II 

111TH CONGRESS 

1ST SESSION S. 1189 

To require the Secretary of Energy to conduct a study of the impact of 

energy and climate policy on the competitiveness of energy-intensive 

manufacturing and measures to mitigate those effects. 

IN THE SENATE OF THE UNITED STATES 

JUNE 4, 2009 

Mr. BAYH (for himself and Mr. BROWN) introduced the following bill; which 

was read twice and referred to the Committee on Energy and Natural 

Resources 

A BILL 

To require the Secretary of Energy to conduct a study of 

the impact of energy and climate policy on the competitiveness of energy-intensive manufacturing and measures 

to mitigate those effects. 

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. 

4 This Act may be cited as the ‘‘Carbon Leakage Miti5 gation Study Act of 2009’’. 

6 SEC. 2. DEFINITIONS. 

7 In this Act: 


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1 (1) CAP-AND-TRADE PROGRAM.—The term 

2 ‘‘cap-and-trade program’’ means an economy-wide 

3 program enacted by Congress under which green4 house gas emission allowances are distributed or 

5 auctioned to control those emissions under the Clean 

6 Air Act (42 U.S.C. 7401 et seq.). 

7 (2) CARBON LEAKAGE.—The term ‘‘carbon 

8 leakage’’ means any substantial increase (as deter9 mined by the Secretary) in greenhouse gas emis10 sions— 

11 (A) by a manufacturing facility located in 

12 a country without a greenhouse gas emission 

13 regulation commensurate to a cap-and-trade 

14 program; or 

15 (B) that is caused by an incremental cost 

16 of production increase in the United States as 

17 a result of a domestic cap-and-trade program. 

18 (3) COMPENSATORY MEASURE.— 

19 (A) IN GENERAL.—The term ‘‘compen20 satory measure’’ means any provision of a cap21 and-trade program intended to mitigate the risk 

22 of carbon leakage. 

23 (B) INCLUSIONS.—The term ‘‘compen24 satory measure’’ includes a provision described 

25 in subparagraph (A) relating to— 


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1 (i) emission allowance allocation; or 

2 (ii) a border tax adjustment. 

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

4 gas’’ means any gas designated as a greenhouse gas 

5 under a cap-and-trade program. 

6 (5) OUTPUT.—The term ‘‘output’’ means the 

7 total tonnage or other standard unit of production 

8 (as determined by the Secretary) produced by a 

9 manufacturing facility. 

10 (6) SECRETARY.—The term ‘‘Secretary’’ means 

11 the Secretary of Energy. 

12 SEC. 3. INDUSTRY PRODUCTIVITY AND CARBON LEAKAGE 

13 STUDY. 

14 (a) IN GENERAL.—Not later than 120 days after the 

15 date of enactment of this Act, the Secretary, in consulta16 tion with the Secretary of Commerce, the Administrator 

17 of the Environmental Protection Agency, and the heads 

18 of other appropriate Federal departments and agencies, 

19 shall conduct a study— 

20 (1) to characterize the relative risk of carbon 

21 leakage and changes in output and investment in 

22 United States industrial sectors and subsectors 

23 caused by a potential cap-and-trade program imple24 mented in the United States, in the absence of comVerDate Nov 24 2008 04:10 Jun 05, 2009 Jkt 079200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\S1189.IS S1189

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1 mensurate greenhouse gas emission regulations in 

2 other countries; and 

3 (2) to estimate the change in output in indus4 trial sectors and subsectors of the United States 

5 that are determined to be at risk of significant car6 bon leakage. 

7 (b) INCLUSIONS.—The study under subsection (a) 

8 shall include an assessment of— 

9 (1) expected United States industrial produc10 tion, imports, and exports, absent a cap-and-trade 

11 program; 

12 (2) the direct and indirect energy intensity and 

13 greenhouse gas intensity of United States industries 

14 in relation to gross value-added, cost of production, 

15 and total shipment values; 

16 (3) the price elasticity of United States indus17 tries; 

18 (4) the trade elasticity of United States indus19 tries; 

20 (5) the trade intensity (calculated as imports 

21 plus exports, relative to domestic consumption) of 

22 United States industries; 

23 (6) other qualitative indicators of the ability of 

24 United States industries to pass on cost increases to 

25 consumers, such as— 


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1 (A) market structure and concentration; 

2 (B) level of product differentiation; 

3 (C) the availability of close substitutes for 

4 customers; and 

5 (D) factors that constrain the response of 

6 foreign producers to an increase in United 

7 States production costs; 

8 (7) the overall risk of carbon leakage, expressed 

9 in list form by sector and subsector of the United 

10 States economy, resulting from a cap-and-trade pro11 gram; 

12 (8) the impacts on the production, profitability, 

13 greenhouse gas emissions, and level of employment 

14 of industries at risk of carbon leakage, expressed— 

15 (A) by sector and subsector, separately and 

16 in aggregate, as a percentage of gross domestic 

17 product; 

18 (B) in relation to national production, 

19 trade, and employment projections under a po20 tential cap-and-trade program; and 

21 (C) as compared to baseline projections ab22 sent a cap-and-trade program; 

23 (9) the manner in which the economic impacts 

24 of climate change policies compare to changes over 


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1 time in other factors affecting production and invest2 ment by industries, such as— 

3 (A) changes in production costs; 

4 (B) currency exchange rates; 

5 (C) consumer preference; and 

6 (D) other relevant factors; and 

7 (10) the highest-priority trading partners of the 

8 industries at risk of carbon leakage, listed in order 

9 of priority. 

10 (c) REPORT.—On completion of the study under this 

11 section, the Secretary shall submit to Congress a report 

12 describing the results of the study, including recommenda13 tions regarding data collection activities and subsequent 

14 studies by the Secretary, if any. 

15 SEC. 4. STUDY OF MEASURES TO MITIGATE CARBON LEAK16 AGE. 

17 (a) IN GENERAL.—Not later than 180 days after the 

18 date of enactment of this Act, but not earlier than the 

19 date of submission to Congress of the report regarding 

20 the competitiveness study under section 3(c), the Sec21 retary, in consultation with the Secretary of Commerce, 

22 the Administrator of the Environmental Protection Agen23 cy, and the heads of other appropriate Federal depart24 ments and agencies, shall conduct a study to evaluate the 


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1 impact of potential compensatory measures to prevent car2 bon leakage resulting from a cap-and-trade program. 

3 (b) INCLUSIONS.—The study under subsection (a) 

4 shall include an assessment of— 

5 (1) compensatory measures used by other juris6 dictions to prevent carbon leakage under regional, 

7 national, or multinational climate policies; 

8 (2) the projected risk of carbon leakage from 

9 United States industries under potential prices on 

10 greenhouse gas emissions and realistic scenarios for 

11 international climate policy, with compensatory 

12 measures, including— 

13 (A) the production, profitability, and level 

14 of employment of the industries at risk of car15 bon leakage, expressed separately and in aggre16 gate; 

17 (B) expected changes in the domestic mar18 ket shares of products produced in the United 

19 States, as compared to products imported into 

20 the United States; and 

21 (C) expected changes in the foreign market 

22 shares of products produced in the United 

23 States, as compared to products produced by 

24 other countries; and 


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1 (3) the consistency of compensatory measures 

2 with international trade commitments (including 

3 principles of the World Trade Organization). 

4 (c) REPORT.—On completion of the study under this 

5 section, the Secretary shall submit to Congress a report 

6 describing the results of the study, including recommenda7 tions of the Secretary, if any. 

Æ 


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