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[Congressional Bills 106th Congress]
[From the U.S. Government Publishing Office]
[S. 547 Introduced in Senate (IS)]

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.

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

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Credit for 
Voluntary Reductions Act''.
    (b) Table of Contents.--The table of contents of this Act is as 
follows:

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.

SEC. 2. PURPOSE.

    The purpose of this Act is to encourage voluntary actions to 
mitigate potential environmental impacts of greenhouse gas emissions by 
authorizing the President to enter into binding agreements under which 
entities operating in the United States will receive credit, usable in 
any future domestic program that requires mitigation of greenhouse gas 
emissions, for voluntary mitigation actions taken before the end of the 
credit period.

SEC. 3. DEFINITIONS.

    In this Act:
            (1) Carbon reservoir.--The term ``carbon reservoir'' means 
        quantifiable nonfossil storage of carbon in a natural or 
        managed ecosystem or other reservoir.
            (2) Compliance period.--The term ``compliance period'' 
        means any period during which a domestic greenhouse gas 
        regulatory statute is in effect.
            (3) Credit period.--The term ``credit period'' means--
                    (A) the period of January 1, 1999, through the 
                earlier of--
                            (i) the day before the beginning of the 
                        compliance period; or
                            (ii) the end of the ninth calendar year 
                        that begins after the date of enactment of this 
                        Act; or
                    (B) if a different period is determined for a 
                participant under section 5(e) or 6(c)(4), the period 
                so determined.
            (4) Domestic.--The term ``domestic'' means within the 
        territorial jurisdiction of the United States.
            (5) Domestic greenhouse gas regulatory statute.--The term 
        ``domestic greenhouse gas regulatory statute'' means a Federal 
        statute, enacted after the date of enactment of this Act, that 
        imposes a quantitative limitation on domestic greenhouse gas 
        emissions, or taxes such emissions.
            (6) Early action agreement.--The term ``early action 
        agreement'' means an agreement with the United States entered 
        into under section 4(a).
            (7) Existing source.--The term ``existing source'' means a 
        source that emitted greenhouse gases during the participant's 
        base period determined under section 6.
            (8) Greenhouse gas.--The term ``greenhouse gas'' means--
                    (A) carbon dioxide; and
                    (B) to the extent provided by an early action 
                agreement--
                            (i) methane;
                            (ii) nitrous oxide;
                            (iii) hydrofluorocarbons;
                            (iv) perfluorocarbons; and
                            (v) sulfur hexafluoride.
            (9) Greenhouse gas reduction credit.--The term ``greenhouse 
        gas reduction credit'' means an authorization under a domestic 
        greenhouse gas regulatory statute to emit 1 metric ton of 
        greenhouse gas (expressed in terms of carbon dioxide 
        equivalent) that is provided because of greenhouse gas emission 
        reductions or carbon sequestration carried out before the 
        compliance period.
            (10) New source.--The term ``new source'' means--
                    (A) a source other than an existing source; and
                    (B) a facility that would be a source but for the 
                facility's use of renewable energy.
            (11) Own.--The term ``own'' means to have direct or 
        indirect ownership of an undivided interest in an asset.
            (12) Participant.--The term ``participant'' means a person 
        that enters into an early action agreement with the United 
        States under this Act.
            (13) Person.--The term ``person'' includes a governmental 
        entity.
            (14) Source.--The term ``source'' means a source of 
        greenhouse gas emissions.

SEC. 4. AUTHORITY FOR EARLY ACTION AGREEMENTS.

    (a) Authority.--
            (1) In general.--The President may enter into a legally 
        binding early action agreement with any person under which the 
        United States agrees to provide greenhouse gas reduction credit 
        usable beginning in the compliance period, if the person takes 
        an action described in section 5 that reduces greenhouse gas 
        emissions or sequesters carbon before the end of the credit 
        period.
            (2) Requirements.--An early action agreement entered into 
        under paragraph (1) shall meet either--
                    (A) the requirements for early action agreements 
                under sections 5 through 8; or
                    (B) in the case of a participant described in 
                section 9, the requirements of that section.
    (b) Delegation.--The President may delegate any authority under 
this Act to any Federal department or agency.
    (c) Regulations.--The President may promulgate such regulations 
(including guidelines) as are appropriate to carry out this Act.

SEC. 5. ENTITLEMENT TO GREENHOUSE GAS REDUCTION CREDIT FOR EARLY 
              ACTION.

    (a) Internationally Creditable Actions.--A participant shall 
receive greenhouse gas reduction credit under an early action agreement 
if the participant takes an action that--
            (1) reduces greenhouse gas emissions or sequesters carbon 
        before the end of the credit period; and
            (2) under any applicable international agreement, will 
        result in an addition to the United States quantified emission 
        limitation for the compliance period.
    (b) United States Initiative for Joint Implementation.--
            (1) In general.--Subject to paragraph (2), an early action 
        agreement may provide that a participant shall be entitled to 
        receive greenhouse gas reduction credit for a greenhouse gas 
        emission reduction or carbon sequestration that--
                    (A) is not creditable under subsection (a); and
                    (B) is for a project--
                            (i) accepted before December 31, 2000, 
                        under the United States Initiative for Joint 
                        Implementation; and
                            (ii) financing for which was provided or 
                        construction of which was commenced before that 
                        date.
            (2) Limitation on period during which credit may be 
        earned.--No greenhouse gas reduction credit may be earned under 
        this subsection after the earlier of--
                    (A) the earliest date on which credit may be earned 
                for a greenhouse gas emission reduction, carbon 
                sequestration, or comparable project under an 
                applicable international agreement; or
                    (B) the end of the credit period.
    (c) Prospective Domestic Actions.--
            (1) Emission reductions.--A participant shall receive 
        greenhouse gas reduction credit under an early action agreement 
        if, during the credit period--
                    (A) the participant's aggregate greenhouse gas 
                emissions from domestic sources that are covered by the 
                early action agreement; are less than
                    (B) the sum of the participant's annual source 
                baselines during that period (as determined under 
                section 6 and adjusted under subsections (a)(2), 
                (c)(1), and (c)(2) of section 7).
            (2) Sequestration.--For the purpose of receiving greenhouse 
        gas reduction credit under paragraph (1), the amount by which 
        aggregate net carbon sequestration for the credit period in a 
        participant's domestic carbon reservoirs covered by an early 
        action agreement exceeds the sum of the participant's annual 
        reservoir baselines for the credit period (as determined under 
        section 6 and adjusted under section 7(c)(1)(B)) shall be 
        treated as a greenhouse gas emission reduction.
    (d) Domestic Section 1605 Actions.--
            (1) Credit.--An early action agreement may provide that a 
        participant shall be entitled to receive 1 ton of greenhouse 
gas reduction credit for each ton of greenhouse gas emission reductions 
or carbon sequestration for the 1991 through 1998 period from domestic 
actions that are--
                    (A) reported before January 1, 1999, under section 
                1605 of the Energy Policy Act of 1992 (42 U.S.C. 
                13385); or
                    (B) carried out and reported before January 1, 
                1999, under a Federal agency program to implement the 
                Climate Change Action Plan.
            (2) Verification.--The participant shall provide 
        information sufficient to verify to the satisfaction of the 
        President (in accordance with section 8 and the regulations 
        promulgated under section 4(c)) that actions reported under 
        paragraph (1)--
                    (A) have been accurately reported;
                    (B) are not double-counted; and
                    (C) represent actual reductions in greenhouse gas 
                emissions or actual increases in net carbon 
                sequestration.
    (e) Extension.--The parties to an early action agreement may extend 
the credit period during which greenhouse gas reduction credit may be 
earned under the early action agreement, if Congress permits such an 
extension by law enacted after the date of enactment of this Act.
    (f) Award of Greenhouse Gas Reduction Credit.--
            (1) Annual notification of cumulative balances.--After the 
        end of each calendar year, the President shall notify each 
        participant of the cumulative balance (if any) of greenhouse 
        gas reduction credit earned under an early action agreement as 
        of the end of the calendar year.
            (2) Award of final credit.--Effective at the end of the 
        credit period, a participant shall have a contractual 
        entitlement, to the extent provided in the participant's early 
        action agreement, to receive 1 ton of greenhouse gas reduction 
        credit for each 1 ton that is creditable under subsections (a) 
        through (d).

SEC. 6. BASELINE AND BASE PERIOD.

    (a) Source Baseline.--A participant's annual source baseline for 
each of the calendar years in the credit period shall be equal to the 
participant's average annual greenhouse gas emissions from domestic 
sources covered by the participant's early action agreement during the 
participant's base period, adjusted for the calendar year as provided 
in subsections (a)(2), (c)(1), and (c)(2) of section 7.
    (b) Reservoir Baseline.--A participant's annual reservoir baseline 
for each of the calendar years in the credit period shall be equal to 
the average level of carbon stocks in carbon reservoirs covered by the 
participant's early action agreement for the participant's base period, 
adjusted for the calendar year as provided in section 7(c)(1).
    (c) Base Period.--
            (1) In general.--Except as provided in paragraphs (2) and 
        (3), a participant's base period shall be 1996 through 1998.
            (2) Data unavailable or unrepresentative.--The regulations 
        promulgated under section 4(c) may specify a base period other 
        than 1996 through 1998 that will be applicable if adequate data 
        are not available to determine a 1996 through 1998 baseline or 
        if such data are unrepresentative.
            (3) Elections.--The regulations promulgated under section 
        4(c) may permit a participant to elect a base period earlier 
        than 1996 (not to include any year earlier than 1990) to 
        reflect voluntary reductions made before January 1, 1996.
            (4) Adjustment of period during which credit may be 
        earned.--Notwithstanding subsections (c) and (d) of section 5, 
        except as otherwise provided by the regulations promulgated 
        under section 4(c), if an election is made for a base period 
        earlier than 1996--
                    (A) greenhouse gas reduction credit shall be 
                available under section 5(c) for the calendar year that 
                begins after the end of the base period and any 
                calendar year thereafter through the end of the credit 
                period; and
                    (B) greenhouse gas reduction credit shall be 
                available under section 5(d) only through the end of 
                the base period.

SEC. 7. SOURCES AND CARBON RESERVOIRS COVERED BY EARLY ACTION 
              AGREEMENTS.

    (a) Sources.--
            (1) In general.--
                    (A) Covered sources.--Except as otherwise provided 
                in this subsection, a participant's early action 
                agreement shall cover all domestic greenhouse gas 
                sources that the participant owns as of the date on 
                which the early action agreement is entered into.
                    (B) Exclusions.--The regulations promulgated under 
                section 4(c) (or the terms of an early action 
                agreement) may exclude from coverage under an early 
                action agreement--
                            (i) small or diverse sources owned by the 
                        participant; and
                            (ii) sources owned by more than 1 person.
            (2) New sources.--
                    (A) In general.--The regulations promulgated under 
                section 4(c) may provide that an early action agreement 
                may provide for an annual addition to a participant's 
                source baseline to account for new sources owned by the 
                participant.
                    (B) Amount of addition.--The amount of an addition 
                under subparagraph (A) shall reflect the emission 
                performance of the most efficient commercially 
                available technology for sources that produce the same 
                or similar output as the new source (determined as of 
                the date on which the early action agreement is entered 
                into).
    (b) Opt-in Provisions.--
            (1) Opt-in for other owned sources.--Domestic sources owned 
        by a participant that are not required to be covered under 
        subsection (a) may be covered under an early action agreement 
        at the election of the participant.
            (2) Opt-in for carbon reservoirs.--
                    (A) In general.--An early action agreement may 
                provide that domestic carbon reservoirs owned by a 
                participant may be covered under the early action 
                agreement at the election of the participant.
                    (B) Coverage.--Except in the case of small or 
                diverse carbon reservoirs owned by the participant (as 
                provided in the regulations promulgated under section 
                4(c)), if a participant elects to have domestic carbon 
                reservoirs covered under the early action agreement, 
                all of the participant's domestic carbon reservoirs 
                shall be covered under the early action agreement.
            (3) Opt-in for sources and carbon reservoirs not owned by 
        participant.--Any source or carbon reservoir not owned by the 
        participant, or any project that decreases greenhouse gas 
        emissions from or sequesters carbon in such a source or carbon 
        reservoir, may be covered by an early action agreement--
                    (A) in the case of a source or carbon reservoir 
                that is covered by another early action agreement, if 
                each owner of the source or carbon reservoir agrees to 
                exclude the source or reservoir from coverage by the 
                owner's early action agreement; and
                    (B) in accordance with the regulations promulgated 
                under section 4(c).
    (c) Accounting Rules.--
            (1) Transfers.--If ownership of a source or carbon 
        reservoir covered by an early action agreement is transferred 
        to or from the participant--
                    (A) in the case of a source, the source's emissions 
                shall be adjusted to reflect the transfer for the base 
                period and each year for which greenhouse gas reduction 
                credit is claimed; and
                    (B) in the case of a carbon reservoir--
                            (i) the carbon reservoir's carbon stocks 
                        shall be adjusted to reflect the transfer for 
                        the participant's base period; and
                            (ii) the carbon reservoir's net carbon 
                        sequestration shall be adjusted to reflect the 
                        transfer for each year for which greenhouse gas 
                        reduction credit is claimed.
            (2) Displacement of emissions.--An early action agreement 
        shall contain effective and workable provisions that ensure 
        that only net emission reductions will be credited under 
        section 5 in circumstances in which emissions are displaced 
        from sources covered by an early action agreement to sources 
        not covered by an early action agreement.
            (3) Period of coverage.--Emissions from sources and net 
        carbon sequestration in carbon reservoirs shall be covered by 
        an early action agreement for the credit period, except as 
        provided under paragraph (1) or by the regulations promulgated 
        under section 4(c).
            (4) Partial years.--An early action agreement shall contain 
        appropriate provisions for any partial year of coverage of a 
        source or carbon reservoir.

SEC. 8. MEASUREMENT AND VERIFICATION.

    (a) In General.--In accordance with the regulations promulgated 
under section 4(c), an early action agreement shall--
            (1) provide that, for each calendar year during which the 
        early action agreement is in effect, the participant shall 
        report to the United States, as applicable--
                    (A) the participant's annual source baseline and 
                greenhouse gas emissions for the calendar year; and
                    (B) the participant's annual reservoir baseline and 
                net carbon sequestration for the calendar year;
            (2) establish procedures under which the participant will 
        measure, track, and report the information required by 
        paragraph (1);
            (3) establish requirements for maintenance of records by 
        the participant and provisions for inspection of the records by 
        representatives of the United States; and
            (4) permit qualified independent third party entities to 
        measure, track, and report the information required by 
        paragraph (1) on behalf of the participant.
    (b) Availability of Reports to the Public.--Reports required to be 
made under subsection (a)(1) shall be available to the public.
    (c) Confidentiality.--The regulations promulgated under section 
4(c) shall make appropriate provision for protection of confidential 
commercial and financial information.

SEC. 9. AUTHORITY TO ENTER INTO AGREEMENTS THAT ACHIEVE COMPARABLE 
              REDUCTIONS.

    In the case of a participant that manufactures or constructs for 
sale to end-users equipment or facilities that emit greenhouse gases, 
the President may enter into an early action agreement that does not 
meet the requirements of sections 5 through 7, if the President 
determines that--
            (1) an early action agreement that meets the requirements 
        of those sections is infeasible;
            (2) an alternative form of agreement would better carry out 
        this Act; and
            (3) an agreement under this section would achieve tonnage 
        reductions of greenhouse gas emissions that are comparable to 
        reductions that would be achieved under an agreement that meets 
        the requirements of those sections.

SEC. 10. TRADING AND POOLING.

    (a) Trading.--A participant may--
            (1) purchase earned greenhouse gas reduction credit from 
        and sell the credit to any other participant; and
            (2) sell the credit to any person that is not a 
        participant.
    (b) Pooling.--The regulations promulgated under section 4(c) may 
permit pooling arrangements under which a group of participants agrees 
to act as a single participant for the purpose of entering into an 
early action agreement.

SEC. 11. RELATIONSHIP TO FUTURE DOMESTIC GREENHOUSE GAS REGULATORY 
              STATUTE.

    (a) In General.--An early action agreement shall not bind the 
United States to adopt (or not to adopt) any particular form of 
domestic greenhouse gas regulatory statute, except that an early action 
agreement shall provide that--
            (1) greenhouse gas reduction credit earned by a participant 
        under an early action agreement shall be provided to the 
        participant in addition to any otherwise available 
        authorizations of the participant to emit greenhouse gases 
        during the compliance period under a domestic greenhouse gas 
        regulatory statute; and
            (2) if the allocation of authorizations under a domestic 
        greenhouse gas regulatory statute to emit greenhouse gases 
        during the compliance period is based on the level of a 
        participant's emissions during a historic period that is later 
        than the participant's base period under the participant's 
        early action agreement, any greenhouse gas reduction credit to 
        which the participant was entitled under the early action 
        agreement for domestic greenhouse gas reductions during that 
        historic period shall, for the purpose of that allocation, be 
        added back to the participant's greenhouse gas emissions level 
        for the historic period.
    (b) Limitation.--Nothing in this Act authorizes aggregate 
greenhouse gas emissions from domestic sources in an amount that 
exceeds any greenhouse gas emission limitation applicable to the United 
States under an international agreement that has been ratified by the 
United States and has entered into force.
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