II

106TH CONGRESS

1ST SESSION S. 547

To authorize the President to enter into agreements to provide regulatory

credit for voluntary early action to mitigate potential environmental impacts from greenhouse gas emissions.

IN THE SENATE OF THE UNITED STATES

MARCH 4, 1999

Mr. CHAFEE (for himself, Mr. MACK, Mr. LIEBERMAN, Mr. WARNER, Mr.

MOYNIHAN, Mr. REID, Mr. JEFFORDS, Mr. WYDEN, Mr. BIDEN, Ms.

COLLINS, Mr. BAUCUS, and Mr. VOINOVICH) introduced the following

bill; which was read twice and referred to the Committee on Environment

and Public Works

A BILL

To authorize the President to enter into agreements to provide regulatory credit for voluntary early action to mitigate potential environmental impacts from greenhouse

gas emissions.

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

3 SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

4 (a) SHORT TITLE.—This Act may be cited as the

5 ‘‘Credit for Voluntary Reductions Act’’.

6 (b) TABLE OF CONTENTS.—The table of contents of

7 this Act is as follows:
2

•S 547 IS

Sec. 1. Short title; table of contents.

Sec. 2. Purpose.

Sec. 3. Definitions.

Sec. 4. Authority for early action agreements.

Sec. 5. Entitlement to greenhouse gas reduction credit for early action.

Sec. 6. Baseline and base period.

Sec. 7. Sources and carbon reservoirs covered by early action agreements.

Sec. 8. Measurement and verification.

Sec. 9. Authority to enter into agreements that achieve comparable reductions.

Sec. 10. Trading and pooling.

Sec. 11. Relationship to future domestic greenhouse gas regulatory statute.

1 SEC. 2. PURPOSE.

2 The purpose of this Act is to encourage voluntary ac3 tions to mitigate potential environmental impacts of green4 house gas emissions by authorizing the President to enter

5 into binding agreements under which entities operating in

6 the United States will receive credit, usable in any future

7 domestic program that requires mitigation of greenhouse

8 gas emissions, for voluntary mitigation actions taken be9 fore the end of the credit period.

10 SEC. 3. DEFINITIONS.

11 In this Act:

12 (1) CARBON RESERVOIR.—The term ‘‘carbon

13 reservoir’’ means quantifiable nonfossil storage of

14 carbon in a natural or managed ecosystem or other

15 reservoir.

16 (2) COMPLIANCE PERIOD.—The term ‘‘compli17 ance period’’ means any period during which a do18 mestic greenhouse gas regulatory statute is in effect.

19 (3) CREDIT PERIOD.—The term ‘‘credit period’’

20 means—
3

•S 547 IS

1 (A) the period of January 1, 1999,

2 through the earlier of—

3 (i) the day before the beginning of the

4 compliance period; or

5 (ii) the end of the ninth calendar year

6 that begins after the date of enactment of

7 this Act; or

8 (B) if a different period is determined for

9 a participant under section 5(e) or 6(c)(4), the

10 period so determined.

11 (4) DOMESTIC.—The term ‘‘domestic’’ means

12 within the territorial jurisdiction of the United

13 States.

14 (5) DOMESTIC GREENHOUSE GAS REGULATORY

15 STATUTE.—The term ‘‘domestic greenhouse gas reg16 ulatory statute’’ means a Federal statute, enacted

17 after the date of enactment of this Act, that imposes

18 a quantitative limitation on domestic greenhouse gas

19 emissions, or taxes such emissions.

20 (6) EARLY ACTION AGREEMENT.—The term

21 ‘‘early action agreement’’ means an agreement with

22 the United States entered into under section 4(a).

23 (7) EXISTING SOURCE.—The term ‘‘existing

24 source’’ means a source that emitted greenhouse
4

•S 547 IS

1 gases during the participant’s base period deter2 mined under section 6.

3 (8) GREENHOUSE GAS.—The term ‘‘greenhouse

4 gas’’ means—

5 (A) carbon dioxide; and

6 (B) to the extent provided by an early ac7 tion agreement—

8 (i) methane;

9 (ii) nitrous oxide;

10 (iii) hydrofluorocarbons;

11 (iv) perfluorocarbons; and

12 (v) sulfur hexafluoride.

13 (9) GREENHOUSE GAS REDUCTION CREDIT.—

14 The term ‘‘greenhouse gas reduction credit’’ means

15 an authorization under a domestic greenhouse gas

16 regulatory statute to emit 1 metric ton of green17 house gas (expressed in terms of carbon dioxide

18 equivalent) that is provided because of greenhouse

19 gas emission reductions or carbon sequestration car20 ried out before the compliance period.

21 (10) NEW SOURCE.—The term ‘‘new source’’

22 means—

23 (A) a source other than an existing source;

24 and
5

•S 547 IS

1 (B) a facility that would be a source but

2 for the facility’s use of renewable energy.

3 (11) OWN.—The term ‘‘own’’ means to have di4 rect or indirect ownership of an undivided interest in

5 an asset.

6 (12) PARTICIPANT.—The term ‘‘participant’’

7 means a person that enters into an early action

8 agreement with the United States under this Act.

9 (13) PERSON.—The term ‘‘person’’ includes a

10 governmental entity.

11 (14) SOURCE.—The term ‘‘source’’ means a

12 source of greenhouse gas emissions.

13 SEC. 4. AUTHORITY FOR EARLY ACTION AGREEMENTS.

14 (a) AUTHORITY.—

15 (1) IN GENERAL.—The President may enter

16 into a legally binding early action agreement with

17 any person under which the United States agrees to

18 provide greenhouse gas reduction credit usable be19 ginning in the compliance period, if the person takes

20 an action described in section 5 that reduces green21 house gas emissions or sequesters carbon before the

22 end of the credit period.

23 (2) REQUIREMENTS.—An early action agree24 ment entered into under paragraph (1) shall meet

25 either—
6

•S 547 IS

1 (A) the requirements for early action

2 agreements under sections 5 through 8; or

3 (B) in the case of a participant described

4 in section 9, the requirements of that section.

5 (b) DELEGATION.—The President may delegate any

6 authority under this Act to any Federal department or

7 agency.

8 (c) REGULATIONS.—The President may promulgate

9 such regulations (including guidelines) as are appropriate

10 to carry out this Act.

11 SEC. 5. ENTITLEMENT TO GREENHOUSE GAS REDUCTION

12 CREDIT FOR EARLY ACTION.

13 (a) INTERNATIONALLY CREDITABLE ACTIONS.—A

14 participant shall receive greenhouse gas reduction credit

15 under an early action agreement if the participant takes

16 an action that—

17 (1) reduces greenhouse gas emissions or seques18 ters carbon before the end of the credit period; and

19 (2) under any applicable international agree20 ment, will result in an addition to the United States

21 quantified emission limitation for the compliance pe22 riod.

23 (b) UNITED STATES INITIATIVE FOR JOINT IMPLE24 MENTATION.—
7

•S 547 IS

1 (1) IN GENERAL.—Subject to paragraph (2), an

2 early action agreement may provide that a partici3 pant shall be entitled to receive greenhouse gas re4 duction credit for a greenhouse gas emission reduc5 tion or carbon sequestration that—

6 (A) is not creditable under subsection (a);

7 and

8 (B) is for a project—

9 (i) accepted before December 31,

10 2000, under the United States Initiative

11 for Joint Implementation; and

12 (ii) financing for which was provided

13 or construction of which was commenced

14 before that date.

15 (2) LIMITATION ON PERIOD DURING WHICH

16 CREDIT MAY BE EARNED.—No greenhouse gas re17 duction credit may be earned under this subsection

18 after the earlier of—

19 (A) the earliest date on which credit may

20 be earned for a greenhouse gas emission reduc21 tion, carbon sequestration, or comparable

22 project under an applicable international agree23 ment; or

24 (B) the end of the credit period.

25 (c) PROSPECTIVE DOMESTIC ACTIONS.—
8

•S 547 IS

1 (1) EMISSION REDUCTIONS.—A participant

2 shall receive greenhouse gas reduction credit under

3 an early action agreement if, during the credit

4 period—

5 (A) the participant’s aggregate greenhouse

6 gas emissions from domestic sources that are

7 covered by the early action agreement; are less

8 than

9 (B) the sum of the participant’s annual

10 source baselines during that period (as deter11 mined under section 6 and adjusted under sub12 sections (a)(2), (c)(1), and (c)(2) of section 7).

13 (2) SEQUESTRATION.—For the purpose of re14 ceiving greenhouse gas reduction credit under para15 graph (1), the amount by which aggregate net car16 bon sequestration for the credit period in a partici17 pant’s domestic carbon reservoirs covered by an

18 early action agreement exceeds the sum of the par19 ticipant’s annual reservoir baselines for the credit

20 period (as determined under section 6 and adjusted

21 under section 7(c)(1)(B)) shall be treated as a

22 greenhouse gas emission reduction.

23 (d) DOMESTIC SECTION 1605 ACTIONS.—

24 (1) CREDIT.—An early action agreement may

25 provide that a participant shall be entitled to receive
9

•S 547 IS

1 1 ton of greenhouse gas reduction credit for each

2 ton of greenhouse gas emission reductions or carbon

3 sequestration for the 1991 through 1998 period

4 from domestic actions that are—

5 (A) reported before January 1, 1999,

6 under section 1605 of the Energy Policy Act of

7 1992 (42 U.S.C. 13385); or

8 (B) carried out and reported before Janu9 ary 1, 1999, under a Federal agency program

10 to implement the Climate Change Action Plan.

11 (2) VERIFICATION.—The participant shall pro12 vide information sufficient to verify to the satisfac13 tion of the President (in accordance with section 8

14 and the regulations promulgated under section 4(c))

15 that actions reported under paragraph (1)—

16 (A) have been accurately reported;

17 (B) are not double-counted; and

18 (C) represent actual reductions in green19 house gas emissions or actual increases in net

20 carbon sequestration.

21 (e) EXTENSION.—The parties to an early action

22 agreement may extend the credit period during which

23 greenhouse gas reduction credit may be earned under the

24 early action agreement, if Congress permits such an exten-
10

•S 547 IS

1 sion by law enacted after the date of enactment of this

2 Act.

3 (f) AWARD OF GREENHOUSE GAS REDUCTION CRED4 IT.—

5 (1) ANNUAL NOTIFICATION OF CUMULATIVE

6 BALANCES.—After the end of each calendar year,

7 the President shall notify each participant of the cu8 mulative balance (if any) of greenhouse gas reduc9 tion credit earned under an early action agreement

10 as of the end of the calendar year.

11 (2) AWARD OF FINAL CREDIT.—Effective at the

12 end of the credit period, a participant shall have a

13 contractual entitlement, to the extent provided in the

14 participant’s early action agreement, to receive 1 ton

15 of greenhouse gas reduction credit for each 1 ton

16 that is creditable under subsections (a) through (d).

17 SEC. 6. BASELINE AND BASE PERIOD.

18 (a) SOURCE BASELINE.—A participant’s annual

19 source baseline for each of the calendar years in the credit

20 period shall be equal to the participant’s average annual

21 greenhouse gas emissions from domestic sources covered

22 by the participant’s early action agreement during the par23 ticipant’s base period, adjusted for the calendar year as

24 provided in subsections (a)(2), (c)(1), and (c)(2) of section

25 7.
11

•S 547 IS

1 (b) RESERVOIR BASELINE.—A participant’s annual

2 reservoir baseline for each of the calendar years in the

3 credit period shall be equal to the average level of carbon

4 stocks in carbon reservoirs covered by the participant’s

5 early action agreement for the participant’s base period,

6 adjusted for the calendar year as provided in section

7 7(c)(1).

8 (c) BASE PERIOD.—

9 (1) IN GENERAL.—Except as provided in para10 graphs (2) and (3), a participant’s base period shall

11 be 1996 through 1998.

12 (2) DATA UNAVAILABLE OR UNREPRESENTA13 TIVE.—The regulations promulgated under section

14 4(c) may specify a base period other than 1996

15 through 1998 that will be applicable if adequate

16 data are not available to determine a 1996 through

17 1998 baseline or if such data are unrepresentative.

18 (3) ELECTIONS.—The regulations promulgated

19 under section 4(c) may permit a participant to elect

20 a base period earlier than 1996 (not to include any

21 year earlier than 1990) to reflect voluntary reduc22 tions made before January 1, 1996.

23 (4) ADJUSTMENT OF PERIOD DURING WHICH

24 CREDIT MAY BE EARNED.—Notwithstanding sub25 sections (c) and (d) of section 5, except as otherwise
12

•S 547 IS

1 provided by the regulations promulgated under sec2 tion 4(c), if an election is made for a base period

3 earlier than 1996—

4 (A) greenhouse gas reduction credit shall

5 be available under section 5(c) for the calendar

6 year that begins after the end of the base pe7 riod and any calendar year thereafter through

8 the end of the credit period; and

9 (B) greenhouse gas reduction credit shall

10 be available under section 5(d) only through the

11 end of the base period.

12 SEC. 7. SOURCES AND CARBON RESERVOIRS COVERED BY

13 EARLY ACTION AGREEMENTS.

14 (a) SOURCES.—

15 (1) IN GENERAL.—

16 (A) COVERED SOURCES.—Except as other17 wise provided in this subsection, a participant’s

18 early action agreement shall cover all domestic

19 greenhouse gas sources that the participant

20 owns as of the date on which the early action

21 agreement is entered into.

22 (B) EXCLUSIONS.—The regulations pro23 mulgated under section 4(c) (or the terms of an

24 early action agreement) may exclude from cov25 erage under an early action agreement—
13

•S 547 IS

1 (i) small or diverse sources owned by

2 the participant; and

3 (ii) sources owned by more than 1

4 person.

5 (2) NEW SOURCES.—

6 (A) IN GENERAL.—The regulations pro7 mulgated under section 4(c) may provide that

8 an early action agreement may provide for an

9 annual addition to a participant’s source base10 line to account for new sources owned by the

11 participant.

12 (B) AMOUNT OF ADDITION.—The amount

13 of an addition under subparagraph (A) shall re14 flect the emission performance of the most effi15 cient commercially available technology for

16 sources that produce the same or similar output

17 as the new source (determined as of the date on

18 which the early action agreement is entered

19 into).

20 (b) OPT-IN PROVISIONS.—

21 (1) OPT-IN FOR OTHER OWNED SOURCES.—Do22 mestic sources owned by a participant that are not

23 required to be covered under subsection (a) may be

24 covered under an early action agreement at the elec25 tion of the participant.
14

•S 547 IS

1 (2) OPT-IN FOR CARBON RESERVOIRS.—

2 (A) IN GENERAL.—An early action agree3 ment may provide that domestic carbon res4 ervoirs owned by a participant may be covered

5 under the early action agreement at the election

6 of the participant.

7 (B) COVERAGE.—Except in the case of

8 small or diverse carbon reservoirs owned by the

9 participant (as provided in the regulations pro10 mulgated under section 4(c)), if a participant

11 elects to have domestic carbon reservoirs cov12 ered under the early action agreement, all of

13 the participant’s domestic carbon reservoirs

14 shall be covered under the early action agree15 ment.

16 (3) OPT-IN FOR SOURCES AND CARBON RES17 ERVOIRS NOT OWNED BY PARTICIPANT.—Any source

18 or carbon reservoir not owned by the participant, or

19 any project that decreases greenhouse gas emissions

20 from or sequesters carbon in such a source or car21 bon reservoir, may be covered by an early action

22 agreement—

23 (A) in the case of a source or carbon res24 ervoir that is covered by another early action

25 agreement, if each owner of the source or car-
15

•S 547 IS

1 bon reservoir agrees to exclude the source or

2 reservoir from coverage by the owner’s early ac3 tion agreement; and

4 (B) in accordance with the regulations pro5 mulgated under section 4(c).

6 (c) ACCOUNTING RULES.—

7 (1) TRANSFERS.—If ownership of a source or

8 carbon reservoir covered by an early action agree9 ment is transferred to or from the participant—

10 (A) in the case of a source, the source’s

11 emissions shall be adjusted to reflect the trans12 fer for the base period and each year for which

13 greenhouse gas reduction credit is claimed; and

14 (B) in the case of a carbon reservoir—

15 (i) the carbon reservoir’s carbon

16 stocks shall be adjusted to reflect the

17 transfer for the participant’s base period;

18 and

19 (ii) the carbon reservoir’s net carbon

20 sequestration shall be adjusted to reflect

21 the transfer for each year for which green22 house gas reduction credit is claimed.

23 (2) DISPLACEMENT OF EMISSIONS.—An early

24 action agreement shall contain effective and work25 able provisions that ensure that only net emission
16

•S 547 IS

1 reductions will be credited under section 5 in cir2 cumstances in which emissions are displaced from

3 sources covered by an early action agreement to

4 sources not covered by an early action agreement.

5 (3) PERIOD OF COVERAGE.—Emissions from

6 sources and net carbon sequestration in carbon res7 ervoirs shall be covered by an early action agreement

8 for the credit period, except as provided under para9 graph (1) or by the regulations promulgated under

10 section 4(c).

11 (4) PARTIAL YEARS.—An early action agree12 ment shall contain appropriate provisions for any

13 partial year of coverage of a source or carbon res14 ervoir.

15 SEC. 8. MEASUREMENT AND VERIFICATION.

16 (a) IN GENERAL.—In accordance with the regula17 tions promulgated under section 4(c), an early action

18 agreement shall—

19 (1) provide that, for each calendar year during

20 which the early action agreement is in effect, the

21 participant shall report to the United States, as

22 applicable—

23 (A) the participant’s annual source base24 line and greenhouse gas emissions for the cal25 endar year; and
17

•S 547 IS

1 (B) the participant’s annual reservoir base2 line and net carbon sequestration for the cal3 endar year;

4 (2) establish procedures under which the partic5 ipant will measure, track, and report the information

6 required by paragraph (1);

7 (3) establish requirements for maintenance of

8 records by the participant and provisions for inspec9 tion of the records by representatives of the United

10 States; and

11 (4) permit qualified independent third party en12 tities to measure, track, and report the information

13 required by paragraph (1) on behalf of the partici14 pant.

15 (b) AVAILABILITY OF REPORTS TO THE PUBLIC.—

16 Reports required to be made under subsection (a)(1) shall

17 be available to the public.

18 (c) CONFIDENTIALITY.—The regulations promul19 gated under section 4(c) shall make appropriate provision

20 for protection of confidential commercial and financial in21 formation.

22 SEC. 9. AUTHORITY TO ENTER INTO AGREEMENTS THAT

23 ACHIEVE COMPARABLE REDUCTIONS.

24 In the case of a participant that manufactures or con25 structs for sale to end-users equipment or facilities that
18

•S 547 IS

1 emit greenhouse gases, the President may enter into an

2 early action agreement that does not meet the require3 ments of sections 5 through 7, if the President determines

4 that—

5 (1) an early action agreement that meets the

6 requirements of those sections is infeasible;

7 (2) an alternative form of agreement would bet8 ter carry out this Act; and

9 (3) an agreement under this section would

10 achieve tonnage reductions of greenhouse gas emis11 sions that are comparable to reductions that would

12 be achieved under an agreement that meets the re13 quirements of those sections.

14 SEC. 10. TRADING AND POOLING.

15 (a) TRADING.—A participant may—

16 (1) purchase earned greenhouse gas reduction

17 credit from and sell the credit to any other partici18 pant; and

19 (2) sell the credit to any person that is not a

20 participant.

21 (b) POOLING.—The regulations promulgated under

22 section 4(c) may permit pooling arrangements under

23 which a group of participants agrees to act as a single

24 participant for the purpose of entering into an early action

25 agreement.
19

•S 547 IS

1 SEC. 11. RELATIONSHIP TO FUTURE DOMESTIC GREEN2 HOUSE GAS REGULATORY STATUTE.

3 (a) IN GENERAL.—An early action agreement shall

4 not bind the United States to adopt (or not to adopt) any

5 particular form of domestic greenhouse gas regulatory

6 statute, except that an early action agreement shall pro7 vide that—

8 (1) greenhouse gas reduction credit earned by a

9 participant under an early action agreement shall be

10 provided to the participant in addition to any other11 wise available authorizations of the participant to

12 emit greenhouse gases during the compliance period

13 under a domestic greenhouse gas regulatory statute;

14 and

15 (2) if the allocation of authorizations under a

16 domestic greenhouse gas regulatory statute to emit

17 greenhouse gases during the compliance period is

18 based on the level of a participant’s emissions during

19 a historic period that is later than the participant’s

20 base period under the participant’s early action

21 agreement, any greenhouse gas reduction credit to

22 which the participant was entitled under the early

23 action agreement for domestic greenhouse gas reduc24 tions during that historic period shall, for the pur25 pose of that allocation, be added back to the partici-
20

•S 547 IS

1 pant’s greenhouse gas emissions level for the historic

2 period.

3 (b) LIMITATION.—Nothing in this Act authorizes ag4 gregate greenhouse gas emissions from domestic sources

5 in an amount that exceeds any greenhouse gas emission

6 limitation applicable to the United States under an inter7 national agreement that has been ratified by the United

8 States and has entered into force.

Æ