" ! SENATE 

111TH CONGRESS

2d Session 

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 


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smartinez on DSKB9S0YB1PROD with REPORTS
U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON : 

1 

89–010 

" ! SENATE 

111TH CONGRESS

2d Session 

REPORT

2010

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 


smartinez on DSKB9S0YB1PROD with REPORTSE:\Seals\Congress.#13
CLEAN ENERGY JOBS AND AMERICAN POWER ACT 


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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. 


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1The Climate Group, ‘‘Cutting the Cost,’’ September 2009. 

2 International Energy Agency, World Energy Outlook 2008 at 5 (2008). 

3Testimony of John Doerr before Senate Committee on Environment & Public Works, ‘‘Investing in Green Technology as a Strategy for Economic Recovery,’’ January 7, 2009. 4Testimony 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. 5 Environmental Defense Fund citing PV News April 2009. 

6Lazard, 7/10/09 

7 January 7, 2009. 

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, 21⁄2 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

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

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

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 


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8Testimony 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. 9Pew Charitable Trusts, The Clean Energy Economy, 8 (June 2009). 

10Political 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/CERESlWeb/ 

Docs/ESlDRHFK091025.pdf. 12Testimony of Wayne F. Krouse before Senate Committee on Environment & Public Works, 

‘‘Business Opportunities and Climate Policy,’’ May 19, 2009. 13Testimony of Charles O. Holliday, Jr. before Senate Committee on Environment & Public 

Works, ‘‘Business Opportunities and Climate Policy,’’ May 19, 2009. 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. 

principal obstacle to creating even more new jobs in the next great 

industry, clean technology.’’ 8

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

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 carbonfree 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. 

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. 

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 


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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=electricitylinlthelunitedlstates. 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). 17The 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/). 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. 20 Energy Information Administration, Electricity in the United States. Can be accessed at: 

http://tonto.eia.doe.gov/energyexplained/index.cfm?page=electricitylinlthelunitedlstates. 21See 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/. 

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

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

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

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 reVerDate Nov 24 2008 04:41 Feb 13, 2010 Jkt 089010 PO 00000 Frm 00008 Fmt 6659 Sfmt 6602 E:\HR\OC\SR121.XXX SR121

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22McKinsey & Company, Unlocking Energy Efficiency in the U.S. Economy (July 2009). Can 

be accessed at: http://www.mckinsey.com/clientservice/electricpowernaturalgas/downloads/ 

uslenergylefficiencylfulllreport.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. 24http://www.aaas.org/news/releases/2007/0202ipcc.shtml. 25http://www.agu.org/scilsoc/policy/positions/climatelchange2008.shtml. 26http://portal.acs.org/portal/fileFetch/C/WPCPl007661/pdf/WPCPl007661.pdf. 27http://www.ametsoc.org/POLICY/2007climatechange.html. 28http://www.nationalacademies.org/includes/G8StatementlEnergyl07lMay.pdf. 29 IPCC, AR4, Working Group I, Summary for Policy Makers. 

duce 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. 

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

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.’’ 

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 


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30 IPCC, AR4, Working Group II, Summary for Policy Makers. 31Global Change Research Act of 1990, P.L. 101–606, 104 Stat. 3096 (Nov. 16, 1990). 

and a ‘‘substantial burden on health services’’ including malnutrition, diarrheal, cardio-respiratory, and infectious diseases.30

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: 

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. 


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32http://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. 33Testimony 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. 

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 heattrapping gases and airborne particles. Responses involve reducing 

emissions to limit future warming, and adapting to the changes 

that are unavoidable.32

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 


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34www.cna.org. 35 National Security and the Threat of Climate Change, The CNA Corporation, 2007, page 6. 36 National Security and the Threat of Climate Change, The CNA Corporation, 2007, page 6. 37Testimony 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. 38Testimony 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. 39Purvis, 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. 42Testimony 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. 

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.’’ 

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. 

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

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 


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43 National Security and the Threat of Climate Change, The CNA Corporation, 2007, page 38. 44Testimony 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. 45Powering America’s Defense: Energy and the Risks to National Security, The CNA Corporation, 2009, page 1. 46Testimony 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. 47Powering America’s Defense: Energy and the Risks to National Security, The CNA Corporation, 2009, page 11. 48Powering America’s Defense: Energy and the Risks to National Security, The CNA Corporation, 2009, page ix. 49 National Security and the Threat of Climate Change, The CNA Corporation, 2007, page 44. 

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

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

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

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. 

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 


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50See 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 51 IPCC AR4 Synthesis Report. 52McKinsey & Company, Unlocking Energy Efficiency in the U.S. Economy (July 2009). Can 

be accessed at: http://www.mckinsey.com/clientservice/electricpowernaturalgas/downloads/ 

uslenergylefficiencylfulllreport.pdf 53http://www.epa.gov/air/caaac/coaltech.html. 

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. 

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. 

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

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

A July 2009 analysis by The Climate Group, an international coalition of leading organizations and experts, concluded that shortterm targets are achievable by focusing on energy efficiency, deforestation and existing renewable and nuclear technologies. Longterm 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 


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54 ‘‘Breaking the Climate Deadlock/Technology for a Low Carbon Future,’’ The Climate Group, 

July 2009. Available at: http://www.theclimategroup.org/assets/resources/Technologyl forlallowlcarbonlfuturelreport.pdf. 55http://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). 56http://webarchive.nationalarchives.gov.uk/+/http://www.hm-treasury.gov.uk/media/4/3/ 

ExecutivelSummary.pdf. 57http://www.nrdc.org/globalwarming/cost/cost.pdf. 

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

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 icefree seasons in the ocean and on lakes and rivers, earlier 

snowmelt, and alterations in river flows. These changes 

are projected to grow.55

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

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 famVerDate Nov 24 2008 04:41 Feb 13, 2010 Jkt 089010 PO 00000 Frm 00015 Fmt 6659 Sfmt 6602 E:\HR\OC\SR121.XXX SR121

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58http://www.epa.gov/climatechange/economics/pdfs/EPAlS1733lAnalysis.pdf. 59http://www.epa.gov/climatechange/economics/pdfs/HR2454lAnalysis.pdf, http:// 

www.eia.doe.gov/oiaf/servicerpt/hr2454/. 60http://www.cbo.gov/ftpdocs/102xx/doc10262&/hr2454.pdf; http://www.epa.gov/ 

climatechange/economics/pdfs/HR2454lAnalysis.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. 62Testimony of David McIntosh before Senate Committee on Environment and Public Works, 

Nov. 3, 2009. 

ily 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

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

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


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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 


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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 generaVerDate Nov 24 2008 04:41 Feb 13, 2010 Jkt 089010 PO 00000 Frm 00018 Fmt 6659 Sfmt 6602 E:\HR\OC\SR121.XXX SR121

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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. 

tion.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. 

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. 


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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. 


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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). 

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

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. 


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66Testimony of Brent Constantz, Ph.D, CEO of Calera Corporation, before Senate Appropriations Committee, Subcommittee on Energy and Water Development, May 6, 2009. 67http://www.eenews.net/eenewspm/2008/02/19/3/. 

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

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. 

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 nuVerDate Nov 24 2008 04:41 Feb 13, 2010 Jkt 089010 PO 00000 Frm 00022 Fmt 6659 Sfmt 6602 E:\HR\OC\SR121.XXX SR121

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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. 69http://www.epa.gov/WaterSense/water/why.htm. 70http://www.epa.gov/WaterSense/water/save/envlbenefits.htm. 

clear 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

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. 

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


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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. 


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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. 


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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 


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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/energylsavers.pdf 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/2008lBEDBlUpdated.pdf 73The Environmental Protection Agency’s Energy Star Program promotes the use of energy 

efficient products and building designs. 74Summary of the financial benefits of Energy Star labeled buildings. US Environmental Protection Agency. Available at: http://www.energystar.gov/ia/partners/publications/pubdocs/ 

SummaryloflthelFinanciallBenefitsl23June06lFINAL.pdf 

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

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 proVerDate Nov 24 2008 04:41 Feb 13, 2010 Jkt 089010 PO 00000 Frm 00027 Fmt 6659 Sfmt 6602 E:\HR\OC\SR121.XXX SR121

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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%20Reportl122309lto%20EPAlWeb.pdf 

gram 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

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. 


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76Testimony 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. 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). 78 H. Conf. Report 111–316 (Oct. 28, 2009), at 109. 79Testimony 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. 

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. 

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

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

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

S. 1733 will encourage the use of natural gas for power generation by authorizing EPA to carry out a program under Section 181 


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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. 81 Id. at 3–7. 

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

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 


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82 Id. at 3–5. 83 Id. at 1–2. 84 Id. at 3–1. 

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

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. 

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 


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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 postsecondary 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. 


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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 


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85Oxfam America. Adaptation 101. 86 Center for Naval Analysis. 2007. National Security and the Threat of Climate Change. 

Available at: http:// securityand climate.cna.org/ report/ National%20Security% 20 

and%20the% 20Threat%20 of%20Climate% 20Change. pdf. 87WHO, ‘‘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. 89 Intergovernmental Panel on Climate Change, Climate Change 2007: Impacts, Adaptation 

and Vulnerability, at 12 (2007). 

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. 

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. 

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 


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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 


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89 Intergovernmental Panel on Climate Change, Climate Change 2007: Impacts, Adaptation 

and Vulnerability, at 12 (2007). 90World Health Organization, Health and Environmental Linkages Initiative, Climate 

Change. Available at http://www.who.int/heli/risks/climate/climatechange/en/ 91Testimony of Dr. Howard Frumkin before Senate Committee on Environment & Public 

Works, ‘‘Update on the Latest Global Warming Science,’’ Feb. 25, 2009, at 1. 92 Id. at 2–3. 93 Id. at 14. 94http://www.globalchange.gov/publications/reports/scientific-assessments/us-impacts/keyfindings; 

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

The World Health Organization (WHO) estimates that climate 

change may already be causing more than 150,000 deaths each 

year.90

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: 

• 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

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

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: 


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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 weatherrelated 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 


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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 § 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, precipiVerDate Nov 24 2008 04:41 Feb 13, 2010 Jkt 089010 PO 00000 Frm 00038 Fmt 6659 Sfmt 6602 E:\HR\OC\SR121.XXX SR121

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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. 97M.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. 98Westerling, 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. 99http://www.usgcrp.gov/usgcrp/Library/nationalassessment/overviewforests.htm. 100Lofgren, 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. 101 National Wildlife Federation. 2008. Investing in America’s Natural Resources—The Urgent 

Need for Global Warming Legislation. Reston, Virginia. 

tation, 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

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. 

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 


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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. 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. 107 Id. at 1–2. 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 

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

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

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. 

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 


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111Science 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. 113 Id. at 175. 114 Id. at 188. 115 Id. 

risk and plan for increased flood risk associated with climate 

change. 

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. 

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. 


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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 


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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. 


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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 


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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 nonhydrofluorocarbon 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. 


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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. 


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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. 


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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. 


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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 offVerDate Nov 24 2008 04:41 Feb 13, 2010 Jkt 089010 PO 00000 Frm 00049 Fmt 6659 Sfmt 6602 E:\HR\OC\SR121.XXX SR121

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sets 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: 


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116Statement 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 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

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. 


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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 disVerDate Nov 24 2008 04:41 Feb 13, 2010 Jkt 089010 PO 00000 Frm 00052 Fmt 6659 Sfmt 6602 E:\HR\OC\SR121.XXX SR121

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tribution 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 fiveyear 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. 


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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 reVerDate Nov 24 2008 04:41 Feb 13, 2010 Jkt 089010 PO 00000 Frm 00054 Fmt 6659 Sfmt 6602 E:\HR\OC\SR121.XXX SR121

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ceiving 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. 


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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. 


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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. 


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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 


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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 domesticallyproduced 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. 


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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 


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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.’’ 


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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 


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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: 


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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 capand-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-andtrade programs and performance standards. CBO estimates that 


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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. 

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

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; 


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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. 

• 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 lowsulphur 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

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 sepaVerDate Nov 24 2008 04:41 Feb 13, 2010 Jkt 089010 PO 00000 Frm 00066 Fmt 6659 Sfmt 6602 E:\HR\OC\SR121.XXX SR121

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rate 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. 


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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-andtrade 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 capand-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. 


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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. 


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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 

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 SPENDING 

Impact 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 APPROPRIATION 

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 

1 Positive numbers indicate decreases in deficits; negative numbers indicate increases in deficits. 

Note: Components may not sum to totals because of rounding. 


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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 


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3For 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 GreenhouseGas Emissions, CBO Background Paper (April 2009). 

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

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 


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4See 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. 

6The 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. 7For 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). 

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

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

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. 

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 allowVerDate Nov 24 2008 04:41 Feb 13, 2010 Jkt 089010 PO 00000 Frm 00073 Fmt 6659 Sfmt 6602 E:\HR\OC\SR121.XXX SR121

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8For 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). 

ances 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

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 


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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 initialyear 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 


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9Two 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 

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 allow- ances 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

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 


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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. 


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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. 


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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 REVENUES 

Net 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 Business Tax Credits ............................................................ 0 0 ¥0.1 ¥0.3 ¥0.7 ¥1.2 ¥1.8 ¥2.5 ¥3.4 ¥4.2 ¥1.1 ¥14.1 

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 SPENDING 

Impact 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. 


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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. 


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Direct spending 

CBO estimates that enacting this legislation would increase di- rect 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, Re- newable 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 Ac- count (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 


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• 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. 


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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 APPROPRIATION 

Spending 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. 


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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 


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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 capand-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 


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$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 capand-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 CaliVerDate Nov 24 2008 04:41 Feb 13, 2010 Jkt 089010 PO 00000 Frm 00086 Fmt 6659 Sfmt 6602 E:\HR\OC\SR121.XXX SR121

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fornia 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 heavyduty 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 strinVerDate Nov 24 2008 04:41 Feb 13, 2010 Jkt 089010 PO 00000 Frm 00087 Fmt 6659 Sfmt 6602 E:\HR\OC\SR121.XXX SR121

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gency 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. 


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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 


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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. 


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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. 

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-andtrade 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. 

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 longVerDate Nov 24 2008 04:41 Feb 13, 2010 Jkt 089010 PO 00000 Frm 00091 Fmt 6604 Sfmt 6604 E:\HR\OC\SR121.XXX SR121

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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 onethird 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 


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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. 


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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 coalfired 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 midterm 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. 


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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. 


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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 øblack 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; 


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(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, øor 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, øor 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 


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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, øor 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), øor 

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, øor 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 


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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, øor 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, øor 

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 øsection 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)* * * 

* * * * * * * 


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(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. 

ø(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), øand 233¿233 (preempting certain State regulation øof 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 


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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 

* * * * * * * 


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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). 


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(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 øcellulosic 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. 

ø(C)¿(D) BASELINE LIFECYCLE GREENHOUSE GAS EMIS- SIONS.—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. 

ø(D)¿(E) BIOMASS-BASED DIESEL.—The term ‘‘biomassbased 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. 

ø(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 


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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, øcellulosic¿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) øCellulosic¿Advanced Green biofuel.—For 

the purpose of subparagraph (A), of the volume of 

advanced biofuel required under subclause (II), 

the applicable volume of øcellulosic¿advanced 

green biofuel for the calendar years 2010 through 

2022 shall be determined in accordance with the 

following table: 

Applicable volume of øcellulosic¿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 

(øcellulosic¿advanced green biofuel and biomassbased diesel); 

* * * * * * * 

(iv) APPLICABLE VOLUME OF øCELLULOSIC¿ADVANCED

GREEN BIOFUEL.—For the purpose of making the deterVerDate Nov 24 2008 04:41 Feb 13, 2010 Jkt 089010 PO 00000 Frm 00104 Fmt 6604 Sfmt 6602 E:\HR\OC\SR121.XXX SR121

smartinez on DSKB9S0YB1PROD with REPORTS
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minations in clause (ii), for each calendar year, the applicable volume of øcellulosic¿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 

øcellulosic¿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 øcellulosic¿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 øcellulosic¿advanced green 

biofuel may not be reduced below 50 percent. 

* * * * * * * 

(7) WAIVERS.— 

(A) * * * 

* * * * * * * 

(D) øCELLULOSIC¿ADVANCED GREEN BIOFUEL.—(i) For 

any calendar year for which the projected volume of 

øcellulosic¿advanced green biofuel production is less than 

the minimum applicable volume established under paragraph (2)(B), as determined by the Administrator based on 


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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 

øcellulosic¿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)ø; 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 operationsø.¿; 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 


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1 Amendment made by section 703 of Public Law 101–549 (104 Stat. 2681) resulted in double 

commas. 2Probably should read ‘‘this Act’’. 

1Public Law 95–95 inserted the additional comma after the words ‘‘under section 111’’. 

2Section 706(2) of Public Law 101–549 (104 Stat. 2682) inserted the additional comma after 

the words ‘‘under section 112,’’. 

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 303ø, 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. 

(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 

111ø,,¿, 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 øsection 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 112ø,,¿, 2 under section 119, or under secVerDate Nov 24 2008 04:41 Feb 13, 2010 Jkt 089010 PO 00000 Frm 00107 Fmt 6604 Sfmt 6602 E:\HR\OC\SR121.XXX SR121

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1So in original. The word ‘‘to’’ probably should not appear. 

tion 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. 

(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. 

(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 


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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) * * * 

* * * * * * * 

ø(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. 


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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; øor¿ 

(3) is used as a refrigerant in appliances manufactured prior 

to January 1, 2020ø.¿; 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) * * * 

* * * * * * * 


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(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. 


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(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). 

* * * * * * * 


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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.— 


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(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): 


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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 


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Calendar Year Percent of Baseline 

2024 50 2025 46 2026 42 2027 38 2028 34 2029 30 2030 25 2031 21 2032 17 

after 2032 15 


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(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 producerimporter pool: 


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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 


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(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 


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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 


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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 


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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, 


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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. 


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(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 

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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. 


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(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 promulVerDate Nov 24 2008 04:41 Feb 13, 2010 Jkt 089010 PO 00000 Frm 00126 Fmt 6604 Sfmt 6603 E:\HR\OC\SR121.XXX SR121

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gating 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 


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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 


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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 


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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, 


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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. 


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(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-inclass 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 


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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. 


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(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 SEQUES- TERED.—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, petroleumbased 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. 


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(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 petroleumbased 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— 


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(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. 


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(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 SEQUES- TERED.—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. 


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(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). 


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(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 


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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 


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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— 


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(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. 


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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). 


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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; 


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(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 


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(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 


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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— 


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(A) improve the characterization of changes in the earthclimate 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 earthclimate 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. 


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(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 MidWest 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. 


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(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 


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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 


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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 


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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: 


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‘‘ 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— 


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(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; 


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(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— 


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(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— 


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(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, 


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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 


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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. 


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(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). 


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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: 


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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 thereafter .................... 1,035 

(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 


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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 


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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 petroleumbased 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.— 


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(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 nonhydrofluorocarbon 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 


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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 coalbased 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 fuelbased 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 


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(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 


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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 


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(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. 


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(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 reVerDate Nov 24 2008 04:41 Feb 13, 2010 Jkt 089010 PO 00000 Frm 00171 Fmt 6604 Sfmt 6601 E:\HR\OC\SR121.XXX SR121

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quirements 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.— 


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(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 


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(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— 


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(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— 


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(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). 


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(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. 


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(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 


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(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. 


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(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 


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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. 


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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. 


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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; 


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(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 REDUC- TION 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 


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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 


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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 


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(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 reVerDate Nov 24 2008 04:41 Feb 13, 2010 Jkt 089010 PO 00000 Frm 00187 Fmt 6604 Sfmt 6601 E:\HR\OC\SR121.XXX SR121

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spect 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 


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(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 


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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). 


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(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). 


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(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 thirdparty 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 acVerDate Nov 24 2008 04:41 Feb 13, 2010 Jkt 089010 PO 00000 Frm 00192 Fmt 6604 Sfmt 6601 E:\HR\OC\SR121.XXX SR121

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credited 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). 


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(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 


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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; 


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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 managementrelated 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 


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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 


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(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, 


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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 pursuVerDate Nov 24 2008 04:41 Feb 13, 2010 Jkt 089010 PO 00000 Frm 00199 Fmt 6604 Sfmt 6601 E:\HR\OC\SR121.XXX SR121

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ant 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-asusual 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 


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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 


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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 forestdependent 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. 


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(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 lowemissions 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. 


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(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); 


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(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 


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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 


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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 develVerDate Nov 24 2008 04:41 Feb 13, 2010 Jkt 089010 PO 00000 Frm 00207 Fmt 6604 Sfmt 6601 E:\HR\OC\SR121.XXX SR121

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oper 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: 


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(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 


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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. 


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(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 


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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 INTEN- SITY.—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 SHIP- MENTS.—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. 


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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). 


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(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. 


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(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 


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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 allowVerDate Nov 24 2008 04:41 Feb 13, 2010 Jkt 089010 PO 00000 Frm 00216 Fmt 6604 Sfmt 6601 E:\HR\OC\SR121.XXX SR121

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ances 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— 


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(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 ironmaking 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. 


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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 


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Small LDCs—Continued 

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 


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Home heating oil and propane consumers—Continued 

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 


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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 2050 ................ 5.00 

(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 


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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 2050 ................ 4.05 

(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. 


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(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 


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State programs for greenhouse gas reduction and 

adaptation—Continued 

2021 ............................................................................ 0.50 

2022 ............................................................................ 1.06 

2023 ............................................................................ 1.06 

2024 ............................................................................ 1.06 

2025 ............................................................................ 1.06 

2026 ............................................................................ 1.06 

Each of vintage years 2027 through 2050 ................ 2.18 

(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 2050 ................ 1.54 

(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: 


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(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 


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Natural Resources Climate Change Adaptation Account— 

Continued 

2022 ............................................................................ 1.23 

2023 ............................................................................ 1.23 

2024 ............................................................................ 1.23 

2025 ............................................................................ 1.23 

2026 ............................................................................ 1.23 

Each of calendar years 2027 through 2050 .............. 2.46 

(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 


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Transportation greenhouse gas reduction—Continued 

2026 ............................................................................ 1.64 

2027 ............................................................................ 2.52 

2028 ............................................................................ 2.52 

2029 ............................................................................ 2.52 

Each of calendar years 2030 through 2050 .............. 2.17 

(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 


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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— 


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(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 allowVerDate Nov 24 2008 04:41 Feb 13, 2010 Jkt 089010 PO 00000 Frm 00230 Fmt 6604 Sfmt 6602 E:\HR\OC\SR121.XXX SR121

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ances 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— 


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(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 reVerDate Nov 24 2008 04:41 Feb 13, 2010 Jkt 089010 PO 00000 Frm 00232 Fmt 6604 Sfmt 6602 E:\HR\OC\SR121.XXX SR121

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covery 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 


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(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 


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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 


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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 


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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 


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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 


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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 


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(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 


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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 


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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 costeffective 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. 


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(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 


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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 longterm 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 longterm contract generators in accordance with paragraph (1). 

(3) ELIGIBILITY.— 


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(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. 


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(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.— 


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(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 lowincome 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 allowVerDate Nov 24 2008 04:41 Feb 13, 2010 Jkt 089010 PO 00000 Frm 00247 Fmt 6604 Sfmt 6602 E:\HR\OC\SR121.XXX SR121

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ances 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 


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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 allowVerDate Nov 24 2008 04:41 Feb 13, 2010 Jkt 089010 PO 00000 Frm 00249 Fmt 6604 Sfmt 6602 E:\HR\OC\SR121.XXX SR121

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ances 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 


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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 


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(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 


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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— 


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(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 


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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 


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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); 


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(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 


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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; 


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(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; 


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(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 GENER- ATING 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). 


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(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 


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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. 


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(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. 


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(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 


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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 VAL- UES.—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. 


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(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 


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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 

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bon 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 


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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 

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ating 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; 


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(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. 


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(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 


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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 

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trator 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). 


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(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 


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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). 


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(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 SUR- PLUS 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 


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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 


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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. 


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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.— 


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(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.— 

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mercial 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. 


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(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 


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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 heavyduty 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. 


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(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 


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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, lowgreenhouse 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— 


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(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 DATA- BASES.—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 

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stantial 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; 


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(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. 


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(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.— 


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(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. 


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(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

* * * * * * * 


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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 

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tation 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, fleetwide 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. 

* * * * * * * 


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øTITLE IV—NOISE POLLUTION¿TITLE IX—NOISE 

POLLUTION 

SEC. ø401¿901. This title may be cited as the ‘‘Noise Pollution 

and Abatement Act of 1970’’. 

SEC. ø402¿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. ø403¿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 øminimizing¿reducing 

transportation-related fuel consumption, reliance on oil, impacts on the environment, transportation-related greenhouse gas 

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wide 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 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; 

* * * * * * * 

(i) DEVELOPMENT OF TRANSPORTATION PLAN.— (1) IN GENERAL.—* * * 

* * * * * * * 

(4) CONSULTATION.— (A) IN GENERAL.—In each metropolitan area, the metropolitan planning organization shall øconsult, 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 

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trian 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 Weband 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. 


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(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 transportationrelated 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; 


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(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 


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(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 


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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.— 


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(i) IN GENERAL.—The long-range transportation plan 

shall be developedø, 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 


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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; 


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(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 

* * * * * * * 


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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 øminimizing¿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 øconsult, 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. 

* * * * * * * 


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(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 


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(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 transportationrelated 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. 


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(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 transporVerDate Nov 24 2008 04:41 Feb 13, 2010 Jkt 089010 PO 00000 Frm 00308 Fmt 6604 Sfmt 6602 E:\HR\OC\SR121.XXX SR121

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tation 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.—* * * 

* * * * * * * 


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(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 developedø, 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 


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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 reVerDate Nov 24 2008 04:41 Feb 13, 2010 Jkt 089010 PO 00000 Frm 00311 Fmt 6604 Sfmt 6602 E:\HR\OC\SR121.XXX SR121

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ducing 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; 


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(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. 


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(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. 


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(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. 

øSec. 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* * * 

* * * * * * * 


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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. 


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(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; 

øand¿ 

(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 qualityø.¿; 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 øFUNDS.— 

(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— 

ø(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— 

ø(i)¿(A) a bus; 

ø(ii)¿(B) a medium-duty truck or a heavy-duty truck; 

ø(iii)¿(C) a marine engine; 

ø(iv)¿(D) a locomotive; or 

ø(v)¿(E) a nonroad engine or vehicle used in— 

ø(I)¿(i) construction; 


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ø(II)¿(ii) handling of cargo (including at a port 

or airport); 

ø(III)¿(iii) agriculture; 

ø(IV)¿(iv) mining; or 

ø(V)¿(v) energy production; or 

ø(B)¿(2) programs or projects to reduce long-duration 

idling using verified technology involving a vehicle or 

equipment described in øsubparagraph (A)¿paragraph (1). 

ø(2) REGULATORY PROGRAMS.— 

ø(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. 

ø(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. 


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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. 


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(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. 

* * * * * * 

* 

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 ø2011¿2021, to 

remain available until expended. 

* * * * * * * 

Æ 


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