                        factors to ensure additionality;
                          (iii) be designed to account for all 
                        significant sources of greenhouse gas 
                        emissions from deforestation in the 
                        project or program boundary; and
                          (iv) be adjusted to fully account for 
                        emissions leakage outside the project 
                        or program boundary, including--
                                  (I) estimation through 
                                monitoring of major forested 
                                areas in a host country and 
                                other areas in a host country 
                                susceptible to leakage, 
                                pursuant to section 744(e)(5); 
                                and
                                  (II) a spatially explicit 
                                land use plan that identifies 
                                intact and primary forest areas 
                                and managed forest areas that 
                                are to remain while country is 
                                reaching the zero net 
                                deforestation trajectory
                  (D) Phase-out.--
                          (i) In general.--Beginning on the 
                        date that is 8 years after the first 
                        calendar year for which a covered 
                        entity must demonstrate compliance with 
                        section 722(a), the Administrator shall 
                        issue no further international offset 
                        credits for project-level or program-
                        level activities as described in this 
                        paragraph, except as provided in clause 
                        (ii).
                          (ii) Extension.--The Administrator 
                        may extend the phase out deadline for 
                        the issuance of international offset 
                        credits under this section by up to 5 
                        years with respect to eligible 
                        activities taking place in a least 
                        developed country, which is a foreign 
                        country that the United Nations has 
                        identified as among the least developed 
                        of developing countries at the time 
                        that the Administrator determines to 
                        provide an extension, provided that the 
                        Administrator, in consultation with the 
                        Secretary of State and the 
                        Administrator of the United States 
                        Agency for International Development, 
                        determines the country--
                                  (I) lacks sufficient capacity 
                                to adopt and implement 
                                effective programs to achieve 
                                reductions in deforestation 
                                measured against national 
                                baselines;
                                  (II) is receiving support 
                                under part E to develop such 
                                capacity; and
                                  (III) has developed and is 
                                working to implement a credible 
                                national strategy or plan to 
                                reduce deforestation.
          (7) Offset credit issuance.--Requirements under this 
        subsection to issue international offset credits only 
        if the quantity of the international offset credits is 
        determined by reference to a national, State-level, or 
        province-level deforestation baseline do not preclude 
        the Administrator from issuing a portion of the total 
        quantity of those credits directly to an offset project 
        developer for use in carrying out activities in 
        accordance with this section that contributed to a 
        reduction in emissions, if that issuance is authorized 
        by--
                  (A) the agreement or arrangement described in 
                subsection (b)(2)(A); and
                  (B) if the credits are issued pursuant to 
                paragraph (5), by the State or provincial 
                government.
          (8) Expansion of scope.--In implementing this 
        subsection, the Administrator, taking into 
        consideration the recommendations of the Advisory 
        Board, may expand the scope of creditable activities to 
        include activities that reduce emissions from land use, 
        such as those that address forest degradation or soil 
        carbon losses associated with forested wetlands or 
        peatlands.
  (f) Modification of Requirements.--In promulgating 
regulations under subsection (b)(1) with respect to the 
issuance of international offset credits under subsection (c), 
(d), or (e), the Administrator, in consultation with the 
Secretary of State and the Administrator of the United States 
Agency for International Development, may modify or omit a 
requirement of this part (excluding the requirements of this 
section) if the Administrator determines that the application 
of that requirement to such subsection is not feasible or would 
result in the creation of offset credits that would not be 
eligible to satisfy emissions reduction commitments made by the 
United States pursuant to the United Nations Framework 
Convention on Climate Change, done at New York on May 9, 1992 
(or any successor agreement). In modifying or omitting such a 
requirement on the basis of infeasibility, the Administrator, 
in consultation with the Secretary of State and the 
Administrator of the United States Agency for International 
Development, shall ensure, with an adequate margin of safety, 
the integrity of international offset credits issued under this 
section and of the greenhouse gas emissions limitations 
established pursuant to section 703.
  (g) Avoiding Double Counting.--The Administrator, in 
consultation with the Secretary of State, shall seek, by 
whatever means appropriate, including agreements, arrangements, 
or technical cooperation, to ensure that activities on the 
basis of which international offset credits are issued under 
this section are not used for compliance with an obligation to 
reduce or avoid greenhouse gas emissions, or increase 
greenhouse gas sequestration, under a foreign or international 
regulatory system. In addition, no international offset credits 
shall be issued for emission reductions from activities with 
respect to which emission allowances were allocated under 
section 771(c) for distribution under part E.
  (h) Limitation.--The Administrator shall not issue 
international offset credits generated by projects based on the 
destruction of hydrofluorocarbons.

           *       *       *       *       *       *       *

                PART E--SUPPLEMENTAL EMISSION REDUCTIONS

SEC. 751. DEFINITIONS.

  In this part:
          (1) Administrator.--The term `Administrator' means 
        the Administrator of the United States Agency for 
        International Development.
          (2) Deforestation.--The term `deforestation' means a 
        change in land use from a forest to any other land use.
          ``(3) Degradation.--The term `degradation', with 
        respect to a forest, is any reduction in the carbon 
        stock of a forest due to the impact of human land-use 
        activities.
          (4) Emission reductions.--The term `emission 
        reductions' means greenhouse gas emission reductions 
        achieved from reduced or avoided deforestation under 
        this title.
          (5) Leakage prevention activities.--The term `leakage 
        prevention activities' means activities in developing 
        countries that are directed at preserving existing 
        forest carbon stocks, including forested wetlands and 
        peatlands, that might, absent such activities, be lost 
        through leakage.

SEC. 752. PURPOSES.

  The purposes of this part are to provide United States 
assistance to developing countries--
          (1) to develop, implement and improve nationally 
        appropriate greenhouse gas mitigation policies and 
        actions that reduce deforestation and forest 
        degradation or conserve or restore forest ecosystems, 
        in a measurable, reportable, and verifiable manner; and
          (2) in a manner that is consistent with and enhances 
        the implementation of complementary United States 
        policies that support the good governance of forests, 
        biodiversity conservation, and environmentally 
        sustainable development, while taking local 
        communities, most vulnerable populations and 
        communities, particularly forest-dependent communities 
        and indigenous peoples into consideration.

SEC. 753. EMISSION REDUCTIONS FROM REDUCED DEFORESTATION.

  (a) In General.--Not later than 2 years after the date of the 
enactment of this part, the Administrator, in consultation with 
the Administrator of the Environmental Protection Agency, the 
Secretary of Agriculture, and the head of any other appropriate 
agency, shall establish a program to provide assistance to 
reduce greenhouse gas emissions from deforestation in 
developing countries, in accordance with this title.
  (b) Objectives.--The objectives of the program established 
under this section shall be--
          (1) to reduce greenhouse gas emissions from 
        deforestation in developing countries by at least 
        720,000,000 tons of carbon dioxide equivalent in 2020, 
        and a cumulative quantity of at least 6,000,000,000 
        tons of carbon dioxide equivalent by December 31, 2025, 
        with additional reductions in subsequent years;
          (2) to assist developing countries in preparing to 
        participate in international markets for international 
        offset credits for reduced emissions from 
        deforestation; and
          (3) to preserve existing forest carbon stocks in 
        countries where such forest carbon may be vulnerable to 
        international leakage.
  (c) Not Eligible for Offset Credit.--Activities that receive 
support under this part shall not be issued offset credits for 
the greenhouse gas emissions reductions or avoidance, or 
greenhouse gas sequestration, produced by such activities.

           *       *       *       *       *       *       *

        PART F--ENSURING REAL REDUCTIONS IN INDUSTRIAL EMISSIONS

SEC. 761. PURPOSES.

  The purposes of this part are--
          (1) to promote a strong global effort to 
        significantly reduce greenhouse gas emissions, and, 
        through this global effort, stabilize greenhouse gas 
        concentrations in the atmosphere at a level that will 
        prevent dangerous anthropogenic interference with the 
        climate system;
          (2) to prevent an increase in greenhouse gas 
        emissions in countries other than the United States as 
        a result of direct and indirect compliance costs 
        incurred under this title;
          (3) to provide a rebate to the owners and operators 
        of entities in domestic eligible industrial sectors for 
        their greenhouse gas emission costs incurred under this 
        title, but not for costs associated with other related 
        or unrelated market dynamics;
          (4) to design such rebates in a way that will prevent 
        carbon leakage while also rewarding innovation and 
        facility-level investments in energy efficiency 
        performance improvements; and
          (5) to eliminate or reduce distribution of emission 
        allowances under this part when such distribution is no 
        longer necessary to prevent carbon leakage from 
        eligible industrial sectors.

SEC. 762. DEFINITIONS.

  In this part:
          (1) Carbon leakage.--The term `carbon leakage' means 
        any substantial increase (as determined by the 
        Administrator) in greenhouse gas emissions by 
        industrial entities located in other countries if such 
        increase is caused by an incremental cost of production 
        increase in the United States resulting from the 
        implementation of this title.
          (2) Eligible industrial sector.--The term `eligible 
        industrial sector' means an industrial sector 
        determined by the Administrator under section 763(b) to 
        be eligible to receive emission allowance rebates under 
        this part.
          (3) Industrial sector.--
                  (A) In general.--The term `industrial sector' 
                means any sector that--
                          (i) is in the manufacturing sector 
                        (as defined in NAICS codes 31, 32, and 
                        33); or
                          (ii) is part of, or an entire, sector 
                        that beneficiates or otherwise 
                        processes (including agglomeration) 
                        metal ores, including iron and copper 
                        ores, soda ash, or phosphate.
                  (B) Exclusion.--The term `industrial sector' 
                does not include any part of a sector that 
                extracts metal ores, soda ash, or phosphate.
          (4) NAICS.--The term `NAICS' means the North American 
        Industrial Classification System of 2002.
          (5) Output.--The term `output' means the total 
        tonnage or other standard unit of production (as 
        determined by the Administrator) produced by an entity 
        in an industrial sector. The output of the cement 
        sector is hydraulic cement, and not clinker.

SEC. 763. ELIGIBLE INDUSTRIAL SECTORS.

  (a) List.--
          (1) Initial list.--Not later than June 30, 2011, the 
        Administrator shall publish in the Federal Register a 
        list of eligible industrial sectors pursuant to 
        subsection (b). Such list shall include the amount of 
        the emission allowance rebate per unit of production 
        that shall be provided to entities in each eligible 
        industrial sector in the following two calendar years 
        pursuant to section 764.
          (2) Subsequent lists.--Not later than February 1, 
        2013, and every 4 years thereafter, the Administrator 
        shall publish in the Federal Register an updated 
        version of the list published under paragraph (1).
  (b) Eligible Industrial Sectors.--
          (1) In general.--Not later than June 30, 2011, the 
        Administrator shall promulgate a rule designating, 
        based on the criteria under paragraph (2), the 
        industrial sectors eligible for emission allowance 
        rebates under this part.
          (2) Presumptively eligible industrial sectors.--
                  (A) Eligibility criteria.--
                          (i) In general.--An owner or operator 
                        of an entity shall be eligible to 
                        receive emission allowance rebates 
                        under this part if such entity is in an 
                        industrial sector that is included in a 
                        six-digit classification of the NAICS 
                        that meets the criteria in both clauses 
                        (ii) and (iii), or the criteria in 
                        clause (iv).
                          (ii) Energy or greenhouse gas 
                        intensity.--As determined by the 
                        Administrator, the industrial sector 
                        had--
                                  (I) an energy intensity of at 
                                least 5 percent, calculated by 
                                dividing the cost of purchased 
                                electricity and fuel costs of 
                                the sector by the value of the 
                                shipments of the sector, based 
                                on data described in 
                                subparagraph (D); or
                                  (II) a greenhouse gas 
                                intensity of at least 5 
                                percent, calculated by 
                                dividing--
                                          (aa) the number 20 
                                        multiplied by the 
                                        number of tons of 
                                        carbon dioxide 
                                        equivalent greenhouse 
                                        gas emissions 
                                        (including direct 
                                        emissions from fuel 
                                        combustion, process 
                                        emissions, and indirect 
                                        emissions from the 
                                        generation of 
                                        electricity used to 
                                        produce the output of 
                                        the sector) of the 
                                        sector based on data 
                                        described in 
                                        subparagraph (D); by
                                          (bb) the value of the 
                                        shipments of the 
                                        sector, based on data 
                                        described in 
                                        subparagraph (D).
                          (iii) Trade intensity.--As determined 
                        by the Administrator, the industrial 
                        sector had a trade intensity of at 
                        least 15 percent, calculated by 
                        dividing the value of the total imports 
                        and exports of such sector by the value 
                        of the shipments plus the value of 
                        imports of such sector, based on data 
                        described in subparagraph (D).
                          (iv) Very high energy or greenhouse 
                        gas intensity.--As determined by the 
                        Administrator, the industrial sector 
                        had an energy or greenhouse gas 
                        intensity, as calculated under clause 
                        (ii)(I) or (II), of at least 20 
                        percent.
                  (B) Metal and phosphate production classified 
                under more than one naics code.--For purposes 
                of this section, the Administrator shall--
                          (i) aggregate data for the 
                        beneficiation or other processing 
                        (including agglomeration) of metal 
                        ores, including iron and copper ores, 
                        soda ash, or phosphate with subsequent 
                        steps in the process of metal and 
                        phosphate manufacturing, regardless of 
                        the NAICS code under which such 
                        activity is classified; and
                          (ii) aggregate data for the 
                        manufacturing of steel with the 
                        manufacturing of steel pipe and tube 
                        made from purchased steel in a 
                        nonintegrated process.
                  (C) Exclusion.--The petroleum refining sector 
                shall not be an eligible industrial sector.
                  (D) Data sources.--
                          (i) Electricity and fuel costs, value 
                        of shipments.--The Administrator shall 
                        determine electricity and fuel costs 
                        and the value of shipments under this 
                        subsection from data from the United 
                        States Census Annual Survey of 
                        Manufacturers. The Administrator shall 
                        take the average of data from as many 
                        of the years of 2004, 2005, and 2006 
                        for which such data are available. If 
                        such data are unavailable, the 
                        Administrator shall make a 
                        determination based upon 2002 or 2006 
                        data from the most detailed industrial 
                        classification level of Energy 
                        Information Agency's Manufacturing 
                        Energy Consumption Survey (using 2006 
                        data if it is available) and the 2002 
                        or 2007 Economic Census of the United 
                        States (using 2007 data if it is 
                        available). If data from the 
                        Manufacturing Energy Consumption Survey 
                        or Economic Census are unavailable for 
                        any sector at the six-digit 
                        classification level in the NAICS, then 
                        the Administrator may extrapolate the 
                        information necessary to determine the 
                        eligibility of a sector under this 
                        paragraph from available Manufacturing 
                        Energy Consumption Survey or Economic 
                        Census data pertaining to a broader 
                        industrial category classified in the 
                        NAICS. If data relating to the 
                        beneficiation or other processing 
                        (including agglomeration) of metal 
                        ores, including iron and copper ores, 
                        soda ash, or phosphate are not 
                        available from the specified data 
                        sources, the Administrator shall use 
                        the best available Federal or State 
                        government data and may use, to the 
                        extent necessary, representative data 
                        submitted by entities that perform such 
                        beneficiation or other processing 
                        (including agglomeration), in making a 
                        determination. Fuel cost data shall not 
                        include the cost of fuel used as 
                        feedstock by an industrial sector.
                          (ii) Imports and exports.--The 
                        Administrator shall base the value of 
                        imports and exports under this 
                        subsection on United States 
                        International Trade Commission data. 
                        The Administrator shall take the 
                        average of data from as many of the 
                        years of 2004, 2005, and 2006 for which 
                        such data are available. If data from 
                        the United States International Trade 
                        Commission are unavailable for any 
                        sector at the six-digit classification 
                        level in the NAICS, then the 
                        Administrator may extrapolate the 
                        information necessary to determine the 
                        eligibility of a sector under this 
                        paragraph from available United States 
                        International Trade Commission data 
                        pertaining to a broader industrial 
                        category classified in the NAICS.
                          (iii) Percentages.--The Administrator 
                        shall round the energy intensity, 
                        greenhouse gas intensity, and trade 
                        intensity percentages under 
                        subparagraph (A) to the nearest whole 
                        number.
                          (iv) Greenhouse gas emission 
                        calculations.--When calculating the 
                        tons of carbon dioxide equivalent 
                        greenhouse gas emissions for each 
                        sector under subparagraph 
                        (A)(ii)(II)(aa), the Administrator--
                                  (I) shall use the best 
                                available data from as many of 
                                the years 2004, 2005, and 2006 
                                for which such data is 
                                available; and
                                  (II) may, to the extent 
                                necessary with respect to a 
                                sector, use economic and 
                                engineering models and the best 
                                available information on 
                                technology performance levels 
                                for such sector.
          (3) Administrative determination of additional 
        eligible industrial sectors.--
                  (A) Updated trade intensity data.--The 
                Administrator shall designate as eligible to 
                receive emission allowance rebates under this 
                part an industrial sector that--
                          (i) met the energy or greenhouse gas 
                        intensity criteria in paragraph 
                        (2)(A)(ii) as of the date of 
                        promulgation of the rule under 
                        paragraph (1); and
                          (ii) meets the trade intensity 
                        criteria in paragraph (2)(A)(iii), 
                        using data from any year after 2006.
                  (B) Individual showing petition.--
                          (i) Petition.--In addition to 
                        designation under paragraph (2) or 
                        subparagraph (A) of this paragraph, the 
                        owner or operator of an entity in an 
                        industrial sector may petition the 
                        Administrator to designate as eligible 
                        industrial sectors under this part an 
                        entity or a group of entities that--
                                  (I) represent a subsector of 
                                a six-digit section of the 
                                NAICS code; and
                                  (II) meet the eligibility 
                                criteria in both clauses (ii) 
                                and (iii) of paragraph (2)(A), 
                                or the eligibility criteria in 
                                clause (iv) of paragraph 
                                (2)(A).
                          (ii) Data.--In making a determination 
                        under this subparagraph, the 
                        Administrator shall consider data 
                        submitted by the petitioner that is 
                        specific to the entity, data solicited 
                        by the Administrator from other 
                        entities in the subsector, if such 
                        other entities exist, and data 
                        specified in paragraph (2)(D).
                          (iii) Basis of subsector 
                        determination.--The Administrator shall 
                        determine an entity or group of 
                        entities to be a subsector of a six-
                        digit section of the NAICS code based 
                        only upon the products manufactured and 
                        not the industrial process by which the 
                        products are manufactured, except that 
                        the Administrator may determine an 
                        entity or group of entities that 
                        manufacture a product from primarily 
                        virgin material to be a separate 
                        subsector from another entity or group 
                        of entities that manufacture the same 
                        product primarily from recycled 
                        material.
                          (iv) Use of most recent data.--In 
                        determining whether to designate a 
                        sector or subsector as an eligible 
                        industrial sector under this 
                        subparagraph, the Administrator shall 
                        use the most recent data available from 
                        the sources described in paragraph 
                        (2)(D), rather than the data from the 
                        years specified in paragraph (2)(D), to 
                        determine the trade intensity of such 
                        sector or subsector, but only for 
                        determining such trade intensity.
                          (v) Final action.--The Administrator 
                        shall take final action on such 
                        petition no later than 6 months after 
                        the petition is received by the 
                        Administrator.

SEC. 764. DISTRIBUTION OF EMISSION ALLOWANCE REBATES.

  (a) Distribution Schedule.--
          (1) In general.--For each vintage year, the 
        Administrator shall distribute pursuant to this section 
        emission allowances made available under section 
        771(a)(5), not later than October 31 of the preceding 
        calendar year. The Administrator shall make such annual 
        distributions to the owners and operators of each 
        entity in an eligible industrial sector in the amount 
        of emission allowances calculated under subsection (b), 
        except that--
                  (A) for vintage years 2012 and 2013, the 
                distribution for a covered entity shall be 
                pursuant to the entity's indirect carbon factor 
                as calculated under subsection (b)(3);
                  (B) for vintage year 2026 and thereafter, the 
                distribution shall be pursuant to the amount 
                calculated under subsection (b) multiplied by, 
                for a sector--
                          (i) 90 percent for vintage year 2026;
                          (ii) 80 percent for vintage year 
                        2027;
                          (iii) 70 percent for vintage year 
                        2028;
                          (iv) 60 percent for vintage year 
                        2029;
                          (v) 50 percent for vintage year 2030;
                          (vi) 40 percent for vintage year 
                        2031;
                          (vii) 30 percent for vintage year 
                        2032;
                          (viii) 20 percent for vintage year 
                        2033;
                          (ix) 10 percent for vintage year 
                        2034; and
                          (x) 0 percent for vintage year 2035 
                        and thereafter.
          (2) Newly eligible sectors.--In addition to receiving 
        a distribution of emission allowances under this 
        section in the first distribution occurring after an 
        industrial sector is designated as eligible under 
        section 763(b)(3), the owner or operator of an entity 
        in that eligible industrial sector may receive a 
        prorated share of any emission allowances made 
        available for distribution under this section that were 
        not distributed for the year in which the petition for 
        eligibility was granted under section 763(b)(3)(A).
          (3) Cessation of qualifying activities.--If, as 
        determined by the Administrator, a facility is no 
        longer in an eligible industrial sector designated 
        under section 763--
                  (A) the Administrator shall not distribute 
                emission allowances to the owner or operator of 
                such facility under this section; and
                  (B) the owner or operator of such facility 
                shall return to the Administrator all 
                allowances that have been distributed to it for 
                future vintage years and a pro-rated amount of 
                allowances distributed to the facility under 
                this section for the vintage year in which the 
                facility ceases to be in an eligible industrial 
                sector designated under section 763.
  (b) Calculation of Direct and Indirect Carbon Factors.--
          (1) In general.--
                  (A) Covered entities.--Except as provided in 
                subsection (a), for covered entities that are 
                in eligible industrial sectors, the amount of 
                emission allowance rebates shall be based on 
                the sum of the covered entity's direct and 
                indirect carbon factors.
                  (B) Other eligible entities.--For entities 
                that are in eligible industrial sectors but are 
                not covered entities, the amount of emission 
                allowance rebates shall be based on the 
                entity's indirect carbon factor.
                  (C) New entities.--Not later than 2 years 
                after the date of enactment of this title, the 
                Administrator shall issue regulations governing 
                the distribution of emission allowance rebates 
                for the first and second years of operation of 
                a new entity in an eligible industrial sector. 
                These regulations shall provide for--
                          (i) the distribution of emission 
                        allowance rebates to such entities 
                        based on comparable entities in the 
                        same sector; and
                          (ii) an adjustment in the third and 
                        fourth years of operation to reconcile 
                        the total amount of emission allowance 
                        rebates received during the first and 
                        second years of operation to the amount 
                        the entity would have received during 
                        the first and second years of operation 
                        had the appropriate data been 
                        available.
          (2) Direct carbon factor.--The direct carbon factor 
        for a covered entity for a vintage year is the product 
        of--
                  (A) the average annual output of the covered 
                entity for the 2 years preceding the year of 
                the distribution; and
                  (B) the most recent calculation of the 
                average direct greenhouse gas emissions 
                (expressed in tons of carbon dioxide 
                equivalent) per unit of output for all covered 
                entities in the sector, as determined by the 
                Administrator under paragraph (4).
          (3) Indirect carbon factor.--
                  (A) In general.--The indirect carbon factor 
                for an entity for a vintage year is the product 
                obtained by multiplying the average annual 
                output of the entity for the 2 years preceding 
                the year of the distribution by both the 
                electricity emissions intensity factor 
                determined pursuant to subparagraph (B) and the 
                electricity efficiency factor determined 
                pursuant to subparagraph (C) for the year 
                concerned.
                  (B) Electricity emissions intensity factor.--
                          (i) In general.--Each person selling 
                        electricity to the owner or operator of 
                        an entity in any sector designated as 
                        an eligible industrial sector under 
                        section 763(b) shall provide the owner 
                        or operator of the entity and the 
                        Administrator, on an annual basis, the 
                        electricity emissions intensity factor 
                        for the entity. The electricity 
                        emissions intensity factor for the 
                        entity, expressed in tons of carbon 
                        dioxide equivalents per kilowatt hour, 
                        is determined by dividing--
                                  (I) the annual sum of the 
                                hourly product of--
                                          (aa) the electricity 
                                        purchased by the entity 
                                        from that person in 
                                        each hour (expressed in 
                                        kilowatt hours); 
                                        multiplied by
                                          (bb) the marginal or 
                                        weighted average tons 
                                        of carbon dioxide 
                                        equivalent per kilowatt 
                                        hour that are reflected 
                                        in the electricity 
                                        charges to the entity, 
                                        as determined by the 
                                        entity's retail rate 
                                        arrangements; by
                                  (II) the total kilowatt hours 
                                of electricity purchased by the 
                                entity from that person during 
                                that year.
                          (ii) Use of other data to determine 
                        factor.--Where it is not possible to 
                        determine the precise electricity 
                        emissions intensity factor for an 
                        entity using the methodology in clause 
                        (i), the person selling electricity 
                        shall use the monthly average data 
                        reported by the Energy Information 
                        Administration or collected and 
                        reported by the Administrator for the 
                        utility serving the entity to determine 
                        the electricity emissions intensity 
                        factor.
                  (C) Electricity efficiency factor.--The 
                electricity efficiency factor is the average 
                amount of electricity (in kilowatt hours) used 
                per unit of output for all entities in the 
                relevant sector, as determined by the 
                Administrator based on the best available data, 
                including data provided under paragraph (6).
                  (D) Indirect carbon factor reduction.--If an 
                electricity provider received a free allocation 
                of emission allowances pursuant to section 
                771(a)(1), the Administrator shall adjust the 
                indirect carbon factor to avoid rebates to the 
                eligible entity for costs that the 
                Administrator determines were not incurred by 
                the eligible entity because the allowances were 
                freely allocated to the eligible entity's 
                electricity provider and used for the benefit 
                of industrial consumers.
          (4) Greenhouse gas intensity calculations.--The 
        Administrator shall calculate the average direct 
        greenhouse gas emissions (expressed in tons of carbon 
        dioxide equivalent) per unit of output and the 
        electricity efficiency factor for all covered entities 
        in each eligible industrial sector every 4 years, using 
        an average of the 5 most recent years of the best 
        available data, from up to 7 years prior to the year in 
        which such calculations are made. For the purpose of 
        determining sector averages that are representative of 
        typical market conditions during the previous 7 years 
        of operations, such averages shall exclude data from 
        individual years with the highest and the lowest direct 
        greenhouse gas emissions per unit of output and 
        electricity efficiency factors. For purposes of the 
        lists required to be published not later than February 
        1, 2013, the Administrator shall use the best available 
        data for the maximum number of years, up to 5 years, 
        for which data are available.
          (5) Determination of sectors for purposes of sectoral 
        averages.--
                  (A) In general.--Notwithstanding the criteria 
                used to determine eligible sectors under 
                paragraphs (2) and (3)(C), not later than June 
                30, 2011, the Administrator shall, by rule, 
                identify sectors or subsectors for purposes of 
                calculating sector averages under paragraphs 
                (2)(B), (3)(C), and (4), based upon, to the 
                extent practicable in achieving the purposes of 
                this part--
                          (i) product produced;
                          (ii) process employed, including 
                        distinctions based upon the extent of 
                        integration or exclusion of process 
                        steps; and
                          (iii) the extent of use of combined 
                        heat and power technologies.
                  (B) Consideration of criteria.--In 
                determining what entities are comparable to a 
                new entity under paragraph (1)(C)(i), the 
                Administrator shall consider, to the extent 
                practicable, the criteria set forth in 
                subparagraph (A).
          (6) Ensuring efficiency improvements.--When making 
        greenhouse gas calculations, the Administrator shall--
                  (A) limit the average direct greenhouse gas 
                emissions per unit of output, calculated under 
                paragraph (4), for any eligible industrial 
                sector to an amount that is not greater than it 
                was in any previous calculation under this 
                subsection;
                  (B) limit the electricity emissions intensity 
                factor, calculated under paragraph (3)(B) and 
                resulting from a change in electricity supply, 
                for any entity to an amount that is not greater 
                than it was during any previous year; and
                  (C) limit the electricity efficiency factor, 
                calculated under paragraph (3)(C), for any 
                eligible industrial sector to an amount that is 
                not greater than it was in any previous 
                calculation under this subsection.
          (7) Data sources.--For the purposes of this 
        subsection--
                  (A) the Administrator shall use data from the 
                greenhouse gas registry established under 
                section 713, where that data is available; and
                  (B) each owner or operator of an entity in an 
                eligible industrial sector and each department, 
                agency, and instrumentality of the United 
                States shall provide the Administrator with 
                such information as the Administrator finds 
                necessary to determine the direct carbon factor 
                and the indirect carbon factor for each entity 
                subject to this section.
  (c) Total Maximum Distribution.--Notwithstanding subsections 
(a) and (b), the Administrator shall not distribute more 
allowances for any vintage year pursuant to this section than 
are allocated for use under this part pursuant to section 765 
for that vintage year. For any vintage year for which the total 
emission allowance rebates calculated pursuant to this section 
exceed the number of allowances allocated pursuant to section 
765, the Administrator shall reduce each entity's distribution 
on a pro rata basis so that the total distribution under this 
section equals the number of allowances allocated under section 
765.
  (d) Iron and Steel Sector.--For purposes of this section, the 
Administrator shall consider as in different industrial 
sectors--
          (1) entities using integrated iron and steelmaking 
        technologies (including coke ovens, blast furnaces, and 
        other iron-making technologies); and
          (2) entities using electric arc furnace technologies.
  (e) Metal, Soda Ash, or Phosphate Production Classified Under 
More Than One Naics Code.--For purposes of this section, the 
Administrator shall not aggregate data for the beneficiation or 
other processing (including agglomeration) of metal ores, soda 
ash, or phosphate with subsequent steps in the process of 
metal, soda ash, or phosphate manufacturing. The Administrator 
shall consider the beneficiation or other processing (including 
agglomeration) of metal ores, soda ash, or phosphate to be in 
separate industrial sectors from the metal, soda ash, or 
phosphate manufacturing sectors. Industrial sectors that 
beneficiate or otherwise process (including agglomeration) 
metal ores, soda ash, or phosphate shall not receive emission 
allowance rebates under this section related to the activity of 
extracting metal ores, soda ash, or phosphate.
  (f) Combined Heat and Power.--For purposes of this section, 
and to achieve the purpose set forth in section 761(4),(the 
Administrator may consider entities to be in different 
industrial sectors or otherwise take into account the 
differences among entities in the same industrial sector, based 
upon the extent to which such entities use combined heat and 
power technologies.

SEC. 765. INTERNATIONAL TRADE.

  It is the sense of the Senate that this Act will contain a 
trade title that will include a border measure that is 
consistent with our international obligations and designed to 
work in conjunction with provisions that allocate allowances to 
energy-intensive and trade-exposed industries.

                   PART G--DISPOSITION OF ALLOWANCES

SEC. 771. ALLOCATION OF EMISSION ALLOWANCES.

  (a) Allocation.--Subject to subsection (d), of the total 
quantity of emission allowances established for each vintage 
year under section 721(a), the Administrator shall allocate 
emission allowances for the purposes and for the vintage years 
and corresponding percentages specified as follows:
          (1) For the program for electricity consumers 
        pursuant to section 772, as described in the following 
        tables:
                  (A) For distribution to electricity consumers 
                in accordance with subsections (b), (c), and 
                (d) of section 772, the percentages specified 
                in the following table:

                         Electricity consumers
Vintage Year                             Percentage of allowances
  2012.................................  43.75
  2013.................................  43.75
  2014.................................  38.89
  2015.................................  38.89
  2016.................................  35.00
  2017.................................  35.00
  2018.................................  35.00
  2019.................................  35.00
  2020.................................  35.00
  2021.................................  35.00
  2022.................................  35.00
  2023.................................  35.00
  2024.................................  35.00
  2025.................................  35.00
  2026.................................  28.00
  2027.................................  21.00
  2028.................................  14.00
  2029.................................  7.00
                  (B) For distribution to small LDCs under 
                section 772(e), the percentages specified in 
                the following table:

                               Small LDCs
Vintage Year                             Percentage of allowances
  2012.................................  0.50
  2013.................................  0.50
  2014.................................  0.50
  2015.................................  0.50
  2016.................................  0.50
  2017.................................  0.50
  2018.................................  0.50
  2019.................................  0.50
  2020.................................  0.50
  2021.................................  0.50
  2022.................................  0.50
  2023.................................  0.50
  2024.................................  0.50
  2025.................................  0.50
  2026.................................  0.40
  2027.................................  0.30
  2028.................................  0.20
  2029.................................  0.10
          (2) For the program for natural gas consumers 
        pursuant to section 773, as described in the following 
        table:

                          Natural gas consumers
Vintage Year                             Percentage of allowances
  2012.................................  0.00
  2013.................................  0.00
  2014.................................  0.00
  2015.................................  0.00
  2016.................................  9.00
  2017.................................  9.00
  2018.................................  9.00
  2019.................................  9.00
  2020.................................  9.00
  2021.................................  9.00
  2022.................................  9.00
  2023.................................  9.00
  2024.................................  9.00
  2025.................................  9.00
  2026.................................  7.20
  2027.................................  5.40
  2028.................................  3.60
  2029.................................  1.80
          (3) For the program for home heating oil and propane 
        consumers pursuant to section 774, as described in the 
        following table:

                 Home heating oil and propane consumers
Vintage Year                             Percentage of allowances
  2012.................................  1.88
  2013.................................  1.88
  2014.................................  1.67
  2015.................................  1.67
  2016.................................  1.50
  2017.................................  1.50
  2018.................................  1.50
  2019.................................  1.50
  2020.................................  1.50
  2021.................................  1.50
  2022.................................  1.50
  2023.................................  1.50
  2024.................................  1.50
  2025.................................  1.50
  2026.................................  1.20
  2027.................................  0.90
  2028.................................  0.60
  2029.................................  0.30
          (4) For the program for domestic fuel production, 
        including petroleum refiners and small business 
        refiners, under section 775, for each of vintage years 
        2014 through 2026, for allocation and distribution in 
        accordance with section 775--
                  (A) 1.25 percent of the emission allowances 
                established for each vintage year under section 
                721(a) to domestic petroleum refineries that 
                are covered entities described in section 
                700(13)(F)(viii); and
                  (B) an additional 1.0 percent of the emission 
                allowances established for each vintage year 
                under section 721(a) to small business refiners 
                that are covered entities described in section 
                700(13)(F)(viii).
          (5) In addition to emission allowances reserved under 
        subsection (d)(5), subject to subparagraph (G), for the 
        program to ensure real reductions in industrial 
        emissions under part F, as follows:
                  (A) For each of vintage years 2012 and 2013, 
                up to 4.0 percent of the emission allowances 
                established for each year under section 721(a).
                  (B) For vintage year 2014, up to 15 percent 
                of the emission allowances established for that 
                year under section 721(a).
                  (C) For vintage year 2015, up to the product 
                of--
                          (i) the quantity specified in 
                        subparagraph (B); multiplied by
                          (ii) the quantity of emission 
                        allowances established for 2015 under 
                        section 721(a) divided by the quantity 
                        of emission allowances established for 
                        2014 under section 721(a).
                  (D) For vintage year 2016, up to the product 
                obtained by multiplying--
                          (i) the quantity specified in 
                        subparagraph (C); and
                          (ii) the quantity of emission 
                        allowances established for 2015 under 
                        section 721(a) divided by the quantity 
                        of emission allowances established for 
                        2014 under section 721(a).
                  (E) For vintage years 2017 through 2025, up 
                to the product obtained by multiplying--
                          (i) the quantity specified in 
                        subparagraph (D); and
                          (ii) the quantity of emission 
                        allowances established for that year 
                        under section 721(a) divided by the 
                        quantity of emission allowances 
                        established for 2016 under section 
                        721(a).
                  (F) For vintage years 2026 through 2050, up 
                to the product of the quantity specified in 
                subparagraph (D)--
                          (i) multiplied by the quantity of 
                        emission allowances established for the 
                        applicable year during 2026 through 
                        2050 under section 721(a) divided by 
                        the quantity of emission allowances 
                        established for 2016 under section 
                        721(a); and
                          (ii) multiplied by a factor that 
                        shall equal 90 percent for 2026 and 
                        decline 10 percent for each year 
                        thereafter until reaching 0.
                  (G) If the Administrator has not distributed 
                all of the allowances allocated pursuant to 
                this paragraph for a given vintage year by the 
                end of that year, any emission allowances 
                allocated to entities in eligible industrial 
                sectors pursuant to this paragraph that have 
                not been so distributed shall, in accordance 
                with subsection (e), be exchanged for 
                allowances from the following vintage year and 
                treated as part of the allocation to such 
                entities for that later vintage year.
          (6)(A) Subject to subparagraph (B), for the program 
        for commercial deployment of carbon capture and 
        sequestration technologies under section 780, as 
        described in the following table:

        Deployment of carbon capture and sequestration technology
Vintage Year                             Percentage of allowances
  2012.................................  0.00
  2013.................................  0.00
  2014.................................  1.75
  2015.................................  1.75
  2016.................................  1.75
  2017.................................  1.75
  2018.................................  4.75
  2019.................................  4.75
  Each of vintage years 2020 through     5.00
   2050.
          (B) If the Administrator has not distributed all of 
        the allowances allocated pursuant to this paragraph for 
        a given vintage year by the end of that year, all such 
        undistributed emission allowances shall, in accordance 
        with subsection (e), be exchanged for allowances from 
        the following vintage year and treated as part of the 
        allocation for the deployment of carbon capture and 
        sequestration technology under this subsection for that 
        later vintage year.
          (7) For the program for early action recognition 
        pursuant to section 782, 2.0 percent of the emission 
        allowances for each of vintage years 2012 and 2013.
          (8) For the program for investment in clean vehicle 
        technology under section 201 of division B of the Clean 
        Energy Jobs and American Power Act--
                  (A) for each of vintage years 2012 through 
                2017, 2.4 percent of the emission allowances; 
                and
                  (B) for each of vintage years 2018 through 
                2025, 0.8 percent of the emission allowances.
          (9)(A) In addition to the emission allowances 
        reserved under subsection (d)(6), subject to 
        subparagraph (B), for the program for State and local 
        investment in energy efficiency and renewable energy 
        under section 202 of division B of the Clean Energy 
        Jobs and American Power Act, as described in the 
        following table:

          Investment in energy efficiency and renewable energy
Vintage Year                             Percentage of allowances
  2012.................................  10.35
  2013.................................  10.35
  2014.................................  8.55
  2015.................................  8.55
  2016.................................  5.85
  2017.................................  6.12
  2018.................................  5.22
  2019.................................  5.22
  2020.................................  4.95
  2021.................................  4.95
  2022.................................  0.90
  2023.................................  0.90
  2024.................................  0.90
  2025.................................  0.90
  Each of vintage years 2026 through     4.05
   2050.
          (B) At the time at which allowances are distributed 
        under subparagraph (A) for each of vintage years 2022 
        through 2025, 3.2 percent of emission allowances 
        established under section 721(a) for the vintage year 
        that is 4 years after that vintage year shall also be 
        distributed (which shall be in addition to the emission 
        allowances distributed under subparagraph (A) for 
        vintage years 2026 through 2050.
          (10) For the program for energy efficiency in 
        building codes under section 163 of division A, and 
        section 203 of division B, of the Clean Energy Jobs and 
        American Power Act, 0.50 percent of the emission 
        allowances for each of vintage years 2012 through 2050.
          (11) For the program for Energy Innovation Hubs 
        pursuant to section 204 of division B of the Clean 
        Energy Jobs and American Power Act--
                  (A) for each of vintage years 2012 through 
                2015, 0.75 percent of the emission allowances; 
                and
                  (B) for each of vintage years 2016 through 
                2050, 0.45 percent of the emission allowances.
          (12) For the program for ARPA-E research pursuant to 
        section 205 of division B of the Clean Energy Jobs and 
        American Power Act--
                  (A) for each of vintage years 2012 and 2013, 
                3.25 percent of the emission allowances; and
                  (B) for each of vintage years 2014 through 
                2050, 1.25 percent of the emission allowances.
          (13) For the International Clean Energy Deployment 
        Program under section 323 of division A, and section 
        206 of division B, of the Clean Energy Jobs and 
        American Power Act--
                  (A) for each of vintage years 2012 through 
                2021, 1.0 percent of the emission allowances;
                  (B) for each of vintage years 2022 through 
                2026, 2.0 percent of the emission allowances; 
                and
                  (C) for each of vintage years 2027 through 
                2050, 3.0 percent of the emission allowances.
          (14) In addition to the emission allowances reserved 
        under subsection (d)(8), for the international climate 
        change adaptation and global security program under 
        section 324 of division A, and section 207 of division 
        B, of the Clean Energy Jobs and American Power Act--
                  (A) for each of vintage years 2012 through 
                2021, 1.0 percent of the emission allowances;
                  (B) for each of vintage years 2022 through 
                2026, 2.0 percent of the emission allowances; 
                and
                  (C) for each of vintage years 2027 through 
                2050, 5.0 percent of the emission allowances.
          (15) For State programs for greenhouse gas reduction 
        and climate adaptation pursuant to section 210(d) of 
        division B of the Clean Energy Jobs and American Power 
        Act, as described in the following table:

       State programs for greenhouse gas reduction and adaptation
Vintage Year                             Percentage of allowances
  2012.................................  1.34
  2013.................................  1.34
  2014.................................  0.50
  2015.................................  0.50
  2016.................................  0.50
  2017.................................  0.50
  2018.................................  0.50
  2019.................................  0.50
  2020.................................  0.50
  2021.................................  0.50
  2022.................................  1.06
  2023.................................  1.06
  2024.................................  1.06
  2025.................................  1.06
  2026.................................  1.06
  Each of vintage years 2027 through     2.18
   2050.
          (16) For State programs for natural resource 
        adaptation activities under the program for climate 
        change safeguards for natural resources conservation 
        under section 370(a)(1) of division A, and section 216 
        of division B, of the Clean Energy Jobs and American 
        Power Act, as described in the following table:

             State programs for natural resource adaptation
Vintage Year                             Percentage of allowances
  2012.................................  0.39
  2013.................................  0.39
  2014.................................  0.39
  2015.................................  0.39
  2016.................................  0.39
  2017.................................  0.39
  2018.................................  0.39
  2019.................................  0.39
  2020.................................  0.39
  2021.................................  0.39
  2022.................................  0.77
  2023.................................  0.77
  2024.................................  0.77
  2025.................................  0.77
  2026.................................  0.77
  Each of vintage years 2027 through     1.54
   2050.
  (b) Auctions.--Subject to subsection (d), of the total 
quantity of emission allowances established for each calendar 
year under section 721(a), the Administrator shall auction, 
pursuant to section 778, emission allowances for the purposes 
and for the vintage or calendar years and corresponding 
percentages specified as follows:
          (1) Emission allowances reserved under subsection 
        (d)(9) for the Market Stability Reserve Fund under 
        section 726.
          (2) For the program for climate change consumer 
        refunds and low- and moderate-income consumers pursuant 
        to section 776--
                  (A) emission allowances for consumer rebates 
                under section 776(a), pursuant to subsection 
                (e)(2); and
                  (B) emission allowances for energy refunds 
                under section 776(b), as follows:
                          (i) For each of calendar years 2012 
                        through 2029, 15.00 percent of the 
                        emission allowances.
                          (ii) For each of calendar years 2030 
                        through 2050, 18.50 percent of the 
                        emission allowances.
                          (iii) For calendar year 2051 and each 
                        calendar year thereafter, 15.00 percent 
                        of the emission allowances.
          (3) For the program for investment in clean vehicle 
        technology under section 201 of division B of the Clean 
        Energy Jobs and American Power Act--
                  (A) for each of calendar years 2012 through 
                2017, 0.6 percent of the emission allowances; 
                and
                  (B) for each of calendar years 2018 through 
                2025, 0.2 percent of the emission allowances.
          (4) For the program for energy efficiency and 
        renewable energy worker training under section 208 of 
        division B of the Clean Energy Jobs and American Power 
        Act--
                  (A) for each of calendar years 2012 and 2013, 
                1.0 percent of the emission allowances; and
                  (B) for each of calendar years 2014 and 2015, 
                0.05 percent of the emission allowances.
          (5) For the program for worker transition under part 
        2 of subtitle A of title III of division A, and section 
        209 of division B, of the Clean Energy Jobs and 
        American Power Act--
                  (A) for each of calendar years 2012 through 
                2021, 0.5 percent of the emission allowances; 
                and
                  (B) for each of calendar years 2022 through 
                2050, 1.0 percent of the emission allowances.
          (6) For the program for public health and climate 
        change under subpart B of part 1 of subtitle C of title 
        III of division A, and section 211 of division B, of 
        the Clean Energy Jobs and American Power Act, 0.10 
        percent of the emission allowances for each of calendar 
        years 2012 through 2050.
          (7) For the Natural Resources Climate Change 
        Adaptation Account under the program for climate change 
        safeguards for natural resources conservation under 
        section 370(a)(2) of division A, and section 212 of 
        division B, of the Clean Energy Jobs and American Power 
        Act, as described in the following table:

           Natural Resources Climate Change Adaptation Account
Calendar Year                            Percentage of allowances
  2012.................................  0.62
  2013.................................  0.62
  2014.................................  0.62
  2015.................................  0.62
  2016.................................  0.62
  2017.................................  0.62
  2018.................................  0.62
  2019.................................  0.62
  2020.................................  0.62
  2021.................................  0.62
  2022.................................  1.23
  2023.................................  1.23
  2024.................................  1.23
  2025.................................  1.23
  2026.................................  1.23
  Each of calendar years 2027 through    2.46
   2050.
          (8) For nuclear worker training under section 132 of 
        division A, and section 213 of division B, of the Clean 
        Energy Jobs and American Power Act--
                  (A) for each of calendar years 2012 and 2013, 
                0.5 percent of the emission allowances; and
                  (B) for each of calendar years 2014 and 2015, 
                0.05 percent of the emission allowances.
          (9) In addition to the emission allowances reserved 
        under subsection (d)(3), for the supplemental 
        agriculture, abandoned mine land, renewable energy, and 
        forestry greenhouse gas reduction and renewable energy 
        program under section 155 of division A, and section 
        214 of division B, of the Clean Energy Jobs and 
        American Power Act--
                  (A) for each of calendar years 2012 and 2013, 
                1.0 percent of the emission allowances; and
                  (B) for each of calendar years 2014 through 
                2016, 0.28 percent of the emission allowances.
          (10) Transportation greenhouse gas reduction.--In 
        addition to the emission allowances reserved under 
        subsection (d)(4), for the transportation greenhouse 
        gas reduction program under sections 831 and 832 of 
        this Act, and 215 of division B, of the Clean Energy 
        Jobs and American Power Act, as described in the 
        following table:

                 Transportation greenhouse gas reduction
Calendar Year                            Percentage of allowances
  2012.................................  2.21
  2013.................................  2.21
  2014.................................  1.35
  2015.................................  1.35
  2016.................................  1.05
  2017.................................  1.08
  2018.................................  0.98
  2019.................................  0.98
  2020.................................  0.95
  2021.................................  0.95
  2022.................................  0.94
  2023.................................  0.94
  2024.................................  0.94
  2025.................................  0.94
  2026.................................  1.64
  2027.................................  2.52
  2028.................................  2.52
  2029.................................  2.52
  Each of calendar years 2030 through    2.17
   2050.
  (c) Supplemental Reductions.--
          (1) In general.--Subject to subsection (d) and 
        paragraphs (2) and (3), the Administrator shall 
        allocate allowances for each vintage year to achieve 
        supplemental reductions pursuant to section 753, as 
        follows:
                  (A) For each of calendar years 2012 through 
                2025, 5.0 percent of the emission allowances.
                  (B) For each of calendar years 2026 through 
                2030, 3.0 percent of the emission allowances.
                  (C) For each of calendar years 2031 through 
                2050, 2.0 percent of the emission allowances.
          (2) Adjustment.--The Administrator shall modify the 
        allowances allocated under paragraph (1) as necessary 
        to ensure the achievement of the annual supplemental 
        emissions reduction objective for 2020 and the 
        cumulative reduction objective through 2025 set forth 
        in section 753(b)(1).
          (3) Carryover.--If the Administrator has not 
        distributed all of the allowances allocated pursuant to 
        this subsection for a given vintage year by the end of 
        that year, all such undistributed emission allowances 
        shall, in accordance with subsection (e), be exchanged 
        for allowances from the following vintage year and 
        treated as part of the allocation for supplemental 
        reductions under this section for that later vintage 
        year.
  (d) Initial Reservation of Allowances.--
          (1) In general.--Before allocating emission 
        allowances under subsections (a) through (c) for each 
        calendar year, the Administrator shall reserve from the 
        total quantity of emission allowances established for 
        the calendar year under section 721(a) the percentages 
        of allowances specified in paragraphs (2) through (9), 
        for use for the purposes described in those paragraphs.
          (2) Deficit reduction.--For auction pursuant to 
        section 778 to ensure that this title does not 
        contribute to the deficit for a calendar year, with 
        proceeds of the auction to be deposited immediately 
        upon receipt in the Deficit Reduction Fund established 
        by section 783, the Administrator shall reserve--
                  (A) for each of calendar years 2012 through 
                2029, 10 percent of the emission allowances;
                  (B) for each of calendar years 2030 through 
                2039, 22 percent of the emission allowances; 
                and
                  (C) for each of calendar years 2040 through 
                2050, 25 percent of the emission allowances.
          (3) Supplemental agriculture, abandoned mine land, 
        renewable energy, and forestry.--For the supplemental 
        agriculture, abandoned mine land, renewable energy, and 
        forestry greenhouse gas reduction and renewable energy 
        program under section 155 of division A, and section 
        214 of division B, of the Clean Energy Jobs and 
        American Power Act, the Administrator shall reserve 1.0 
        percent of the emission allowances for each of calendar 
        years 2012 through 2050.
          (4) Transportation greenhouse gas reduction.--For the 
        transportation greenhouse gas reduction program under 
        sections 831 and 832 of this Act, and section 215 of 
        division B of the Clean Energy Jobs and American Power 
        Act, the Administrator shall reserve for each of 
        calendar years 2012 through 2050, 1.0 percent of the 
        emission allowances.
          (5) Industrial emissions.--For the program to ensure 
        real reductions in industrial emissions under part F, 
        the Administrator shall reserve 0.50 percent of the 
        emission allowances for each of calendar years 2012 
        through 2050.
          (6) State and local investment in energy efficiency 
        and renewable energy.--For the program for State and 
        local investment in energy efficiency and renewable 
        energy under section 202 of division B of the Clean 
        Energy Jobs and American Power Act, the Administrator 
        shall reserve 0.50 percent of the emission allowances 
        for each of calendar years 2012 through 2050.
          (7) Electricity consumers; small ldcs.--For 
        distribution to small LDCs under the program for 
        electricity consumers under section 772(e), the 
        Administrator shall reserve--
                  (A) for each of calendar years 2012 through 
                2025, 0.50 percent of the emission allowances;
                  (B) for calendar year 2026, 0.40 percent of 
                the emission allowances;
                  (C) for calendar year 2027, 0.30 percent of 
                the emission allowances;
                  (D) for calendar year 2028, 0.20 percent of 
                the emission allowances; and
                  (E) for calendar year 2029, 0.10 percent of 
                the emission allowances.
          (8) International climate change adaptation and 
        global security program.--For the international climate 
        change adaptation and global security program under 
        section 324 of division A, and section 207 of division 
        B, of the Clean Energy Jobs and American Power Act, the 
        Administrator shall reserve 0.25 percent of the 
        emission allowances for each of calendar years 2012 
        through 2026.
          (9) Market stability reserve fund.--For the Market 
        Stability Reserve Fund under section 726, the 
        Administrator shall reserve--
                  (A) for each of calendar years 2012 through 
                2019, 2.0 percent of the emission allowances; 
                and
                  (B) for each of calendar years 2020 through 
                2050, 3.0 percent of the emission allowances.
  (e) Treatment of Carryover Allowances.--
          (1) In general.--If there are undistributed 
        allowances from a vintage year for eligible industrial 
        sectors pursuant to subsection (a)(5), deployment of 
        carbon capture and sequestration technology pursuant to 
        subsection (a)(6), or supplemental reductions pursuant 
        to subsection (c), the Administrator shall--
                  (A) use the undistributed allowances to 
                increase for the same vintage year--
                          (i) the allocation of allowances to 
                        be auctioned, with the proceeds to be 
                        deposited immediately upon receipt in 
                        the Deficit Reduction Fund established 
                        by section 783;
                          (ii) the allocation of allowances for 
                        the program for climate change consumer 
                        refunds and low- and moderate-income 
                        consumers pursuant to subsection 
                        (b)(2); or
                          (iii) a combination the purposes 
                        described in clauses (i) and (ii); and
                  (B) except as provided in paragraph (2)--
                          (i) decrease by the same quantity for 
                        the following vintage year the 
                        allocation for the purpose for which 
                        the allocation was increased pursuant 
                        to subparagraph (A); and
                          (ii) increase by the same quantity 
                        for the following vintage year the 
                        allocation for the purpose for which 
                        the undistributed allowances were 
                        originally allocated.
          (2) Excess undistributed allowances.--
                  (A) In general.--For each vintage year for 
                which this subsection applies, the 
                Administrator shall determine whether--
                          (i) the total quantity of 
                        undistributed allowances for that 
                        vintage year that were allocated 
                        pursuant to paragraphs (5)(G) and 
                        (6)(B) of subsection (a), and 
                        subsection (c); exceeds
                          (ii) the total quantity of allowances 
                        allocated pursuant to subsections 
                        (b)(2) and (d)(2) for the following 
                        vintage year, decreased by the quantity 
                        of allowances for that following 
                        vintage year set aside for the reserve 
                        established by section 778(f).
                  (B) Determination of exceedance.--If the 
                Administrator determines under subparagraph (A) 
                that the quantity described in subparagraph 
                (A)(i) exceeds the quantity described in 
                subparagraph (A)(ii)--
                          (i) paragraph (1)(B)(ii) shall not 
                        apply; and
                          (ii) for each purpose described in 
                        paragraphs (5)(G) and (6)(B) of 
                        subsection (a), and subsection (c), for 
                        which undistributed allowances for a 
                        given vintage year were allocated, the 
                        Administrator shall increase the 
                        allocation for the following vintage 
                        year by the quantity that equals the 
                        product obtained by multiplying--
                          (iii) the number of undistributed 
                        allowances for that purpose; and
                          (iv) the quantity described in 
                        subparagraph (A)(ii) divided by the 
                        quantity described in subparagraph 
                        (A)(i).
  (f) Remaining Allowances.--After making the allocations of 
emission allowances under subsections (a) through (e) for a 
calendar year, the Administrator shall allocate any emission 
allowances remaining from the total quantity of emission 
allowances established for the calendar year under section 
721(a)--
          (1) for each of calendar years 2012 through 2025, for 
        auction in accordance with section 778 and deposit in 
        the Deficit Reduction Fund established by section 783; 
        and
          (2) for each of calendar years 2026 through 2050, for 
        the program for climate change consumer refunds and 
        low- and moderate-income consumers pursuant to section 
        776.

SEC. 772. ELECTRICITY CONSUMERS.

  (a) Definitions.--In this section:
          (1) CHP savings.--The term `CHP savings' means--
                  (A) CHP system savings from a combined heat 
                and power system that commences operation after 
                the date of enactment of this section; and
                  (B) the increase in CHP system savings from, 
                at any time after the date of the enactment of 
                this section, upgrading, replacing, expanding, 
                or increasing the utilization of a combined 
                heat and power system that commenced operation 
                on or before the date of enactment of this 
                section.
          (2) CHP system savings.--The term `CHP system 
        savings' means the increment of electric output of a 
        combined heat and power system that is attributable to 
        the higher efficiency of the combined system (as 
        compared to the efficiency of separate production of 
        the electric and thermal outputs).
          (3) Coal-fueled unit.--The term `coal-fueled unit' 
        means a utility unit that derives at least 85 percent 
        of its heat input from coal, petroleum coke, or any 
        combination of those 2 fuels.
          (4) Cost-effective.--The term `cost-effective', with 
        respect to an energy efficiency program, means that the 
        program meets the total resource cost test, which 
        requires that the net present value of economic 
        benefits over the life of the program, including 
        avoided supply and delivery costs and deferred or 
        avoided investments, is greater than the net present 
        value of the economic costs over the life of the 
        program, including program costs and incremental costs 
        borne by the energy consumer.
          (5) Electricity local distribution company.--The term 
        `electricity local distribution company' means an 
        electric utility--
                  (A) that has a legal, regulatory, or 
                contractual obligation to deliver electricity 
                directly to retail consumers in the United 
                States, regardless of whether that entity or 
                another entity sells the electricity as a 
                commodity to those retail consumers; and
                  (B) the retail rates of which, except in the 
                case of an electric cooperative, are regulated 
                or set by--
                          (i) a State regulatory authority;
                          (ii) a State or political subdivision 
                        thereof (or an agency or 
                        instrumentality of, or corporation 
                        wholly owned by, either of the 
                        foregoing); or
                          (iii) an Indian tribe pursuant to 
                        tribal law.
          (6) Electricity savings.--The term `electricity 
        savings' means reductions in electricity consumption, 
        relative to business-as-usual projections, achieved 
        through measures implemented after the date of 
        enactment of this section, limited to--
                  (A) customer facility savings of electricity, 
                adjusted to reflect any associated increase in 
                fuel consumption at the facility;
                  (B) reductions in distribution system losses 
                of electricity achieved by a retail electricity 
                distributor, as compared to losses attributable 
                to new or replacement distribution system 
                equipment of average efficiency;
                  (C) CHP savings; and
                  (D) fuel cell savings.
          (7) Fuel cell.--The term `fuel cell' means a device 
        that directly converts the chemical energy of a fuel 
        and an oxidant into electricity by electrochemical 
        processes occurring at separate electrodes in the 
        device.
          (8) Fuel cell savings.--The term `fuel cell savings' 
        means the electricity saved by a fuel cell that is 
        installed after the date of enactment of this section, 
        or by upgrading a fuel cell that commenced operation on 
        or before the date of enactment of this section, as a 
        result of the greater efficiency with which the fuel 
        cell transforms fuel into electricity as compared with 
        sources of electricity delivered through the grid, 
        provided that--
                  (A) the fuel cell meets such requirements 
                relating to efficiency and other operating 
                characteristics as the Federal Energy 
                Regulatory Commission may promulgate by 
                regulation; and
                  (B) the net sales of electricity from the 
                fuel cell to customers not consuming the 
                thermal output from the fuel cell, if any, do 
                not exceed 50 percent of the total annual 
                electricity generation by the fuel cell.
          (9) Independent power production facility.--The term 
        `independent power production facility' means a 
        facility--
                  (A) that is used for the generation of 
                electric energy, at least 80 percent of which 
                is sold at wholesale; and
                  (B) the sales of the output of which are not 
                subject to retail rate regulation or setting of 
                retail rates by--
                          (i) a State regulatory authority;
                          (ii) a State or political subdivision 
                        thereof (or an agency or 
                        instrumentality of, or corporation 
                        wholly owned by, either of the 
                        foregoing);
                          (iii) an electric cooperative; or
                          (iv) an Indian tribe pursuant to 
                        tribal law.
          (10) Long-term contract generator.--
                  (A) In general.--The term `long-term contract 
                generator' means a qualifying small power 
                production facility, a qualifying cogeneration 
                facility ), an independent power production 
                facility, or a facility for the production of 
                electric energy for sale to others that is 
                owned and operated by an electric cooperative 
                that is--
                          (i) a covered entity; and
                          (ii) as of the date of enactment of 
                        this title--
                                  (I) a facility with 1 or more 
                                sales or tolling agreements 
                                executed before March 1, 2007, 
                                that govern the facility's 
                                electricity sales and provide 
                                for sales at a price (whether a 
                                fixed price or a price formula) 
                                for electricity that does not 
                                allow for recovery of the costs 
                                of compliance with the 
                                limitation on greenhouse gas 
                                emissions under this title, 
                                provided that such agreements 
                                are not between entities that 
                                were affiliates of one another 
                                at the time at which the 
                                agreements were entered into; 
                                or
                                  (II) a facility consisting of 
                                1 or more cogeneration units 
                                that makes useful thermal 
                                energy available to an 
                                industrial or commercial 
                                process with 1 or more sales 
                                agreements executed before 
                                March 1, 2007, that govern the 
                                facility's useful thermal 
                                energy sales and provide for 
                                sales at a price (whether a 
                                fixed price or price formula) 
                                for useful thermal energy that 
                                does not allow for recovery of 
                                the costs of compliance with 
                                the limitation on greenhouse 
                                gas emissions under this title, 
                                provided that such agreements 
                                are not between entities that 
                                were affiliates of one another 
                                at the time at which the 
                                agreements were entered into.
                  (B) Affiliate.--In this paragraph, the term 
                `affiliate', when used in relation to a covered 
                entity, means another entity that directly or 
                indirectly owned or controlled, was owned or 
                controlled by, or that had 50 percent or more 
                of its equity interests under common ownership 
                or control with, the covered entity.
          (11) Merchant coal unit.--The term `merchant coal 
        unit' means a coal-fueled unit that--
                  (A) is or is part of a covered entity;
                  (B) is not owned by a Federal, State, or 
                regional agency or power authority; and
                  (C) generates electricity solely for sale to 
                others, provided that all or a portion of such 
                sales are made by a separate legal entity 
                that--
                          (i) has a full or partial ownership 
                        or leasehold interest in the unit, as 
                        certified in accordance with such 
                        requirements as the Administrator shall 
                        prescribe; and
                          (ii) is not subject to retail rate 
                        regulation or setting of retail rates 
                        by--
                                  (I) a State regulatory 
                                authority;
                                  (II) a State or political 
                                subdivision thereof (or an 
                                agency or instrumentality of, 
                                or corporation wholly owned by, 
                                either of the foregoing);
                                  (III) an electric 
                                cooperative; or
                                  (IV) an Indian tribe pursuant 
                                to tribal law.
          (12) Merchant coal unit sales.--The term `merchant 
        coal unit sales' means sales to others of electricity 
        generated by a merchant coal unit that are made by the 
        owner or leaseholder described in paragraph (11)(C).
          (13) New coal-fueled unit.--The term `new coal-fueled 
        unit' means a coal-fueled unit that commenced operation 
        on or after January 1, 2009 and before January 1, 2013.
          (14) New merchant coal unit.--The term `new merchant 
        coal unit' means a merchant coal unit--
                  (A) that commenced operation on or after 
                January 1, 2009 and before January 1, 2013; and
                  (B) the actual, on-site construction of which 
                commenced prior to January 1, 2009.
          (15) Qualified hydropower.--The term `qualified 
        hydropower' means--
                  (A) energy produced from increased efficiency 
                achieved, or additions of capacity made, on or 
                after January 1, 1988, at a hydroelectric 
                facility that was placed in service before that 
                date and does not include additional energy 
                generated as a result of operational changes 
                not directly associated with efficiency 
                improvements or capacity additions; or
                  (B) energy produced from generating capacity 
                added to a dam on or after January 1, 1988, 
                provided that the Federal Energy Regulatory 
                Commission certifies that--
                          (i) the dam was placed in service 
                        before the date of the enactment of 
                        this section and was operated for flood 
                        control, navigation, or water supply 
                        purposes and was not producing 
                        hydroelectric power prior to the 
                        addition of such capacity;
                          (ii) the hydroelectric project 
                        installed on the dam is licensed (or is 
                        exempt from licensing) by the Federal 
                        Energy Regulatory Commission and is in 
                        compliance with the terms and 
                        conditions of the license or exemption, 
                        and with other applicable legal 
                        requirements for the protection of 
                        environmental quality, including 
                        applicable fish passage requirements; 
                        and
                          (iii) the hydroelectric project 
                        installed on the dam is operated so 
                        that the water surface elevation at any 
                        given location and time that would have 
                        occurred in the absence of the 
                        hydroelectric project is maintained, 
                        subject to any license or exemption 
                        requirements that require changes in 
                        water surface elevation for the purpose 
                        of improving the environmental quality 
                        of the affected waterway.
          (16) Qualifying small power production facility; 
        qualifying cogeneration facility.--The terms 
        `qualifying small power production facility' and 
        `qualifying cogeneration facility' have the meanings 
        given those terms in section 3(17)(C) and 3(18)(B) of 
        the Federal Power Act (16 U.S.C. 796(17)(C) and 
        796(18)(B)).
          (17) Renewable energy resource.--The term `renewable 
        energy resource' means each of the following:
                  (A) Wind energy.
                  (B) Solar energy.
                  (C) Geothermal energy.
                  (D) Renewable biomass.
                  (E) Biogas derived exclusively from renewable 
                biomass.
                  (F) Biofuels derived exclusively from 
                renewable biomass.
                  (G) Qualified hydropower.
                  (H) Marine and hydrokinetic renewable energy, 
                as that term is defined in section 632 of the 
                Energy Independence and Security Act of 2007 
                (42 U.S.C. 17211).
          (18) Small ldc.--The term `small LDC' means, for any 
        given year, an electricity local distribution company 
        that delivered less than 4,000,000 megawatt hours of 
        electric energy directly to retail consumers in the 
        preceding year.
          (19) State regulatory authority.--The term `State 
        regulatory authority' has the meaning given that term 
        in section 3(17) of the Public Utility Regulatory 
        Policies Act of 1978 (16 U.S.C. 2602(17)).
          (20) Useful thermal energy.--The term `useful thermal 
        energy' has the meaning given that term in section 
        371(7) of the Energy Policy and Conservation Act (42 
        U.S.C. 6341(7)).
  (b) Electricity Local Distribution Companies.--
          (1) Distribution of allowances.--The Administrator 
        shall distribute to electricity local distribution 
        companies for the benefit of retail ratepayers the 
        quantity of emission allowances allocated for the 
        following vintage year pursuant to section 
        771(a)(1)(A). Notwithstanding the preceding sentence, 
        the Administrator shall withhold from distribution 
        under this subsection a quantity of emission allowances 
        equal to the lesser of 14.3 percent of the quantity of 
        emission allowances allocated under section 771(a)(1) 
        for the relevant vintage year, or 105 percent of the 
        emission allowances for the relevant vintage year that 
        the Administrator anticipates will be distributed to 
        merchant coal units and to long-term contract 
        generators, respectively, under subsections (c) and 
        (d), on the condition that the Administrator shall be 
        authorized to distribute future vintage year allowances 
        available to long-term contract generators under 
        subsection (d) in the case of a shortfall of allowances 
        in any vintage year, subject to section 772(d)(2). If 
        not required by subsections (c) and (d) to distribute 
        all of these reserved allowances, the Administrator 
        shall distribute any remaining emission allowances to 
        electricity local distribution companies in accordance 
        with this subsection.
          (2) Distribution based on emissions.--
                  (A) In general.--For each vintage year, 50 
                percent of the emission allowances available 
                for distribution under paragraph (1), after 
                reserving allowances for distribution under 
                subsections (c) and (d), shall be distributed 
                by the Administrator among individual 
                electricity local distribution companies 
                ratably based on the annual average carbon 
                dioxide emissions attributable to generation of 
                electricity delivered at retail by each such 
                company during the base period determined under 
                subparagraph (B).
                  (B) Base period.--
                          (i) Vintage years 2012 and 2013.--For 
                        vintage years 2012 and 2013, an 
                        electricity local distribution 
                        company's base period shall be--
                                  (I) calendar years 2006 
                                through 2008;
                                  (II) any 3 consecutive 
                                calendar years between 1999 and 
                                2008, inclusive, that such 
                                company selects, provided that 
                                the company timely informs the 
                                Administrator of such 
                                selection; or
                                  (III) calendar year 2012, in 
                                the case of a local 
                                distribution company that--
                                          (aa) is located 
                                        outside of the Pacific 
                                        Northwest (as defined 
                                        in section 3 of the 
                                        Pacific Northwest 
                                        Electric Power Planning 
                                        and Conservation Act 
                                        (16 U.S.C. 839a)), and 
                                        purchased long-term 
                                        excess Federal power 
                                        and Hungry Horse 
                                        Reservation power from 
                                        the Bonneville Power 
                                        Administration; and
                                          (bb) will no longer 
                                        have long-term excess 
                                        Federal power or Hungry 
                                        Horse Reservation power 
                                        from the Bonneville 
                                        Power Administration 
                                        after October 1, 2011.
                          (ii) Vintage years 2014 and 
                        thereafter.--For vintage years 2014 and 
                        thereafter, the base period shall be--
                                  (I) the base period selected 
                                under clause (i); or
                                  (II) calendar year 2012, in 
                                the case of--
                                          (aa) an electricity 
                                        local distribution 
                                        company that owns, co-
                                        owns, or purchases 
                                        through a power 
                                        purchase agreement 
                                        (whether directly or 
                                        through a cooperative 
                                        arrangement) a 
                                        substantial portion of 
                                        the electricity 
                                        generated by a new 
                                        coal-fueled unit, on 
                                        the condition that such 
                                        company timely informs 
                                        the Administrator of 
                                        its election to use 
                                        2012 as its base 
                                        period; or
                                          (bb) any small local 
                                        distribution company 
                                        that is located outside 
                                        of the Pacific 
                                        Northwest (as defined 
                                        in section 3 of the 
                                        Pacific Northwest 
                                        Electric Power Planning 
                                        and Conservation Act 
                                        (16 U.S.C. 839a)), that 
                                        purchased long-term 
                                        excess Federal power 
                                        and Hungry Horse 
                                        Reservation power from 
                                        the Bonneville Power 
                                        Administration, and 
                                        that will no longer 
                                        have long-term excess 
                                        Federal power or Hungry 
                                        Horse Reservation power 
                                        from the Bonneville 
                                        Power Administration 
                                        after October 1, 2011, 
                                        on the condition that 
                                        such company timely 
                                        informs the 
                                        Administrator of its 
                                        election to use 2012 as 
                                        its base period.
                  (C) Determination of emissions.--
                          (i) Determination for 1999-2008.--As 
                        part of the regulations promulgated 
                        pursuant to subsection (g), the 
                        Administrator, after consultation with 
                        the Energy Information Administration, 
                        shall determine the average amount of 
                        carbon dioxide emissions attributable 
                        to generation of electricity delivered 
                        at retail by each electricity local 
                        distribution company for each of the 
                        years 1999 through 2008, taking into 
                        account entities' electricity 
                        generation, electricity purchases, and 
                        electricity sales. In the case of any 
                        electricity local distribution company 
                        that owns, co-owns, or purchases 
                        through a power purchase agreement 
                        (whether directly or through a 
                        cooperative arrangement) a substantial 
                        portion of the electricity generated 
                        by, a coal-fueled unit that commenced 
                        operation after January 1, 2006, and 
                        before December 31, 2008, the 
                        Administrator shall adjust the 
                        emissions attributable to such 
                        company's retail deliveries in calendar 
                        years 2006 through 2008 to reflect the 
                        emissions that would have occurred if 
                        the relevant unit were in operation 
                        during the entirety of such 3-year 
                        period.
                          (ii) Adjustments for new coal-fueled 
                        units.--
                                  (I) Vintage years 2012 and 
                                2013.--For purposes of emission 
                                allowance distributions for 
                                vintage years 2012 and 2013, in 
                                the case of any electricity 
                                local distribution company that 
                                owns, co-owns, or purchases 
                                through a power purchase 
                                agreement (whether directly or 
                                through a cooperative 
                                arrangement) a substantial 
                                portion of the electricity 
                                generated by, a new coal-fueled 
                                unit, the Administrator shall 
                                adjust the emissions 
                                attributable to such company's 
                                retail deliveries in the 
                                applicable base period to 
                                reflect the emissions that 
                                would have occurred if the new 
                                coal-fueled unit were in 
                                operation during such period.
                                  (II) Vintage year 2014 and 
                                thereafter.--Not later than 
                                necessary for use in making 
                                emission allowance 
                                distributions under this 
                                subsection for vintage year 
                                2014, the Administrator shall, 
                                for any electricity local 
                                distribution company that owns, 
                                co-owns, or purchases through a 
                                power purchase agreement 
                                (whether directly or through a 
                                cooperative arrangement) a 
                                substantial portion of the 
                                electricity generated by a new 
                                coal-fueled unit and has 
                                selected calendar year 2012 as 
                                its base period pursuant to 
                                subparagraph (B)(ii)(II), 
                                determine the amount of carbon 
                                dioxide emissions attributable 
                                to generation of electricity 
                                delivered at retail by such 
                                company in calendar year 2012. 
                                If the relevant new coal-fueled 
                                unit was not yet operational by 
                                January 1, 2012, the 
                                Administrator shall adjust such 
                                determination to reflect the 
                                emissions that would have 
                                occurred if such unit were in 
                                operation for all of calendar 
                                year 2012.
                          (iii) Requirements.--Determinations 
                        under this paragraph shall be as 
                        precise as practicable, taking into 
                        account the nature of data currently 
                        available and the nature of markets and 
                        regulation in effect in various regions 
                        of the country. The following 
                        requirements shall apply to such 
                        determinations:
                                  (I) The Administrator shall 
                                determine the amount of fossil 
                                fuel-based electricity 
                                delivered at retail by each 
                                electricity local distribution 
                                company, and shall use 
                                appropriate emission factors to 
                                calculate carbon dioxide 
                                emissions associated with the 
                                generation of such electricity.
                                  (II) Where it is not 
                                practical to determine the 
                                precise fuel mix for the 
                                electricity delivered at retail 
                                by an individual electricity 
                                local distribution company, the 
                                Administrator may use the best 
                                available data, including 
                                average data on a regional 
                                basis with reference to 
                                Regional Transmission 
                                Organizations or regional 
                                entities (as that term is 
                                defined in section 215(a)(7) of 
                                the Federal Power Act (16 
                                U.S.C. 824o(a)(7)), to estimate 
                                fuel mix and emissions. 
                                Different methodologies may be 
                                applied in different regions if 
                                appropriate to obtain the most 
                                accurate estimate.
          (3) Distribution based on deliveries.--
                  (A) Initial formula.--Except as provided in 
                subparagraph (B), for each vintage year, the 
                Administrator shall distribute 50 percent of 
                the emission allowances available for 
                distribution under paragraph (1), after 
                reserving allowances for distribution under 
                subsections (c) and (d), among individual 
                electricity local distribution companies 
                ratably based on each electricity local 
                distribution company's annual average retail 
                electricity deliveries for calendar years 2006 
                through 2008, unless the owner or operator of 
                the company selects 3 other consecutive years 
                between 1999 and 2008, inclusive, and timely 
                notifies the Administrator of its selection.
                  (B) Updating.--Prior to distributing 2015 
                vintage year emission allowances under this 
                paragraph and at 3-year intervals thereafter, 
                the Administrator shall update the distribution 
                formula under this paragraph to reflect changes 
                in each electricity local distribution 
                company's service territory since the most 
                recent formula was established. For each 
                successive 3-year period, the Administrator 
                shall distribute allowances ratably among 
                individual electricity local distribution 
                companies based on the product of--
                          (i) each electricity local 
                        distribution company's average annual 
                        deliveries per customer during calendar 
                        years 2006 through 2008, or during the 
                        3 alternative consecutive years 
                        selected by such company under 
                        subparagraph (A); and
                          (ii) the number of customers of such 
                        electricity local distribution company 
                        in the most recent year in which the 
                        formula is updated under this 
                        subparagraph.
          (4) Prohibition against excess distributions.--The 
        regulations promulgated under subsection (g) shall 
        ensure that, notwithstanding paragraphs (2) and (3), no 
        electricity local distribution company shall receive a 
        greater quantity of allowances under this subsection 
        than is necessary to offset any increased electricity 
        costs to such company's retail ratepayers, including 
        increased costs attributable to purchased power costs, 
        due to enactment of this title. Any emission allowances 
        withheld from distribution to an electricity local 
        distribution company pursuant to this paragraph shall 
        be distributed among all remaining electricity local 
        distribution companies ratably based on emissions 
        pursuant to paragraph (2).
          (5) Use of allowances.--
                  (A) Ratepayer benefit.--Emission allowances 
                distributed to an electricity local 
                distribution company under this subsection 
                shall be used exclusively for the benefit of 
                retail ratepayers of such electricity local 
                distribution company and may not be used to 
                support electricity sales or deliveries to 
                entities or persons other than such ratepayers.
                  (B) Ratepayer classes.--In using emission 
                allowances distributed under this subsection 
                for the benefit of ratepayers, an electricity 
                local distribution company shall ensure that 
                ratepayer benefits are distributed--
                          (i) among ratepayer classes ratably 
                        based on electricity deliveries to each 
                        class; and
                          (ii) equitably among individual 
                        ratepayers within each ratepayer class, 
                        including entities that receive 
                        emission allowances pursuant to part F.
                  (C) Limitation.--In general, an electricity 
                local distribution company shall not use the 
                value of emission allowances distributed under 
                this subsection to provide to any ratepayer a 
                rebate that is based solely on the quantity of 
                electricity delivered to such ratepayer. To the 
                extent an electricity local distribution 
                company uses the value of emission allowances 
                distributed under this subsection to provide 
                rebates, it shall, to the maximum extent 
                practicable, provide such rebates with regard 
                to the fixed portion of ratepayers' bills or as 
                a fixed credit or rebate on electricity bills.
                  (D) Residential and industrial ratepayers.--
                Notwithstanding subparagraph (C), if compliance 
                with the requirements of this title results (or 
                would otherwise result) in an increase in 
                electricity costs for residential or industrial 
                retail ratepayers of any given electricity 
                local distribution company (including entities 
                that receive emission allowances pursuant to 
                part F), such electricity local distribution 
                company--
                          (i) shall pass through to residential 
                        retail ratepayers as a class their 
                        ratable share (based on deliveries to 
                        each ratepayer class) of the value of 
                        the emission allowances that reduce 
                        electricity cost impacts on such 
                        ratepayers; and
                          (ii) shall pass through to industrial 
                        ratepayers as a class their ratable 
                        share (based on deliveries to each 
                        ratepayer class) of the value of the 
                        emission allowances that reduce 
                        electricity cost impacts on such 
                        ratepayers. The electricity local 
                        distribution company may do so based on 
                        the quantity of electricity delivered 
                        to individual industrial retail 
                        ratepayers.
                  (E) Guidelines.--As part of the regulations 
                promulgated under subsection (g), the 
                Administrator shall, after consultation with 
                State and tribal regulatory authorities, 
                prescribe guidelines for the implementation of 
                the requirements of this paragraph. Such 
                guidelines shall include--
                          (i) requirements to ensure that 
                        residential and industrial retail 
                        ratepayers (including entities that 
                        receive emission allowances under part 
                        F) receive their ratable share of the 
                        value of the allowances distributed to 
                        each electricity local distribution 
                        company pursuant to this subsection; 
                        and
                          (ii) requirements for measurement, 
                        verification, reporting, and approval 
                        of methods used to assure the use of 
                        allowance values to benefit retail 
                        ratepayers.
          (6) Regulatory proceedings.--
                  (A) Requirement.--No electricity local 
                distribution company shall be eligible to 
                receive emission allowances under this 
                subsection or subsection (e) unless the State 
                regulatory authority with authority over such 
                company's retail rates, or the entity with 
                authority to regulate or set retail electricity 
                rates of an electricity local distribution 
                company not regulated by a State regulatory 
                authority, has--
                          (i) after public notice and an 
                        opportunity for comment, promulgated a 
                        regulation or completed a rate 
                        proceeding (or the equivalent, in the 
                        case of a ratemaking entity other than 
                        a State regulatory authority) that 
                        provides for the full implementation of 
                        the requirements of paragraph (5) of 
                        this subsection and the requirements of 
                        subsection (e); and
                          (ii) made available to the 
                        Administrator and the public a report 
                        describing, in adequate detail, the 
                        manner in which the requirements of 
                        paragraph (5) and the requirements of 
                        subsection (e) will be implemented.
                  (B) Updating.--The Administrator shall 
                require, as a condition of continued receipt of 
                emission allowances under this subsection by an 
                electricity local distribution company, that a 
                new regulation be promulgated or rate 
                proceeding be completed , after public notice 
                and an opportunity for comment, and a new 
                report be made available to the Administrator 
                and the public, pursuant to subparagraph (A), 
                not less frequently than every 5 years.
          (7) Plans and reporting.--
                  (A) Regulations.--As part of the regulations 
                promulgated under subsection (g), the 
                Administrator shall prescribe requirements 
                governing plans and reports to be submitted in 
                accordance with this paragraph.
                  (B) Plans.--Not later than April 30 of 2011 
                and every 5 years thereafter through 2026, each 
                electricity local distribution company shall 
                submit to the Administrator a plan, approved by 
                the State regulatory authority or other entity 
                charged with regulating tor setting the retail 
                rates of such company, describing such 
                company's plans for the disposition of the 
                value of emission allowances to be received 
                pursuant to this subsection and subsection (e), 
                in accordance with the requirements of this 
                subsection and subsection (e). Such plan shall 
                include a description of the manner in which 
                the company will provide to industrial retail 
                ratepayers (including entities that receive 
                emission allowances under part F) their ratable 
                share of the value of such allowances.
                  (C) Reports.--Not later than June 30, 2013, 
                and each calendar year thereafter through 2031, 
                each electricity local distribution company 
                shall submit a report to the Administrator, and 
                to the relevant State regulatory authority or 
                other entity charged with regulating or setting 
                the retail electricity rates of such company, 
                describing the disposition of the value of any 
                emission allowances received by such company in 
                the prior calendar year pursuant to this 
                subsection and subsection (e), including--
                          (i) a description of sales, transfer, 
                        exchange, or use by the company for 
                        compliance with obligations under this 
                        title, of any such emission allowances;
                          (ii) the monetary value received by 
                        the company, whether in money or in 
                        some other form, from the sale, 
                        transfer, or exchange of any such 
                        emission allowances;
                          (iii) the manner in which the 
                        company's disposition of any such 
                        emission allowances complies with the 
                        requirements of this subsection and of 
                        subsection (e), including each of the 
                        requirements of paragraph (5) of this 
                        subsection, including the requirement 
                        that industrial retail ratepayers 
                        (including entities that receive 
                        emission allowances under part F) 
                        receive their ratable share of the 
                        value of such allowances; and
                          (iv) such other information as the 
                        Administrator may require pursuant to 
                        subparagraph (A).
                  (D) Publication.--The Administrator shall 
                make available to the public all plans and 
                reports submitted under this subsection, 
                including by publishing such plans and reports 
                on the Internet.
          (8) Administrator audit reports.--
                  (A) In general.--Each year, the Administrator 
                shall audit a representative sample of 
                electricity local distribution companies to 
                ensure that emission allowances distributed 
                under this subsection have been used 
                exclusively for the benefit of retail 
                ratepayers and that such companies are 
                complying with the requirements of this 
                subsection and of subsection (e), including the 
                requirement that residential and industrial 
                retail ratepayers (including entities that 
                receive emission allowances under part F) 
                receive their ratable share of the value of 
                such allowances. The Administrator shall assess 
                the degree to which electric local distribution 
                companies have maintained a marginal electric 
                price signal while protecting consumers on 
                total cost using the value of emissions 
                allowances. In selecting companies for audit, 
                the Administrator shall take into account any 
                credible evidence of noncompliance with such 
                requirements. The Administrator shall make 
                available to the public a report describing the 
                results of each such audit, including by 
                publishing such report on the Internet.
                  (B) GAO audit report.--Not later than April 
                30, 2015, and every 3 years thereafter through 
                2026, the Comptroller General of the United 
                States, incorporating results from the 
                Administrators' audit report and other relevant 
                information including distribution company 
                reports, shall conduct an in-depth evaluation 
                and make available to the public a report on 
                the investments made pursuant to paragraph (5). 
                Said report shall be made available to the 
                State regulatory authority, or the entity with 
                authority to regulate or set retail electricity 
                rates in the case of an electricity 
                distribution company that is not regulated by a 
                State regulatory authority, and shall include a 
                description of how the distribution companies 
                in the audit meet or fail to meet the 
                requirement of paragraph (5), including for 
                investments made in cost-effective end-use 
                energy efficiency programs, the lifetime and 
                annual energy saving benefits, and capacity 
                benefits of said programs.
                  (C) Administrator cost containment report.--
                Not later than April 30, 2015 and every 3 years 
                thereafter through 2026, the Administrator 
                shall transmit a report to Congress containing 
                an evaluation of the disposition of the value 
                of emission allowances received pursuant to 
                this subsection and subsection (e) and 
                recommendations of ways to more effectively 
                direct the value of allowances to reduce costs 
                for consumers, contain the overall costs of the 
                greenhouse gas emissions reduction program, and 
                meet the pollution reduction targets of the 
                Act. The Administrator shall make available to 
                the public such report, including by publishing 
                such report on the Internet.
          (9) Enforcement.--A violation of any requirement of 
        this subsection or of subsection (e), irrespective of 
        approval by a State regulatory authority, shall be a 
        violation of this Act. Each emission allowance the 
        value of which is used in violation of the requirements 
        of this subsection or of subsection (e) shall be a 
        separate violation.
  (c) Merchant Coal Units.--
          (1) Qualifying emissions.--The qualifying emissions 
        for a merchant coal unit for a given calendar year 
        shall be the product of the number of megawatt hours of 
        merchant coal unit sales generated by such unit in such 
        calendar year and the average carbon dioxide emissions 
        per megawatt hour generated by such unit during the 
        base period under paragraph (2), provided that the 
        number of megawatt hours in a given calendar year for 
        purposes of such calculation shall be reduced in 
        proportion to the portion of such unit's carbon dioxide 
        emissions that are either--
                  (A) captured and sequestered in such calendar 
                year; or
                  (B) attributable to the combustion or 
                gasification of biomass, to the extent that the 
                owner or operator of the unit is not required 
                to hold emission allowances for such emissions.
          (2) Base period.--For purposes of this subsection, 
        the base period for a merchant coal unit shall be--
                  (A) calendar years 2006 through 2008; or
                  (B) in the case of a new merchant coal unit--
                          (i) the first full calendar year of 
                        operation of such unit, if such unit 
                        commences operation before January 1, 
                        2012;
                          (ii) calendar year 2012, if such unit 
                        commences operation on or after January 
                        1, 2012, and before October 1, 2012; or
                          (iii) calendar year 2013, if such 
                        unit commences operation on or after 
                        October 1, 2012, and before January 1, 
                        2013.
          (3) Phase-down schedule.--The Administrator shall 
        identify an annual phase-down factor, applicable to 
        distributions to merchant coal units for each of 
        vintage years 2012 through 2029, that corresponds to 
        the overall decline in the amount of emission 
        allowances allocated to the electricity sector in such 
        years pursuant to section 771(a)(1). Such factor 
        shall--
                  (A) for vintage year 2012, be equal to 1.0;
                  (B) for each of vintage years 2013 through 
                2029, correspond to the quotient of--
                          (i) the quantity of emission 
                        allowances allocated under section 
                        771(a)(1) for such vintage year; 
                        divided by
                          (ii) the quantity of emission 
                        allowances allocated under section 
                        771(a)(1) for vintage year 2012.
          (4) Distribution of emission allowances.--Not later 
        than March 1 of 2013 and each calendar year through 
        2030, the Administrator shall distribute emission 
        allowances of the preceding vintage year to the owner 
        or operator of each merchant coal unit described in 
        subsection (a)(11)(C) in an amount equal to the product 
        of--
                  (A) 0.5;
                  (B) the qualifying emissions for such 
                merchant coal unit for the preceding year, as 
                determined under paragraph (1); and
                  (C) the phase-down factor for the preceding 
                calendar year, as identified under paragraph 
                (3).
          (5) Adjustment.--
                  (A) Study.--Not later than 5 years after the 
                date of enactment of the Clean Energy Jobs and 
                American Power Act, the Administrator, in 
                consultation with the Federal Energy Regulatory 
                Commission, shall issue a study to determine 
                whether the allocation formula under paragraph 
                (3) is resulting in windfall profits to 
                merchant coal generators or substantially 
                disparate treatment of merchant coal generators 
                operating in different markets or regions.
                  (B) Regulation.--If the Administrator, in 
                consultation with the Federal Energy Regulatory 
                Commission, makes an affirmative finding of 
                windfall profits or disparate treatment under 
                subparagraph (A), the Administrator shall, not 
                later than 18 months after the completion of 
                the study described in subparagraph (A), 
                promulgate regulations providing for the 
                adjustment of the allocation formula under 
                paragraph (3) to mitigate, to the extent 
                practicable, such windfall profits, if any, and 
                such disparate treatment, if any.
          (6) Limitation on allowances.--Notwithstanding 
        paragraph (4) or (5), for each vintage year the 
        Administrator shall distribute under this subsection no 
        more than 10 percent of the total quantity of emission 
        allowances available for such vintage year for 
        distribution to the electricity sector under section 
        771(a)(1). If the quantity of emission allowances that 
        would otherwise be distributed pursuant to paragraph 
        (4) or (5) for any vintage year would exceed such 
        limit, the Administrator shall distribute 10 percent of 
        the total emission allowances available for 
        distribution under section 771(a)(1) for such vintage 
        year ratably among merchant coal generators based on 
        the applicable formula under paragraph (4) or (5).
          (7) Eligibility.--The owner or operator of a merchant 
        coal unit shall not be eligible to receive emission 
        allowances under this subsection for any vintage year 
        for which such owner or operator has elected to receive 
        emission allowances for the same unit under subsection 
        (d).
  (d) Long-term Contract Generators.--
          (1) Distribution.--Not later than March 1, 2013, and 
        each calendar year through 2030, the Administrator 
        shall distribute to the owner or operator of each long-
        term contract generator a quantity of emission 
        allowances of the preceding vintage year that is equal 
        to the sum of--
                  (A) the number of tons of carbon dioxide 
                emitted as a result of a qualifying electricity 
                sales agreement referred to in subsection 
                (a)(10)(B)(i); and
                  (B) the incremental number of tons of carbon 
                dioxide emitted solely as a result of a 
                qualifying thermal sales agreement referred to 
                in subsection (a)(10)(B)(ii), provided that in 
                no event shall the Administrator distribute 
                more than 1 emission allowance for the same ton 
                of emissions.
          (2) Limitation on allowances.--
                  (A) In general.--Notwithstanding paragraph 
                (1), for each vintage year the Administrator 
                shall distribute under this subsection no more 
                than 4.3 percent of the total quantity of 
                emission allowances available for such vintage 
                year for distribution to the electricity sector 
                under section 771(a)(1).
                  (B) Future vintage year allowances.--
                          (i) In general.--To the extent that 
                        any quantity of allowances that would 
                        otherwise be distributed pursuant to 
                        paragraph (1) would exceed 4.3 percent 
                        in any vintage year, the Administrator 
                        shall distribute future vintage year 
                        allowances reserved for long-term 
                        contract generators under this section 
                        to satisfy any such shortfall in 
                        available allowances, subject to 
                        projections by the Administrator of 
                        required allowance needs for long-term 
                        contract generators in future vintage 
                        years.
                          (ii) Maintenance of year.--Future 
                        vintage year allowances distributed 
                        pursuant to this subsection shall 
                        maintain the future vintage year 
                        assigned to those allowances.
                  (C) Shortfall.--If the quantity of emission 
                allowances that would otherwise be distributed 
                pursuant to paragraph (1) for any vintage year 
                would result in a shortfall based on a 
                consideration of available allowances under 
                this subsection over the entire allocation 
                period, as determined by the Administrator, the 
                Administrator shall distribute the emission 
                allowances available for distribution under 
                section 771(a)(1) for such vintage year ratably 
                among long-term contract generators in 
                accordance with paragraph (1).
          (3) Eligibility.--
                  (A) Facility eligibility.--The owner or 
                operator of a facility shall cease to be 
                eligible to receive emission allowances under 
                this subsection upon the earliest date on which 
                the facility no longer meets each and every 
                element of the definition of a long-term 
                contract generator under subsection (a)(10).
                  (B) Contract eligibility.--The owner or 
                operator of a facility shall cease to be 
                eligible to receive emission allowances under 
                this subsection based on an electricity or 
                thermal sales agreement referred to in 
                subsection (a)(10)(B) upon the earliest date 
                that such agreement--
                          (i) expires;
                          (ii) is terminated; or
                          (iii) is amended in any way that 
                        changes the location of the facility, 
                        the price (whether a fixed price or 
                        price formula) for electricity or 
                        thermal energy sold under such 
                        agreement, the quantity of electricity 
                        or thermal energy sold under the 
                        agreement, or the expiration or 
                        termination date of the agreement.
          (4) Demonstration of eligibility.--To be eligible to 
        receive allowance distributions under this subsection, 
        the owner or operator of a long-term contract generator 
        shall submit each of the following in writing to the 
        Administrator within 180 days after the date of 
        enactment of this title, and not later than September 
        30 of each vintage year for which such generator wishes 
        to receive emission allowances:
                  (A) A certificate of representation described 
                in section 700(15).
                  (B) An identification of each owner and each 
                operator of the facility.
                  (C) An identification of the units at the 
                facility and the location of the facility.
                  (D) A written certification by the designated 
                representative that the facility meets all the 
                requirements of the definition of a long-term 
                contract generator.
                  (E) The expiration date of each qualifying 
                electricity or thermal sales agreement referred 
                to in subsection (a)(10)(B).
                  (F) A copy of each qualifying electricity or 
                thermal sales agreement referred to in 
                subsection (a)(10)(B).
          (5) Notification.--Not later than 30 days after, in 
        accordance with paragraph (3), a facility or an 
        agreement ceases to meet the eligibility requirements 
        for distribution of emission allowances pursuant to 
        this subsection, the designated representative of such 
        facility shall notify the Administrator in writing 
        when, and on what basis, such facility or agreement 
        ceased to meet such requirements.
  (e) Small LDCs.--
          (1) Distribution.--The Administrator shall, in 
        accordance with this subsection, distribute emission 
        allowances allocated pursuant to section 771(a)(1)(B) 
        for the following vintage year. Such allowances shall 
        be distributed ratably among small LDCs based on 
        historic emissions in accordance with the same measure 
        of such emissions applied to each such small LDC for 
        the relevant vintage year under subsection (b)(2) of 
        this section.
          (2) Uses.--A small LDC receiving allowances under 
        this section shall use such allowances exclusively for 
        the following purposes:
                  (A) Cost-effective programs to achieve 
                electricity savings, provided that such savings 
                shall not be transferred or used for compliance 
                with any renewable electricity standard 
                established under the Public Utility Regulatory 
                Policies Act of 1978 (16 U.S.C. 2601 et seq.).
                  (B) Deployment of technologies to generate 
                electricity from renewable energy resources, 
                provided that any Federal renewable electricity 
                credits issued based on generation supported 
                under this section shall be submitted to the 
                Federal Energy Regulatory Commission for 
                voluntary retirement and shall not be used for 
                compliance with the Public Utility Regulatory 
                Policies Act of 1978 (16 U.S.C. 2601 et seq.).
                  (C) Assistance programs to reduce electricity 
                costs for low-income residential ratepayers of 
                such small LDC, provided that such assistance 
                is made available equitably to all residential 
                ratepayers below a certain income level, which 
                shall not be higher than 200 percent of the 
                poverty line (as that term is defined in 
                section 673(2) of the Community Services Block 
                Grant Act (42 U.S.C. 9902(2)).
                  (D) Costs of compliance associated with the 
                enactment of this title.
          (3) Requirements.--As part of the regulations 
        promulgated under subsection (g), the Administrator 
        shall prescribe--
                  (A) after consultation with the Federal 
                Energy Regulatory Commission, requirements to 
                ensure that programs and projects under 
                paragraph (2)(A) and (B) are consistent with 
                the standards established by, and effectively 
                supplement electricity savings and generation 
                of electricity from renewable energy resources 
                achieved by, the Combined Efficiency and 
                Renewable Electricity Standard established by 
                law;
                  (B) eligibility criteria and guidelines for 
                consumer assistance programs for low-income 
                residential ratepayers under paragraph (2)(C); 
                and
                  (C) such other requirements as the 
                Administrator determines appropriate to ensure 
                compliance with the requirements of this 
                subsection.
          (4) Reporting.--Reports submitted under subsection 
        (b)(7) shall include, in accordance with such 
        requirements as the Administrator may prescribe--
                  (A) a description of any facilities deployed 
                under paragraph (2)(A), the quantity of 
                resulting electricity generation from renewable 
                energy resources;
                  (B) an assessment demonstrating the cost-
                effectiveness of, and electricity savings 
                achieved by, programs supported under paragraph 
                (2)(B); and
                  (C) a description of assistance provided to 
                low-income retail ratepayers under paragraph 
                (2)(C).
  (f) Rural Electric Cooperatives, Consumer, or Publicly Owned 
Small LDCs.--
          (1) Distribution.--
                  (A) In general.--The Administrator shall, in 
                accordance with this subsection, distribute 
                emission allowances allocated pursuant to 
                section 771(d)(7) for the following vintage 
                year.
                  (B) Method.--Allowances described in 
                subparagraph (A) shall be distributed ratably, 
                among rural electric cooperatives and consumer-
                owned or publicly owned electricity local 
                distribution companies that meet the definition 
                of the term `small LDC' based on historic 
                emissions, in accordance with the same measure 
                of those emissions applied to each such rural 
                electric cooperative for the relevant vintage 
                year under subsection (b)(2).
          (2) Uses.--A small LDC receiving allowances under 
        this section shall use the allowances only for--
                  (A) cost-effective programs to achieve 
                electricity savings, on the condition that such 
                savings shall not be transferred or used for 
                compliance with any renewable electricity 
                standard established under the Public Utility 
                Regulatory Policies Act of 1978 (16 U.S.C. 2601 
                et seq.);
                  (B) deployment of technologies to generate 
                electricity from renewable energy resources, on 
                the condition that any Federal renewable 
                electricity credits issued based on generation 
                supported under this section shall--
                          (i) be submitted to the Federal 
                        Energy Regulatory Commission for 
                        voluntary retirement; and
                          (ii) not be used for compliance with 
                        the Public Utility Regulatory Policies 
                        Act of 1978 (16 U.S.C. 2601 et seq.); 
                        and
                  (C) assistance programs to reduce electricity 
                costs for low-income residential ratepayers of 
                the small LDC, on the condition that the 
                assistance is made available equitably to all 
                residential ratepayers below a certain income 
                level, which shall not be higher than 200 
                percent of the poverty line (as defined in 
                section 673 of the Community Services Block 
                Grant Act (42 U.S.C. 9902).
  (g) Regulations.--Not later than 2 years after the date of 
enactment of this title, the Administrator, in consultation 
with the Federal Energy Regulatory Commission, shall promulgate 
regulations to implement the requirements of this section.

SEC. 773. NATURAL GAS CONSUMERS.

  (a) Definition.--For purposes of this section, the term 
`cost-effective', with respect to an energy efficiency program, 
means that the program meets the Total Resource Cost Test, 
which requires that the net present value of economic benefits 
over the life of the program, including avoided supply and 
delivery costs and deferred or avoided investments, is greater 
than the net present value of the economic costs over the life 
of the program, including program costs and incremental costs 
borne by the energy consumer.
  (b) Allocation.--Not later than June 30, 2015, and each 
calendar year thereafter through 2028, the Administrator shall 
distribute to natural gas local distribution companies for the 
benefit of retail ratepayers the quantity of emission 
allowances allocated for the following vintage year pursuant to 
section 771(a)(2). Such allowances shall be distributed among 
local natural gas distribution companies based on the following 
formula:
          (1) Initial formula.--Except as provided in paragraph 
        (2), for each vintage year, the Administrator shall 
        distribute emission allowances among natural gas local 
        distribution companies on a pro rata basis based on 
        each such company's annual average retail natural gas 
        deliveries for 2006 through 2008, unless the owner or 
        operator of the company selects 3 other consecutive 
        years between 1999 and 2008, inclusive, and timely 
        notifies the Administrator of its selection.
          (2) Updating.--Prior to distributing 2019 vintage 
        emission allowances and at 3-year intervals thereafter, 
        the Administrator shall update the distribution formula 
        under this subsection to reflect changes in each 
        natural gas local distribution company's service 
        territory since the most recent formula was 
        established. For each successive 3-year period, the 
        Administrator shall distribute allowances on a pro rata 
        basis among natural gas local distribution companies 
        based on the product of--
                  (A) each natural gas local distribution 
                company's average annual natural gas deliveries 
                per customer during calendar years 2006 through 
                2008, or during the 3 alternative consecutive 
                years selected by such company under paragraph 
                (1); and
                  (B) the number of customers of such natural 
                gas local distribution company in the most 
                recent year in which the formula is updated 
                under this paragraph.
  (c) Use of Allowances.--
          (1) Ratepayer benefit.--Emission allowances 
        distributed to a natural gas local distribution company 
        under this section shall be used exclusively for the 
        benefit of retail ratepayers of such natural gas local 
        distribution company and may not be used to support 
        natural gas sales or deliveries to entities or persons 
        other than such ratepayers.
          (2) Ratepayer classes.--In using emission allowances 
        distributed under this section for the benefit of 
        ratepayers, a natural gas local distribution company 
        shall ensure that ratepayer benefits are distributed--
                  (A) among ratepayer classes on a pro rata 
                basis based on natural gas deliveries to each 
                class; and
                  (B) equitably among individual ratepayers 
                within each ratepayer class.
          (3) Limitation.--A natural gas local distribution 
        company shall not use the value of emission allowances 
        distributed under this section to provide to any 
        ratepayer a rebate that is based solely on the quantity 
        of natural gas delivered to such ratepayer. To the 
        extent a natural gas local distribution company uses 
        the value of emission allowances distributed under this 
        section to provide rebates, it shall, to the maximum 
        extent practicable, provide such rebates with regard to 
        the fixed portion of ratepayers' bills or as a fixed 
        creditor rebate on natural gas bills.
          (4) Energy efficiency programs.--The value of no less 
        than one-third of the emission allowances distributed 
        to natural gas local distribution companies pursuant to 
        this section in any calendar year shall be used for 
        cost-effective energy efficiency programs for natural 
        gas consumers. Such programs must be authorized and 
        overseen by the State regulatory authority, or by the 
        entity with regulatory authority over retail natural 
        gas rates in the case of a natural gas local 
        distribution company that is not regulated by a State 
        regulatory authority.
          (5) Certain intracompany deliveries.--If a natural 
        gas local distribution company makes an intracompany 
        delivery of natural gas to a customer that is not a 
        covered entity, for which such company is required to 
        hold emission allowances under section 722, such 
        customer shall, for purposes of this section, be 
        considered to be a retail ratepayer and a member of a 
        ratepayer class to be determined by the relevant State 
        regulatory authority (or other entity with authority to 
        regulate or set natural gas rates, in the case of a 
        company not regulated by a State regulatory authority).
          (6) Guidelines.--As part of the regulations 
        promulgated under subsection (h), the Administrator 
        shall prescribe specific guidelines for the 
        implementation of the requirements of this subsection.
  (d) Regulatory Proceedings.--
          (1) Requirement.--No natural gas local distribution 
        company shall be eligible to receive emission 
        allowances under this section unless the State 
        regulatory authority with authority over such company, 
        or the entity with authority to regulate retail rates 
        of a natural gas local distribution company not 
        regulated by a State regulatory authority, has--
                  (A) promulgated a regulation or completed a 
                rate proceeding (or the equivalent, in the case 
                of a ratemaking entity other than a State 
                regulatory authority) that provides for the 
                full implementation of the requirements of 
                subsection (c); and
                  (B) made available to the Administrator and 
                the public a report describing, in adequate 
                detail, the manner in which the requirements of 
                subsection (c) will be implemented.
          (2) Updating.--The Administrator shall require, as a 
        condition of continued receipt of emission allowances 
        under this section, that a new regulation be 
        promulgated or rate proceeding be completed, and a new 
        report be made available to the Administrator and the 
        public, pursuant to paragraph (1), not less frequently 
        than every 5 years.
  (e) Plans and Reporting.--
          (1) Regulations.--As part of the regulations 
        promulgated under subsection (h), the Administrator 
        shall prescribe requirements governing plans and 
        reports to be submitted in accordance with this 
        subsection.
          (2) Plans.--Not later than April 30, 2015, and every 
        5 years thereafter through 2025, each natural gas local 
        distribution company shall submit to the Administrator 
        a plan, approved by the State regulatory authority or 
        other entity charged with regulating the retail rates 
        of such company, describing such company's plans for 
        the disposition of the value of emission allowances to 
        be received pursuant to this section, in accordance 
        with the requirements of this section.
          (3) Reports.--Not later than June 30, 2017, and each 
        calendar year thereafter through 2031, each natural gas 
        local distribution company shall submit a report to the 
        Administrator, approved by the relevant State 
        regulatory authority or other entity charged with 
        regulating the retail natural gas rates of such 
        company, describing the disposition of the value of any 
        emission allowances received by such company in the 
        prior calendar year pursuant to this subsection, 
        including--
                  (A) a description of sales, transfer, 
                exchange, or use by the company for compliance 
                with obligations under this title, of any such 
                emission allowances;
                  (B) the monetary value received by the 
                company, whether in money or in some other 
                form, from the sale, transfer, or exchange of 
                emission allowances received by the company 
                under this section;
                  (C) the manner in which the company's 
                disposition of emission allowances received 
                under this subsection complies with the 
                requirements of this section, including each of 
                the requirements of subsection (c);
                  (D) the cost-effectiveness of, and energy 
                savings achieved by, energy efficiency programs 
                supported through such emission allowances; and
                  (E) such other information as the 
                Administrator may require pursuant to paragraph 
                (1).
          (4) Publication.--The Administrator shall make 
        available to the public all plans and reports submitted 
        by natural gas local distribution companies under this 
        subsection, including by publishing such plans and 
        reports on the Internet.
  (f) Auditing.--
          (1) Administrator audit report.--Each year, the 
        Administrator shall audit a significant representative 
        sample of natural gas local distribution companies to 
        ensure that emission allowances distributed under this 
        section have been used exclusively for the benefit of 
        retail ratepayers and that such companies are complying 
        with the requirements of this section. In selecting 
        companies for audit, the Administrator shall take into 
        account any credible evidence of noncompliance with 
        such requirements. The Administrator shall make 
        available to the public a report describing the results 
        of each such audit, including by publishing such report 
        on the Internet.
          (2) GAO audit report.--Not later April 30, 2015 and 
        every 3 years thereafter through April 30, 2026, the 
        Comptroller General of the United States, incorporating 
        results from the Administrators' audit report and other 
        relevant information including distribution company 
        reports, shall conduct an in-depth evaluation and make 
        available to the public a report on the investments 
        made pursuant to subsection (c). Said report shall be 
        made available to the State regulatory authority, or 
        the entity with authority to regulate or set retail 
        natural gas rates in the case of a natural gas 
        distribution company that is not regulated by a State 
        regulatory authority, and shall include a description 
        how the distribution companies in the audit meet or 
        fail to meet the requirement of subsection (c), 
        including for investments made in cost-effective end-
        use energy efficiency programs, the lifetime and annual 
        energy saving benefits, and capacity benefits of said 
        programs.
          (3) Administrator cost containment report.--Not later 
        April 30, 2015, and every 3 years thereafter through 
        April 30, 2026, the Administrator shall transmit a 
        report to Congress containing an evaluation of the 
        disposition of the value of emission allowances 
        received pursuant to this subsection and 
        recommendations of ways to more effectively direct the 
        value of allowances to reduce costs for consumers, 
        contain the overall costs of the greenhouse gas 
        emissions reduction program, and meet the pollution 
        reduction targets of the Act. The Administrator shall 
        make available to the public such report, including by 
        publishing such report on the Internet.
  (g) Enforcement.--A violation of any requirement of this 
section, irrespective of approval by a State regulatory 
authority, shall be a violation of this Act. Each emission 
allowance the value of which is used in violation of the 
requirements of this section shall be a separate violation.
  (h) Regulations.--Not later than January 1, 2014, the 
Administrator, in consultation with the Federal Energy 
Regulatory Commission, shall promulgate regulations to 
implement the requirements of this section.

SEC. 774. HOME HEATING OIL AND PROPANE CONSUMERS.

  (a) Definitions.--For purposes of this section:
          (1) Carbon content.--The term `carbon content' means 
        the amount of carbon dioxide that would be emitted as a 
        result of the combustion of a fuel.
          (2) Cost-effective.--The term `cost-effective' has 
        the meaning given that term in section 773(a).
  (b) Allocation.--The Administrator shall distribute among the 
States, in accordance with this section, the quantity of 
emission allowances allocated pursuant to section 771(a)(3). 
The Administrator shall distribute a percentage of such 
allowances determined by the Administrator, after consultation 
with the Secretary of the Interior, pursuant to subsection (f).
  (c) Distribution Among States.--The Administrator shall 
distribute emission allowances among the States under this 
section each year on a pro rata basis based on the ratio of--
          (1) the carbon content of home heating oil and 
        propane sold to consumers within each State in the 
        preceding year for residential or commercial uses; to
          (2) the carbon content of home heating oil and 
        propane sold to consumers within the United States in 
        the preceding year for residential or commercial uses.
  (d) Use of Allowances.--
          (1) In general.--States shall use emission allowances 
        distributed under this section exclusively for the 
        benefit of consumers of home heating oil or propane for 
        residential or commercial purposes. Such proceeds shall 
        be used exclusively for--
                  (A) cost-effective energy efficiency programs 
                for consumers that use home heating oil or 
                propane for residential or commercial purposes; 
                or
                  (B) rebates or other direct financial 
                assistance programs for consumers of home 
                heating oil or propane used for residential or 
                commercial purposes.
          (2) Administration and delivery mechanisms.--In 
        administering programs supported by this section, 
        States shall--
                  (A) use no less than 50 percent of the value 
                of emission allowances received under this 
                section for cost-effective energy efficiency 
                programs to reduce consumers' overall fuel 
                costs;
                  (B) to the extent practicable, deliver 
                consumer support under this section through 
                existing energy efficiency and consumer energy 
                assistance programs or delivery mechanisms, 
                including, where appropriate, programs or 
                mechanisms administered by parties other than 
                the State; and
                  (C) seek to coordinate the administration and 
                delivery of energy efficiency and consumer 
                energy assistance programs supported under this 
                section, with one another and with existing 
                programs for various fuel types, so as to 
                deliver comprehensive, fuel-blind, coordinated 
                programs to consumers.
  (e) Reporting.--Each State receiving emission allowances 
under this section shall submit to the Administrator, within 12 
months of each receipt of such allowances, a report, in 
accordance with such requirements as the Administrator may 
prescribe, that--
          (1) describes the State's use of emission allowances 
        distributed under this section, including a description 
        of the energy efficiency and consumer assistance 
        programs supported with such allowances;
          (2) demonstrates the cost-effectiveness of, and the 
        energy savings achieved by, energy efficiency programs 
        supported under this section; and
          (3) includes a report prepared by an independent 
        third party, in accordance with such regulations as the 
        Administrator may promulgate, evaluating the 
        performance of the energy efficiency and consumer 
        assistance programs supported under this section.
  (f) Distribution to Indian Tribes.--Not later than 18 months 
after the date of enactment of this title, the Administrator 
shall, in consultation with the Secretary of the Interior and 
Indian tribes, promulgate regulations establishing a program to 
distribute the emission allowances made available to Indian 
tribes under this section.
  (g) Enforcement.--
          (1) In general.--If the Administrator determines that 
        a State or Indian tribe is not in compliance with this 
        section, the Administrator may withhold a portion of 
        the emission allowances, the quantity of which is equal 
        to up to twice the quantity of the allowances that the 
        State or Indian tribe failed to use in accordance with 
        the requirements of this section, that such State or 
        Indian tribe would otherwise be eligible to receive 
        under this section in later years.
          (2) Withheld allowances.--
                  (A) States.--Allowances withheld from States 
                pursuant to this subsection shall be 
                distributed among the remaining States on a pro 
                rata basis in accordance with the formula in 
                subsection (c).
                  (B) Indian tribes.--Allowances withheld from 
                Indian tribes pursuant to this subsection shall 
                be distributed among the remaining Indian 
                tribes on a pro rata basis in accordance with 
                the program established under subsection (f).

SEC. 775. DOMESTIC FUEL PRODUCTION.

  (a) Purpose.--The purpose of this section is to provide 
emission allowance rebates to petroleum refineries in the 
United States in a manner that promotes energy efficiency and a 
reduction in greenhouse gas emissions at such facilities.
  (b) Definitions.--In this section:
          (1) Emissions.--The term `emissions' includes direct 
        emissions from fuel combustion, process emissions, and 
        indirect emissions from the generation of electricity, 
        steam, and hydrogen used to produce the output of a 
        petroleum refinery or the petroleum refinery sector.
          (2) Petroleum refinery.--The term `petroleum 
        refinery' means a facility classified under code 324110 
        of the North American Industrial Classification System 
        of 2002.
          (3) Small business refiner.--The term `small business 
        refiner' means a refiner that meets the applicable 
        Federal refinery capacity and employee limitations 
        criteria described in section 45H(c)(1) of the Internal 
        Revenue Code of 1986 (as in effect on the date of 
        enactment of this section and without regard to section 
        45H(d)). Eligibility of a small business refiner under 
        this paragraph shall not be recalculated or disallowed 
        on account of (i) its merger with another small 
        business refiner or refiners after December 31, 2002 or 
        (ii) its acquisition of another small business refiner 
        (or refinery of such refiner) after December 31, 2002.
  (c) Distribution of Allowances.--The Administrator shall 
distribute allowances pursuant to this section to owners and 
operators of petroleum refineries, including small business 
refiners, in the United States.
  (d) Distribution Schedule.--The Administrator shall 
distribute emission allowances pursuant to the regulations 
issued under subsection (e) for each vintage year no later than 
October 31 of the preceding calendar year.
  (e) Regulations.--
          (1) In general.--Not later than 3 years after the 
        date of enactment of this title, the Administrator, in 
        consultation with the Administrator of the Energy 
        Information Administration, shall promulgate 
        regulations in accordance with the purpose of this 
        section that establish separate formulas for 
        distribution of emission allowances provided to--
                  (A) petroleum refineries pursuant to section 
                771(a)(4)(A); and
                  (B) small business refiners pursuant to 
                section 771(a)(4)(B).
          (2) Considerations.--In establishing the formulas 
        under paragraph (1), the Administrator shall consider--
                  (A) the relative complexity of refinery 
                processes and appropriate mechanisms to take 
                energy efficiency and greenhouse gas reductions 
                into account;
                  (B) direct emissions from fuel combustion;
                  (C) process emissions;
                  (D) indirect emissions for the generation of 
                electricity, steam, and hydrogen used to 
                produce the output of a petroleum refinery; and
                  (E) emissions from the combustion of products 
                produced at a petroleum refinery or by the 
                petroleum refinery sector.
          (3) Excess distribution.--If the electricity provider 
        for a petroleum refinery received a free allocation of 
        emission allowances pursuant to section 771(a)(1), the 
        Administrator shall take the free allocation into 
        account when establishing the applicable formula under 
        this subsection to avoid rebates to a petroleum 
        refinery for costs that the Administrator determines 
        were not incurred by the petroleum refinery because the 
        allowances were--
                  (A) freely allocated to the electricity 
                provider of the petroleum refinery; and
                  (B) used for the benefit of the petroleum 
                refinery.

SEC. 776. CONSUMER PROTECTION.

  (a) Consumer Rebates.--
          (1) Establishment of fund.--There is established in 
        the Treasury a separate account, to be known as the 
        `Consumer Rebate Fund').
          (2) Availability of amounts.--All amounts deposited 
        in the Consumer Rebate Fund shall be available without 
        further appropriation or fiscal year limitation.
          (3) Distribution of amounts.--Beginning in 2026, for 
        each year after deposits are made in the Consumer 
        Rebate Fund pursuant to section 771(b)(2)(A), the 
        President shall use the funds in accordance with 
        Federal statutory authority to provide relief to 
        consumers and others affected by the enactment of the 
        Clean Energy Jobs and American Power Act (and 
        amendments made by that Act).
  (b) Energy Refund Program.--
          (1) Establishment of fund.--There is established in 
        the Treasury a separate account, to be known as the 
        `Energy Refund Account').
          (2) Availability of amounts.--All amounts deposited 
        in the Energy Refund Account shall be available without 
        further appropriation or fiscal year limitation.
          (3) Distribution of amounts.--For each year after 
        deposits are made to the Energy Refund Account pursuant 
        to section 771(b)(2)(B), the President shall use the 
        funds in accordance with Federal statutory authority to 
        offset energy cost impacts on low- and moderate-income 
        households.

SEC. 777. EXCHANGE FOR STATE-ISSUED ALLOWANCES.

  (a) In General.--Not later than 1 year after the date of 
enactment of this title, the Administrator shall issue 
regulations allowing any person in the United States to 
exchange greenhouse gas emission allowances issued before the 
later of December 31, 2011, or the date that is 9 months after 
the first auction under section 778, by the State of California 
or for the Regional Greenhouse Gas Initiative, or the Western 
Climate Initiative (in this section referred to as `State 
allowances') for emission allowances established by the 
Administrator under section 721(a).
  (b) Regulations.--Regulations issued under subsection (a) 
shall--
          (1) provide that a person exchanging State allowances 
        under this section receive emission allowances 
        established under section 721(a) in the amount that is 
        sufficient to compensate for the cost of obtaining and 
        holding such State allowances;
          (2) establish a deadline by which persons must 
        exchange the State allowances;
          (3) provide that the Federal emission allowances 
        disbursed pursuant to this section shall be deducted 
        from the allowances to be auctioned pursuant to section 
        771(b); and
          (4) require that, once exchanged, the credit or other 
        instrument be retired for purposes of use under the 
        program by or for which it was originally issued.
  (c) Cost of Obtaining State Allowance.--For purposes of this 
section, the cost of obtaining a State allowance shall be the 
average auction price, for emission allowances issued in the 
year in which the State allowance was issued, under the program 
under which the State allowance was issued.

SEC. 778. AUCTION PROCEDURES.

  (a) In General.--To the extent that auctions of emission 
allowances by the Administrator are authorized by this part, 
such auctions shall be carried out pursuant to this section and 
the regulations established hereunder.
  (b) Initial Regulations.--Not later than 12 months after the 
date of enactment of this title, the Administrator, in 
consultation with other agencies, as appropriate, shall 
promulgate regulations governing the auction of allowances 
under this section. Such regulations shall include the 
following requirements:
          (1) Frequency; first auction.--Auctions shall be held 
        four times per year at regular intervals, with the 
        first auction to be held no later than March 31, 2011.
          (2) Auction schedule; current and future vintages.--
        The Administrator shall, at each quarterly auction 
        under this section, offer for sale both a portion of 
        the allowances with the same vintage year as the year 
        in which the auction is being conducted and a portion 
        of the allowances with vintage years from future years. 
        The preceding sentence shall not apply to auctions held 
        before 2012, during which period, by necessity, the 
        Administrator shall auction only allowances with a 
        vintage year that is later than the year in which the 
        auction is held. Beginning with the first auction and 
        at each quarterly auction held thereafter, the 
        Administrator may offer for sale allowances with 
        vintage years of up to 4 years after the year in which 
        the auction is being conducted.
          (3) Auction format.--Auctions shall follow a single-
        round, sealed-bid, uniform price format.
          (4) Participation; financial assurance.--Auctions 
        shall be open to any person, except that the 
        Administrator may establish financial assurance 
        requirements to ensure that auction participants can 
        and will perform on their bids.
          (5) Disclosure of beneficial ownership.--Each bidder 
        in the auction shall be required to disclose the person 
        or entity sponsoring or benefitting from the bidder's 
        participation in the auction if such person or entity 
        is, in whole or in part, other than the bidder.
          (6) Purchase limits.--No person may, directly or in 
        concert with another participant, purchase more than 5 
        percent of the allowances offered for sale at any 
        quarterly auction.
          (7) Publication of information.--After the auction, 
        the Administrator shall, in a timely fashion, publish 
        the identities of winning bidders, the quantity of 
        allowances obtained by each winning bidder, and the 
        auction clearing price.
          (8) Other requirements.--The Administrator may 
        include in the regulations such other requirements or 
        provisions as the Administrator, in consultation with 
        other agencies, as appropriate, considers appropriate 
        to promote effective, efficient, transparent, and fair 
        administration of auctions under this section.
  (c) Revision of Regulations.--The Administrator may, in 
consultation with other agencies, as appropriate, at any time, 
revise the initial regulations promulgated under subsection (b) 
by promulgating new regulations. Such revised regulations need 
not meet the requirements identified in subsection (b) if the 
Administrator determines that an alternative auction design 
would be more effective, taking into account factors including 
costs of administration, transparency, fairness, and risks of 
collusion or manipulation. In determining whether and how to 
revise the initial regulations under this subsection, the 
Administrator shall not consider maximization of revenues to 
the Federal Government.
  (d) Reserve Auction Price.--The minimum reserve auction price 
shall be $10 (in constant 2005 dollars) for auctions occurring 
in 2012. The minimum reserve price for auctions occurring in 
years after 2012 shall be the minimum reserve auction price for 
the previous year increased by 5 percent plus the rate of 
inflation (as measured by the Consumer Price Index for all 
urban consumers).
  (e) Delegation or Contract.--Pursuant to regulations under 
this section, the Administrator may by delegation or contract 
provide for the conduct of auctions under the Administrator's 
supervision by other departments or agencies of the Federal 
Government or by nongovernmental agencies, groups, or 
organizations.
  (f) Small Business Refiner Reserve.--The Administrator shall, 
in accordance with this subsection, issue regulations setting 
aside a specified number of allowances, as determined by the 
Administrator, that small business refiners may purchase at the 
average auction price and may use to demonstrate compliance 
pursuant to section 722. These regulations shall provide the 
following:
          (1) Amount.--The Administrator shall place in the 
        small business refiner reserve account allowances that 
        are to be sold at auction pursuant to the allocations 
        under section 771 in an amount equal to--
                  (A) for each of vintage years 2012 and 2013, 
                6.2 percent of the emission allowances 
                established under section 721(a);
                  (B) for each of vintage years 2014 and 2015, 
                5.4 percent of the emission allowances 
                established under section 721(a); and
                  (C) for each of vintage years 2016 through 
                2024, 4.9 percent of the emission allowances 
                established under section 721(a).
          (2) Allowed purchases.--From January 1 of the 
        calendar year that matches the vintage year for which 
        allowances have been placed in the reserve, through 
        January 14 of the following year, small business 
        refiners (as defined in section 775(b)) may purchase 
        allowances from this reserve at the price determined 
        pursuant to paragraph (3).
          (3) Price.--The price for allowances purchased from 
        this reserve shall be the average auction price for 
        allowances of the same vintage year purchased at 
        auctions conducted pursuant to this section during the 
        12 months preceding the purchase of the allowances.
          (4) Use of allowances.--Allowances purchased from 
        this reserve shall only be used by the purchaser to 
        demonstrate compliance pursuant to section 722 for 
        attributable greenhouse gas emissions in the calendar 
        year that matches the vintage year of the purchased 
        allowance. Allowances purchased from this reserve may 
        not be banked, traded or borrowed.
          (5) Limitations on purchase amount.--The 
        Administrator, by regulation adopted after public 
        notice and an opportunity for comment, shall establish 
        procedures to distribute the ability to purchase 
        allowances from the reserve fairly among all small 
        business refiners interested in purchasing allowances 
        from this reserve so as to address the potential that 
        requests to purchase allowances exceed the number of 
        allowances available in the reserve. This regulation 
        may place limits on the number of allowances a small 
        business refiner may purchase from the reserve.
          (6) Unsold allowances.--Vintage year allowances not 
        sold from the reserve on or before January 15 of the 
        calendar year following the vintage year shall be sold 
        at an auction conducted pursuant to this section no 
        later than March 31 of the calendar year following the 
        vintage year. If significantly more allowances are 
        being placed in the reserve than are being purchased 
        from the reserve several years in a row, the 
        Administrator may adjust either the percent of 
        allowances placed in the reserve or the date by which 
        allowances may be purchased from the reserve.

SEC. 779. AUCTIONING ALLOWANCES FOR OTHER ENTITIES.

  (a) Consignment.--Any entity holding emission allowances or 
compensatory allowances may request that the Administrator 
auction, pursuant to section 778, the allowances on 
consignment.
  (b) Pricing.--When the Administrator acts under this section 
as the agent of an entity in possession of emission allowances, 
the Administrator is not obligated to obtain the highest price 
possible for the emission allowances, and instead shall auction 
consignment allowances in the same manner and pursuant to the 
same rules as auctions of other allowances under section 778. 
The Administrator may permit the entity offering the allowance 
for sale to condition the sale of its allowances pursuant to 
this section on a minimum reserve price that is different than 
the reserve auction price set pursuant to section 778(d).
  (c) Proceeds.--For emission allowances and compensatory 
allowances auctioned pursuant to this section, notwithstanding 
section 3302 of title 31, United States Code, or any other 
provision of law, within 90 days of receipt, the United States 
shall transfer the proceeds from the auction to the entity 
which held the allowances auctioned. No funds transferred from 
a purchaser to a seller of emission allowances or compensatory 
allowances under this subsection shall be held by any officer 
or employee of the United States or treated for any purpose as 
public monies.
  (d) Regulations.--The Administrator shall issue regulations 
within 24 months after the date of enactment of this title to 
implement this section.

SEC. 780. COMMERCIAL DEPLOYMENT OF CARBON CAPTURE AND PERMANENT 
                    SEQUESTRATION TECHNOLOGIES.

  (a) Definitions.--In this section:
          (1) Carbon capture and permanent sequestration.--The 
        term `carbon capture and permanent sequestration' 
        shall--
                  (A) have such meaning as the Administrator 
                shall determine by regulation; and
                  (B) include--
                          (i) permanent geological 
                        sequestration; and
                          (ii) conversion of captured carbon 
                        dioxide to a stable form that will 
                        safely and permanently sequester the 
                        carbon dioxide.
          (2) Enhanced hydrocarbon recovery.--
                  (A) In general.--The term `enhanced 
                hydrocarbon recovery' means a process by which 
                oil, methane, or other natural gases are 
                recovered by the injection of carbon dioxide 
                into a geologic formation.
                  (B) Exclusion.--The term `enhanced 
                hydrocarbon recovery' does not include the in 
                situ generation of a new hydrocarbon.
          (3) Qualifying electric generating unit.--The term 
        `qualifying electric generating unit' means an electric 
        utility unit--
                  (A) that derives at least 50 percent of the 
                annual fuel input of the unit from--
                          (i) coal or waste coal;
                          (ii) petroleum coke; or
                          (iii) any combination of those 2 
                        fuels; and
                  (B)(i) that has a nameplate capacity of 200 
                megawatts or more; or
                  (ii) in the case of retrofit applications, 
                the carbon capture and permanent sequestration 
                technology of which is applied to the flue gas 
                or fuel gas stream from at least 200 megawatts 
                of the total nameplate generating capacity of 
                the unit.
          (4) Qualifying industrial source.--The term 
        `qualifying industrial source' means a source that--
                  (A) is not a qualifying electric generating 
                unit;
                  (B) absent carbon capture and permanent 
                sequestration, would emit greater than 50,000 
                tons per year of carbon dioxide; and
                  (C) does not produce a liquid transportation 
                fuel from a solid fossil-based feedstock.
          (5) Treated generating capacity.--
                  (A) In general.--The term `treated generating 
                capacity' means the portion of the total 
                generating capacity of an electric generating 
                unit (or industrial source, measured by such 
                method as the Administrator may designate to be 
                equivalent to the calculation under 
                subparagraph (B)) for which the flue gas or 
                fuel gas is treated by the carbon capture and 
                permanent sequestration technology.
                  (B) Calculation.--In determining the treated 
                portion of flue gas or fuel gas of an electric 
                generating unit under subparagraph (A), the 
                Administrator shall multiply the nameplate 
                capacity of the unit by the ratio that--
                          (i) the mass of flue gas or fuel gas 
                        that is treated by the carbon capture 
                        and permanent sequestration technology; 
                        bears to
                          (ii) the total mass of the flue gas 
                        or fuel gas that is produced when the 
                        unit is operating at maximum capacity.
  (b) Regulations.--Not later than 2 years after the date of 
enactment of this title, the Administrator shall promulgate 
regulations providing for the distribution of emission 
allowances allocated under section 771(a)(6), pursuant to the 
requirements of this section, to support the commercial 
deployment of carbon capture and permanent sequestration 
technologies in electric power generation and industrial 
operations.
  (c) Eligibility Criteria and Method of Distribution.--
          (1) Eligibility.--For an owner or operator of a 
        project to be eligible to receive emission allowances 
        under this section, the project shall--
                  (A) implement carbon capture and permanent 
                sequestration technology--
                          (i) at a qualifying electric 
                        generating unit that, upon 
                        implementation of the carbon capture 
                        and permanent sequestration technology, 
                        will achieve an emission limitation 
                        that is at least a 50-percent reduction 
                        in emissions of the carbon dioxide 
                        produced by--
                                  (I) the unit, measured on an 
                                annual basis, as determined by 
                                the Administrator; or
                                  (II) in the case of retrofit 
                                applications described in 
                                subsection (a)(2)(B)(ii), the 
                                treated portion of flue gas 
                                from the unit, measured on an 
                                annual basis, as determined by 
                                the Administrator; or
                          (ii) at a qualifying industrial 
                        source that, upon implementation, will 
                        achieve an emission limitation that is 
                        at least a 50-percent reduction in 
                        emissions of the carbon dioxide 
                        produced by the emission point, 
                        measured on an annual basis, as 
                        determined by the Administrator;
                  (B)(i) geologically sequester carbon dioxide 
                at a site that meets all applicable permitting 
                and certification requirements for permanent 
                geological sequestration; or
                  (ii) pursuant to such requirements as the 
                Administrator may prescribe by regulation, 
                convert captured carbon dioxide to a stable 
                form that will safely and permanently sequester 
                the carbon dioxide;
                  (C) meet all other applicable State, tribal, 
                and Federal permitting requirements; and
                  (D) be located in the United States.
          (2) Method of distribution.--
                  (A) Period.--The Administrator shall 
                distribute emission allowances allocated under 
                section 771(a)(6) to eligible projects for each 
                of the first 10 calendar years for which each 
                eligible project is in commercial operation.
                  (B) Bonus allowance formula for electric 
                generating units.--
                          (i) Phase i distribution.--For each 
                        project that is certified under 
                        subsection (h), the quantity of 
                        emission allowances that the 
                        Administrator shall distribute for a 
                        calendar year to the owner or operator 
                        of the eligible project shall be equal 
                        to the quotient obtained by dividing--
                                  (I) the product obtained by 
                                multiplying--
                                          (aa) the number of 
                                        metric tons of carbon 
                                        dioxide emissions 
                                        avoided through carbon 
                                        capture and permanent 
                                        sequestration of 
                                        emissions by the 
                                        project for a 
                                        particular year, as 
                                        determined pursuant to 
                                        such methodology as the 
                                        Administrator shall 
                                        prescribe by 
                                        regulation; and
                                          (bb) a bonus 
                                        allowance value that is 
                                        assigned to the project 
                                        under subsection 
                                        (d)(2); by
                                  (II) the average fair market 
                                value of an emission allowance 
                                during the calendar year 
                                preceding the earlier of--
                                          (aa) the year during 
                                        which the project 
                                        captured and 
                                        sequestered the carbon 
                                        dioxide emissions; or
                                          (bb) the year in 
                                        which the project 
                                        receives an advanced 
                                        distribution of 
                                        emission allowances 
                                        under subsection 
                                        (h)(3)(B).
                          (ii) Phase ii distribution.--For each 
                        project that qualifies under subsection 
                        (e), the quantity of emission 
                        allowances that the Administrator shall 
                        distribute for a calendar year to the 
                        owner or operator of the eligible 
                        project shall be determined through--
                                  (I) reverse auction, as 
                                prescribed by regulation under 
                                subsection (e)(3); or
                                  (II) if the Administrator 
                                decides not to distribute 
                                allowances through a reverse 
                                auction, an alternate 
                                distribution method established 
                                by regulation under subsection 
                                (e)(4).
                  (C) Formula for industrial sources.--For each 
                project that qualifies under subsection (g), 
                the quantity of emission allowances that the 
                Administrator shall distribute for a calendar 
                year to the owner or operator of the eligible 
                project shall be determined in accordance with 
                subsection (g)(2).
                  (D) Consistency.--The Administrator shall 
                develop a method of distribution for each 
                category of eligible projects under this 
                paragraph in a manner that is consistent with 
                the certification and distribution requirements 
                under subsection (h).
  (d) Phase I Distribution to Electric Generating Units.--
          (1) Applicability.--
                  (A) In general.--Subject to subparagraph (B), 
                this subsection shall apply to projects that 
                are undertaken at qualifying electric 
                generating units that the Administrator 
                determines to be eligible to receive emission 
                allowances under this section.
                  (B) Capacity.--The total cumulative 
                generating capacity of the projects described 
                in subparagraph (A) shall be equal to 
                approximately 20 gigawatts of the treated 
                generating capacity.
          (2) Bonus allowance values.--
                  (A) First tranche.--
                          (i) In general.--The first tranche 
                        shall include the first 10 gigawatts of 
                        treated generating capacity undertaken 
                        at qualifying electric generating units 
                        that receive emission allowances under 
                        this section.
                          (ii) Certain units.--For an eligible 
                        project achieving carbon capture and 
                        permanent sequestration of 90 percent 
                        or more of the carbon dioxide that 
                        otherwise would be emitted by the unit, 
                        the bonus allowance value shall be $96 
                        per ton of carbon dioxide emissions 
                        avoided through the use of carbon 
                        capture and permanent sequestration.
                          (iii) Bonus allowance value.--The 
                        Administrator shall establish, by 
                        regulation, a bonus allowance value for 
                        each rate of carbon capture and 
                        permanent sequestration achieved by an 
                        eligible project--
                                  (I) beginning at a minimum of 
                                $50 per ton for a 50-percent 
                                rate; and
                                  (II) varying in direct 
                                proportion with increasing 
                                rates of carbon capture and 
                                permanent sequestration up to 
                                $96 per ton for an 90-percent 
                                rate.
                  (B) Second tranche.--
                          (i) In general.--The second tranche 
                        shall include the second 10 gigawatts 
                        of treated generating capacity 
                        undertaken at qualifying electric 
                        generating units that receive emission 
                        allowances under this section.
                          (ii) Certain units.--For an eligible 
                        project achieving the carbon capture 
                        and permanent sequestration of 90 
                        percent or more of the carbon dioxide 
                        that otherwise would be emitted by the 
                        eligible project, the bonus allowance 
                        value shall be $85 per ton of carbon 
                        dioxide emissions avoided through the 
                        use of capture and permanent 
                        sequestration.
                          (iii) Bonus allowance value.--The 
                        Administrator shall establish, by 
                        regulation, a bonus allowance value for 
                        each rate of carbon capture and 
                        permanent sequestration achieved by an 
                        eligible project--
                                  (I) beginning at a minimum of 
                                $50 per ton for a 50-percent 
                                rate; and
                                  (II) varying in direct 
                                proportion with increasing 
                                rates of carbon capture and 
                                permanent sequestration up to 
                                $85 per ton for a 90-percent 
                                rate.
                  (C) Increase in bonus allowance value.--For 
                an eligible project that commences commercial 
                operation by not later than January 1, 2017, 
                and that meets the eligibility criteria under 
                subsection (c), the otherwise-applicable bonus 
                allowance value under this paragraph shall be 
                increased by $10, if the owner or operator of 
                the eligible project submits to the 
                Administrator by not later than January 1, 
                2012, a notification of the intent to implement 
                carbon capture and permanent sequestration 
                technology at a qualifying electric generating 
                unit in accordance with subsection (c).
                  (D) Reduction.--
                          (i) In general.--For a carbon capture 
                        and permanent sequestration project 
                        sequestering in a geological formation 
                        for purposes of enhanced hydrocarbon 
                        recovery, the Administrator, by 
                        regulation, shall reduce the applicable 
                        bonus allowance value under this 
                        paragraph to reflect the lower net cost 
                        of the project, as compared to 
                        permanent sequestration into geological 
                        formations solely for purposes of 
                        sequestration.
                          (ii) Assessment of net cost.--For the 
                        purpose of this subparagraph, an 
                        assessment of net cost of a project 
                        shall account for the cost of the 
                        injection of carbon dioxide, or other 
                        method of enhanced hydrocarbon 
                        recovery, that would have otherwise 
                        been undertaken in the absence of the 
                        carbon capture and permanent 
                        sequestration project under 
                        consideration.
                  (E) Adjustments.--The Administrator shall 
                annually adjust for monetary inflation the 
                bonus allowance values established under this 
                paragraph.
                  (F) Measurement.--The Administrator shall 
                measure the tranches and capture levels for 
                assigning the bonus allowance values under this 
                subsection based on the treated generating 
                capacity of the qualifying electric generating 
                units and qualifying industrial sources that 
                receive emission allowances under this 
                subsection.
                  (G) Average fair market value.--
                          (i) In general.--The Administrator 
                        and the Secretary of Energy may jointly 
                        determine that the average fair market 
                        value for emission allowances or the 
                        bonus allowances have been too low or 
                        too high to achieve efficient and cost-
                        effective commercial deployment of 
                        carbon capture and permanent 
                        sequestration technology in a given 
                        calendar year.
                          (ii) Action on determination.--On 
                        making a determination under clause 
                        (i), the Administrator may--
                                  (I) promulgate regulations to 
                                adjust the bonus allowance 
                                value under this paragraph; or
                                  (II) distribute an 
                                appropriate quantity of 
                                emission allowances allocated 
                                under section 771(a)(6) from 
                                any future vintage year.
  (e) Phase II Distribution to Electric Generating Units.--
          (1) Application.--This subsection shall apply only to 
        the distribution of emission allowances for carbon 
        capture and permanent sequestration projects undertaken 
        at qualifying electric generating units and qualifying 
        industrial sources after the treated generating 
        capacity threshold identified under subsection (d)(1) 
        is reached.
          (2) Regulations.--Not later than 2 years before the 
        date on which the capacity threshold identified in 
        subsection (d)(1) is projected to be reached, the 
        Administrator shall promulgate regulations to govern 
        the distribution of emission allowances to the owners 
        or operators of eligible projects under this 
        subsection.
          (3) Reverse auctions.--
                  (A) In general.--Except as provided in 
                paragraph (4), the regulations promulgated 
                pursuant to paragraph (2) shall provide for the 
                distribution of emission allowances to the 
                owners or operators of eligible projects under 
                this subsection through at least 2 reverse 
                auctions, each of which shall be held not less 
                frequently than once each calendar year.
                  (B) Requirements.--
                          (i) Projects at industrial sources.--
                        The Administrator shall annually 
                        establish a reverse auction for 
                        projects at industrial sources, which 
                        may not participate in other auctions.
                          (ii) Other auctions.--The 
                        Administrator may establish a separate 
                        auction for each of not more than 5 
                        different project categories, as 
                        defined based on--
                                  (I) coal type;
                                  (II) capture technology;
                                  (III) geological formation 
                                type;
                                  (IV) new unit versus retrofit 
                                application;
                                  (V) such other factors as the 
                                Administrator may prescribe; or
                                  (VI) any combination of the 
                                factors described in subclauses 
                                (I) through (V).
                          (iii) Efficient distribution.--The 
                        Administrator shall establish 
                        procedures for the auction of emission 
                        allowances under this subparagraph to 
                        ensure that the establishment of 
                        separate auctions for different project 
                        categories will not unduly impede the 
                        efficient and expeditious distribution 
                        of emission allowances to eligible 
                        projects under this subsection.
                          (iv) Minimum rates.--The 
                        Administrator may establish appropriate 
                        minimum rates of carbon capture and 
                        permanent sequestration for the treated 
                        generating capacity of a project in 
                        implementing this subparagraph.
                  (C) Auction process.--At each reverse auction 
                under this paragraph--
                          (i) the Administrator shall solicit 
                        bids from eligible projects;
                          (ii) owners or operators of eligible 
                        projects participating in the auction 
                        shall submit a bid, including the 
                        desired level of carbon dioxide 
                        permanent sequestration incentive per 
                        ton and the estimated quantity of 
                        carbon dioxide that the project will 
                        permanently sequester during a 10-year 
                        period; and
                          (iii) the Administrator shall select 
                        bids within each auction for the 
                        permanent sequestration quantity 
                        submitted, beginning with the eligible 
                        project for which the bid is submitted 
                        for the lowest level of permanent 
                        sequestration incentive on a per-ton 
                        basis and meeting such other 
                        requirements as the Administrator may 
                        specify, until the amounts available 
                        for the reverse auction are committed.
                  (D) Form of distribution.--The Administrator 
                shall distribute emission allowances to the 
                owners or operators of eligible projects 
                selected through a reverse auction under this 
                paragraph pursuant to a formula equivalent to 
                the formula contained in subsection (c)(2)(B), 
                except that the bonus allowance value that is 
                bid by the applicable entity shall be 
                substituted for the bonus allowance values 
                described in subsection (c)(2).
          (4) Alternative distribution method.--
                  (A) In general.--If the Administrator 
                determines that a reverse auction will not 
                result in efficient and cost-effective 
                commercial deployment of carbon capture and 
                permanent sequestration technologies, the 
                Administrator, pursuant to regulations under 
                paragraph (2) or (5), shall prescribe a 
                schedule for the provision of bonus allowances 
                to the owners or operators of eligible projects 
                under this subsection, in accordance with the 
                requirements of this paragraph.
                  (B) Multiple tranches.--The Administrator 
                shall divide emission allowances available for 
                distribution to the owners or operators of 
                eligible projects into a series of tranches, 
                each of which--
                          (i) shall support the deployment of a 
                        specified quantity of cumulative 
                        electric generating capacity using 
                        carbon capture and permanent 
                        sequestration technology; and
                          (ii) shall not be greater than 10 
                        gigawatts of treated generating 
                        capacity.
                  (C) Method of distribution.--The 
                Administrator shall distribute emission 
                allowances within each tranche, on a first-
                come, first-served basis--
                          (i) based on the date of full-scale 
                        operation of carbon capture and 
                        permanent sequestration technology; and
                          (ii) pursuant to a formula that--
                                  (I) is similar to the formula 
                                contained in subsection 
                                (c)(2)(C), except that the 
                                Administrator may prescribe 
                                bonus allowance values 
                                different than those described 
                                in subsection (c)(2) based on 
                                the criteria established under 
                                subparagraph (E); and
                                  (II) establishes the number 
                                of emission allowances to be 
                                distributed per ton of carbon 
                                dioxide sequestered by the 
                                project.
                  (D) Requirements.--For each tranche 
                established pursuant to subparagraph (B), the 
                Administrator shall establish a schedule for 
                distributing emission allowances that--
                          (i) is based on a sliding scale that 
                        provides higher bonus allowance values 
                        for projects achieving higher rates of 
                        carbon capture and permanent 
                        sequestration for the treated 
                        generation capacity at the unit;
                          (ii) for each carbon capture and 
                        permanent sequestration rate, 
                        establishes a bonus allowance value 
                        that is lower than that established for 
                        the applicable rate for the previous 
                        tranche (or, in the case of the first 
                        tranche, than that established for the 
                        applicable rate under subsection 
                        (d)(2)); and
                          (iii) may establish different bonus 
                        allowance levels for not more than 5 
                        different project categories, as 
                        defined based on--
                                  (I) coal type;
                                  (II) capture and 
                                transportation technology;
                                  (III) geological formation 
                                type;
                                  (IV) new unit versus retrofit 
                                application;
                                  (V) such other factors as the 
                                Administrator may prescribe; or
                                  (VI) any combination of the 
                                factors described in subclauses 
                                (I) through (V).
                  (E) Criteria for establishing bonus allowance 
                values.--In establishing bonus allowance values 
                under this paragraph, the Administrator shall 
                seek to cover not more than the reasonable 
                incremental capital and operating costs of a 
                project that are attributable to implementation 
                of carbon capture and permanent sequestration 
                technologies and carbon transportation 
                technologies, taking into account--
                          (i) the reduced cost of compliance 
                        with section 722;
                          (ii) the reduced cost associated with 
                        sequestering in a geological formation 
                        for purposes of enhanced hydrocarbon 
                        recovery, as compared to permanent 
                        sequestration into geological 
                        formations solely for purposes of 
                        sequestration;
                          (iii) the relevant factors defining 
                        the project category; and
                          (iv) such other factors as the 
                        Administrator determines to be 
                        appropriate.
          (5) Revision of regulations.--The Administrator shall 
        review and, as appropriate, revise the applicable 
        regulations under this subsection not less frequently 
        than once every 8 years.
  (f) Limits for Certain Electric Generating Units.--
          (1) Definitions.--In this subsection, the terms 
        `covered EGU' and `initially permitted' have the 
        meanings given those terms in section 812.
          (2) Covered egus initially permitted from 2009 
        through 2014.--For a covered EGU that is initially 
        permitted during the period beginning on January 1, 
        2009, and ending on December 31, 2014, the 
        Administrator shall reduce the quantity of emission 
        allowances that the owner or operator of the covered 
        EGU would otherwise be eligible to receive under this 
        section as follows:
                  (A) In the case of a covered EGU commencing 
                operation on or before January 1, 2019, if the 
                date in clause (ii)(I) is earlier than the date 
                in clause (ii)(II), by the product obtained by 
                multiplying--
                          (i) 20 percent; and
                          (ii) the number of years, if any, 
                        that have elapsed between--
                                  (I) the earlier of--
                                          (aa) January 1, 2020; 
                                        and
                                          (bb) the date that is 
                                        5 years after the 
                                        commencement of 
                                        operation of the 
                                        covered EGU; and
                                  (II) the first year that the 
                                covered EGU achieves (and 
                                thereafter maintains) an 
                                emission limitation that is at 
                                least a 50-percent reduction in 
                                emissions of carbon dioxide 
                                produced by the unit, measured 
                                on an annual basis, as 
                                determined in accordance with 
                                section 812(b)(2).
                  (B) In the case of a covered EGU commencing 
                operation after January 1, 2019, by the product 
                obtained by multiplying--
                          (i) 20 percent; and
                          (ii) the number of years, if any, 
                        that have elapsed between--
                                  (I) the commencement of 
                                operation of the covered EGU; 
                                and
                                  (II) the first year that the 
                                covered EGU achieves (and 
                                thereafter maintains) an 
                                emission limitation that is at 
                                least a 50-percent reduction in 
                                emissions of carbon dioxide 
                                produced by the unit, measured 
                                on an annual basis, as 
                                determined in accordance with 
                                section 812(b)(2).
          (3) Covered egus initially permitted from 2015 
        through 2019.--The owner or operator of a covered EGU 
        that is initially permitted during the period beginning 
        on January 1, 2015, and ending on December 31, 2019, 
        shall be ineligible to receive emission allowances 
        under this section if the covered EGU, on commencement 
        of operations (and thereafter), does not achieve and 
        maintain an emission limitation that is at least a 50-
        percent reduction in emissions of carbon dioxide 
        produced by the covered EGU, measured on an annual 
        basis, as determined in accordance with section 
        812(b)(2).
          (4) Egus receiving advanced distribution.--
                  (A) In general.--For an EGU that receives an 
                advanced distribution of emission allowances, 
                the Administrator shall reduce and recover, as 
                applicable, the quantity of emission allowances 
                that the owner or operator of the EGU has 
                received and remains eligible to receive under 
                this section, which shall be equal to the 
                product obtained by multiplying--
                          (i) 20 percent; and
                          (ii) the number of years, if any, 
                        that have elapsed between--
                                  (I) the date that is 18 
                                months after--
                                          (aa) in the case of 
                                        an EGU that was 
                                        initially permitted 
                                        during the period 
                                        beginning on January 1, 
                                        2009, and ending on 
                                        December 31, 2014, the 
                                        date of commencement of 
                                        operation of the EGU; 
                                        or
                                          (bb) in the case of 
                                        an EGU that was 
                                        initially permitted 
                                        prior to January 1, 
                                        2009, the date that is 
                                        3 years after the date 
                                        on which the project 
                                        owner receives an 
                                        advanced distribution 
                                        for that EGU under 
                                        subsection (h)(3)(B); 
                                        and
                                  (II) the first year that the 
                                EGU achieves (and thereafter 
                                maintains) an emission 
                                limitation that is at least a 
                                50-percent reduction in 
                                emissions of carbon dioxide 
                                produced by the EGU, measured 
                                on an annual basis.
                  (B) Extension.--
                          (i) In general.--If an owner or 
                        operator of an EGU that receives an 
                        advanced distribution of emission 
                        allowances determines that the owner or 
                        operator will not be able to achieve at 
                        least a 50-percent reduction in 
                        emissions of carbon dioxide produced by 
                        the EGU, as measured on an annual 
                        basis, by the date specified in 
                        subparagraph (A)(ii)(I), the owner or 
                        operator may petition the Administrator 
                        to extend that date by not more than 18 
                        months.
                          (ii) Time of submission of 
                        petition.--The owner or operator shall 
                        submit a petition described in clause 
                        (i) to the Administrator as soon as 
                        practicable after the date on which the 
                        basis for the petition arises.
                          (iii) Conditions for extension.--The 
                        Administrator shall prescribe, by 
                        regulation, the conditions under which 
                        an extension under clause (i) may be 
                        granted, including--
                                  (I) an inability of an EGU to 
                                sequester at the site, despite 
                                due diligence having been 
                                undertaken; and
                                  (II) legal challenges to the 
                                implementation of the carbon 
                                capture and permanent 
                                sequestration technology.
  (g) Industrial Sources.--
          (1) Emission allowances.--The Administrator--
                  (A) may distribute not more than 15 percent 
                of the emission allowances allocated under 
                section 771(a)(6) for any vintage year to the 
                owners or operators of eligible industrial 
                sources to support the commercial-scale 
                deployment of carbon capture and permanent 
                sequestration technologies at those sources; 
                and
                  (B) notwithstanding any other provision of 
                law--
                          (i) may distribute to eligible 
                        industrial sources not more than 15 
                        percent of the emission allowances 
                        allocated under section 771(a)(6) for 
                        any vintage year in the second tranche 
                        of phase I; but
                          (ii) may not distribute those 
                        allowances for any vintage year in the 
                        first tranche of phase I.
          (2) Distribution.--
                  (A) In general.--The Administrator shall 
                prescribe, by regulation, requirements for the 
                distribution of emission allowances to the 
                owners or operators of industrial sources under 
                this subsection, based on a bonus allowance 
                formula that awards emission allowances to 
                qualifying projects on the basis of tons of 
                carbon dioxide captured and permanently 
                sequestered.
                  (B) Method.--The Administrator may provide 
                for the distribution of emission allowances 
                pursuant to--
                          (i) a reverse auction method similar 
                        to the method described in subsection 
                        (e)(3), including the use of separate 
                        auctions for different project 
                        categories; or
                          (ii) an incentive schedule similar to 
                        the schedule described in subsection 
                        (e)(4), which shall ensure that 
                        incentives are established so as to 
                        satisfy the requirement described in 
                        subsection (e)(4)(E).
          (3) Revision of regulations.--The Administrator shall 
        review and, as appropriate, revise the regulations 
        under this subsection not less frequently than once 
        every 8 years.
  (h) Certification and Distribution.--
          (1) Certification.--
                  (A) Request.--
                          (i) Phase i; alternative distribution 
                        method.--In the case of a qualifying 
                        project that is eligible to receive 
                        allowances under phase I or under 
                        subsection (e)(4), at any time prior to 
                        placing a carbon capture and permanent 
                        sequestration project into commercial 
                        operation, the owner or operator of the 
                        planned project may request from the 
                        Administrator a certification that the 
                        project is eligible to receive emission 
                        allowances under this section.
                          (ii) Reverse auctions.--In the case 
                        of a qualifying project that wins a 
                        reverse auction under subsection (e) or 
                        (g), within a reasonably brief period 
                        following completion of the auction (as 
                        specified by the Administrator), the 
                        owner or operator of the qualifying 
                        project shall request from the 
                        Administrator a certification that the 
                        project is eligible to receive emission 
                        allowances under this section.
                          (iii) Eligible projects.--Eligible 
                        projects in phase I and phase II may 
                        receive certification under this 
                        paragraph.
                          (iv) Issuance.--Not later than 90 
                        days after the date on which the 
                        Administrator determines that the owner 
                        or operator of the planned project has 
                        submitted complete documentation 
                        pursuant to subparagraph (B), the 
                        Administrator shall issue a 
                        certification described in this 
                        subparagraph--
                                  (I) if the owner or operator 
                                demonstrates a commitment to 
                                construct and operate a project 
                                that satisfies--
                                          (aa) the eligibility 
                                        criteria of subsection 
                                        (c); and
                                          (bb) the requirements 
                                        of this paragraph; and
                                  (II) that is based on the 
                                consideration by the 
                                Administrator of the 
                                documentation submitted 
                                pursuant to subparagraph (B), 
                                as well as other relevant 
                                information, as determined by 
                                the Administrator, in 
                                consultation with the owner or 
                                operator.
                  (B) Documentation.--
                          (i) In general.--The Administrator 
                        shall prescribe, by regulation, the 
                        documentation necessary for making a 
                        determination of project eligibility 
                        for the certification under 
                        subparagraph (A), including--
                                  (I) in the case of a planned 
                                project receiving an advanced 
                                distribution of emission 
                                allowances, a commitment to 
                                implement carbon and permanent 
                                sequestration technology upon 
                                commencement of operation, to 
                                meet the eligibility 
                                requirements of (c)(1) by not 
                                later than 18 months after the 
                                date of commencement of 
                                operation;
                                  (II) technical information 
                                regarding the carbon capture 
                                and permanent sequestration 
                                technology, coal type, 
                                geological formation type (if 
                                applicable), and other relevant 
                                design features that are 
                                planned for the project;
                                  (III) the annual reductions 
                                in carbon dioxide emissions 
                                that the carbon capture and 
                                permanent sequestration 
                                technology is projected to 
                                achieve during each of the 
                                first 10 years that the project 
                                achieves commercial operation;
                                  (IV) a demonstration that the 
                                owner or operator is committed 
                                to both constructing and 
                                operating the planned project 
                                on a timeline marked by 
                                reasonable milestones, through 
                                the completion of 1 of the 
                                actions specified in 
                                subparagraph (C)(iii);
                                  (V) the amount of Federal 
                                funding the project owner has 
                                received, if any, to cover the 
                                costs of constructing a project 
                                that is eligible under this 
                                paragraph; and
                                  (VI) an assessment of the 
                                costs of constructing the 
                                project, which shall serve as a 
                                basis for the determination of 
                                the Administrator regarding 
                                advanced distributions under 
                                paragraph (3)(C).
                          (ii) Nonretrofit application.--In the 
                        case of a project that is not a 
                        retrofit application, the assessment of 
                        costs described in clause (i)(VI) shall 
                        include an assessment of the costs of 
                        constructing the electric generating 
                        unit or industrial source that will 
                        produce the flue gas or fuel gas to be 
                        treated by the carbon capture and 
                        permanent sequestration technology.
                  (C) Commitment.--
                          (i) In general.--Subject to clause 
                        (ii), the completion of any 1 of the 
                        qualifying actions specified under 
                        clause (iii) shall constitute a 
                        commitment to construct and operate a 
                        planned carbon capture and permanent 
                        sequestration project.
                          (ii) Condition.--In the case of a 
                        qualifying action specified in 
                        subclause (I) or (II) of clause (iii), 
                        the completion of such an action may be 
                        subject to a condition that the 
                        Administrator will issue a 
                        certification under this paragraph for 
                        the distribution of emission allowances 
                        to the project.
                          (iii) Qualifying actions.--Qualifying 
                        actions under this subparagraph shall 
                        include--
                                  (I) the execution of--
                                          (aa) a commitment by 
                                        lenders or other 
                                        appropriate entities to 
                                        finance the project, 
                                        which may be subject to 
                                        customary closing 
                                        conditions that are 
                                        associated with the 
                                        execution of the 
                                        commitment;
                                          (bb) an authorization 
                                        by a State regulatory 
                                        authority to allow 
                                        recovery, from the 
                                        retail customers of 
                                        such electric utility, 
                                        of the costs of the 
                                        project by a State-
                                        regulated electric 
                                        utility that plans to 
                                        construct the project; 
                                        or
                                          (cc) an authorization 
                                        by a State legislature 
                                        to allow recovery, from 
                                        the retail customers of 
                                        electric utilities that 
                                        are required to 
                                        purchase some or all of 
                                        the electricity from 
                                        the project pursuant to 
                                        State law, of the costs 
                                        of the project, on the 
                                        conditions that the 
                                        project has been 
                                        approved by the 
                                        legislature and, under 
                                        State law, retail 
                                        electric providers are 
                                        required collectively 
                                        to purchase all of the 
                                        net electric output 
                                        from the project; and
                                  (II) a commitment by the 
                                owner or operator of the 
                                project to execute a surety 
                                bond in sufficient amounts by 
                                not later than 2 years after 
                                the date on which the 
                                Administrator issues the 
                                certification for the project.
                  (D) Content of certification.--The 
                Administrator shall prescribe, by regulation, 
                the required content of each certification 
                issued under this paragraph, including--
                          (i) the annual reductions in carbon 
                        dioxide emissions that the carbon 
                        capture and sequestration technology 
                        the owner or operator of the planned 
                        project commits to achieve during each 
                        of the first 10 years that the project 
                        is in commercial operation, as 
                        specified in section 812;
                          (ii) the construction and operating 
                        milestones to which the owner or 
                        operator of the planned project 
                        commits;
                          (iii) a certification that the 
                        documentation submitted under 
                        subparagraph (B) is true and accurate;
                          (iv) for those sources that have 
                        received advanced distribution of 
                        emission allowances under paragraph 
                        (3)(B), the repayment periods that the 
                        Administrator has specified pursuant to 
                        paragraph (3)(D)(v) as of the effective 
                        date of the certification; and
                          (v) such other requirements as may be 
                        necessary to govern the advanced 
                        distribution of emission allowances 
                        between the Administrator and the owner 
                        or operator of the planned project, 
                        subject to the requirements of this 
                        subsection.
                  (E) Failure to request certification.--
                          (i) In general.--An owner or operator 
                        may elect not to request a 
                        certification on the eligibility of a 
                        planned project under subparagraph (A) 
                        prior to the commercial operation of 
                        the project.
                          (ii) Determination by 
                        administrator.--If an owner or operator 
                        elects not to request a certification 
                        under clause (i), the Administrator 
                        shall make a determination regarding 
                        whether the project satisfies the 
                        eligibility requirements of subsection 
                        (c) at the time that the Administrator 
                        makes a determination regarding the 
                        annual distribution of emission 
                        allowances under paragraph (3)(A).
          (2) Reservation of emission allowances.--
                  (A) Amount.--
                          (i) In general.--For each project 
                        that receives a certification of 
                        eligibility under paragraph (1), the 
                        Administrator shall reserve on a first-
                        come, first-served basis a portion of 
                        the emission allowances that are 
                        allocated for the deployment of carbon 
                        capture and permanent sequestration 
                        technology under section 771(a)(6).
                          (ii) Determination.--The reservation 
                        of emission allowances for a particular 
                        eligible project under this paragraph 
                        shall be equal to the number of 
                        emission allowances that the project 
                        would be entitled to receive under the 
                        applicable distribution method under 
                        this section upon commercial operation 
                        of the carbon capture and permanent 
                        sequestration technology, as determined 
                        by the Administrator based on--
                                  (I) the applicable bonus 
                                allowance value;
                                  (II) the number of tons of 
                                carbon dioxide emissions 
                                projected to be avoided through 
                                the use of carbon capture and 
                                permanent sequestration 
                                technologies during each 
                                calendar year under paragraph 
                                (1)(B)(i)(II); and
                                  (III) a discount rate to 
                                account for the increase in the 
                                monetary inflation that may be 
                                expected to occur during each 
                                of the relevant 10 calendar 
                                years, as determined by the 
                                Administrator.
                  (B) Termination of reservation.--
                          (i) In general.--A reservation of 
                        emission allowances for a particular 
                        project under subparagraph (A) shall 
                        terminate if the Administrator 
                        determines that the owner or operator 
                        has failed to achieve a reasonable 
                        number of milestones for commencing 
                        construction or commercial operation of 
                        the project, as specified under 
                        paragraph (1)(B)(i)(III).
                          (ii) Reduced quantity of carbon 
                        dioxide captured and sequestered.--If 
                        the quantity of carbon dioxide 
                        emissions avoided through the operation 
                        of the carbon capture and permanent 
                        sequestration project on average over 3 
                        consecutive calendar years is less than 
                        the quantity specified for those 
                        calendar years under subparagraph (A), 
                        the reservation of emission allowances 
                        for the project under subparagraph (A) 
                        shall be reduced in future years by the 
                        difference between--
                                  (I) the quantity of carbon 
                                dioxide emissions avoided 
                                through operation of the carbon 
                                capture and permanent 
                                sequestration project on 
                                average over the applicable 3 
                                consecutive years; and
                                  (II) the quantity specified 
                                under subparagraph (A) for the 
                                applicable years.
                          (iii) Availability.--The 
                        Administrator shall immediately make 
                        available to other eligible projects 
                        emission allowances for which the 
                        Administrator has terminated an 
                        emission allowance reservation for a 
                        particular project under this 
                        subparagraph.
          (3) Distribution process.--
                  (A) Annual distribution.--
                          (i) In general.--The Administrator 
                        shall distribute the emission 
                        allowances to eligible projects on an 
                        annual basis.
                          (ii) Basis.--The annual distribution 
                        of emission allowances shall be based 
                        on the total tons of carbon dioxide 
                        emissions avoided through operation of 
                        the carbon capture and permanent 
                        sequestration project during each of 
                        the first 10 years of commercial 
                        operation, in accordance with 
                        subsection (c)(2).
                          (iii) Total distribution amount.--The 
                        total amount of emission allowances 
                        distributed to an eligible project for 
                        each of the first 10 years of 
                        commercial operation may be greater 
                        than, or less than, the quantity of 
                        emissions allowances that the 
                        Administrator has reserved for the 
                        eligible project under paragraph (2).
                          (iv) Reports.--
                                  (I) In general.--Except as 
                                provided in subparagraph (B), 
                                the Administrator shall make 
                                each annual distribution of 
                                emission allowances by not 
                                later than 90 days after the 
                                date on which the owner or 
                                operator of a project submits 
                                to the Administrator a report 
                                regarding the tons of carbon 
                                dioxide emissions avoided for 
                                that year through operation of 
                                the carbon capture and 
                                permanent sequestration 
                                project.
                                  (II) Requirement.--A report 
                                under subclause (I) shall be 
                                verified in accordance with 
                                regulations to be promulgated 
                                by the Administrator.
                  (B) Advanced distribution.--
                          (i) In general.--The Administrator 
                        may provide an advanced distribution of 
                        emission allowances to the projects--
                                  (I) that receive emission 
                                allowances under the phase I 
                                distributions authorized by 
                                subsection (d); and
                                  (II) for which the 
                                Administrator has issued a 
                                certification of eligibility 
                                under paragraph (1).
                          (ii) Requirements.--An advanced 
                        distribution of emission allowances for 
                        a particular project shall be 
                        provided--
                                  (I) prior to the operational 
                                phase of the project, at an 
                                appropriate milestone that best 
                                ensures the expeditious 
                                deployment of the carbon 
                                capture and permanent 
                                sequestration technology, as 
                                determined by the 
                                Administrator;
                                  (II) in a quantity that 
                                equals a percentage, as 
                                specified in subparagraph (C), 
                                of the total number of emission 
                                allowances that the 
                                Administrator has reserved for 
                                that project during the 10-year 
                                period of commercial operation; 
                                and
                                  (III) using allowances that 
                                are drawn--
                                          (aa) from the current 
                                        vintage year; or
                                          (bb) if the 
                                        allowances are 
                                        exhausted from the 
                                        current vintage year, 
                                        in order from 
                                        successive vintage 
                                        years, beginning with 
                                        the most proximate 
                                        future vintage year.
                          (iii) Reports.--
                                  (I) In general.--The owner or 
                                operator of a planned project 
                                that receives an advanced 
                                distribution of emission 
                                allowances shall submit to the 
                                Administrator, not later than 
                                90 days after the end of each 
                                calendar year, a report 
                                describing the tons of carbon 
                                dioxide emissions avoided for 
                                that year through operation of 
                                the carbon capture and 
                                permanent sequestration project 
                                , compared to the total tons of 
                                carbon dioxide emissions 
                                generated by the unit on which 
                                the planned project is 
                                implemented.
                                  (II) Requirement.--A report 
                                under subclause (I) shall be 
                                verified in accordance with 
                                regulations promulgated by the 
                                Administrator.
                                  (III) Avoidance of 
                                duplicative reporting.--If the 
                                unit on which a planned project 
                                is implemented already submits 
                                the information required by 
                                subclause (I) to the 
                                Administrator pursuant to 
                                another reporting requirement, 
                                the owner or operator of the 
                                planned project may refer the 
                                Administrator to the other 
                                submission in which the 
                                required information is 
                                provided.
                  (C) Percentages.--
                          (i) In general.--Subject to clauses 
                        (ii) and (iii), the Administrator shall 
                        apply the following percentages for 
                        determining the advanced distribution 
                        of emission allowances:
                                  (I) 70 percent of the 
                                emission allowance reservation 
                                for the first tranche under 
                                subsection (d)(2)(A).
                                  (II) 50 percent of the 
                                emission allowance reservation 
                                for the second tranche under 
                                subsection (d)(2)(B).
                          (ii) Costs less than value of 
                        allowances.--If the costs described in 
                        clause (iii) are less than the monetary 
                        value of allowances represented by the 
                        percentages described in clause (i) at 
                        the time of advanced distribution, the 
                        advanced distribution shall be limited 
                        to an amount that is equivalent to the 
                        costs described in clause (iii).
                          (iii) Costs.--
                                  (I) In general.--For retrofit 
                                projects, the advanced 
                                distribution shall equate to 
                                100 percent of the costs of 
                                permitting, design or 
                                engineering, labor, materials, 
                                land, and equipment associated 
                                with the construction and 
                                installation of the system to 
                                capture, compress, transport, 
                                and store carbon dioxide 
                                (including design changes to 
                                the associated generating unit 
                                needed to accommodate the 
                                carbon dioxide capture and 
                                compression system).
                                  (II) New electric generating 
                                units.--For new projects--
                                          (aa) the advanced 
                                        distribution shall 
                                        equate to 100 percent 
                                        of the incremental 
                                        permitting, design or 
                                        engineering, labor, 
                                        materials, land, and 
                                        equipment cost 
                                        differences between--
                                                  (AA) a new 
                                                coal power 
                                                plant with 
                                                carbon capture 
                                                and storage; 
                                                and
                                                  (BB) a new 
                                                coal power 
                                                plant without 
                                                carbon capture 
                                                and storage in 
                                                the location 
                                                where the new 
                                                coal power 
                                                plant is being 
                                                constructed, 
                                                and for the 
                                                same intended 
                                                service 
                                                territory 
                                                absent carbon 
                                                capture and 
                                                storage; and
                                          (bb) it shall be the 
                                        responsibility of the 
                                        organization that is 
                                        requesting advanced 
                                        distributions to 
                                        provide to the 
                                        Administrator a cost 
                                        estimate for both the 
                                        new coal power plant 
                                        with carbon capture and 
                                        storage and a new coal 
                                        power plant without 
                                        carbon capture and 
                                        storage.
                                  (III) Reduction.--For the 
                                purposes of this subparagraph, 
                                the costs under this clause 
                                shall be reduced by the amounts 
                                documented under paragraph 
                                (1)(B)(i)(V).
                  (D) Reconciliation for advanced payments.--
                          (i) In general.--In the case of a 
                        project that receives an advanced 
                        distribution of emission allowances 
                        under this paragraph, the Administrator 
                        shall distribute annually the remainder 
                        of emission allowances reserved under 
                        paragraph (2) once the carbon capture 
                        and permanent sequestration technology 
                        begins commercial operation.
                          (ii) Timing of distribution.--The 
                        annual distribution of emission 
                        allowances under clause (i) shall take 
                        place not later than 60 days after the 
                        end of each calendar year.
                          (iii) Calculation of remaining 
                        distribution.--Subject to clauses (iv) 
                        and (v), the remaining distribution 
                        referred to in clause (i) shall 
                        annually be calculated upward or 
                        downward as the difference between--
                                  (I) the number of allowances 
                                that were reserved for the 
                                project in the relevant 
                                calendar year under paragraph 
                                (2)(A)(ii)(II); and
                                  (II) the number of allowances 
                                that the project would be 
                                eligible to receive under the 
                                bonus allowance formula 
                                described in subsection 
                                (c)(2)(B)(i) based on the tons 
                                of carbon dioxide emissions 
                                that were avoided through 
                                operation of the carbon capture 
                                and permanent sequestration 
                                project during the relevant 
                                calendar year.
                          (iv) Number of allowances.--For 
                        purposes of clauses (iii)(II) and 
                        (viii)(I), for the purposes of 
                        calculating the number of allowances 
                        under subsection (c)(2)(B)(i), the 
                        Administrator shall enter the average 
                        fair market value of emission 
                        allowances in the year specified under 
                        subsection (c)(2)(B)(i)(II)(bb)).
                          (v) Methods of reconciliation.--
                                  (I) In general.--If, in any 
                                calendar year, the number of 
                                tons of carbon dioxide 
                                emissions projected to be 
                                avoided for that year under 
                                paragraph (1)(B)(i)(III) is 
                                greater than the number of tons 
                                of carbon dioxide emissions 
                                that were actually avoided by a 
                                project during that year, based 
                                on the report submitted to the 
                                Administrator under paragraph 
                                (3)(B)(iii), the difference may 
                                be accounted for by--
                                          (aa) the owner or 
                                        operator of the project 
                                        capturing and storing 
                                        an additional quantity 
                                        of emissions that 
                                        cumulatively exceeds 
                                        the difference 
                                        between--
                                                  (AA) the 
                                                number of tons 
                                                of carbon 
                                                dioxide 
                                                emissions that 
                                                were projected 
                                                to be avoided 
                                                for the 
                                                relevant 
                                                calendar year 
                                                under paragraph 
                                                (1)(B)(i)(II); 
                                                and
                                                  (BB) the 
                                                number of tons 
                                                of carbon 
                                                dioxide 
                                                emissions that 
                                                were actually 
                                                avoided through 
                                                operation of 
                                                the project 
                                                during that 
                                                year;
                                          (bb) the 
                                        Administrator adjusting 
                                        the annual 
                                        distributions under 
                                        clause (iii), on the 
                                        condition that the 
                                        reduction shall be 
                                        sufficient to account 
                                        for the difference 
                                        described in this 
                                        subclause within the 
                                        period specified by the 
                                        Administrator in 
                                        subclause (II); or
                                          (cc) the owner or 
                                        operator of the project 
                                        making a repayment in 
                                        accordance with clause 
                                        (vi).
                                  (II) Period.--Compliance with 
                                subclause (I)(aa) shall occur 
                                over a period to be specified 
                                by the Administrator, but not 
                                to exceed 18 months.
                                  (III) Interest.--The 
                                Administrator may apply an 
                                appropriate rate of interest to 
                                the repayment requirement under 
                                this clause.
                          (vi) Alternate repayment by 
                        allowances or cash.--If the owner or 
                        operator of the project elects to 
                        comply by repaying in accordance with 
                        clause (v)(I)(aa), during the period 
                        specified by the Administrator under 
                        clause (v)(II), the owner or operator 
                        shall repay the Administrator an amount 
                        of allowances or cash (as calculated 
                        under clause (viii)) if--
                                  (I) the number of tons of 
                                carbon dioxide emissions that 
                                were actually avoided through 
                                operation of the project during 
                                that period is less than the 
                                number necessary to rectify the 
                                difference described in clause 
                                (v)(I); and
                                  (II) the number of allowances 
                                remaining reserved for a 
                                project is insufficient to 
                                adjust for the difference under 
                                clause (iii).
                          (vii) Milestones.--If the 
                        Administrator determines that the owner 
                        or operator failed to achieve a 
                        milestone for commencing construction 
                        or commercial operation of the project 
                        (as specified in paragraph (1)(B)), the 
                        owner or operator shall repay the 
                        Administrator an amount of allowances 
                        or cash calculated under clause (viii).
                          (viii) Calculation.--The repayments 
                        required under clauses (vi)(I) and 
                        (vii) shall be equal to, at the option 
                        of the owner or operator of the 
                        project--
                                  (I) the difference between 
                                the numbers of allowances 
                                described in subclauses (I) and 
                                (II) of clause (iii); or
                                  (II) a cash payment in an 
                                amount equal to the product 
                                obtained by multiplying--
                                          (aa) the difference 
                                        between the numbers of 
                                        allowances described in 
                                        subclauses (I) and (II) 
                                        of clause (iii); and
                                          (bb) the average fair 
                                        market value of an 
                                        emission allowance 
                                        during the year in 
                                        which the repayment 
                                        would be made under 
                                        clause (vi).
                          (ix) Use of repaid amounts.--The 
                        Administrator shall use amounts 
                        received as repayments under this 
                        subparagraph to support the deployment 
                        of carbon capture and permanent 
                        sequestration.
  (i) Limitations.--
          (1) In general.--Emission allowances shall be 
        distributed under this section only for tons of carbon 
        dioxide emissions that are captured and sequestered in 
        accordance with this section.
          (2) Period.--A qualifying project may receive annual 
        emission allowances under this section only for the 
        first 10 years of operation.
          (3) Capacity.--
                  (A) In general.--Approximately 72 gigawatts 
                of total cumulative treated generating capacity 
                may receive emission allowances under this 
                section.
                  (B) Allowance surplus.--On reaching the 
                cumulative capacity described in subparagraph 
                (A), any emission allowances that are allocated 
                for carbon capture and permanent sequestration 
                deployment under section 771(a)(6) and are not 
                yet obligated under this section shall be 
                treated as emission allowances not designated 
                for distribution for purposes of section 
                771(b)(2).
  (j) Exhaustion of Account and Annual Roll-over of Surplus 
Emission Allowances.--
          (1) In general.--In distributing emission allowances 
        under this section, the Administrator shall ensure that 
        eligible projects receive distributions of emission 
        allowances for the first 10 years of commercial 
        operation.
          (2) Different vintage years.--
                  (A) Determination.--If the Administrator 
                determines that the emission allowances 
                allocated under section 771(a)(6) with a 
                vintage year that matches the year of 
                distribution will be exhausted once the 
                estimated full 10-year distributions will be 
                provided to current eligible participants, the 
                Administrator shall provide to new eligible 
                projects emission allowances from vintage years 
                after the year of the distribution.
                  (B) Diversity factors.--If the Administrator 
                provides allowances to new eligible projects 
                under subparagraph (A), the Administrator shall 
                promulgate regulations to prioritize new 
                eligible projects that are distinguished from 
                prior recipients of allowances by 1 or more of 
                the following diversity factors (without regard 
                to order):
                          (i) Location in a coal-producing 
                        region that provides a majority of coal 
                        to the project.
                          (ii) Coal type, including waste coal.
                          (iii) Capture and transportation 
                        technologies.
                          (iv) Geological formations.
                          (v) New units and retrofit 
                        applications.
  (k) Davis-Bacon Compliance.--
          (1) In general.--All laborers and mechanics employed 
        on projects funded directly by or assisted in whole or 
        in part by this section through the use of emission 
        allowances shall be paid wages at rates not less than 
        those prevailing on projects of a character similar in 
        the locality as determined by the Secretary of Labor in 
        accordance with subchapter IV of chapter 31 of title 
        40, United States Code.
          (2) Authority.--With respect to the labor standards 
        specified in this subsection, the Secretary of Labor 
        shall have the authority and functions set forth in 
        Reorganization Plan Numbered 14 of 1950 (64 Stat. 1267; 
        5 U.S.C. App.) and section 3145 of title 40, United 
        States Code.

SEC. 781. OVERSIGHT OF ALLOCATIONS.

  (a) In General.--Not later than January 1, 2014, and every 2 
years thereafter, the Comptroller General of the United States 
shall carry out a review of programs administered by the 
Federal Government that distribute emission allowances or funds 
from any Federal auction of allowances.
  (b) Contents.--Each such report shall include a comprehensive 
evaluation of the administration and effectiveness of each 
program, including--
          (1) the efficiency, transparency, and soundness of 
        the administration of each program;
          (2) the performance of activities receiving 
        assistance under each program;
          (3) the cost-effectiveness of each program in 
        achieving the stated purposes of the program; and
          (4) recommendations, if any, for regulatory or 
        administrative changes to each program to improve its 
        effectiveness.
  (c) Focus.--In evaluating program performance, each review 
under this section review shall address the effectiveness of 
such programs in--
          (1) creating and preserving jobs;
          (2) ensuring a manageable transition for working 
        families and workers;
          (3) reducing the emissions, or enhancing 
        sequestration, of greenhouse gases;
          (4) developing clean technologies; and
          (5) building resilience to the impacts of climate 
        change.

SEC. 782. EARLY ACTION RECOGNITION.

  (a) In General.--Emission allowances allocated pursuant to 
section 771(a)(7) shall be distributed by the Administrator in 
accordance with this section. Not later than 1 year after the 
date of enactment of this title, the Administrator shall issue 
regulations allowing--
          (1) any person in the United States to exchange 
        instruments in the nature of offset credits issued 
        before January 1, 2009, by a State, local, or voluntary 
        offset program with respect to which the Administrator 
        has made an affirmative determination under section 
        740(a)(2), for emission allowances established by the 
        Administrator under section 721(a); and
          (2) the Administrator to provide compensation in the 
        form of emission allowances to entities, including 
        units of local government, that do not meet the 
        criteria of paragraph (1) and meet the criteria of this 
        paragraph for documented early reductions or avoidance 
        of greenhouse gas emissions or greenhouse gases 
        sequestered before January 1, 2009, from projects or 
        process improvements begun before January 1, 2009, 
        where--
                  (A) the entity publicly stated greenhouse gas 
                reduction goals and publicly reported against 
                those goals;
                  (B) the entity demonstrated entity-wide net 
                greenhouse gas reductions; and
                  (C) the entity demonstrates the actual 
                projects or process improvements undertaken to 
                make reductions and documents the reductions 
                (such as through documentation of engineering 
                projects).
  (b) Regulations.--Regulations issued under subsection (a) 
shall--
          (1) provide that a person exchanging credits under 
        subsection (a)(1) receive emission allowances 
        established under section 721(a) in an amount for which 
        the monetary value is equivalent to the average 
        monetary value of the credits during the period from 
        January 1, 2006, to January 1, 2009, as adjusted for 
        inflation to reflect current dollar values at the time 
        of the exchange;
          (2) provide that a person receiving compensation for 
        documented early action under subsection (a)(2) shall 
        receive emission allowances established under section 
        721(a) in an amount that is approximately equivalent in 
        value to the carbon dioxide equivalent per ton value 
        received by entities in exchange for credits under 
        paragraph (1) (as adjusted for inflation to reflect 
        current dollar values at the time of the exchange), as 
        determined by the Administrator;
          (3) provide that only reductions or avoidance of 
        greenhouse gas emissions, or sequestration of 
        greenhouse gases, achieved by activities in the United 
        States between January 1, 2001, and January 1, 2009, 
        may be compensated under this section, and only credits 
        issued for such activities may be exchanged under this 
        section;
          (4) provide that only credits that have not been 
        retired or otherwise used to meet a voluntary or 
        mandatory commitment, and have not expired, may be 
        exchanged under subsection (a)(1);
          (5) require that, once exchanged, the credit be 
        retired for purposes of use under the program by or for 
        which it was originally issued; and
          (6) establish a deadline by which persons must 
        exchange the credits or request compensation for early 
        action under this section.
  (c) Participation.--Participation in an exchange of credits 
for allowances or compensation for early action authorized by 
this section shall not preclude any person from participation 
in an offset credit program established under part D.

SEC. 783. ESTABLISHMENT OF DEFICIT REDUCTION FUND.

  (a) Deficit Reduction Fund.--There is established in the 
Treasury of the United States a fund, to be known as the 
`Deficit Reduction Fund'.
  (b) Disbursements.--No disbursement shall be made from the 
Deficit Reduction Fund except pursuant to an appropriation Act.

            TITLE VIII--ADDITIONAL GREENHOUSE GAS STANDARDS

SEC. 801. DEFINITIONS.

  For purposes of this title, terms that are defined in title 
VII, except for the term `stationary source', shall have the 
meanings given those terms in title VII.

                  PART A--STATIONARY SOURCE STANDARDS

SEC. 811. STANDARDS OF PERFORMANCE.

  (a) Definition of Uncapped Greenhouse Gas Emissions.--In this 
section, the term `uncapped greenhouse gas emissions' means 
those greenhouse gas emissions to which section 722 does not 
apply.
  (b) Standards.--Before January 1, 2020, the Administrator 
shall not promulgate new source performance standards for 
greenhouse gases under section 111 that are applicable to any 
stationary source that--
          (1) emits uncapped greenhouse gas emissions; and
          (2) qualifies as an eligible offset project pursuant 
        to section 733 that is eligible to receive an offset 
        credit pursuant to section 737.

           *       *       *       *       *       *       *

SEC. 812. PERFORMANCE STANDARDS FOR NEW COAL-FIRED POWER PLANTS.

  (a) Definitions.--In this section:
          (1) Covered egu.--The term `covered EGU' means a 
        utility unit that is--
                  (A) required to have a permit under section 
                503(a); and
                  (B) authorized under State or Federal law to 
                derive at least 30 percent of the annual heat 
                input of the unit from--
                          (i) coal;
                          (ii) petroleum coke; or
                          (iii) any combination of those fuels.
          (2) Initially permitted.--
                  (A) In general.--The term `initially 
                permitted', with respect to a covered EGU, 
                means that--
                          (i) the owner or operator of the 
                        covered EGU has received a 
                        preconstruction approval or permit 
                        under this Act as a new (not modified) 
                        source; but
                          (ii) administrative review or appeal 
                        of the approval or permit has not been 
                        exhausted.
                  (B) Calculation.--A subsequent modification 
                of any approval or permit described in 
                subparagraph (A), ongoing administrative or 
                court review, appeals, challenges, or the 
                existence or tolling of any time to pursue 
                additional review, appeals, or challenges shall 
                not affect the date on which a covered EGU is 
                considered to be initially permitted for 
                purposes of this paragraph.
  (b) Standards.--
          (1) In general.--A covered EGU that is initially 
        permitted on or after January 1, 2020, shall--
                  (A) achieve an emission limitation that 
                represents a 65-percent reduction in emissions 
                of the carbon dioxide produced by the covered 
                EGU, as measured on an annual basis; or
                  (B) meet such more-stringent standard as the 
                Administrator may establish pursuant to 
                subsection (c).
          (2) Certain covered egus.--
                  (A) In general.--A covered EGU that is 
                initially permitted during the period beginning 
                on January 1, 2009, and ending on December 31, 
                2019, shall achieve, by the applicable 
                compliance date established under this 
                paragraph, an emission limitation that 
                represents a 50-percent reduction in emissions 
                of the carbon dioxide produced by the covered 
                EGU, as measured on an annual basis.
                  (B) Date of requirement.--Compliance with the 
                requirement described in subparagraph (A) shall 
                be required by the earlier of--
                          (i) the date that is 4 years after 
                        the date on which the Administrator has 
                        published pursuant to subsection (d) a 
                        report that there are in commercial 
                        operation in the United States electric 
                        generating units or other stationary 
                        sources equipped with carbon capture 
                        and permanent sequestration technology 
                        that, in the aggregate--
                                  (I) have a total of at least 
                                10 gigawatts of capacity 
                                (including at least 3 gigawatts 
                                which shall be through electric 
                                generating units, and up to 1 
                                gigawatt which may be through 
                                industrial applications (for 
                                which capture and permanent 
                                sequestration of 3,000,000 tons 
                                of carbon dioxide per year on 
                                an aggregate annualized basis 
                                shall be considered equivalent 
                                to 1 gigawatt)), measured as 
                                the sum of--
                                          (aa) the treated 
                                        generating capacity (as 
                                        defined in section 
                                        780(a)) for electric 
                                        generating unit 
                                        retrofits and 
                                        industrial sources; and
                                          (bb) the nameplate 
                                        capacity for new 
                                        electric generating 
                                        units;
                                  ``(II) include at least 3 
                                electric generating units, each 
                                with a nameplate generating 
                                capacity of 250 megawatts or 
                                greater, that capture, inject, 
                                and sequester carbon dioxide 
                                into geological formations 
                                other than oil and gas fields; 
                                and
                                  (III) are capturing and 
                                sequestering at least 
                                12,000,000 tons of carbon 
                                dioxide per year, calculated on 
                                an aggregate annualized basis; 
                                or
                          (ii) January 1, 2020.
          (3) Progress review.--
                  (A) In general.--Not later than June 30, 
                2017, the Administrator and the Secretary of 
                Energy shall jointly prepare and submit to 
                Congress a review of the status of commercial 
                deployment of carbon capture and permanent 
                sequestration technology that specifies--
                          (i) the number of and size of units 
                        in the United States that are capturing 
                        and permanently sequestering carbon 
                        dioxide;
                          (ii) the tons of carbon dioxide being 
                        captured and permanently sequestered by 
                        those units; and
                          (iii) the geographical and 
                        technological diversity represented by 
                        those units and that technology.
                  (B) Finding.--To accompany the report under 
                subparagraph (A), the Administrator and the 
                Secretary of Energy shall make a finding that, 
                in light of the status of commercial deployment 
                of carbon capture and permanent sequestration 
                technology, the date set forth in paragraph 
                (2)(B)(ii) should--
                          (i) remain in effect; or
                          (ii) in accordance with subparagraph 
                        (C), be extended to January 1, 2022.
                  (C) Conditions for extension.--The date set 
                forth in paragraph (2)(B)(ii) shall be extended 
                to January 1, 2022, only if--
                          (i) the Administrator and the 
                        Secretary jointly find, pursuant to 
                        subparagraph (B), that the extension 
                        should occur; and
                          (ii) Congress acts to approve the 
                        finding by not later than January 1, 
                        2018.
          (4) Unit-specific extension.--
                  (A) In general.--If the deadline for 
                compliance with paragraph (2) is the date 
                specified in paragraph (2)(B), the 
                Administrator may extend the deadline for 
                compliance by a covered EGU by not more than 18 
                months if the Administrator makes a 
                determination, based on a showing by the owner 
                or operator of the covered EGU, that it will be 
                technically infeasible for the covered EGU to 
                meet the standard by that date.
                  (B) Request.--An owner or operator of a 
                covered EGU shall submit to the Administrator a 
                request for an extension under subparagraph (A) 
                by not later than June 1, 2018.
                  (C) Public comment.--The Administrator shall 
                provide for public notice and comment on each 
                extension request submitted under subparagraph 
                (B).
  (c) Review and Revision of Standards.--Not later than the 
date specified in subsection (b)(2)(B), and not less frequently 
than once every 5 years thereafter, the Administrator shall--
          (1) review the standards for new covered EGUs under 
        this section; and
          (2) by rule, reduce the maximum carbon dioxide 
        emission rate for new covered EGUs to a rate that 
        reflects the degree of emission limitation achievable 
        through the application of the best system of emission 
        reduction that (taking into account the cost of 
        achieving the reduction and any nonair quality health 
        and environmental impact and energy requirements) the 
        Administrator determines has been adequately 
        demonstrated.
  (d) Reports.--Not later than the date that is 18 months after 
the date of enactment of this title, and semiannually 
thereafter, the Administrator shall publish a report on the 
nameplate capacity of units (determined pursuant to subsection 
(b)(2)(A)) in commercial operation in the United States 
equipped with carbon capture and storage technology, including 
the information described in subsection (b)(2)(A) (including 
the cumulative generating capacity to which carbon capture and 
storage retrofit projects meeting the criteria described in 
section 780(c)(1)(A) has been applied and the quantities of 
carbon dioxide captured and sequestered by those projects).
  (e) Regulations.--Not later than 2 years after the date of 
enactment of this title, the Administrator shall promulgate 
regulations to carry out the requirements of this section.

SEC. 813. GEOLOGICAL STORAGE SITES.

  (a) Coordinated Process.--
          (1) In general.--The Administrator shall establish a 
        coordinated approach to certifying and permitting 
        geological storage, taking into consideration all 
        relevant statutory authorities.
          (2) Requirements.--In establishing such approach, the 
        Administrator shall--
                  (A) take into account, and reduce redundancy 
                with, the requirements of section 1421 of the 
                Safe Drinking Water Act (42 U.S.C. 300h), 
                including the rulemaking for geological storage 
                wells described in the proposed rule entitled 
                `Federal Requirements Under the Underground 
                Injection Control (UIC) Program for Carbon 
                Dioxide (CO2) Geologic Sequestration (GS) 
                Wells' (73 Fed. Reg. 43492 (July 25, 2008)); 
                and
                  (B) to the maximum extent practicable, reduce 
                the burden on certified entities and 
                implementing authorities.
  (b) Regulations.--Not later than 2 years after the date of 
enactment of this title, the Administrator shall promulgate 
regulations to protect human health and the environment by 
minimizing the risk of escape to the atmosphere of carbon 
dioxide injected for purposes of geological storage.
  (c) Requirements.--The regulations under subsection (b) shall 
include--
          (1) a process to obtain certification for geological 
        storage under this section; and
          (2) requirements for--
                  (A) monitoring, recordkeeping, and reporting 
                for emissions associated with injection into, 
                and escape from, geological storage sites, 
                taking into account any requirements or 
                protocols developed under section 713;
                  (B) public participation in the certification 
                process that maximizes transparency;
                  (C) the sharing of data among States, Indian 
                tribes, and the Environmental Protection 
                Agency; and
                  (D) other elements or safeguards necessary to 
                achieve the purpose described in subsection 
                (b).
  (d) Report.--
          (1) In general.--Not later than 2 years after the 
        date of promulgation of regulations pursuant to 
        subsection (b), and not less frequently than once every 
        3 years thereafter, the Administrator shall submit to 
        the Committee on Energy and Commerce of the House of 
        Representatives and the Committee on Environment and 
        Public Works of the Senate a report describing 
        geological storage in the United States, and, to the 
        extent relevant, other countries in North America.
          (2) Inclusions.--Each report under paragraph (1) 
        shall include--
                  (A) data regarding injection, emissions to 
                the atmosphere, if any, and performance of 
                active and closed geological storage sites, 
                including those at which enhanced hydrocarbon 
                recovery operations occur;
                  (B) an evaluation of the performance of 
                relevant Federal environmental regulations and 
                programs in ensuring environmentally protective 
                geological storage practices;
                  (C) recommendations on how those programs and 
                regulations should be improved or made more 
                effective; and
                  (D) other relevant information.

                         PART B--MOBILE SOURCES

SEC. 821. GREENHOUSE GAS EMISSION STANDARDS FOR MOBILE SOURCES.

  (a) New Motor Vehicles and New Motor Vehicle Engines.--(1) 
Pursuant to section 202(a)(1), by December 31, 2010, the 
Administrator shall promulgate standards applicable to 
emissions of greenhouse gases from new heavy-duty motor 
vehicles or new heavy-duty motor vehicle engines, excluding 
such motor vehicles covered by the Tier II standards (as 
established by the Administrator as of the date of the 
enactment of this section). The Administrator may revise these 
standards from time to time.
  (2) Regulations issued under section 202(a)(1) applicable to 
emissions of greenhouse gases from new heavy-duty motor 
vehicles or new heavy-duty motor vehicle engines, excluding 
such motor vehicles covered by the Tier II standards (as 
established by the Administrator as of the date of the 
enactment of this section), shall contain standards that 
reflect the greatest degree of emissions reduction achievable 
through the application of technology which the Administrator 
determines will be available for the model year to which such 
standards apply, giving appropriate consideration to cost, 
energy, and safety factors associated with the application of 
such technology. Any such regulations shall take effect after 
such period as the Administrator finds necessary to permit the 
development and application of the requisite technology, and, 
at a minimum, shall apply for a period no less than 3 model 
years beginning no earlier than the model year commencing 4 
years after such regulations are promulgated.
  (3) Regulations issued under section 202(a)(1) applicable to 
emissions of greenhouse gases from new heavy-duty motor 
vehicles or new heavy-duty motor vehicle engines, excluding 
such motor vehicles covered by the Tier II standards (as 
established by the Administrator as of the date of the 
enactment of this section), shall supersede and satisfy any and 
all of the rulemaking and compliance requirements of section 
32902(k) of title 49, United States Code.
  (4) Other than as specifically set forth in paragraph (3) of 
this subsection, nothing in this section shall affect or 
otherwise increase or diminish the authority of the Secretary 
of Transportation to adopt regulations to improve the overall 
fuel efficiency of the commercial goods movement system.
  (b) Nonroad Vehicles and Engines.--(1) Pursuant to section 
213(a)(4) and (5), the Administrator shall identify those 
classes or categories of new nonroad vehicles or engines, or 
combinations of such classes or categories, that, in the 
judgment of the Administrator, both contribute significantly to 
the total emissions of greenhouse gases from nonroad engines 
and vehicles, and provide the greatest potential for 
significant and cost-effective reductions in emissions of 
greenhouse gases. The Administrator shall promulgate standards 
applicable to emissions of greenhouse gases from these new 
nonroad engines or vehicles by December 31, 2012. The 
Administrator shall also promulgate standards applicable to 
emissions of greenhouse gases for such other classes and 
categories of new nonroad vehicles and engines as the 
Administrator determines appropriate and in the timeframe the 
Administrator determines appropriate. The Administrator shall 
base such determination, among other factors, on the relative 
contribution of greenhouse gas emissions, and the costs for 
achieving reductions, from such classes or categories of new 
nonroad engines and vehicles. The Administrator may revise 
these standards from time to time.
  (2) Standards under section 213(a)(4) and (5) applicable to 
emissions of greenhouse gases from those classes or categories 
of new nonroad engines or vehicles identified in the first 
sentence of paragraph (1) of this subsection, shall achieve the 
greatest degree of emissions reduction achievable based on the 
application of technology which the Administrator determines 
will be available at the time such standards take effect, 
taking into consideration cost, energy, and safety factors 
associated with the application of such technology. Any such 
regulations shall take effect at the earliest possible date 
after such period as the Administrator finds necessary to 
permit the development and application of the requisite 
technology, giving appropriate consideration to the cost of 
compliance within such period, the applicable compliance dates 
for other standards, and other appropriate factors, including 
the period of time appropriate for the transfer of applicable 
technology from other applications, including motor vehicles, 
and the period of time in which previously promulgated 
regulations have been in effect.
  (3) For purposes of this section and standards under section 
213(a)(4) or (5) applicable to emissions of greenhouse gases, 
the term `nonroad engines and vehicles' shall include non-
internal combustion engines and the vehicles these engines 
power (such as electric engines and electric vehicles), for 
those non-internal combustion engines and vehicles which would 
be in the same category and have the same uses as nonroad 
engines and vehicles that are powered by internal combustion 
engines.
  (c) Averaging, Banking, and Trading of Emissions Credits.--In 
establishing standards applicable to emissions of greenhouse 
gases pursuant to this section and sections 202(a), 213(a)(4) 
and (5), and 231(a), the Administrator may establish provisions 
for averaging, banking, and trading of greenhouse gas emissions 
credits within or across classes or categories of motor 
vehicles and motor vehicle engines, nonroad vehicles and 
engines (including marine vessels), and aircraft and aircraft 
engines, to the extent the Administrator determines appropriate 
and considering the factors appropriate in setting standards 
under those sections. Such provisions may include reasonable 
and appropriate provisions concerning generation, banking, 
trading, duration, and use of credits.
  (d) Reports.--The Administrator shall, from time to time, 
submit a report to Congress that projects the amount of 
greenhouse gas emissions from the transportation sector, 
including transportation fuels, for the years 2030 and 2050, 
based on the standards adopted under this section.
  (e) Greenhouse Gases.--Notwithstanding the provisions of 
section 711, hydrofluorocarbons shall be considered a 
greenhouse gas for purposes of this section.

SEC. 822. SMARTWAY TRANSPORTATION EFFICIENCY PROGRAM.

  (a) In General.--There is established within the 
Environmental Protection Agency a SmartWay Transportation 
Efficiency Program to quantify, demonstrate, and promote the 
benefits of technologies, products, fuels, and operational 
strategies that reduce petroleum consumption, air pollution, 
and greenhouse gas emissions from the mobile source sector.
  (b) General Duties.--Under the program established under this 
section, the Administrator shall carry out each of the 
following:
          (1) Development of measurement protocols to evaluate 
        the energy consumption and greenhouse gas impacts from 
        technologies and strategies in the mobile source 
        sector, including those for passenger transport and 
        goods movement.
          (2) Development of qualifying thresholds for 
        certifying, verifying, or designating energy-efficient, 
        low-greenhouse gas SmartWay technologies and strategies 
        for each mode of passenger transportation and goods 
        movement.
          (3) Development of partnership and recognition 
        programs to promote best practices and drive demand for 
        energy-efficient, low-greenhouse gas transportation 
        performance.
          (4) Promotion of the availability of, and 
        encouragement of the adoption of, SmartWay certified or 
        verified technologies and strategies, and publication 
        of the availability of financial incentives, such as 
        assistance from loan programs and other Federal and 
        State incentives.
  (c) Smartway Transport Freight Partnership.--The 
Administrator shall establish a SmartWay Transport Partnership 
program with shippers and carriers of goods to promote energy-
efficient, low-greenhouse gas transportation. In carrying out 
such partnership, the Administrator shall undertake each of the 
following:
          (1) Verification of the energy and greenhouse gas 
        performance of participating freight carriers, 
        including those operating rail, trucking, marine, and 
        other goods movement operations.
          (2) Publication of a comprehensive energy and 
        greenhouse gas performance index of freight modes 
        (including rail, trucking, marine, and other modes of 
        transporting goods) and individual freight companies so 
        that shippers can choose to deliver their goods more 
        efficiently.
          (3) Development of tools for--
                  (A) carriers to calculate their energy and 
                greenhouse gas performance; and
                  (B) shippers to calculate the energy and 
                greenhouse gas impacts of moving their products 
                and to evaluate the relative impacts from 
                transporting their goods by different modes and 
                corporate carriers.
          (4) Provision of recognition opportunities for 
        participating shipper and carrier companies 
        demonstrating advanced practices and achieving superior 
        levels of greenhouse gas performance.
  (d) Improving Freight Greenhouse Gas Performance Databases.--
The Secretary of Transportation shall, in coordination with 
other appropriate agencies, define and collect data on the 
physical and operational characteristics of the Nation's truck 
population, with special emphasis on data related to energy 
efficiency and greenhouse gas performance to inform the 
performance index published under subsection (c)(2) of this 
section, and other means of goods transport as necessary, at 
least every 5 years.
  (e) SmartWay Passenger Transport Study.--
          (1) In general.--Not later than 1 year after the date 
        of enactment of this section, the Administrator shall 
        submit to the Committee on Environment and Public Works 
        of the Senate and the Committee on Energy and Commerce 
        of the House of Representatives a report that describes 
        the results of a study of the commercial passenger 
        carrier industry, including tour, charter, intercity, 
        commuter, and other passenger operations.
          (2) Inclusions.--The study under paragraph (1) shall 
        include--
                  (A) an identification of options for 
                commercial passenger carriers to promote 
                energy-efficient, low-greenhouse gas emission 
                transportation; and
                  (B) at the discretion of the Administrator, 
                support for a partnership and recognition 
                program for those commercial passenger carrier 
                companies that demonstrate and achieve superior 
                levels of greenhouse gas emissions performance.
  (f) Establishment of Financing Program.--The Administrator 
shall establish a SmartWay Financing Program to competitively 
award funding to eligible entities identified by the 
Administrator in accordance with the program requirements in 
subsection (h).
  (g) Purposes.--Under the SmartWay Financing Program, eligible 
entities shall--
          (1) use funds awarded by the Administrator to provide 
        flexible loan and/or lease terms that increase approval 
        rates or lower the costs of loans and/or leases in 
        accordance with guidance developed by the 
        Administrator;
          (2) make such loans and/or leases available to public 
        and private entities for the purpose of adopting low-
        greenhouse gas technologies or strategies for the 
        mobile source sector that are designated by the 
        Administrator; and
          (3) use funds provided by the Administrator for 
        electrification of freight transportation systems in 
        major national goods movement corridors, giving 
        priority to electrification of transportation systems 
        in areas that are gateways for high volumes of 
        international and national freight transport and 
        require substantial criteria pollutant emission 
        reductions in order to attain national ambient air 
        quality standards.
  (h) Program Requirements.--The Administrator shall determine 
program design elements and requirements, including--
          (1) the type of financial mechanism with which to 
        award funding, in the form of grants and/or contracts;
          (2) the designation of eligible entities to receive 
        funding, such as State, tribal, and local governments, 
        regional organizations comprised of governmental units, 
        nonprofit organizations, or for-profit companies;
          (3) criteria for evaluating applications from 
        eligible entities, including anticipated--
                  (A) cost-effectiveness of loan or lease 
                program on a metric-ton-of-greenhouse gas-
                saved-per-dollar basis; and
                  (B) ability to promote the loan or lease 
                program and associated technologies and 
                strategies to the target audience; and
          (4) reporting requirements for entities that receive 
        awards, including--
                  (A) actual cost-effectiveness and greenhouse 
                gas savings from the loan or lease program 
                based on a methodology designated by the 
                Administrator;
                  (B) the total number of applications and 
                number of approved applications; and
                  (C) terms granted to loan and lease 
                recipients compared to prevailing market 
                practices and/or rates.
  (i) Authorization of Appropriations.--Such sums as necessary 
are authorized to be appropriated to the Administrator to carry 
out this section.

                    PART C--TRANSPORTATION EMISSIONS

SEC. 831. GREENHOUSE GAS EMISSION REDUCTIONS THROUGH TRANSPORTATION 
                    EFFICIENCY.

  (a) In General.--The Administrator, in consultation with the 
Secretary of Transportation (referred to in this part as the 
``Secretary''), shall promulgate, and update from time to time, 
regulations to establish--
          (1) national transportation-related greenhouse gas 
        emission reduction goals that are commensurate with the 
        emission reduction goals established under the Clean 
        Energy Jobs and American Power Act and amendments made 
        by that Act;
          (2) standardized emission models and related methods, 
        to be used by States, metropolitan planning 
        organizations, and air quality agencies to address 
        emission reduction goals, including--
                  (A) the development of surface 
                transportation-related greenhouse gas emission 
                reduction targets pursuant to sections 134 and 
                135 of title 23, and sections 5303 and 5304 of 
                title 49, United States Code;
                  (B) the assessment of projected surface 
                transportation-related greenhouse gas emissions 
                from transportation strategies;
                  (C) the assessment of projected surface 
                transportation-related greenhouse gas emissions 
                from State and regional transportation plans;
                  (D) the establishment of surface 
                transportation-related greenhouse gas emission 
                baselines at a national, State, and regional 
                levels; and
                  (E) the measurement and assessment of actual 
                surface transportation-related emissions to 
                assess progress toward achievement of emission 
                targets at the State and regional levels;
          (3) methods for collection of data on transportation-
        related greenhouse gas emissions; and
          (4) publication and distribution of successful 
        strategies employed by States, Indian tribes, 
        metropolitan planning organizations, and other entities 
        to reduce transportation-related greenhouse gas 
        emissions.
  (b) Role of Department of Transportation.--The Secretary, in 
consultation with the Administrator, shall promulgate, and 
update from time to time, regulations--
          (1) to improve the ability of transportation planning 
        models and tools, including travel demand models, to 
        address greenhouse gas emissions;
          (2) to assess projected surface transportation-
        related travel activity and transportation strategies 
        from State and regional transportation plans; and
          (3) to update transportation planning requirements 
        and approval of transportation plans as necessary to 
        carry out this section.
  (c) Consultation and Models.--In promulgating the 
regulations, the Administrator and the Secretary--
          (1) shall consult with States, Indian tribes, 
        metropolitan planning organizations, and air quality 
        agencies;
          (2) may use existing models and methodologies if the 
        models and methodologies are widely considered to 
        reflect the best practicable modeling or methodological 
        approach for assessing actual and projected 
        transportation-related greenhouse gas emissions from 
        transportation plans and projects; and
          (3) shall consider previously developed plans that 
        were based on models and methodologies for reducing 
        greenhouse gas emissions in applying those regulations 
        to the first approvals after promulgation.
  (d) Timing.--The Administrator and the Secretary shall--
          (1) publish proposed regulations under subsections 
        (a) and (b) not later than 1 year after the date of 
        enactment of this section; and
          (2) promulgate final regulations under subsections 
        (a) and (b) not later than 18 months after the date of 
        enactment of this section.
  (e) Assessment.--
          (1) In general.--At least every 6 years after 
        promulgating final regulations under subsections (a) 
        and (b), the Administrator and the Secretary shall 
        jointly assess current and projected progress in 
        reducing national transportation-related greenhouse gas 
        emissions.
          (2) Requirements.--The assessment shall examine the 
        contributions to emission reductions attributable to--
                  (A) improvements in vehicle efficiency;
                  (B) greenhouse gas performance of 
                transportation fuels;
                  (C) reductions in vehicle miles traveled;
                  (D) changes in consumer demand and use of 
                transportation management systems; and
                  (E) any other greenhouse gas-related 
                transportation policies enacted by Congress.
          (3) Results of assessment.--The Secretary and the 
        Administrator shall consider--
                  (A) the results of the assessment conducted 
                under this subsection; and
                  (B) based on those results, whether technical 
                or other updates to regulations required under 
                this section and sections 134 and 135 of title 
                23, and sections 5303 and 5304 of title 49, 
                United States Code, are necessary.

           *       *       *       *       *       *       *

SEC. 832. TRANSPORTATION GREENHOUSE GAS EMISSION REDUCTION PROGRAM 
                    GRANTS.

  (a) In General.--The Secretary of Transportation (referred to 
in this section as the `Secretary') shall provide grants to 
States and metropolitan planning organizations to carry out the 
purposes of this section for each fiscal year--
          (1) to support the developing and updating of 
        transportation greenhouse gas reduction targets and 
        strategies; and
          (2) to provide financial assistance to implement 
        plans approved pursuant to--
                  (A) sections 134(k)(6) and 135(f)(9) of title 
                23, United States Code; and
                  (B) sections 5303(k)(6) and 5304(f)(9) of 
                title 49, United States Code.
  (b) Planning Grants.--
          (1) In general.--Subject to paragraph (2), the 
        Secretary shall allocate not more than 10 percent of 
        the funds available to carry out this section for a 
        fiscal year for metropolitan planning organizations to 
        develop and update transportation plans, including 
        targets and strategies for greenhouse gas emission 
        reduction under--
                  (A) sections 134(k)(6) and 135(f)(9) of title 
                23, United States Code; and
                  (B) sections 5303(k)(6) and 5304(f)(9) of 
                title 49, United States Code.
          (2) Eligible organizations.--The Secretary shall 
        distribute the funds available in (1) to metropolitan 
        planning organizations (as defined in section 134(k)(7) 
        of title 23, United States Code) in the proportion 
        that--
                  (A) the population within such a metropolitan 
                planning organization; bears to
                  (B) the total population of all such 
                metropolitan planning organizations.
  (c) Performance Grants.--
          (1) In general.--After allocating funds pursuant to 
        subsection (b)(1), and subject to subsection (h), the 
        Secretary shall use the remainder of amounts made 
        available to carry out this section to provide grants 
        to States and metropolitan planning organizations.
          (2) Criteria.--In providing grants under this 
        subsection, the Secretary, in consultation with the 
        Administrator, shall develop criteria for providing the 
        grants, taking into consideration, with respect to 
        areas to be covered by the grants--
                  (A) the quantity of total greenhouse gas 
                emissions to be reduced as a result of 
                implementation of a plan, within a covered 
                area, as determined by methods established 
                under section 831(a);
                  (B) the quantity of total greenhouse gas 
                emissions to be reduced per capita as a result 
                of implementation of a plan, within the covered 
                area, as determined by methods established 
                under section 831(a);
                  (C) the cost-effectiveness of reducing 
                greenhouse gas emissions during the life of the 
                plan;
                  (D) progress toward achieving emission 
                reductions target established under--
                          (i) sections 134(k)(6) and 135(f)(9) 
                        of title 23, United States Code; and
                          (ii) sections 5303(k)(6) and 
                        5304(f)(9) of title 49, United States 
                        Code;
                  (E) reductions in greenhouse gas emissions 
                previously achieved by States and metropolitan 
                planning organizations during the 5-year period 
                beginning on the date of enactment of this Act;
                  (F) plans that increase transportation 
                options and mobility, particularly for low-
                income individuals, minorities, the elderly, 
                households without motor vehicles, cost-
                burdened households, and the disabled; and
                  (G) other factors, including innovative 
                approaches, minimization of costs, and 
                consideration of economic development, revenue 
                generation, consumer fuel cost-savings, and 
                other economic, environmental and health 
                benefits, as the Secretary determines to be 
                appropriate.
  (d) Requirement for Reduced Emissions.--A performance grant 
under subsection (c) may be used only to fund strategies that 
demonstrate a reduction in greenhouse gas emissions that is 
sustainable over the life of the applicable transportation 
plan.
  (e) Cost-sharing.--The Federal share of the costs of a 
project receiving Federal financial assistance under this 
section shall be 80 percent.
  (f) Compliance With Applicable Laws.--
          (1) In general.--Subject to paragraph (2), a project 
        receiving funds under this section shall comply with 
        all applicable Federal laws (including regulations), 
        including--
                  (A) subchapter IV of chapter 31 of title 40, 
                United States Code; and
                  (B) applicable requirements of titles 23 and 
                49, United States Code.
          (2) Eligibility.--Project eligibility shall be 
        determined in accordance with this section.
          (3) Determination of applicable modal requirements.--
        The Secretary shall--
                  (A) have the discretion to designate the 
                specific modal requirements that shall apply to 
                a project; and
                  (B) be guided by the predominant modal 
                characteristics of the project in the event 
                that a project has cross-modal application.
  (g) Additional Requirements.--
          (1) In general.--As a condition on the receipt of 
        financial assistance under this section, the interests 
        of public transportation employees affected by the 
        assistance shall be protected under arrangements that 
        the Secretary of Labor determines--
                  (A) to be fair and equitable; and
                  (B) to provide benefits equal to the benefits 
                established under section 5333(b) of title 49, 
                United States Code.
          (2) Wages and benefits.--Laborers and mechanics 
        employed on projects funded with amounts made available 
        under this section shall be paid wages and benefits not 
        less than those determined by the Secretary of Labor 
        under subchapter IV of chapter 31 of title 40, United 
        States Code, to be prevailing in the same locality.
  (h) Administrative Expenses.--Not more than 5 percent of the 
funds made available to carry out this section may be used by 
the Secretary to pay the administrative expenses necessary to 
carry out this section for a fiscal year.
  (i) Miscellaneous.--
          (1) Road-use and congestion pricing measures.--All 
        projects funded by amounts made available under this 
        section shall be eligible to receive amounts collected 
        through road-use and congestion pricing measures.
          (2) Limitations.--The Administrator may not approve 
        any transportation plan for a project that would be 
        inconsistent with existing design, procurement, and 
        construction guidelines established by the Department 
        of Transportation.
          (3) Subgrantees.--With the approval of the Secretary, 
        recipients of funding under this section may enter into 
        agreements providing for the transfer of funds to 
        private transportation providers or noneligible public 
        entities (such as local governments, air quality 
        agencies, zoning commissions, special districts and 
        transit agencies) that have statutory responsibility or 
        authority for actions necessary to implement the 
        strategies pursuant to--
                  (A) sections 134(k)(6) and 135(f)(9) of title 
                23, United States Code; and
                  (B) sections 5303(k)(6) and 5304(f)(9) of 
                title 49, United States Code.

           *       *       *       *       *       *       *

Part D--Plan Requirements for Nonattainment Areas

           *       *       *       *       *       *       *

                          PART E--BLACK CARBON

SEC. 851. BLACK CARBON.

  (a) Domestic Black Carbon Mitigation.--
          (1) In general.--Taking into consideration the public 
        health and environmental impacts of black carbon 
        emissions, including the effects on global and regional 
        warming, the Arctic, and other snow and ice-covered 
        surfaces, the Administrator shall--
                  (A) not later than 2 years after the date of 
                enactment of this part, propose--
                          (i) regulations applicable to 
                        emissions of black carbon under the 
                        existing authorities of this Act; or
                          (ii) a finding that existing 
                        regulations promulgated pursuant to 
                        this Act adequately regulate black 
                        carbon emissions, which finding may be 
                        based on a finding that existing 
                        regulations, in the judgment of the 
                        Administrator--
                                  (I) address those sources 
                                that both contribute 
                                significantly to the total 
                                emissions of black carbon and 
                                provide the greatest potential 
                                for significant and cost-
                                effective reductions in 
                                emissions of black carbon, 
                                under the existing authorities; 
                                and
                                  (II) reflect the greatest 
                                degree of emission reduction 
                                achievable through application 
                                of technology that will be 
                                available for such sources, 
                                giving appropriate 
                                consideration to cost, energy, 
                                and safety factors associated 
                                with the application of such 
                                technology; and
                  (B) not later than 3 years after the date of 
                enactment of this part, promulgate final 
                regulations under the existing authorities of 
                this Act or finalize the proposed finding.
          (2) Applicability of regulations.--Regulations 
        promulgated under paragraph (1) shall not apply to 
        specific types, classes, categories, or other suitable 
        groupings of emission sources that the Administrator 
        finds are subject to adequate regulation.
  (b) Authorization of Appropriations.--There are authorized to 
be appropriated such sums as are necessary to carry out this 
section.

           *       *       *       *       *       *       *

                         PART F--MISCELLANEOUS

SEC. 861. STATE PROGRAMS.

  (a) In General.--Notwithstanding section 116, if a Federal 
auction is conducted, by the deadline of March 31, 2011, as 
established in section 778, no State or political subdivision 
thereof shall implement or enforce a comprehensive greenhouse 
gas emission limitation program that covers any capped 
emissions emitted during the years 2012 through 2017.
  (b) Deadline.--Notwithstanding section 116, in the event the 
March 31, 2011 auction is delayed, no State or political 
subdivision thereof shall enforce a comprehensive greenhouse 
gas emission limitation program that covers any capped 
emissions emitted during the period that commences at least 9 
months after the date of the first auction as set out in 
section 778, through 2017.
  (c) Definition of Comprehensive Greenhouse Gas Emission 
Limitation Program.--For purposes of this section, the term 
`comprehensive greenhouse gas emission limitation program' 
means a system of greenhouse gas regulation under which a State 
or political subdivision issues a limited number of tradable 
instruments in the nature of emission allowances and requires 
that sources within its jurisdiction surrender such tradable 
instruments for each unit of greenhouse gases emitted during a 
compliance period. For purposes of this section, a 
`comprehensive greenhouse gas emission limitation program' does 
not include a target or limit on greenhouse gas emissions 
adopted by a State or political subdivision that is implemented 
other than through the issuance and surrender of a limited 
number of tradable instruments in the nature of emission 
allowances, nor does it include any other standard, limit, 
regulation, or program to reduce greenhouse gas emissions that 
is not implemented through the issuance and surrender of a 
limited number of tradable instruments in the nature of 
emission allowances. For purposes of this section, the term 
`comprehensive greenhouse gas emission limitation program' does 
not include, among other things, fleet-wide motor vehicle 
emission requirements that allow greater emissions with 
increased vehicle production, or requirements that fuels, or 
other products, meet an average pollution emission rate or 
lifecycle greenhouse gas standard.

SEC. 862. GRANTS FOR SUPPORT OF AIR POLLUTION CONTROL PROGRAMS.

  The Administrator is authorized to make grants to air 
pollution control agencies pursuant to section 105 for purposes 
of assisting in the implementation of programs to address 
global warming established under the Clean Energy Jobs and 
American Power Act.

SEC. 863. REDUCING ACID RAIN AND MERCURY POLLUTION.

  (a) In General.--Not later than 18 months after the date of 
enactment of this part, the Administrator shall submit to 
Congress a report that analyzes the effects of different carbon 
dioxide reduction strategies and technologies on the emissions 
of mercury, sulfur dioxide, and nitrogen oxide, which cause 
acid rain, particulate matter, ground-level ozone, mercury 
contamination, and other environmental problems.
  (b) Inclusions.--The report under subsection (a) shall 
include--
          (1) an assessment of a variety of carbon reduction 
        technologies, including the application of various 
        carbon capture and sequestration technologies for new 
        and existing power plants;
          (2) an assessment of the current scientific and 
        technical understanding of the interplay between the 
        various technologies and emissions of air pollutants;
          (3) identification of hurdles to strategies that 
        could cost-effectively reduce emissions of multiple 
        pollutants; and
          (4) appropriate recommendations of the Administrator, 
        if any.

           *       *       *       *       *       *       *

          [TITLE IV--NOISE POLLUTION]TITLE IX--NOISE POLLUTION

  Sec. [401]901. This title may be cited as the ``Noise 
Pollution and Abatement Act of 1970''.
  Sec. [402]902. (a) The Administrator shall establish within 
the the Environmental Protection Agency an Office of Noise 
Abatement and Control, and shall carry out through such Office 
a full and complete investigation and study of noise and its 
effect on the public health and welfare in order to (1) 
identify and classify causes and sources of noise, and (2) 
determine--
          (A) effects at various levels;
          (B) projected growth of noise levels in urban areas 
        through the year 2000;
          (C) the psychological and physiological effect on 
        humans;
          (D) effects of sporadic extreme noise (such as jet 
        noise near airports) as compared with constant noise;
          (E) effect on wildlife and property (including 
        values);
          (F) effect of sonic booms on property (including 
        values); and
          (G) such other matters as may be of interest in the 
        public welfare.
  (b) In conducting such investigation, the Administrator shall 
hold public hearings, conduct research, experiments, 
demonstrations, and studies. The Administrator shall report the 
results of such investigation and study, together with his 
recommendations for legislation or other action, to the 
President and the Congress not later than one year after the 
date of enactment of this title.
  (c) In any case where any Federal department or a agency is 
carrying out or sponsoring any activity resulting in noise 
which the administrator determines amounts to a public nuisance 
or is otherwise objectionable, such department or agency shall 
consult with the Administrator to determine possible means of 
abating such noise.
  Sec. [403]903. There is authorized to be appropriated such 
amount, not to exceed $30,000,000, as may be necessary for the 
purposes of this title.

           *       *       *       *       *       *       *

Chapter 1 of Title 23, United States Code

           *       *       *       *       *       *       *

    Sec. 134

Metropolitan transportation planning

  (a) Policy.--It is in the national interest to--
          (1) encourage and promote the safe and efficient 
        management, operation, and development of surface 
        transportation systems that will serve the mobility 
        needs of people and freight and foster economic growth 
        and development within and between States and urbanized 
        areas, while [minimizing]reducing transportation-
        related fuel consumption, reliance on oil, impacts on 
        the environment, transportation-related greenhouse gas 
        emissions, and air pollution through metropolitan and 
        statewide transportation planning processes identified 
        in this chapter; and

           *       *       *       *       *       *       *

  (h) Scope of Planning Process.--
          (1) In general.--The metropolitan planning process 
        for a metropolitan planning area under this section 
        shall provide for consideration of projects and 
        strategies that will--
                  (A) support the economic vitality of the 
                metropolitan area, especially by enabling 
                global competitiveness, productivity, and 
                efficiency;
                  (B) increase the safety of the transportation 
                system for motorized and nonmotorized users;
                  (C) increase the security of the 
                transportation system for motorized and 
                nonmotorized users;
                  (D) increase the accessibility and mobility 
                of people and for freight;
                  (E) protect and enhance the environment, 
                promote energy conservation, sustainability, 
                and livability, reduce surface transportation-
                related greenhouse gas emissions and reliance 
                on oil, adapt to the effects of climate change, 
                improve the quality of life and public health, 
                and promote consistency between transportation 
                improvements and State and local planned growth 
                and economic development patterns,including 
                housing and land use patterns;

           *       *       *       *       *       *       *

  (i) Development of Transportation Plan.--
          (1) In general.--* * *

           *       *       *       *       *       *       *

          (4) Consultation.--
                  (A) In general.--In each metropolitan area, 
                the metropolitan planning organization shall 
                [consult, as appropriate,]cooperate with State 
                and local agencies responsible 
                fortransportation, public transportation, air 
                quality, and housing, and shall consult, as 
                appropriate, with State and local agencies and 
                Indian tribes responsible for land use 
                management, natural resources, environmental 
                protection, conservation,public health, and 
                historic preservation concerning the 
                development of a long-range transportation 
                plan.
                  (B) Issues.--The consultation shall involve, 
                as appropriate--
                          (i) comparison of transportation 
                        plans with State conservation plans or 
                        maps, if available; or
                          (ii) comparison of transportation 
                        plans to inventories of natural or 
                        historic resources, if available.
          (5) Participation by interested parties.--
                  (A) In general.--Each metropolitan planning 
                organization shall provide citizens, affected 
                public agencies, representatives of public 
                transportation employees, freight shippers, 
                providers of freight transportation services, 
                private providers of transportation, 
                representatives of users of public 
                transportation, representatives of users of 
                pedestrian walkways and bicycle transportation 
                facilities, representatives of the disabled, 
                and other interested parties with a reasonable 
                opportunity to comment on the transportation 
                plan.
                  (B) Contents of participation plan.--A 
                participation plan--
                          (i) shall be developed in 
                        consultation with all interested 
                        parties; and
                          (ii) shall provide that all 
                        interested parties have reasonable 
                        opportunities to comment on the 
                        contents of the transportation plan.
                  (C) Methods.--In carrying out subparagraph 
                (A), the metropolitan planning organization 
                shall, to the maximum extent practicable--
                          (i) hold any public meetings at 
                        convenient and accessible locations and 
                        times;
                          (ii) employ visualization techniques 
                        to describe plans; and
                          (iii) make public information 
                        available in electronically accessible 
                        format and means, such as the World 
                        Wide Web, as appropriate to afford 
                        reasonable opportunity for 
                        consideration of public information 
                        under subparagraph (A).
          (6) Publication.--A transportation plan involving 
        Federal participation shall be published or otherwise 
        made readily available by the metropolitan planning 
        organization for public review, including (to the 
        maximum extent practicable) in electronically 
        accessible formats and means, such as the World Wide 
        Web and through the website of the metropolitan 
        planning organization, including emission reduction 
        targets and strategies developed under subsection (k) 
        (6), including an analysis of the anticipated effects 
        of the targets and strategies,, approved by the 
        metropolitan planning organization and submitted for 
        information purposes to the Governor at such times and 
        in such manner as the Secretary shall establish.
          (7) Selection of projects from illustrative list.--
        Notwithstanding paragraph (2)(C), a State or 
        metropolitan planning organization shall not be 
        required to select any project from the illustrative 
        list of additional projects included in the financial 
        plan under paragraph (2)(C).

           *       *       *       *       *       *       *

  (k) Transportation Management Areas.--
          (1) Identification and designation.--
                  (A) Required identification.--* * *

           *       *       *       *       *       *       *

          (6) Transportation greenhouse gas reduction 
        efforts.--
                  (A) In general.--Within a metropolitan 
                planning area serving a transportation 
                management area, the transportation planning 
                process under this section shall address 
                transportation-related greenhouse gas emissions 
                by including emission reduction targets and 
                strategies to meet those targets.
                  (B) Eligible organizations.--
                          (i) MPOS within tmas.--All provisions 
                        and requirements of this section, 
                        including the requirements of the 
                        transportation greenhouse gas reduction 
                        efforts, shall apply to metropolitan 
                        planning organizations that also serve 
                        as transportation management areas.
                          (ii) Other mpos.--A metropolitan 
                        planning organization that does not 
                        serve as a transportation management 
                        area--
                                  (I) may develop 
                                transportation greenhouse gas 
                                emission reduction targets and 
                                strategies to meet those 
                                targets; and
                                  (II) if those targets and 
                                strategies are developed, shall 
                                be subject to all applicable 
                                provisions and requirements of 
                                this section and the Clean 
                                Energy Jobs and American Power 
                                Act, including requirements of 
                                the transportation greenhouse 
                                gas reduction efforts.
                  (C) Establishment of targets and criteria.--
                          (i) In general.--Not later than 2 
                        years after the promulgation of the 
                        final regulations required under 
                        section 831 of the Clean Air Act, each 
                        metropolitan planning organization that 
                        also serves as a transportation 
                        management area shall develop surface 
                        transportation-related greenhouse gas 
                        emission reduction targets, as well as 
                        strategies to meet those targets, in 
                        consultation with State air agencies 
                        and Indian tribes as part of the 
                        metropolitan transportation planning 
                        process under this section.
                          (ii) Multiple designations.--If more 
                        than 1 metropolitan planning 
                        organization has been designated within 
                        a metropolitan area, each metropolitan 
                        planning organization shall coordinate 
                        with other metropolitan planning 
                        organizations in the same metropolitan 
                        area to develop the targets and 
                        strategies described in clause (i).
                          (iii) Minimum requirements.--Each 
                        metropolitan transportation plan 
                        developed by a metropolitan planning 
                        organization under clause (i) shall, 
                        within the plan, demonstrate progress 
                        in stabilizing and reducing 
                        transportation-related greenhouse gas 
                        emissions so as to contribute to the 
                        achievement of State targets pursuant 
                        to section 135(f)(9).
                          (iv) Requirements for targets and 
                        strategies.--The targets and strategies 
                        developed under this subparagraph 
                        shall, at a minimum--
                                  (I) be based on the emission 
                                and travel demand models and 
                                related methodologies 
                                established in the final 
                                regulations required under 
                                section 831 of the Clean Air 
                                Act;
                                  (II) inventory all sources of 
                                surface transportation-related 
                                greenhouse gas emissions;
                                  (III) apply to those modes of 
                                surface transportation that are 
                                addressed in the planning 
                                process under this section;
                                  (IV) be integrated and 
                                consistent with regional 
                                transportation plans and 
                                transportation improvement 
                                programs; and
                                  (V) be selected through 
                                scenario analysis, and include, 
                                pursuant to the requirements of 
                                the transportation planning 
                                process under this section, 
                                transportation investment and 
                                management strategies that 
                                reduce greenhouse gas emissions 
                                from the transportation sector 
                                over the life of the plan, such 
                                as--
                                          (aa) efforts to 
                                        increase public 
                                        transportation 
                                        ridership, including 
                                        through service 
                                        improvements, capacity 
                                        expansions, and access 
                                        enhancement;
                                          (bb) efforts to 
                                        increase walking, 
                                        bicycling, and other 
                                        forms of nonmotorized 
                                        transportation;
                                          (cc) implementation 
                                        of zoning and other 
                                        land use regulations 
                                        and plans to support 
                                        infill, transit-
                                        oriented development, 
                                        redevelopment, or mixed 
                                        use development;
                                          (dd) travel demand 
                                        management programs 
                                        (including carpool, 
                                        vanpool, or car-share 
                                        projects), 
                                        transportation pricing 
                                        measures, parking 
                                        policies, and programs 
                                        to promote 
                                        telecommuting, flexible 
                                        work schedules, and 
                                        satellite work centers;
                                          (ee) surface 
                                        transportation system 
                                        operation improvements, 
                                        including intelligent 
                                        transportation systems 
                                        or other operational 
                                        improvements to reduce 
                                        long-term greenhouse 
                                        gas emissions through 
                                        reduced congestion and 
                                        improved system 
                                        management;
                                          (ff) intercity 
                                        passenger rail 
                                        improvements;
                                          (gg) intercity bus 
                                        improvements;
                                          (hh) freight rail 
                                        improvements;
                                          (ii) use of materials 
                                        or equipment associated 
                                        with the construction 
                                        or maintenance of 
                                        transportation projects 
                                        that reduce greenhouse 
                                        gas emissions;
                                          (jj) public 
                                        facilities for 
                                        supplying electricity 
                                        to electric or plug-in 
                                        hybrid-electric 
                                        vehicles; or
                                          (kk) any other effort 
                                        that demonstrates 
                                        progress in reducing 
                                        transportation-related 
                                        greenhouse gas 
                                        emissions in each 
                                        metropolitan planning 
                                        organization under this 
                                        subsection.
                  (D) Review and approval.--Not later than 180 
                days after the date of submission of a plan 
                under this section--
                          (i) the Secretary and the 
                        Administrator shall review the plan; 
                        and
                          (ii) the Secretary shall make a 
                        determination that the plan submitted 
                        by a metropolitan planning organization 
                        meets the requirements of subparagraph 
                        (C) if--
                                  (I) the Secretary finds that 
                                a metropolitan planning 
                                organization has developed, 
                                submitted, and published the 
                                plan of the metropolitan 
                                planning organization pursuant 
                                to this section;
                                  (II) the Secretary, in 
                                consultation with the 
                                Administrator, determines that 
                                the plan is likely to achieve 
                                the targets established by the 
                                metropolitan planning 
                                organization under this 
                                subsection; and
                                  (III) the development of the 
                                plan complies with the minimum 
                                requirements established under 
                                clauses (iii) and (iv) of 
                                subparagraph (C).
                  (E) Certification.--
                          (i) In general.--Only metropolitan 
                        planning organizations that meet the 
                        requirements of subparagraph (C) shall 
                        be eligible to receive performance 
                        grants under section 113(c).
                          (ii) Failure to comply.--Failure to 
                        comply with the requirements under 
                        subparagraph (C) shall not impact 
                        certification standards under paragraph 
                        (5).
          (7) Definition of metropolitan planning 
        organization.--In this subsection, the term 
        `metropolitan planning organization' means a 
        metropolitan planning organization described in clause 
        (i) or (ii) of paragraph (6)(B).
          (8) Scenario analysis.--The term `scenario analysis' 
        means the use of a planning tool that--
                  (A) develops a range of scenarios 
                representing various combinations of 
                transportation and land use strategies, and 
                estimates of how each of those scenarios would 
                perform in meeting the greenhouse gas emission 
                reduction targets based on analysis of various 
                forces (such as health, transportation, 
                economic or environmental factors, and land 
                use) that affect growth;
                  (B) may include features such as--
                          (i) the involvement of the general 
                        public, key stakeholders, and elected 
                        officials on a broad scale;
                          (ii) the creation of an opportunity 
                        for those participants to educate each 
                        other as to growth trends and trade-
                        offs, as a means to incorporate values 
                        and feedback into future plans; and
                          (iii) the use of continuing efforts 
                        and ongoing processes; and
                  (C) may include key elements such as--
                          (i) identification of the driving 
                        forces behind planning decisions and 
                        outcomes;
                          (ii) determination of patterns of 
                        interaction;
                          (iii) creation of scenarios for 
                        discussion purposes;
                          (iv) analysis of implications;
                          (v) evaluation of scenarios; and
                          (vi) use of monitoring indicators.

           *       *       *       *       *       *       *

    Sec. 135

 Statewide transportation planning

  (a) General Requirements.--
          (1) Development of plans and programs.--* * *

           *       *       *       *       *       *       *

  (d) Scope of Planning Process.--
          (1) In general.--Each State shall carry out a 
        statewide transportation planning process that provides 
        for consideration and implementation of projects, 
        strategies, and services that will--
                  (A) support the economic vitality of the 
                United States, the States, nonmetropolitan 
                areas, and metropolitan areas, especially by 
                enabling global competitiveness, productivity, 
                and efficiency;
                  (B) increase the safety of the transportation 
                system for motorized and nonmotorized users;
                  (C) increase the security of the 
                transportation system for motorized and 
                nonmotorized users;
                  (D) increase the accessibility and mobility 
                of people and freight;
                  (E) protect and enhance the environment, 
                promote energy conservation,sustainability, and 
                livability, reduce surface transportation-
                related greenhouse gas emissions and reliance 
                on oil, adapt to the effects of climate change, 
                improve the quality of lifeand public health, 
                and promote consistency between transportation 
                improvements and State and local planned growth 
                and economic development patterns, including 
                housing and land use patterns;

           *       *       *       *       *       *       *

  (f) Long-Range Statewide Transportation Plan.--
          (1) Development.--Each State shall develop a long-
        range statewide transportation plan, with a minimum 20-
        year forecast period for all areas of the State, that 
        provides for the development and implementation of the 
        intermodal transportation system of the State.
          (2) Consultation with governments.--
                  (A) Metropolitan areas.--The statewide 
                transportation plan shall be developed for each 
                metropolitan area in the State in cooperation 
                with the metropolitan planning organization 
                designated for the metropolitan area under 
                section 134.
                  (B) Nonmetropolitan areas.--With respect to 
                nonmetropolitan areas, the statewide 
                transportation plan shall be developed in 
                consultation with affected nonmetropolitan 
                officials with responsibility for 
                transportation. The Secretary shall not review 
                or approve the consultation process in each 
                State.
                  (C) Indian tribal areas.--With respect to 
                each area of the State under the jurisdiction 
                of an Indian tribal government, the statewide 
                transportation plan shall be developed in 
                consultation with the tribal government and the 
                Secretary of the Interior.
                  (D) Consultation, comparison, and 
                consideration.--
                          (i) In general.--The long-range 
                        transportation plan shall be 
                        developed[, as appropriate, in 
                        consultation] in cooperation with State 
                        and local agencies and Indian tribes 
                        responsible for transportation, public 
                        transportation, air quality, and 
                        housing and in consultation with State, 
                        tribal, and local agencies responsible 
                        for land use management, natural 
                        resources, environmental protection, 
                        conservation,public health, and 
                        historic preservation.

           *       *       *       *       *       *       *

          (3) Participation by interested parties.--
                  (A) In general.--In developing the statewide 
                transportation plan, the State shall provide 
                citizens, affected public agencies, 
                representatives of public transportation 
                employees, freight shippers, private providers 
                of transportation, representatives of users of 
                public transportation, representatives of users 
                of pedestrian walkways and bicycle 
                transportation facilities, representatives of 
                the disabled, providers of freight 
                transportation services, and other interested 
                parties with a reasonable opportunity to 
                comment on the proposed plan.
                  (B) Methods.--In carrying out subparagraph 
                (A), the State shall, to the maximum extent 
                practicable--
                          (i) hold any public meetings at 
                        convenient and accessible locations and 
                        times;
                          (ii) employ visualization techniques 
                        to describe plans; and
                          (iii) make public information 
                        available in electronically accessible 
                        format and means, such as the World 
                        Wide Weband through the website of the 
                        State, including emission reduction 
                        targets and strategies developed under 
                        paragraph (9) and an analysis of the 
                        anticipated effects of the targets and 
                        strategies, as appropriate to afford 
                        reasonable opportunity for 
                        consideration of public information 
                        under subparagraph (A).

           *       *       *       *       *       *       *

          (8) Publication of long-range transportation plans.--
        Each long-range transportation plan prepared by a State 
        shall be published or otherwise made available, 
        including (to the maximum extent practicable) in 
        electronically accessible formats and means, such as 
        the World Wide Web.
          (9) Transportation greenhouse gas reduction 
        efforts.--
                  (A) In general.--Within a State, the 
                transportation planning process under this 
                section, shall address transportation-related 
                greenhouse gas emissions by including emission 
                reduction targets and strategies to meet those 
                targets.
                  (B) Establishment of targets and criteria.--
                          (i) In general.--Not later than 2 
                        years after the promulgation of the 
                        final regulations required under 
                        section 831 of the Clean Air Act, each 
                        State shall develop surface 
                        transportation-related greenhouse gas 
                        emission reduction targets, as well as 
                        strategies to meet those targets, in 
                        consultation with State air agencies 
                        and Indian tribes as part of the 
                        transportation planning process under 
                        this section.
                          (ii) Minimum requirements.--Each 
                        transportation plan developed by a 
                        State under clause (i) shall, within 
                        the plan, demonstrate progress in 
                        stabilizing and reducing 
                        transportation-related greenhouse gas 
                        emissions in the State so as to 
                        contribute to the achievement of 
                        national goals pursuant to section 
                        831(a)(1) of the Clean Air Act.
                          (iii) Requirements for targets and 
                        strategies.--The targets and strategies 
                        developed under this subparagraph 
                        shall, at a minimum--
                                  (I) be based on the emission 
                                models and related 
                                methodologies established in 
                                the final regulations required 
                                under section 831 of the Clean 
                                Air Act;
                                  (II) inventory all sources of 
                                surface transportation-related 
                                greenhouse gas emissions;
                                  (III) apply to those modes of 
                                surface transportation that are 
                                addressed in the planning 
                                process under this section;
                                  (IV) be integrated and 
                                consistent with statewide 
                                transportation plans and 
                                statewide transportation 
                                improvement programs; and
                                  (V) be selected through 
                                scenario analysis (as defined 
                                in section 134(k)), and 
                                include, pursuant to the 
                                requirements of the 
                                transportation planning process 
                                under this section, 
                                transportation investment and 
                                management strategies that 
                                reduce greenhouse gas emissions 
                                from the transportation sector 
                                over the life of the plan, such 
                                as--
                                          (aa) efforts to 
                                        increase public 
                                        transportation 
                                        ridership, including 
                                        through service 
                                        improvements, capacity 
                                        expansions, and access 
                                        enhancement;
                                          (bb) efforts to 
                                        increase walking, 
                                        bicycling, and other 
                                        forms of nonmotorized 
                                        transportation;
                                          (cc) implementation 
                                        of zoning and other 
                                        land use regulations 
                                        and plans to support 
                                        infill, transit-
                                        oriented development, 
                                        redevelopment, or mixed 
                                        use development;
                                          (dd) travel demand 
                                        management programs 
                                        (including carpool, 
                                        vanpool, or car-share 
                                        projects), 
                                        transportation pricing 
                                        measures, parking 
                                        policies, and programs 
                                        to promote 
                                        telecommuting, flexible 
                                        work schedules, and 
                                        satellite work centers;
                                          (ee) surface 
                                        transportation system 
                                        operation improvements, 
                                        including intelligent 
                                        transportation systems 
                                        or other operational 
                                        improvements to reduce 
                                        congestion and improve 
                                        system management;
                                          (ff) intercity 
                                        passenger rail 
                                        improvements;
                                          (gg) intercity bus 
                                        improvements;
                                          (hh) freight rail 
                                        improvements;
                                          (ii) use of materials 
                                        or equipment associated 
                                        with the construction 
                                        or maintenance of 
                                        transportation projects 
                                        that reduce greenhouse 
                                        gas emissions;
                                          (jj) public 
                                        facilities for 
                                        supplying electricity 
                                        to electric or plug-in 
                                        hybrid-electric 
                                        vehicles; or
                                          (kk) any other effort 
                                        that demonstrates 
                                        progress in reducing 
                                        transportation-related 
                                        greenhouse gas 
                                        emissions.
                  (C) Coordination and consultation with public 
                agencies.--Transportation greenhouse gas 
                targets and plans pursuant to this section 
                shall be developed--
                          (i) in coordination with--
                                  (I) all metropolitan planning 
                                organizations covered by this 
                                section within the State; and
                                  (II) transportation and air 
                                quality agencies within the 
                                State;
                          (ii) in consultation with 
                        representatives of State and local 
                        housing, economic development, and land 
                        use agencies; and
                          (iii) in consultation with Indian 
                        tribes contiguous to the State.
                  (D) Enforcement.--Not later than 180 days 
                after the date of submission of a plan under 
                this section--
                          (i) the Secretary and the 
                        Administrator shall review the plan; 
                        and
                          (ii) the Secretary shall make a 
                        determination that the plan submitted 
                        by a State meets the requirements of 
                        subparagraph (B) if--
                                  (I) the Secretary finds that 
                                a State has developed, 
                                submitted, and published the 
                                plan pursuant to this section;
                                  (II) the Secretary, in 
                                consultation with the 
                                Administrator, determines that 
                                the plan is likely to achieve 
                                the targets established by the 
                                State under this subsection; 
                                and
                                  (III) the development of the 
                                plan complies with the minimum 
                                requirements established under 
                                clauses (ii) and (iii) of 
                                subparagraph (B).
                  (E) Planning finding.--
                          (i) In general.--Only States that 
                        meet the requirements of subparagraph 
                        (B) shall be eligible to receive 
                        performance grants under section 
                        113(c).
                          (ii) Failure to comply.--Failure to 
                        comply with the requirements under 
                        subparagraph (B) shall not impact the 
                        planning finding under subsection 
                        (g)(7).

           *       *       *       *       *       *       *

                      TITLE 49, UNITED STATES CODE

           *       *       *       *       *       *       *
    Sec. 5303

Metropolitan transportation planning

  (a) Policy.--It is in the national interest to--
          (1) encourage and promote the safe and efficient 
        management, operation, and development of surface 
        transportation systems that will serve the mobility 
        needs of people and freight and foster economic growth 
        and development within and between States and urbanized 
        areas, while [minimizing]reducing transportation-
        related fuel consumption, reliance on oil, impacts on 
        the environment, transportation-related greenhouse gas 
        emissions and air pollution through metropolitan and 
        statewide transportation planning processes identified 
        in this chapter; and

           *       *       *       *       *       *       *

  (h) Scope of Planning Process.--
          (1) In general.--The metropolitan planning process 
        for a metropolitan planning area under this section 
        shall provide for consideration of projects and 
        strategies that will--
                  (A) support the economic vitality of the 
                metropolitan area, especially by enabling 
                global competitiveness, productivity, and 
                efficiency;
                  (B) increase the safety of the transportation 
                system for motorized and nonmotorized users;
                  (C) increase the security of the 
                transportation system for motorized and 
                nonmotorized users;
                  (D) increase the accessibility and mobility 
                of people and for freight;
                  (E) protect and enhance the environment, 
                promote energy conservation, sustainability, 
                and livability, reduce surface transportation-
                related greenhouse gas emissions and reliance 
                on oil, adapt to the effects of climate change, 
                improve the quality of life and public health, 
                and promote consistency between transportation 
                improvements and State and local planned growth 
                and economic development patterns, including 
                housing and land use patterns;

           *       *       *       *       *       *       *

  (i) Development of Transportation Plan.--
          (1) In general.--* * *

           *       *       *       *       *       *       *

          (4) Consultation.--
                  (A) In general.--In each metropolitan area, 
                the metropolitan planning organization shall 
                [consult, as appropriate,]cooperate with State 
                and local agencies responsible for 
                transportation, public transportation, air 
                quality, and housing, and shall consult, as 
                appropriate, with State and local agencies and 
                Indian tribes responsible for land use 
                management, natural resources, environmental 
                protection, conservation, public health, and 
                historic preservation concerning the 
                development of a long-range transportation 
                plan.

           *       *       *       *       *       *       *

          (5) Participation by interested parties.--
                  (A) In general.--Each metropolitan planning 
                organization shall provide citizens, affected 
                public agencies, representatives of public 
                transportation employees, freight shippers, 
                providers of freight transportation services, 
                private providers of transportation, 
                representatives of users of public 
                transportation, representatives of users of 
                pedestrian walkways and bicycle transportation 
                facilities, representatives of the disabled, 
                and other interested parties with a reasonable 
                opportunity to comment on the transportation 
                plan.
                  (B) Contents of participation plan.--A 
                participation plan--
                          (i) shall be developed in 
                        consultation with all interested 
                        parties; and
                          (ii) shall provide that all 
                        interested parties have reasonable 
                        opportunities to comment on the 
                        contents of the transportation plan.
                  (C) Methods.--In carrying out subparagraph 
                (A), the metropolitan planning organization 
                shall, to the maximum extent practicable--
                          (i) hold any public meetings at 
                        convenient and accessible locations and 
                        times;
                          (ii) employ visualization techniques 
                        to describe plans; and
                          (iii) make public information 
                        available in electronically accessible 
                        format and means, such as the World 
                        Wide Web and through the website of the 
                        metropolitan planning organization, 
                        including emission reduction targets 
                        and strategies developed under 
                        subsection (k)(6), including an 
                        analysis of the anticipated effects of 
                        the targets and strategies, as 
                        appropriate to afford reasonable 
                        opportunity for consideration of public 
                        information under subparagraph (A).

           *       *       *       *       *       *       *

  (k) Transportation Management Areas.--* * *

           *       *       *       *       *       *       *

          (5) Certification.--
                  (A) In general.--The Secretary shall--
                          (i) ensure that the metropolitan 
                        planning process of a metropolitan 
                        planning organization serving a 
                        transportation management area is being 
                        carried out in accordance with 
                        applicable provisions of Federal law; 
                        and
                          (ii) subject to subparagraph (B), 
                        certify, not less often than once every 
                        4 years, that the requirements of this 
                        paragraph are met with respect to the 
                        metropolitan planning process.
                  (B) Requirements for certification.--The 
                Secretary may make the certification under 
                subparagraph (A) if--
                          (i) the transportation planning 
                        process complies with the requirements 
                        of this section and other applicable 
                        requirements of Federal law; and
                          (ii) there is a TIP for the 
                        metropolitan planning area that has 
                        been approved by the metropolitan 
                        planning organization and the Governor.
                  (C) Effect of failure to certify.--
                          (i) Withholding of project funds.--If 
                        a metropolitan planning process of a 
                        metropolitan planning organization 
                        serving a transportation management 
                        area is not certified, the Secretary 
                        may withhold up to 20 percent of the 
                        funds attributable to the metropolitan 
                        planning area of the metropolitan 
                        planning organization for projects 
                        funded under this chapter and title 23.
                          (ii) Restoration of withheld funds.--
                        The withheld funds shall be restored to 
                        the metropolitan planning area at such 
                        time as the metropolitan planning 
                        process is certified by the Secretary.
                  (D) Review of certification.--In making 
                certification determinations under this 
                paragraph, the Secretary shall provide for 
                public involvement appropriate to the 
                metropolitan area under review.
          (6) Transportation greenhouse gas reduction 
        efforts.--
                  (A) In general.--Within a metropolitan 
                planning area serving a transportation 
                management area, the transportation planning 
                process under this section shall address 
                transportation-related greenhouse gas emissions 
                by including emission reduction targets and 
                strategies to meet those targets.
                  (B) Eligible organizations.--
                          (i) In general.--The requirements of 
                        the transportation greenhouse gas 
                        reduction efforts shall apply only to 
                        metropolitan planning organizations 
                        within a transportation management 
                        area.
                          (ii) Development of plan.--A 
                        metropolitan planning organization that 
                        does not serve as a transportation 
                        management area--
                                  (I) may develop 
                                transportation greenhouse gas 
                                emission reduction targets and 
                                strategies to meet those 
                                targets; and
                                  (II) if those targets and 
                                strategies are developed, shall 
                                be subject to all provisions 
                                and requirements of this 
                                section, including requirements 
                                of the transportation 
                                greenhouse gas reduction 
                                efforts.
                  (C) Establishment of targets and criteria.--
                          (i) In general.--Not later than 2 
                        years after the promulgation of the 
                        final regulations required under 
                        section 831 of the Clean Air Act, each 
                        metropolitan planning organization 
                        shall develop surface transportation-
                        related greenhouse gas emission 
                        reduction targets, as well as 
                        strategies to meet those targets, in 
                        consultation with State air agencies 
                        and Indian tribes as part of the 
                        metropolitan transportation planning 
                        process under this section.
                          (ii) Multiple designations.--If more 
                        than 1 metropolitan planning 
                        organization has been designated within 
                        a metropolitan area, each metropolitan 
                        planning organization shall coordinate 
                        with other metropolitan planning 
                        organizations in the same metropolitan 
                        area to develop the targets and 
                        strategies described in clause (i).
                          (iii) Minimum requirements.--Each 
                        metropolitan transportation plan 
                        developed by a metropolitan planning 
                        organization under clause (i) shall, 
                        within the plan, demonstrate progress 
                        in stabilizing and reducing 
                        transportation-related greenhouse gas 
                        emissions so as to contribute to the 
                        achievement of State targets pursuant 
                        to section 135(f)(9) of title 23.
                          (iv) Requirements for targets and 
                        strategies.--The targets and strategies 
                        developed under this subparagraph 
                        shall, at a minimum--
                                  (I) be based on the emission 
                                models and related 
                                methodologies established in 
                                the final regulations required 
                                under section 831 of the Clean 
                                Air Act;
                                  (II) inventory all sources of 
                                surface transportation-related 
                                greenhouse gas emissions;
                                  (III) apply to those modes of 
                                surface transportation that are 
                                addressed in the planning 
                                process under this section;
                                  (IV) be integrated and 
                                consistent with regional 
                                transportation plans and 
                                transportation improvement 
                                programs; and
                                  (V) be selected through 
                                scenario analysis (as defined 
                                in section 134(k) of title 23), 
                                and include, pursuant to the 
                                requirements of the 
                                transportation planning process 
                                under this section, 
                                transportation investment and 
                                management strategies that 
                                reduce greenhouse gas emissions 
                                from the transportation sector 
                                over the life of the plan, such 
                                as--
                                          (aa) efforts to 
                                        increase public 
                                        transportation 
                                        ridership, including 
                                        through service 
                                        improvements, capacity 
                                        expansions, and access 
                                        enhancement;
                                          (bb) efforts to 
                                        increase walking, 
                                        bicycling, and other 
                                        forms of nonmotorized 
                                        transportation;
                                          (cc) implementation 
                                        of zoning and other 
                                        land use regulations 
                                        and plans to support 
                                        infill, transit-
                                        oriented development, 
                                        redevelopment, or mixed 
                                        use development;
                                          (dd) travel demand 
                                        management programs 
                                        (including carpool, 
                                        vanpool, or car-share 
                                        projects), 
                                        transportation pricing 
                                        measures, parking 
                                        policies, and programs 
                                        to promote 
                                        telecommuting, flexible 
                                        work schedules, and 
                                        satellite work centers;
                                          (ee) surface 
                                        transportation system 
                                        operation improvements, 
                                        including intelligent 
                                        transportation systems 
                                        or other operational 
                                        improvements to reduce 
                                        long-term greenhouse 
                                        gas emissions through 
                                        reduced congestion and 
                                        improved system 
                                        management;
                                          (ff) intercity 
                                        passenger rail 
                                        improvements;
                                          (gg) intercity bus 
                                        improvements;
                                          (hh) freight rail 
                                        improvements;
                                          (ii) use of materials 
                                        or equipment associated 
                                        with the construction 
                                        or maintenance of 
                                        transportation projects 
                                        that reduce greenhouse 
                                        gas emissions;
                                          (jj) public 
                                        facilities for 
                                        supplying electricity 
                                        to electric or plug-in 
                                        hybrid-electric 
                                        vehicles; or
                                          (kk) any other effort 
                                        that demonstrates 
                                        progress in reducing 
                                        transportation-related 
                                        greenhouse gas 
                                        emissions in each 
                                        metropolitan planning 
                                        organization under this 
                                        subsection.
                  (D) Review and approval.--Not later than 180 
                days after the date of submission of a plan 
                under this section--
                          (i) the Secretary and the 
                        Administrator shall review the plan; 
                        and
                          (ii) the Secretary shall make a 
                        determination that the plan submitted 
                        by a metropolitan planning organization 
                        meets the requirements of subparagraph 
                        (C) if--
                                  (I) the Secretary finds that 
                                a metropolitan planning 
                                organization has developed, 
                                submitted, and published the 
                                plan of the metropolitan 
                                planning organization pursuant 
                                to this section;
                                  (II) the Secretary, in 
                                consultation with the 
                                Administrator, determines that 
                                the plan is likely to achieve 
                                the targets established by the 
                                metropolitan planning 
                                organization under this 
                                subsection; and
                                  (III) the development of the 
                                plan complies with the minimum 
                                requirements established under 
                                clauses (iii) and (iv) of 
                                subparagraph (C).
                  (E) Certification.--
                          (i) In general.--Only metropolitan 
                        planning organizations that meet the 
                        requirements of subparagraph (C) shall 
                        be eligible to receive performance 
                        grants under section 113(c).
                          (ii) Failure to comply.--Failure to 
                        comply with the requirements under 
                        subparagraph (C) shall not impact 
                        certification standards under paragraph 
                        (5).
          (7) Definition of metropolitan planning 
        organization.--In this subsection, the term 
        `metropolitan planning organization' means a 
        metropolitan planning organization described in clause 
        (i) or (ii) of paragraph (6)(B).
    Sec. 5304

Statewide transportation planning

  (a) General Requirements.--
          (1) Development of plans and programs.--* * *

           *       *       *       *       *       *       *

  (d) Scope of Planning Process.--
          (1) In general.--Each State shall carry out a 
        statewide transportation planning process that provides 
        for consideration and implementation of projects, 
        strategies, and services that will--
                  (A) support the economic vitality of the 
                United States, the States, nonmetropolitan 
                areas, and metropolitan areas, especially by 
                enabling global competitiveness, productivity, 
                and efficiency;
                  (B) increase the safety of the transportation 
                system for motorized and nonmotorized users;
                  (C) increase the security of the 
                transportation system for motorized and 
                nonmotorized users;
                  (D) increase the accessibility and mobility 
                of people and freight;
                  (E) protect and enhance the environment, 
                promote energy conservation, sustainability, 
                and livability, reduce surface transportation-
                related greenhouse gas emissions and reliance 
                on oil, adapt to the effects of climate change, 
                improve the quality of life and public health, 
                and promote consistency between transportation 
                improvements and State and local planned growth 
                and economic development patterns, including 
                housing and land use patterns;

           *       *       *       *       *       *       *

  (f) Long-Range Statewide Transportation Plan.--
          (1) Development.--Each State shall develop a long-
        range statewide transportation plan, with a minimum 20-
        year forecast period for all areas of the State, that 
        provides for the development and implementation of the 
        intermodal transportation system of the State.
          (2) Consultation with governments.--
                  (A) Metropolitan areas.--The statewide 
                transportation plan shall be developed for each 
                metropolitan area in the State in cooperation 
                with the metropolitan planning organization 
                designated for the metropolitan area under 
                section 5303.
                  (B) Nonmetropolitan areas.--With respect to 
                nonmetropolitan areas, the statewide 
                transportation plan shall be developed in 
                consultation with affected nonmetropolitan 
                officials with responsibility for 
                transportation. The Secretary shall not review 
                or approve the consultation process in each 
                State.
                  (C) Indian tribal areas.--With respect to 
                each area of the State under the jurisdiction 
                of an Indian tribal government, the statewide 
                transportation plan shall be developed in 
                consultation with the tribal government and the 
                Secretary of the Interior.
                  (D) Consultation, comparison, and 
                consideration.--
                          (i) In general.--The long-range 
                        transportation plan shall be 
                        developed[, as appropriate, in 
                        consultation]in cooperation with State 
                        and local agencies and Indian tribes 
                        responsible for transportation, public 
                        transportation, air quality, and 
                        housing and in consultation with State, 
                        tribal, and local agencies responsible 
                        for land use management, natural 
                        resources, environmental protection, 
                        conservation, public health, and 
                        historic preservation.

           *       *       *       *       *       *       *

          (3) Participation by interested parties.--
                  (A) In general.--In developing the statewide 
                transportation plan, the State shall provide 
                citizens, affected public agencies, 
                representatives of public transportation 
                employees, freight shippers, private providers 
                of transportation, representatives of users of 
                public transportation, representatives of users 
                of pedestrian walkways and bicycle 
                transportation facilities, representatives of 
                the disabled, providers of freight 
                transportation services, and other interested 
                parties with a reasonable opportunity to 
                comment on the proposed plan.
                  (B) Methods.--In carrying out subparagraph 
                (A), the State shall, to the maximum extent 
                practicable--
                          (i) hold any public meetings at 
                        convenient and accessible locations and 
                        times;
                          (ii) employ visualization techniques 
                        to describe plans; and
                          (iii) make public information 
                        available in electronically accessible 
                        format and means, such as the World 
                        Wide Web and through the website of the 
                        State, including emission reduction 
                        targets and strategies developed under 
                        paragraph (9) and an analysis of the 
                        anticipated effects of the targets and 
                        strategies, as appropriate to afford 
                        reasonable opportunity for 
                        consideration of public information 
                        under subparagraph (A).

           *       *       *       *       *       *       *

          (8) Publication of long-range transportation plans.--
        Each long-range transportation plan prepared by a State 
        shall be published or otherwise made available, 
        including (to the maximum extent practicable) in 
        electronically accessible formats and means, such as 
        the World Wide Web.
          (9) Transportation greenhouse gas reduction 
        efforts.--
                  (A) In general.--Within a State, the 
                transportation planning process under this 
                section, shall address transportation-related 
                greenhouse gas emissions by including emission 
                reduction targets and strategies to meet those 
                targets.
                  (B) Establishment of targets and criteria.--
                          (i) In general.--Not later than 2 
                        years after the promulgation of the 
                        final regulations required under 
                        section 831 of the Clean Air Act, each 
                        State shall develop surface 
                        transportation-related greenhouse gas 
                        emission reduction targets, as well as 
                        strategies to meet those targets, in 
                        consultation with State air agencies 
                        and Indian tribes as part of the 
                        transportation planning process under 
                        this section.
                          (ii) Minimum requirements.--Each 
                        transportation plan developed by a 
                        State under clause (i) shall, within 
                        the plan, demonstrate progress in 
                        stabilizing and reducing 
                        transportation-related greenhouse gas 
                        emissions in the State so as to 
                        contribute to the achievement of 
                        national targets pursuant to section 
                        831(a)(1) of the Clean Air Act.
                          (iii) Requirements for targets and 
                        strategies.--The targets and strategies 
                        developed under this subparagraph 
                        shall, at a minimum--
                                  (I) be based on the emission 
                                models and related 
                                methodologies established in 
                                the final regulations required 
                                under section 831 of the Clean 
                                Air Act;
                                  (II) inventory all sources of 
                                surface transportation-related 
                                greenhouse gas emissions;
                                  (III) apply to those modes of 
                                surface transportation that are 
                                addressed in the planning 
                                process under this section;
                                  (IV) be integrated and 
                                consistent with statewide 
                                transportation plans and 
                                statewide transportation 
                                improvement programs; and
                                  (V) be selected through 
                                scenario analysis (as defined 
                                in section 134(k) of title 23), 
                                and include, pursuant to the 
                                requirements of the 
                                transportation planning process 
                                under this section, 
                                transportation investment and 
                                management strategies that 
                                reduce greenhouse gas emissions 
                                from the transportation sector 
                                over the life of the plan, such 
                                as--
                                          (aa) efforts to 
                                        increase public 
                                        transportation 
                                        ridership, including 
                                        through service 
                                        improvements, capacity 
                                        expansions, and access 
                                        enhancement;
                                          (bb) efforts to 
                                        increase walking, 
                                        bicycling, and other 
                                        forms of nonmotorized 
                                        transportation;
                                          (cc) implementation 
                                        of zoning and other 
                                        land use regulations 
                                        and plans to support 
                                        infill, transit-
                                        oriented development, 
                                        redevelopment, or mixed 
                                        use development;
                                          (dd) travel demand 
                                        management programs 
                                        (including carpool, 
                                        vanpool, or car-share 
                                        projects), 
                                        transportation pricing 
                                        measures, parking 
                                        policies, and programs 
                                        to promote 
                                        telecommuting, flexible 
                                        work schedules, and 
                                        satellite work centers;
                                          (ee) surface 
                                        transportation system 
                                        operation improvements, 
                                        including intelligent 
                                        transportation systems 
                                        or other operational 
                                        improvements to reduce 
                                        congestion and improve 
                                        system management;
                                          (ff) intercity 
                                        passenger rail 
                                        improvements;
                                          (gg) intercity bus 
                                        improvements;
                                          (hh) freight rail 
                                        improvements;
                                          (ii) use of materials 
                                        or equipment associated 
                                        with the construction 
                                        or maintenance of 
                                        transportation projects 
                                        that reduce greenhouse 
                                        gas emissions;
                                          (jj) public 
                                        facilities for 
                                        supplying electricity 
                                        to electric or plug-in 
                                        hybrid-electric 
                                        vehicles; or
                                          (kk) any other effort 
                                        that demonstrates 
                                        progress in reducing 
                                        transportation-related 
                                        greenhouse gas 
                                        emissions.
                  (C) Coordination and consultation with public 
                agencies.--Transportation greenhouse gas 
                targets and plans pursuant to this section 
                shall be developed--
                          (i) in coordination with--
                                  (I) all metropolitan planning 
                                organizations covered by this 
                                section within the State; and
                                  (II) transportation and air 
                                quality agencies within the 
                                State;
                          (ii) in consultation with 
                        representatives of State and local 
                        housing, economic development, and land 
                        use agencies; and
                          (iii) in consultation with Indian 
                        tribes contiguous to the State.
                  (D) Enforcement.--Not later than 180 days 
                after the date of submission of a plan under 
                this section--
                          (i) the Secretary and the 
                        Administrator shall review the plan; 
                        and
                          (ii) the Secretary shall make a 
                        determination that the plan submitted 
                        by a State meets the requirements of 
                        subparagraph (B) if--
                                  (I) the Secretary finds that 
                                a State has developed, 
                                submitted, and published the 
                                plan pursuant to this section;
                                  (II) the Secretary, in 
                                consultation with the 
                                Administrator, determines that 
                                the plan is likely to achieve 
                                the targets established by the 
                                State under this subsection; 
                                and
                                  (III) the development of the 
                                plan complies with the minimum 
                                requirements established under 
                                clauses (ii) and (iii) of 
                                subparagraph (B).
                  (E) Planning finding.--
                          (i) In general.--Only States that 
                        meet the requirements of subparagraph 
                        (B) shall be eligible to receive 
                        performance grants under section 
                        113(c).
                          (ii) Failure to comply.--Failure to 
                        comply with the requirements under 
                        subparagraph (B) shall not impact the 
                        planning finding under subsection 
                        (g)(7).

           *       *       *       *       *       *       *

    Sec. 32919

Preemption

  (a) General.--When an average fuel economy standard 
prescribed under this chapter is in effect, a State or a 
political subdivision of a State may not adopt or enforce a law 
or regulation related to fuel economy standards or average fuel 
economy standards for automobiles covered by an average fuel 
economy standard under this chapter.
  (b) Requirements Must Be Identical.--When a requirement under 
section 32908 of this title is in effect, a State or a 
political subdivision of a State may adopt or enforce a law or 
regulation on disclosure of fuel economy or fuel operating 
costs for an automobile covered by section 32908 only if the 
law or regulation is identical to that requirement.
  (c) State and Political Subdivision Automobiles.--A State or 
a political subdivision of a State may prescribe requirements 
for fuel economy for automobiles obtained for its own use.
  (d) Taxicabs.--Notwithstanding subsection (a), a State or 
political subdivision of a State may prescribe requirements for 
fuel economy for taxicabs and other automobiles if such 
requirements are at least as stringent as applicable Federal 
requirements and if such taxicabs and other automobiles--
          (1) are automobiles that are capable of transporting 
        not more than 10 individuals, including the driver;
          (2) are commercially available or are designed and 
        manufactured pursuant to a contract with such State or 
        political subdivision of such State;
          (3) are operated for hire pursuant to an operating or 
        regulatory license, permit, or other authorization 
        issued by such State or political subdivision of such 
        State;
          (4) provide local transportation for a fare 
        determined on the basis of the time or distance 
        traveled or a combination of time and distance 
        traveled; and
          (5) do not exclusively provide transportation to and 
        from airports.

           *       *       *       *       *       *       *

                        SAFE DRINKING WATER ACT

  Sec. 1400.

           *       *       *       *       *       *       *

  Sec. 1421. (a)(1) The Administrator shall publish proposed 
regulations for State underground injection control programs 
within 180 days after the date of enactment of this title. 
Within 180 days after publication of such proposed regulations, 
he shall promulgate such regulations with such modifications as 
he deems appropriate. Any regulation under this subsection may 
be amended from time to time.
  (2) * * *

           *       *       *       *       *       *       *

  (e) Carbon Dioxide Geological Storage Wells.--
          (1) In general.--Not later than 1 year after the date 
        of enactment of this subsection, the Administrator 
        shall promulgate regulations under subsection (a) for 
        carbon dioxide geological storage wells.
          (2) Financial responsibility.--
                  (A) In general.--The regulations under 
                paragraph (1) shall include requirements for 
                maintaining evidence of financial 
                responsibility, including financial 
                responsibility for emergency and remedial 
                response, well plugging, site closure, and 
                post-injection site care.
                  (B) Regulations.--Financial responsibility 
                may be established for carbon dioxide 
                geological wells in accordance with regulations 
                promulgated by the Administrator by any 1, or 
                any combination, of the following:
                          (i) Insurance.
                          (ii) Guarantee.
                          (iii) Trust.
                          (iv) Standby trust.
                          (v) Surety bond.
                          (vi) Letter of credit.
                          (vii) Qualification as a self-
                        insurer.
                          (viii) Any other method satisfactory 
                        to the Administrator.

           *       *       *       *       *       *       *

PUBLIC WORKS AND ECONOMIC DEVELOPMENT ACT OF 1965

           *       *       *       *       *       *       *

Sec. 1. Short title; table of contents.
Sec. 2. Findings and declarations.
Sec. 3. Definitions.

 TITLE I--ECONOMIC DEVELOPMENT PARTNERSHIPS COOPERATION AND COORDINATION

Sec. 101. Establishment of economic development partnerships.
Sec. 102. Cooperation of Federal agencies.
Sec. 103. Coordination.

       TITLE II--GRANTS FOR PUBLIC WORKS AND ECONOMIC DEVELOPMENT

Sec. 201. Grants for public works and economic development.
Sec. 202. Base closings and realignments.
Sec. 203. Grants for planning and grants for administrative expenses.
Sec. 204. Cost sharing.
Sec. 205. Supplementary grants.
Sec. 206. Regulations on relative needs and allocations.
Sec. 207. Grants for training, research, and technical assistance.
[Sec. 208. Repealed]
Sec. 209. Grants for economic adjustment.
Sec. 210. Changed project circumstances.
Sec. 211. Use of funds in projects constructed under projected cost.
Sec. 212. Reports by recipients.
Sec. 213. Prohibition on use of funds for attorney's and consultant's 
          fees.
Sec. 214. Special impact areas.
Sec. 215. Performance awards.
Sec. 216. Planning performance awards.
Sec. 217. Direct expenditure or redistribution by recipient.
Sec. 218. Brightfields demonstration program.
Sec. 219. Economic Development Climate Change Fund.

       TITLE II--GRANTS FOR PUBLIC WORKS AND ECONOMIC DEVELOPMENT

SEC. 201* * *

           *       *       *       *       *       *       *

SEC. 218. BRIGHTFIELDS DEMONSTRATION PROGRAM.

  (a) Definition of Brightfield Site.--In this section, the 
term ``brightfield site'' means a brownfield site that is 
redeveloped through the incorporation of 1 or more solar energy 
technologies.
  (b) Demonstration Program.--On the application of an eligible 
recipient, the Secretary may make a grant for a project for the 
development of a brightfield site if the Secretary determines 
that the project will--
          (1) use 1 or more solar energy technologies to 
        develop abandoned or contaminated sites for commercial 
        use; and
          (2) improve the commercial and economic opportunities 
        in the area in which the project is located.
  (c) Savings Clause.--To the extent that any portion of a 
grant awarded under subsection (b) involves remediation, the 
remediation shall be subject to section 612.
  (d) Authorization of Appropriations.--There is authorized to 
be appropriated to carry out this section $5,000,000 for each 
of fiscal years 2004 through 2008, to remain available until 
expended.

SEC. 219. ECONOMIC DEVELOPMENT CLIMATE CHANGE FUND.

  (a) In General.--On the application of an eligible recipient, 
the Secretary may provide technical assistance, make grants, 
enter into contracts, or otherwise provide amounts for 
projects--
          (1) to promote energy efficiency to enhance economic 
        competitiveness;
          (2) to increase the use of renewable energy resources 
        to support sustainable economic development and job 
        growth;
          (3) to support the development of conventional energy 
        resources to produce alternative transportation fuels, 
        electricity and heat;
          (4) to develop energy efficient or environmentally 
        sustainable infrastructure;
          (5) to promote environmentally sustainable economic 
        development practices and models;
          (6) to support development of energy efficiency and 
        alternative energy development plans, studies or 
        analysis, including enhancement of new and existing 
        Comprehensive Economic Development Strategies funded 
        under this Act; and
          (7) to supplement other Federal grants, loans, or 
        loan guarantees for purposes described in paragraphs 
        (1) through (6).
  (b) Federal Share.--The Federal share of the cost of any 
project carried out under this section shall not exceed 80 
percent, except that the Federal share of a Federal grant, 
loan, or loan guarantee provided under subsection (a)(7) may be 
100 percent.
  (c) Authorization of Appropriations.--There is authorized to 
be appropriated to carry out this section $50,000,000 for each 
of fiscal years 2009 through 2013, to remain available until 
expended.

ENERGY POLICY ACT OF 2005

           *       *       *       *       *       *       *

SEC. 791. DEFINITIONS.

  In this subtitle:
          (1) Administrator.--The term ``Administrator'' means 
        the Administrator of the Environmental Protection 
        Agency.
          (2) Certified engine configuration.--The term 
        ``certified engine configuration'' means a new, 
        rebuilt, or remanufactured engine configuration--
                  (A) that has been certified or verified by--
                          (i) the Administrator; or
                          (ii) the California Air Resources 
                        Board;
                  (B) that meets or is rebuilt or 
                remanufactured to a more stringent set of 
                engine emission standards, as determined by the 
                Administrator; and
                  (C) in the case of a certified engine 
                configuration involving the replacement of an 
                existing engine or vehicle, an engine 
                configuration that replaced an engine that 
                was--
                          (i) removed from the vehicle; and
                          (ii) returned to the supplier for 
                        remanufacturing to a more stringent set 
                        of engine emissions standards or for 
                        scrappage.
          (3) Eligible entity.--The term ``eligible entity'' 
        means--
                  (A) a regional, State, local, or tribal 
                agency or port authority with jurisdiction over 
                transportation or air quality; [and]
                  (B) a nonprofit organization or institution 
                that--
                          (i) represents or provides pollution 
                        reduction or educational services to 
                        persons or organizations that own or 
                        operate diesel fleets; or
                          (ii) has, as its principal purpose, 
                        the promotion of transportation or air 
                        quality[.]; and
                  (C) any person that is the owner of record of 
                a diesel fleet.

           *       *       *       *       *       *       *

SEC. 792. NATIONAL GRANT AND LOAN PROGRAMS.

  (a) In General.--The Administrator shall use 70 percent of 
the funds made available to carry out this subtitle for each 
fiscal year to provide grants and low-cost revolving loans, as 
determined by the Administrator, on a competitive basis, to 
eligible entities to achieve significant reductions in diesel 
emissions in terms of--
          (1)* * *

           *       *       *       *       *       *       *

  (d) Use of [Funds.--
          (1) In general.--An eligible entity] Funds.--An 
        eligible entity may use a grant or loan provided under 
        this section to fund the costs of--
                  [(A)](1) a retrofit technology (including any 
                incremental costs of a repowered or new diesel 
                engine) that significantly reduces emissions 
                through development and implementation of a 
                certified engine configuration, verified 
                technology, or emerging technology for--
                          [(i)](A) a bus;
                          [(ii)](B) a medium-duty truck or a 
                        heavy-duty truck;
                          [(iii)](C) a marine engine;
                          [(iv)](D) a locomotive; or
                          [(v)](E) a nonroad engine or vehicle 
                        used in--
                                  [(I)](i) construction;
                                  [(II)](ii) handling of cargo 
                                (including at a port or 
                                airport);
                                  [(III)](iii) agriculture;
                                  [(IV)](iv) mining; or
                                  [(V)](v) energy production; 
                                or
                  [(B)](2) programs or projects to reduce long-
                duration idling using verified technology 
                involving a vehicle or equipment described in 
                [subparagraph (A)]paragraph (1).
          [(2) Regulatory programs.--
                  [(A) In general.--Notwithstanding paragraph 
                (1), no grant or loan provided under this 
                section shall be used to fund the costs of 
                emissions reductions that are mandated under 
                Federal, State or local law.
                  [(B) Mandated.--For purposes of subparagraph 
                (A), voluntary or elective emission reduction 
                measures shall not be considered ``mandated'', 
                regardless of whether the reductions are 
                included in the State implementation plan of a 
                State.]

           *       *       *       *       *       *       *

SEC. 795. OUTREACH AND INCENTIVES.

  (a) Definition of Eligible Technology.--In this section, the 
term ``eligible technology'' means--
          (1) a verified technology; or
          (2) an emerging technology.
  (b) Technology Transfer Program.--
          (1) In general.--The Administrator shall establish a 
        program under which the Administrator--
                  (A) informs stakeholders of the benefits of 
                eligible technologies; and
                  (B) develops nonfinancial incentives to 
                promote the use of eligible technologies.
          (2) Eligible stakeholders.--Eligible stakeholders 
        under this section include--
                  (A) equipment owners and operators;
                  (B) emission and pollution control technology 
                manufacturers;
                  (C) engine and equipment manufacturers;
                  (D) State and local officials responsible for 
                air quality management;
                  (E) community organizations; and
                  (F) public health, educational, and 
                environmental organizations.
  (c) State Implementation Plans.--The Administrator shall 
develop appropriate guidance to provide credit to a State for 
emission reductions in the State created by the use of eligible 
technologies through a State implementation plan under section 
110 of the Clean Air Act (42 U.S.C. 7410).
  (d) International Markets.--The Administrator, in 
coordination with the Department of Commerce and industry 
stakeholders, shall inform foreign countries with air quality 
problems of the potential of technology developed or used in 
the United States to provide emission reductions in those 
countries.

SEC. 795A. BLACK CARBON REDUCTION GRANT PROGRAM.

  (a) Definitions.--In this section:
          (1) Administrator.--The term `Administrator' means 
        the Administrator of the Environmental Protection 
        Agency.
          (2) Black carbon.--The term `black carbon' means a 
        primary light-absorbing aerosol, as determined by the 
        Administrator based on the best available science.
          (3) Diesel particulate filter.--The term `diesel 
        particulate filter' means a pollution control 
        technology that reduces at least 85 percent of black 
        carbon, as verified by the Administrator or the 
        California Air Resources Board.
          (4) Eligible entity.--The term `eligible entity' 
        means a person that is the owner of record of a heavy 
        duty vehicle.
          (5) Heavy duty vehicle.--The term `heavy duty 
        vehicle' has the meaning given the term in section 
        202(b)(3) of the Clean Air Act (42 U.S.C. 7521(b)(3)).
          (6) Program.--The term `program' means the Black 
        Carbon Reduction Program established under this 
        section.
  (b) Establishment.--The Administrator shall establish a 
voluntary grant program, to be known as the `Black Carbon 
Reduction Program'--
          (1) to cost effectively mitigate the adverse 
        consequences of global warming by means of early action 
        to reduce black carbon emissions from diesel-powered 
        heavy-duty vehicles placed in service prior to 2007; 
        and
          (2) under which the Administrator, in accordance with 
        this section (including regulations promulgated under 
        subsection (g)), shall authorize the provision of 
        grants in accordance with subsection (c) to cover 100 
        percent of the cost of purchasing and installing diesel 
        particulate filters on heavy duty vehicles.
  (c) Program Specifications.--
          (1) In general.--A grant may be issued under the 
        program only to cover the costs of the purchase and 
        installation of a diesel particulate filter.
          (2) Maximum amount.--The total amount of grants 
        issued for a fiscal year under the program may not 
        exceed the amounts made available for the program for 
        the fiscal year under subsection (h).
  (d) Evaluation and Report.--
          (1) In general.--Not later than 2 years after the 
        date of enactment of this section and biennially 
        thereafter, the Administrator shall submit to Congress 
        a report evaluating the implementation of the program.
          (2) Inclusions.--The report shall include a 
        description of--
                  (A) the total number of grant applications 
                received;
                  (B) the total dollar value of all grants 
                issued;
                  (C) the estimated benefits of grants provided 
                under the program, including estimates of the 
                total number of tons of black carbon reduced, 
                cost-effectiveness, and cost-benefits; and
                  (D) any other information the Administrator 
                considers to be appropriate.
  (e) Exclusion of Grants From Income.--A grant issued under 
the program shall not be considered gross income of the 
purchaser of technology for purposes of the Internal Revenue 
Code of 1986.
  (f) Effect of Section.--Nothing in this section affects any 
authority under the Clean Air Act (42 U.S.C. 7401 et seq.) as 
in existence on the day before the date of enactment of this 
section.
  (g) Regulations.--
          (1) In general.--As soon as practicable after the 
        date of enactment of this section, the Administrator 
        shall promulgate regulations to implement the program.
          (2) Requirements.--The regulations promulgated under 
        paragraph (1) shall--
                  (A) establish streamlined procedures for the 
                provision of grants to eligible entities 
                participating in the program for the amount of 
                the purchase and installation of diesel 
                particulate filters as soon as practicable, but 
                not later than 30 days after the date of 
                submission of an application for a grant;
                  (B) include a list of diesel particulate 
                filters the purchase and installation of which 
                are eligible to be funded through the program; 
                and
                  (C) include a list of vehicles by model year 
                that are eligible to be retrofitted under the 
                program.
  (h) Funding.--The Administrator shall use to carry out the 
program all of the funding provided for each fiscal year under 
section 201(g)(1) of division B of the Clean Energy Jobs and 
American Power Act.

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SEC. 797. AUTHORIZATION OF APPROPRIATIONS.

  There is authorized to be appropriated to carry out this 
subtitle $200,000,000 for each of fiscal years 2007 through 
[2011]2021, to remain available until expended.

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