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[Congressional Bills 110th Congress]
[From the U.S. Government Publishing Office]
[S. 1168 Introduced in Senate (IS)]

110th CONGRESS
  1st Session
                                S. 1168

To amend the Clean Air Act to establish a regulatory program for sulfur 
 dioxide, nitrogen oxides, mercury, and carbon dioxide emissions from 
                    the electric generating sector.

_______________________________________________________________________

                   IN THE SENATE OF THE UNITED STATES

                             April 19, 2007

Mr. Alexander (for himself and Mr. Lieberman) introduced the following 
bill; which was read twice and referred to the Committee on Environment 
                            and Public Works

_______________________________________________________________________

                                 A BILL

 
To amend the Clean Air Act to establish a regulatory program for sulfur 
 dioxide, nitrogen oxides, mercury, and carbon dioxide emissions from 
                    the electric generating sector.

    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 ``Clean Air/Climate 
Change Act of 2007''.
    (b) Table of Contents.--The table of contents of this Act is as 
follows:

Sec. 1. Short title; table of contents.
Sec. 2. Findings and purposes.
                      TITLE I--GENERAL PROVISIONS

Sec. 101. New source performance standard.
Sec. 102. New source review program.
Sec. 103. Integrated air quality planning for the electric generating 
                            sector.
Sec. 104. Revisions to sulfur dioxide allowance program.
Sec. 105. Air quality forecasts and warnings.
Sec. 106. Relationship to other law.
                    TITLE II--GREENHOUSE GAS OFFSETS

Sec. 201. Greenhouse gas offsets.

SEC. 2. FINDINGS AND PURPOSES.

    (a) Findings.--Congress finds that--
            (1) in 1992, the United States became a signatory to the 
        United Nations Framework Convention on Climate Change in 
        recognition of the need to begin to decrease greenhouse gas 
        emission levels to 1990 levels;
            (2) fossil fuel-fired electric generating sources, 
        consisting of units fueled by coal, fuel oil, and natural gas, 
        produce nearly \2/3\ of the electricity generated in the United 
        States;
            (3) fossil fuel-fired electric generating units produce 
        approximately 67 percent of the total sulfur dioxide emissions, 
        23 percent of the total nitrogen oxides emissions, 40 percent 
        of the total mercury emissions, and 40 percent of the total 
        carbon dioxide emissions in the United States;
            (4) as of the date of enactment of this Act, nearly \3/4\ 
        of all coal-fired electricity generating units are more than 30 
        years old;
            (5)(A) many electric generating units have been exempt from 
        the emission limitations applicable to new units based on the 
        expectation that over time the units would be retired or 
        updated with new pollution control equipment; but
            (B) many of the exempted units continue to operate and emit 
        pollutants at relatively high rates;
            (6) many owners of electric generating units have failed--
                    (A) to install best available control technology 
                for emissions reductions; and
                    (B) to retire the units, as anticipated by Congress 
                in the new source review provisions of the prevention 
                of significant deterioration and nonattainment programs 
                of the Clean Air Act (42 U.S.C. 7401 et seq.);
            (7) the Clean Air Act (42 U.S.C. 7401 et seq.) regulates 
        substances (including carbon dioxide) that--
                    (A) are emitted into the ambient air; and
                    (B) affect the weather and the climate;
            (8)(A) as of the date of enactment of this Act--
                    (i) many class I areas (as designated under section 
                162(a) of the Clean Air Act (42 U.S.C. 7472(a))) are 
                impaired by haze pollution;
                    (ii) the ecosystems of many class I areas are 
                adversely affected by deposits of acidic and toxic 
                compounds; and
                    (iii) the air quality of many class I areas fails 
                to meet national ambient air quality standards; and
            (B)(i) fossil-fuel fired electric generating units are a 
        major source of air pollution impacting class I areas; and
            (ii) proposed new fossil-fuel fired electric generating 
        units threaten to increase air pollution in class I areas 
        throughout the United States;
            (9) according to the Energy Outlook for 2006 of the Energy 
        Information Administration, carbon dioxide emissions from 
        electric generating units in the Unites States have increased 
        by 32 percent during the period of 1990 through 2006 to at 
        least 2,300,000,000 metric tons of carbon dioxide in 2006;
            (10) the ability of owners of electric generating units to 
        plan effectively for the future is impeded by the uncertainties 
        surrounding future environmental regulatory requirements;
            (11) according to the National Energy Technology Laboratory 
        of the Department of Energy--
                    (A) as of the date of enactment of this Act, 159 
                new coal-fired electric generating units are proposed 
                to be constructed, which would produce 96 gigawatts of 
                new electric generating capacity; and
                    (B) if the units described in subparagraph (A) are 
                constructed, the units would produce--
                            (i) an incremental increase of 500,000,000 
                        tons of carbon dioxide per year from the 
                        production by the power sector in the United 
                        States as in existence on the date of enactment 
                        of this Act; and
                            (ii) an estimated 30,000,000,000 additional 
                        tons of carbon dioxide over the course of the 
                        useful lives of the units (assuming a lifespan 
                        of 60 years);
            (12) by December 31, 2015, emissions of carbon dioxide from 
        the United States electric utility sector should be limited to 
        2,100,000,000 metric tons;
            (13) a report of the Congressional Budget Office, dated 
        September 19, 2006, concluded that--
                    (A) relying exclusively on research and development 
                funding is not the most effective strategy for reducing 
                greenhouse gas emissions; and
                    (B) combining research and development funding with 
                a gradually-increasing limitation on emissions is a 
                more cost-effective approach;
            (14)(A) agriculture can be part of the solution to reducing 
        greenhouse gas emissions;
            (B) less productive agricultural land can be reforested 
        with carbon dioxide-consuming trees;
            (C) farming practices can be improved to increase the 
        absorption and retention of carbon in agricultural soils;
            (D) biomass from agricultural sources (including corn and 
        grass) can be used to produce biofuels that can take the place 
        of high-carbon fossil fuels used in transportation and power 
        generation; and
            (E) many of the farming practices and land use changes 
        involved in achieving those reductions have multiple benefits, 
        including--
                    (i) improving soil, water, and air quality;
                    (ii) increasing wildlife habitat; and
                    (iii) providing additional recreational 
                opportunities; and
            (15) States and regions have adopted programs to address 
        carbon dioxide emissions from electric generating units, and 
        Federal regulations relating to carbon dioxide emissions should 
        take those programs into consideration.
    (b) Purposes.--The purposes of this Act are--
            (1) to protect and preserve the environment and safeguard 
        public health by ensuring that substantial emission reductions 
        are achieved at fossil fuel-fired electric generating units;
            (2) to ensure that air quality of national parks and all 
        other class I areas (as designated by section 162(a) of the 
        Clean Air Act (42 U.S.C. 7472(a))) affected by emissions from 
        fossil fuel-fired electric generating units is significantly 
        improved;
            (3) to reduce significantly the quantities of mercury, 
        sulfur dioxide, nitrogen oxides, and carbon dioxide that enter 
        the environment as a result of the combustion of fossil fuels;
            (4) to encourage the development and use of renewable 
        energy;
            (5) to internalize the cost of protecting the values of 
        public health, air, land, and water quality;
            (6) to provide a period of environmental regulatory 
        stability for owners and operators of electric generating units 
        so as to promote improved management of existing assets and new 
        capital investments; and
            (7) to achieve emission reductions from electric generating 
        units in a cost-effective manner.

                      TITLE I--GENERAL PROVISIONS

SEC. 101. NEW SOURCE PERFORMANCE STANDARD.

    Section 111 of the Clean Air Act (42 U.S.C. 7411) is amended by 
adding at the end the following:
    ``(k) Standard of Performance for New Electric Generating 
Facilities.--
            ``(1) In general.--Each electric generating unit 
        constructed or modified after January 1, 2015, shall meet a 
        standard of performance equivalent to an emission limitation of 
        1,100 pounds of carbon dioxide per megawatt-hour or less.
            ``(2) Eligibility for carbon dioxide allowances.--Beginning 
        on January 1, 2007, each of the first 30 electric generating 
        units to achieve the standard of performance described in 
        paragraph (1) (or a revised standard under paragraph (4), as 
        applicable) shall be eligible to participate in the Climate 
        Champions Program under section 707.
            ``(3) Treatment of certain carbon dioxide.--Carbon dioxide 
        that is injected into a geological formation in a manner that 
        prevents any release of the carbon dioxide into the atmosphere 
        shall not be considered to be carbon dioxide emissions from an 
        electric generating unit for purposes of the standard of 
        performance under paragraph (1).
            ``(4) Review.--
                    ``(A) In general.--Not later than January 1, 2015, 
                and every 8 years thereafter, the Administrator shall 
                review the applicable standards of performance for new 
                electric generating units with respect to carbon 
                dioxide emissions to determine whether the emission 
                limitation for the units under paragraph (1) should be 
                decreased, based on the best available technological 
                system of continuous emission reduction.
                    ``(B) Treatment.--A determination by the 
                Administrator under subparagraph (A) shall be--
                            ``(i) published in the Federal Register not 
                        later than the deadline described in that 
                        subparagraph for the applicable review; and
                            ``(ii) considered to be final agency action 
                        for purposes of section 307(b)(1).''.

SEC. 102. NEW SOURCE REVIEW PROGRAM.

    Section 165 of the Clean Air Act (42 U.S.C. 7475) is amended by 
adding at the end the following:
    ``(f) Revisions to New Source Review Program.--
            ``(1) Definitions.--In this subsection:
                    ``(A) Affected unit.--The term `affected unit' has 
                the meaning given the term in section 701.
                    ``(B) New source review program.--The term `new 
                source review program' means the program to carry out 
                this part and part D.
            ``(2) Performance standards.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), beginning January 1, 2020, and on 
                each January 1 thereafter, each affected unit that has 
                been in operation 40 or more years as of that January 1 
                shall meet performance standards of--
                            ``(i) 2 lbs/MWh for sulfur dioxide; and
                            ``(ii) 1 lbs/MWh for nitrogen oxides.
                    ``(B) Exception.--
                            ``(i) In general.--Notwithstanding 
                        subparagraph (A), an affected unit that, as of 
                        January 1, 2020, is required to meet a more 
                        stringent performance standard than the 
                        applicable standard under subparagraph (A) 
                        shall continue to meet the more stringent 
                        standard.
                            ``(ii) Modification of affected units.--The 
                        requirements of this section shall not affect 
                        in any way any requirement under section 
                        111(a)(4), this part, or part D governing 
                        modifications of major stationary sources.
            ``(3) No effect on other requirements and retention of 
        state authority.--Nothing in this subsection affects--
                    ``(A) any State authority under section 116; or
                    ``(B) the obligation of any State or local 
                government or any major emitting facility to comply 
                with the requirements of this section.''.

SEC. 103. INTEGRATED AIR QUALITY PLANNING FOR THE ELECTRIC GENERATING 
              SECTOR.

    The Clean Air Act (42 U.S.C. 7401 et seq.) is amended by adding at 
the end the following:

     ``TITLE VII--INTEGRATED AIR QUALITY PLANNING FOR THE ELECTRIC 
                           GENERATING SECTOR

     ``TITLE VII--INTEGRATED AIR QUALITY PLANNING FOR THE ELECTRIC 
                           GENERATING SECTOR

``Sec. 701. Definitions.
``Sec. 702. National pollutant tonnage limitations.
``Sec. 703. Nitrogen oxide trading program.
``Sec. 704. Mercury program.
``Sec. 705. Carbon dioxide allowance trading program.
``Sec. 706. Conventional pulverized coal facilities.
``Sec. 707. Climate Champions Program.
``Sec. 708. Auction of carbon dioxide allowances.

``SEC. 701. DEFINITIONS.

    ``In this title:
            ``(1) Affected source.--The term `affected source' means a 
        source that includes 1 or more affected units.
            ``(2) Affected unit.--
                    ``(A) Carbon dioxide.--
                            ``(i) In general.--The term `affected 
                        unit', with respect to carbon dioxide, means an 
                        electric generating unit that, on or after 
                        January 1, 2000, served a generator producing 
                        electricity for sale with a nameplate capacity 
                        of greater than 25 megawatts.
                            ``(ii) Exclusion.--The term `affected 
                        unit', with respect to carbon dioxide, does not 
                        include a unit that--
                                    ``(I) cogenerates useful steam and 
                                electricity; but
                                    ``(II) is not a cogeneration unit.
                    ``(B) Mercury.--
                            ``(i) In general.--The term `affected 
                        unit', with respect to mercury, means a coal-
                        fired electric generating unit that, on or 
                        after January 1, 1985, served a generator 
                        producing electricity for sale with a nameplate 
                        capacity greater than 25 megawatts.
                            ``(ii) Exclusion.--The term `affected 
                        unit', with respect to mercury, does not 
                        include a unit that--
                                    ``(I) cogenerates useful steam and 
                                electricity; but
                                    ``(II) is not a cogeneration unit.
                    ``(C) Nitrogen oxides.--
                            ``(i) In general.--The term `affected 
                        unit', with respect to nitrogen oxides, means a 
                        fossil fuel-fired electric generating unit 
                        that, on or after January 1, 1985, served a 
                        generator producing electricity for sale with a 
                        nameplate capacity greater than 25 megawatts.
                            ``(ii) Exclusion.--The term `affected 
                        unit', with respect to nitrogen oxides, does 
                        not include a unit that--
                                    ``(I) cogenerates useful steam and 
                                electricity; but
                                    ``(II) is not a cogeneration unit.
                    ``(D) Sulfur dioxide.--The term `affected unit', 
                with respect to sulfur dioxide, has the meaning given 
                the term in section 402.
            ``(3) CAIR.--The term `CAIR' means the rule promulgated by 
        the Administrator entitled the `Clean Air Interstate Rule' (70 
        Fed. Reg. 25162 (May 12, 2005)) (as in effect on the date of 
        enactment of this title).
            ``(4) CAIR state.--The term `CAIR State' means each State 
        that is subject to the annual emission limitation and allowance 
        trading program for nitrogen oxides and sulfur dioxide under 
        CAIR, including, as of the date of enactment of this Act--
                    ``(A) Alabama;
                    ``(B) Delaware;
                    ``(C) the District of Columbia;
                    ``(D) Florida;
                    ``(E) Georgia;
                    ``(F) Illinois;
                    ``(G) Indiana;
                    ``(H) Iowa;
                    ``(I) Kentucky;
                    ``(J) Louisiana;
                    ``(K) Maryland;
                    ``(L) Michigan;
                    ``(M) Minnesota;
                    ``(N) Mississippi;
                    ``(O) Missouri;
                    ``(P) New Jersey;
                    ``(Q) New York;
                    ``(R) North Carolina;
                    ``(S) Ohio;
                    ``(T) Pennsylvania;
                    ``(U) South Carolina;
                    ``(V) Tennessee;
                    ``(W) Texas;
                    ``(X) Virginia;
                    ``(Y) West Virginia; and
                    ``(Z) Wisconsin.
            ``(5) Carbon dioxide allowance.--The term `carbon dioxide 
        allowance' means an authorization allocated by the 
        Administrator under this title to emit 1 ton of carbon dioxide 
        during or after a specified calendar year.
            ``(6) Cogeneration unit.--The term `cogeneration unit' 
        means a unit that--
                    ``(A) cogenerates--
                            ``(i) useful steam; and
                            ``(ii) electricity; and
                    ``(B) supplies, in any calendar year, to any 
                utility power distribution system for sale--
                            ``(i) more than \1/3\ of the potential 
                        electric output capacity of the unit; and
                            ``(ii) more than 219,000 megawatt-hours of 
                        electrical output.
            ``(7) Designated representative.--The term `designated 
        representative' means a responsible person or official 
        authorized by the owner or operator of an affected source to 
        represent the owner or operator in any matter relating to--
                    ``(A) the holding, transfer, or disposition of an 
                allowance under this title; or
                    ``(B) any submission concerning, and compliance 
                with, any requirement of this title for the affected 
                source.
            ``(8) Fossil fuel.--The term `fossil fuel' includes--
                    ``(A) natural gas;
                    ``(B) petroleum;
                    ``(C) coal; and
                    ``(D) any form of solid, liquid, or gaseous fuel 
                derived from a material described in any of 
                subparagraphs (A) through (C).
            ``(9) Fossil fuel-fired.--The term `fossil fuel-fired' 
        means the combustion of any quantity of a fossil fuel during 
        any calendar year.
            ``(10) Greenhouse gas.--The term `greenhouse gas' means any 
        of--
                    ``(A) carbon dioxide;
                    ``(B) methane (CH<INF>4</INF>);
                    ``(C) nitrous oxide (N<INF>20</INF>);
                    ``(D) hydrofluorocarbons (HFC-23, HFC-32, HFC-41, 
                HFC-43-10mee, HFC-125, HFC-134, HFC-134a, HFC-152a, 
                HFC-143, HFC-143a, HFC-227ea, HFC-236fa, and HFC-
                245ca);
                    ``(E) perfluorocarbons (CF<INF>4</INF>, 
                C<INF>2</INF>F<INF>6</INF>, C<INF>3</INF>F<INF>8</INF>, 
                C<INF>4</INF>F<INF>10</INF>, C-
                C<INF>4</INF>F<INF>8</INF>, 
                C<INF>5</INF>F<INF>12</INF>, and 
                C<INF>6</INF>F<INF>14</INF>); and
                    ``(F) sulfur hexafluoride (SF<INF>6</INF>).
            ``(11) New unit.--The term `new unit' means an affected 
        unit that has operated for not more than 3 years and is not 
        eligible to receive nitrogen oxide allowances under the 
        regulations promulgated by the Administrator pursuant to 
        section 705(b).
            ``(12) Nitrogen oxide allowance.--The term `nitrogen oxide 
        allowance' means an authorization allocated by the 
        Administrator under this title to emit 1 ton of nitrogen oxides 
        during or after a specified calendar year.
            ``(13) Sequestration.--The term `sequestration' means the 
        action of sequestering carbon dioxide by--
                    ``(A) enhancing a natural carbon dioxide sink (such 
                as through afforestation); or
                    ``(B)(i) capturing the carbon dioxide emitted from 
                relevant industrial units and a fossil fuel-based 
                energy system; and
                    ``(ii)(I) storing the carbon dioxide in a geologic 
                formation in a manner that prevents any release of the 
                carbon dioxide; or
                    ``(II) converting the carbon dioxide to a benign 
                solid material through a biological or chemical 
                process.
            ``(14) Sulfur dioxide allowance.--The term `sulfur dioxide 
        allowance' has the meaning given the term `allowance' in 
        section 402.
            ``(15) Unit.--The term `unit' means a combustion device.
            ``(16) Useful energy.--The term `useful energy', with 
        respect to a cogeneration unit, means the total quantity of 
        useful energy (including electrical generation and useful 
        steam) as determined by the Administrator.
            ``(17) Zone 1 state.--The term `Zone 1 State' means--
                    ``(A) any CAIR State;
                    ``(B) Arkansas;
                    ``(C) Connecticut;
                    ``(D) Massachusetts;
                    ``(E) Maine;
                    ``(F) New Hampshire;
                    ``(G) Rhode Island; and
                    ``(H) Vermont.
            ``(18) Zone 2 state.--The term `Zone 2 State' means any of 
        the 48 contiguous States that is not a Zone 1 State.

``SEC. 702. NATIONAL POLLUTANT TONNAGE LIMITATIONS.

    ``(a) Sulfur Dioxide.--The annual tonnage limitation for emissions 
of sulfur dioxide shall be equal to--
            ``(1) for each of calendar years 2010 through 2014, for 
        affected units subject to CAIR, 3,500,000 tons, in accordance 
        with CAIR; and
            ``(2) for calendar year 2015 and each calendar year 
        thereafter, for all affected units in the 48 contiguous States, 
        2,000,000 tons.
    ``(b) Nitrogen Oxides.--The Administrator shall allocate an annual 
tonnage limitation for emissions of nitrogen oxides in a quantity that 
is equal to--
            ``(1) for each of calendar years 2009 through 2014, for 
        affected units subject to CAIR, 1,450,000 tons; and
            ``(2) for calendar year 2015 and each calendar year 
        thereafter--
                    ``(A) for affected units in Zone 1 States, 
                1,300,000 tons; and
                    ``(B) for affected units in Zone 2 States, 320,000 
                tons.
    ``(c) Mercury.--The emission of mercury from affected units shall 
be limited in accordance with section 704.
    ``(d) Carbon Dioxide.--The annual tonnage limitation for emissions 
of carbon dioxide from affected units in the 48 contiguous States shall 
be equal to, as determined by the Administrator based on certified and 
quality-assured continuous emissions monitoring data for carbon dioxide 
reported to the Administrator by affected units in accordance with this 
Act--
            ``(1) for each of calendar years 2011 through 2014, 
        2,300,000,000 metric tons;
            ``(2) for each of calendar years 2015 through 2019, 
        2,100,000,000 metric tons;
            ``(3) for each calendar years 2020 through 2024, 
        1,800,000,000 metric tons; and
            ``(4) for calendar year 2025 and each calendar year 
        thereafter, 1,500,000,000 metric tons.
    ``(e) Reduction of Emissions From Specified Affected Units.--
Notwithstanding the annual tonnage limitations and mercury emissions 
requirements established under this section, the Federal Government or 
a State government may require that emissions from a specified affected 
unit be reduced.
    ``(f) CAIR States.--
            ``(1) In general.--Each CAIR State shall comply with the 
        applicable requirements of CAIR.
            ``(2) Exception.--Notwithstanding paragraph (1), CAIR shall 
        not apply to--
                    ``(A) annual emissions of nitrogen oxides emitted 
                during calendar year 2015 and thereafter; or
                    ``(B) annual emissions of sulfur dioxide emitted 
                during calendar year 2015 and thereafter.

``SEC. 703. NITROGEN OXIDE TRADING PROGRAM.

    ``(a) Regulations.--
            ``(1) In general.--Not later than 2 years after the date of 
        enactment of this title, the Administrator shall promulgate 
        regulations to establish for affected units in the 48 
        contiguous States a nitrogen oxide allowance trading program.
            ``(2) Requirements.--Regulations promulgated under 
        paragraph (1) shall establish requirements for the allowance 
        trading program under this section, including requirements 
        concerning--
                    ``(A)(i) the allocation, issuance, recording, 
                tracking, transfer, and use of nitrogen oxide 
                allowances; and
                    ``(ii) the public availability of all information 
                concerning the activities described in clause (i) that 
                is not confidential business information;
                    ``(B) compliance with subsection (d)(1);
                    ``(C) the monitoring and reporting of emissions 
                under paragraphs (2) and (3) of subsection (d); and
                    ``(D) excess emission penalties under subsection 
                (d)(4).
    ``(b) Nitrogen Oxide Allocations.--
            ``(1) Timing of allocations.--Not later than 2 years after 
        the date of enactment of this title, the Administrator shall 
        allocate nitrogen oxide allowances to affected units.
            ``(2) Allocations to affected units.--
                    ``(A) Zone 1 states.--The Administrator shall 
                allocate, to each affected unit in a Zone 1 State, a 
                quantity of nitrogen oxide allowances that is equal to 
                the product obtained by multiplying--
                            ``(i) the quantity of nitrogen oxide 
                        allowances available for allocation under 
                        section 702(b)(2)(A); and
                            ``(ii) the quotient obtained by dividing--
                                    ``(I) the adjusted average heat 
                                input (measured in mmBtus), of the 
                                affected unit during calendar years 
                                2006 through 2008; by
                                    ``(II) the sum of the adjusted heat 
                                input quantities described in subclause 
                                (I) with respect to all affected units 
                                in all Zone 1 States.
                    ``(B) Zone 2 states.--The Administrator shall 
                allocate, to each affected unit in a Zone 2 State, a 
                quantity of nitrogen oxide allowances that is equal to 
                the product obtained by multiplying--
                            ``(i) the quantity of nitrogen oxide 
                        allowances available for allocation under 
                        section 702(b)(2)(B); and
                            ``(ii) the quotient obtained by dividing--
                                    ``(I) the adjusted average heat 
                                input (measured in mmBtus), of the 
                                affected unit during calendar years 
                                2006 through 2008; by
                                    ``(II) the sum of the adjusted heat 
                                input quantities described in subclause 
                                (I) with respect to all affected units 
                                in all Zone 2 States.
                    ``(C) Adjusted heat input.--
                            ``(i) In general.--The adjusted heat input 
                        for a calendar year of an affected unit that 
                        begins operation before January 1, 2006, shall 
                        be equal to the product obtained by multiplying 
                        (using factors, emission rates, and categories 
                        of units determined by the Administrator)--
                                    ``(I) the heat input of the 
                                affected unit for the calendar year; 
                                and
                                    ``(II) a factor reflecting--
                                            ``(aa) the category of the 
                                        affected unit, based on the 
                                        types of fuels combusted by the 
                                        affected unit during the 
                                        calendar year; and
                                            ``(bb) the actual nitrogen 
                                        oxides emission rate (expressed 
                                        in tons of nitrogen oxides 
                                        emitted per mmBtu) that is 
                                        generally applicable to that 
                                        category of affected units.
                            ``(ii) Average.--The average adjusted heat 
                        input of an affected unit for a 3-calendar year 
                        period described in subparagraph (A)(ii)(I) or 
                        (B)(ii)(I) shall be equal to the quotient 
                        obtained by dividing--
                                    ``(I) the sum of the adjusted heat 
                                input quantities, as determined under 
                                clause (i), for each calendar year of 
                                the 3-calendar year period; by
                                    ``(II) 3.
            ``(3) Adjustment of allocations.--If, for any calendar 
        year, the total quantities of allowances allocated under 
        paragraph (2) are not equal to the applicable quantities 
        determined under section 702(b)(2), the Administrator shall 
        adjust the quantities of allowances allocated to affected units 
        on a pro rata basis so that the quantities are equal to the 
        applicable quantities determined under section 702(b)(2).
            ``(4) Allowance not a property right.--A nitrogen oxide 
        allowance--
                    ``(A) is not a property right; and
                    ``(B) may be terminated or limited by the 
                Administrator.
            ``(5) No judicial review.--An allocation of nitrogen oxide 
        allowances by the Administrator under this subsection, and a 
        determination of a value used in calculating the allocation, 
        shall not be subject to judicial review.
    ``(c) Nitrogen Oxide Allowance Transfer System.--
            ``(1) Use of allowances.--The regulations promulgated under 
        subsection (a)(1) shall--
                    ``(A) prohibit the use (but not the transfer in 
                accordance with paragraph (3)) of any nitrogen oxide 
                allowance before the calendar year for which the 
                allowance is allocated;
                    ``(B) provide that unused nitrogen oxide allowances 
                may be carried forward and added to nitrogen oxide 
                allowances allocated for subsequent years;
                    ``(C) provide that unused nitrogen oxide allowances 
                may be transferred by--
                            ``(i) the person to which the allowances 
                        are allocated; or
                            ``(ii) any person to which the allowances 
                        are transferred; and
                    ``(D) provide that, to achieve compliance with 
                paragraphs (1) and (4) of subsection (d)--
                            ``(i) the owner and operator of an affected 
                        unit in a Zone 1 State shall use only nitrogen 
                        oxide allowances allocated to affected units in 
                        Zone 1 States; and
                            ``(ii) the owner and operator of an 
                        affected unit in a Zone 2 State shall use only 
                        nitrogen oxide allowances allocated to affected 
                        units in Zone 2 States.
            ``(2) Use by persons to which allowances are transferred.--
        Any person to which nitrogen oxide allowances are transferred 
        under paragraph (1)(C)--
                    ``(A) may use the nitrogen oxide allowances in the 
                calendar year for which the nitrogen oxide allowances 
                were allocated, or in a subsequent calendar year, to 
                achieve compliance with subsection (d)(1); or
                    ``(B) may transfer the nitrogen oxide allowances to 
                any other person.
            ``(3) Certification of transfer.--A transfer of a nitrogen 
        oxide allowance shall not take effect until a certification of 
        the transfer, authorized by a responsible official of the 
        person making the transfer, is received and recorded by the 
        Administrator.
            ``(4) Permit requirements.--An allocation or transfer of 
        nitrogen oxide allowances to an affected unit shall, after 
        recording by the Administrator, be considered to be part of the 
        federally enforceable permit of the affected unit under this 
        Act, without a requirement for any further review or revision 
        of the permit.
    ``(d) Compliance and Enforcement.--
            ``(1) In general.--For calendar year 2015 and each calendar 
        year thereafter, the owner and operator of each affected source 
        shall hold for the affected source and surrender to the 
        Administrator a quantity of nitrogen oxide allowances that is 
        equal to the total tons of nitrogen oxides emitted by the 
        affected units of the affected source during the calendar year.
            ``(2) Monitoring system.--The Administrator shall 
        promulgate regulations requiring--
                    ``(A) installation, operation, reporting, and 
                certification of continuous emissions monitoring 
                systems, or any alternative monitoring system or 
                methodology that, as determined by the Administrator, 
                provides information with the same precision, 
                reliability, accessibility, and timeliness as that 
                provided by continuous emission monitoring system, to 
                measure the quantity of nitrogen oxides that is emitted 
                from each affected unit;
                    ``(B) quality assurance, verification, and 
                reporting of nitrogen oxides emissions at each affected 
                unit; and
                    ``(C) if continuous emission monitoring system 
                data, or data from an alternative monitoring system 
                approved by the Administrator, is not available for an 
                affected unit during any period of a calendar year for 
                which the data is required to be certified under this 
                subsection, and if the owner or operator of the 
                affected unit cannot provide information satisfactory 
                to the Administrator on emissions during that period--
                            ``(i) treatment of the affected unit as 
                        operating in an uncontrolled manner during the 
                        entire period for which the data was not 
                        available; and
                            ``(ii) calculation of emissions for that 
                        period as prescribed by the Administrator.
            ``(3) Reporting.--
                    ``(A) In general.--Not less often than quarterly, 
                the designated representative of the owner or operator 
                of an affected unit shall submit to the Administrator a 
                report on the monitoring of emissions of nitrogen 
                oxides carried out by the owner or operator in 
                accordance with the regulations promulgated under 
                paragraph (2).
                    ``(B) Authorization.--Each report submitted under 
                subparagraph (A) shall be authorized by the designated 
                representative of the affected unit, who shall certify 
                the accuracy of the report.
                    ``(C) Public reporting.--The Administrator shall 
                make available to the public, through 1 or more 
                published reports and 1 or more forms of electronic 
                media, data concerning the emissions of nitrogen oxides 
                from each affected unit.
            ``(4) Excess emissions.--The owner and operator of an 
        affected source the affected units of which emit, during a 
        calendar year specified in paragraph (1), nitrogen oxides in 
        excess of the nitrogen oxide allowances held for use by the 
        affected source for the calendar year shall offset, and pay an 
        excess emissions penalty for, the excess emissions by 
        surrendering to the Administrator a quantity of nitrogen oxides 
        allowances for the following calendar year, or such earlier 
        period as the Administrator may prescribe, equal to the product 
        obtained by multiplying--
                    ``(A) the number of tons of the excess emissions; 
                and
                    ``(B) 2.
    ``(e) Effect.--Nothing in this section limits or otherwise affects 
the application of section 113, 114, 120, or 304.

``SEC. 704. MERCURY PROGRAM.

    ``(a) Definition of Inlet Mercury.--In this section, the term 
`inlet mercury' means the quantity of mercury found--
            ``(1) in the as-fired coal of an affected unit; or
            ``(2) for an affected unit using coal that is subjected to 
        an advanced coal cleaning technology, in the as-mined coal of 
        the affected unit.
    ``(b) Annual Limitation for Certain Units.--An affected unit that 
begins operation on or after the date of enactment of this title shall 
be subject to the less stringent of the following emission limitations 
on an annual average calendar year basis with respect to inlet mercury:
            ``(1) 90 percent capture of inlet mercury.
            ``(2) An emission rate of 0.0060 lbs/GWh.
    ``(c) Annual Limitation for Existing Units.--An affected unit in 
operation on the date of enactment of this title shall be subject to 
the following emission limitations on an annual average calendar year 
basis with respect to inlet mercury:
            ``(1) First full calendar year beginning 4 years after the 
        date of enactment of title through 2014.--For each of the first 
        full calendar year beginning 4 years after the date of 
        enactment of this title through calendar year 2014, the less 
        stringent limitation of--
                    ``(A) 60 percent capture of inlet mercury; and
                    ``(B) an emission rate of 0.02 lbs/GWh.
            ``(2) 2015 and thereafter.--Beginning on January 1, 2015, 
        the less stringent limitation of--
                    ``(A) 90 percent capture of inlet mercury; and
                    ``(B) an emission rate of 0.0060 lbs/GWh.
    ``(d) Averaging Across Units.--An owner or operator of an affected 
unit may demonstrate compliance with the annual average limitations 
under subsections (b) and (c) by averaging emissions from all affected 
units at an affected source.
    ``(e) Monitoring System.--The Administrator shall promulgate 
regulations requiring--
            ``(1) installation, operation, reporting, and certification 
        of continuous emissions monitoring systems, or any alternative 
        monitoring system or methodology that, as determined by the 
        Administrator, provides information with the same precision, 
        reliability, accessibility, and timeliness as that provided by 
        continuous emission monitors, to measure the quantity of 
        mercury emitted from each affected unit;
            ``(2) quality assurance, verification, and reporting of 
        mercury emissions data at each affected unit; and
            ``(3) if continuous emission monitoring system data, or 
        data from an alternative monitoring system approved by the 
        Administrator, is not available for an affected unit during any 
        period of a calendar year for which the data is required to be 
        certified under this subsection, and if the owner or operator 
        of the affected unit cannot provide information satisfactory to 
        the Administrator on emissions during that period--
                    ``(A) treatment of the affected unit as operating 
                in an uncontrolled manner during the entire period for 
                which the data was not available; and
                    ``(B) calculation of emissions for that period as 
                prescribed by the Administrator.
    ``(f) Reporting.--
            ``(1) In general.--Not less often than quarterly, the owner 
        or operator of an affected unit shall submit to the 
        Administrator a report on the monitoring of emissions of 
        mercury carried out by the owner or operator in accordance with 
        the regulations promulgated under subsection (e).
            ``(2) Authorization.--Each report submitted under paragraph 
        (1) shall be authorized by a designated representative of the 
        affected unit, who shall certify the accuracy of the report.
            ``(3) Public reporting.--The Administrator shall make 
        available to the public, through 1 or more published reports 
        and 1 or more forms of electronic media, data concerning the 
        emission of mercury from each affected unit.
    ``(g) Excess Emissions.--
            ``(1) Penalty.--
                    ``(A) In general.--The owner and operator of an 
                affected unit described in subparagraph (B) shall pay 
                an excess emissions penalty determined under paragraph 
                (2).
                    ``(B) Description of affected units.--An affected 
                unit referred to in subparagraph (A) is an affected 
                unit that--
                            ``(i) for an affected unit demonstrating 
                        compliance at the unit level, emits mercury in 
                        excess of an emission limitation described in 
                        subsection (b) or (c); or
                            ``(ii) for an affected unit demonstrating 
                        compliance under subsection (d), is part of an 
                        affected source that emits mercury in excess of 
                        the emission limitation applicable to the 
                        affected source.
            ``(2) Determination of excess emissions penalty.--The 
        excess emissions penalty for mercury shall be an amount equal 
        to $50,000 for each pound of mercury emitted in excess of the 
        emission limitation described in subsection (b) or (c), as pro-
        rated for each fraction of a pound.
            ``(3) Penalty adjustment.--For each fiscal year, the 
        Administrator, by regulation, shall adjust the penalty 
        specified in paragraph (2) to reflect changes for the 12-month 
        period ending the preceding November 30 in the Consumer Price 
        Index for All Urban Consumers published by the Bureau of Labor 
        Statistics of the Department of Labor.
    ``(h) Petition for Extension.--The Administrator, or the 
appropriate agency of a State with a program approved under title IV, 
may issue for an affected unit in existence on the date of enactment of 
this title a permit that provides an extension of not more than 1 
additional year of a deadline for compliance with any standard under 
this section, if the Administrator or agency determines the extension 
is necessary for the installation at the affected unit of an 
appropriate control technology.
    ``(i) Effect of Section.--Nothing in this section limits or 
otherwise affects the application of section 113, 114, 120, or 304.

``SEC. 705. CARBON DIOXIDE ALLOWANCE TRADING PROGRAM.

    ``(a) Regulations.--
            ``(1) In general.--Not later than 2 years after the date of 
        enactment of this title, the Administrator shall promulgate 
        regulations to establish a carbon dioxide allowance trading 
        program for affected units in the United States.
            ``(2) Requirements.--
                    ``(A) Other required programs.--In promulgating 
                regulations pursuant to paragraph (1), the 
                Administrator shall ensure that no carbon dioxide 
                allowance is provided for an offset project the 
                greenhouse gas reductions under which are effectively 
                required by any other Federal, State, or local law 
                (including regulations) or judicial or administrative 
                order.
                    ``(B) Other standards.--In promulgating regulations 
                pursuant to paragraph (1), the Administrator shall 
                require that--
                            ``(i) each reduction or removal of 
                        greenhouse gas emissions for which an offset 
                        project receives carbon dioxide allowances 
                        under this section--
                                    ``(I) is not double counted under 
                                this or any other allowance program;
                                    ``(II) is a permanent reduction in 
                                greenhouse gas emissions; and
                                    ``(III) is monitored as the 
                                Administrator determines to be 
                                appropriate with respect to the 
                                specific offset project type and 
                                quantity of carbon dioxide allowances 
                                provided for the reduction; and
                            ``(ii) each offset project shall reflect a 
                        level of performance that, with respect to 
                        emission reductions or a technology or 
                        practice, is significantly better than average, 
                        as compared with recently carried out 
                        activities or practices.
            ``(3) State offset methods.--In promulgating regulations 
        under paragraph (1), the Administrator shall take into 
        consideration offset methods developed, as of the date of 
        enactment of this title, by California or any other State 
        pursuant to the Regional Greenhouse Gas Initiative or a similar 
        regulatory program with of comparable rigor, as determined by 
        the Administrator.
    ``(b) New Unit Reserve.--
            ``(1) Establishment.--
                    ``(A) In general.--For each of calendar years 2011 
                through 2020, the Administrator shall establish, by 
                regulation, a reserve of carbon dioxide allowances to 
                be allocated to new affected units fueled by coal that 
                meet the criteria under the Climate Champions Program 
                under section 707 for the calendar year.
                    ``(B) Required quantity.--For a calendar year 
                described in subparagraph (A), the quantity of carbon 
                dioxide allowances in the reserve established under 
                this paragraph shall not exceed 5 percent of the annual 
                tonnage limitation for carbon dioxide specified in 
                section 702(d) for that calendar year.
            ``(2) Required allocations.--For each of calendar years 
        2011 through 2014, the Administrator shall allocate allowances 
        in the reserve established under paragraph (1) to each of the 
        30 entities identified under section 707(b)(1).
            ``(3) Unused carbon dioxide allowances.--For each calendar 
        year, the Administrator shall reallocate, to all affected 
        units, any unused carbon dioxide allowances from the new unit 
        reserve established under paragraph (1) in the proportion 
        that--
                    ``(A) the number of carbon dioxide allowances 
                allocated to each affected unit for the calendar year; 
                bears to
                    ``(B) the number of carbon dioxide allowances 
                allocated to all affected units for the calendar year.
    ``(c) Carbon Dioxide Allocations.--
            ``(1) Allocations to affected units that are not new 
        units.--
                    ``(A) In general.--Not later than 2 years after the 
                date of enactment of this title, the Administrator 
                shall allocate, to each affected unit that is not a new 
                unit, a quantity of carbon dioxide allowances that is 
                equal to the product obtained by multiplying--
                            ``(i) the quantity of carbon dioxide 
                        allowances available for allocation under 
                        paragraph (2); and
                            ``(ii) the quotient obtained by dividing--
                                    ``(I) the adjusted average heat 
                                input (measured in mmBtus), of the 
                                affected unit during any 3-consecutive-
                                calendar-year period during the period 
                                beginning on January 1, 2000, and 
                                ending on December 31, 2007; and
                                    ``(II) the sum of the adjusted heat 
                                input quantities described in subclause 
                                (I) with respect to all affected units 
                                that are not new units.
                    ``(B) Adjusted heat input.--
                            ``(i) In general.--The adjusted heat input 
                        for a calendar year of an affected unit that 
                        begins operation before January 1, 2005, shall 
                        be equal to the product obtained by multiplying 
                        (using factors, emission rates, and categories 
                        of units determined by the Administrator)--
                                    ``(I) the heat input of the 
                                affected unit for the calendar year;
                                    ``(II) a factor reflecting the 
                                category of the affected unit, based on 
                                the types of fuels combusted by the 
                                affected unit during the calendar year; 
                                and
                                    ``(III) the actual carbon dioxide 
                                emission rate (expressed in tons of 
                                carbon dioxide emitted per mmBtu) that 
                                is generally applicable to that 
                                category of affected units.
                            ``(ii) Average.--The average adjusted heat 
                        input of an affected unit for a 3-calendar year 
                        period described in subparagraph (A)(ii)(I)(bb) 
                        shall be equal to the quotient obtained by 
                        dividing--
                                    ``(I) the sum of the adjusted heat 
                                input quantities, as determined under 
                                clause (i), for each calendar year of 
                                the 3-calendar year period; and
                                    ``(II) 3.
            ``(2) Quantity to be allocated.--For each calendar year, 
        the quantity of carbon dioxide allowances allocated under 
        paragraph (1)(A) to affected units that are not new units shall 
        be equal to the difference between--
                    ``(A) the annual tonnage limitation for emissions 
                of carbon dioxide from affected units specified in 
                section 702(d) for the calendar year; and
                    ``(B) the sum of--
                            ``(i) the quantity of carbon dioxide 
                        allowances placed in the new unit reserve 
                        established under subsection (b) for the 
                        calendar year; and
                            ``(ii) the quantity of carbon dioxide 
                        allowances made available for auction under 
                        section 708.
            ``(3) Adjustment of allocations.--If the total quantity of 
        carbon dioxide allowances to be allocated under paragraph (1) 
        for a calendar year is more than the total quantity of carbon 
        dioxide allowances available for allocation under paragraph (2) 
        for the calendar year, the Administrator shall allocate to each 
        affected unit a quantity of carbon dioxide allowances equal to 
        the proportion that--
                    ``(A) the quantity of carbon dioxide allowances to 
                be allocated to the affected unit under paragraph (1) 
                for the calendar year; bears to
                    ``(B) the total quantity of carbon dioxide 
                allowances to be allocated to all affected units under 
                paragraph (1) for the calendar year.
            ``(4) Allocations to new units.--The Administrator shall 
        promulgate regulations to establish a methodology for 
        allocating carbon dioxide allowances to new units from the new 
        unit reserve under subsection (b).
    ``(d) Use and Transfer of Carbon Dioxide Allowances.--
            ``(1) Use before applicable calendar year.--A carbon 
        dioxide allowance may not be used before the calendar year for 
        which the carbon dioxide allowance was allocated.
            ``(2) Transfer.--
                    ``(A) In general.--Notwithstanding paragraph (1), 
                carbon dioxide allowances may be transferred before the 
                calendar year for which the carbon dioxide allowances 
                were allocated.
                    ``(B) Limitation.--The transfer of a carbon dioxide 
                allowance shall not take effect until receipt and 
                recording by the Administrator of a certification of 
                the transfer, which is executed by an authorized 
                official of the person making the transfer.
            ``(3) Use by persons to which carbon dioxide allowances are 
        transferred.--Any person to which carbon dioxide allowances are 
        transferred under paragraph (2)(A) may use the carbon dioxide 
        allowances in the calendar year for which the carbon dioxide 
        allowances were allocated, or in a subsequent calendar year, to 
        demonstrate compliance with subsection (e)(1).
            ``(4) Permit requirements.--An allocation or transfer of 
        carbon dioxide allowances to an affected unit shall be 
        considered to be part of the federally enforceable permit of 
        the affected unit under this Act, without a requirement for 
        further review or revision of the permit.
    ``(e) Compliance and Enforcement.--
            ``(1) In general.--For the first full calendar year 
        beginning 4 years after the date of enactment of this title and 
        each calendar year thereafter, the owner or operator of each 
        affected source shall hold for the affected source and 
        surrender to the Administrator a quantity of carbon dioxide 
        allowances equal to the total tons of carbon dioxide emitted by 
        each affected unit of the affected source during the calendar 
        year.
            ``(2) Excess emissions.--The owner and operator of an 
        affected source any affected unit of which emits carbon dioxide 
        in excess of the carbon dioxide allowances held for use by the 
        affected source for the calendar year shall offset, and pay an 
        excess emissions penalty for, the excess emissions by 
        surrendering to the Administrator a quantity of carbon dioxide 
        allowances for the following calendar year or such other period 
        as the Administrator may prescribe equal to the product 
        obtained by multiplying--
                    ``(A) the number of tons of the excess emissions; 
                and
                    ``(B) 2.
            ``(3) Monitoring system.--The Administrator shall 
        promulgate regulations requiring--
                    ``(A) installation, operation, reporting, and 
                certification of continuous emissions monitoring 
                systems, or any alternative monitoring system or 
                methodology that, as determined by the Administrator, 
                provides information with the same precision, 
                reliability, accessibility, and timeliness as that 
                provided by continuous emission monitors, to measure 
                the quantity of carbon dioxide emitted from each 
                affected unit;
                    ``(B) quality assurance, verification, and 
                reporting of carbon dioxide emissions data at each 
                affected unit; and
                    ``(C) if continuous emission monitoring system 
                data, or data from an alternative monitoring system 
                approved by the Administrator, is not available for an 
                affected unit during any period of a calendar year for 
                which the data is required to be certified under this 
                subsection, and if the owner or operator of the 
                affected unit cannot provide information satisfactory 
                to the Administrator on emissions during that period--
                            ``(i) treatment of the affected unit as 
                        operating in an uncontrolled manner during the 
                        entire period for which the data was not 
                        available; and
                            ``(ii) calculation of emissions for that 
                        period as prescribed by the Administrator.
            ``(4) Reporting.--
                    ``(A) In general.--Not less often than quarterly, 
                the owner or operator of an affected unit shall submit 
                to the Administrator a report on the monitoring of 
                emissions of carbon dioxide carried out by the owner or 
                operator in accordance with the regulations promulgated 
                under paragraph (3).
                    ``(B) Authorization.--Each report submitted under 
                subparagraph (A) shall be authorized by the designated 
                representative of the affected unit, who shall certify 
                the accuracy of the report.
                    ``(C) Public reporting.--The Administrator shall 
                make available to the public, through 1 or more 
                published reports and 1 or more forms of electronic 
                media, data concerning the emission of carbon dioxide 
                from each affected unit.
    ``(f) Effect of Section.--Nothing in this section limits or 
otherwise affects the application of section 113, 114, 120, or 304.
    ``(g) Allowance Not a Property Right.--A carbon dioxide allowance--
            ``(1) is not a property right; and
            ``(2) may be terminated or limited by the Administrator.
    ``(h) No Judicial Review.--An allocation or issuance of a carbon 
dioxide allowance by the Administrator, and the determination of any 
value used in calculating the allocation or issuance, shall not be 
subject to judicial review.

``SEC. 706. CONVENTIONAL PULVERIZED COAL FACILITIES.

    ``The correspondence of the Office of Air Quality Planning and 
Standards addressing best available control technology requirements for 
proposed coal-fired power plant projects and dated December 13, 2005--
            ``(1) shall be considered to be inconsistent with section 
        169(3); and
            ``(2) shall be treated as void and of no effect as of the 
        date of issuance of the correspondence.

``SEC. 707. CLIMATE CHAMPIONS PROGRAM.

    ``(a) Establishment.--The Administrator shall establish a program, 
to be known as the `Climate Champions Program'.
    ``(b) Rewards; Receipt of Allowances.--Under the Climate Champions 
Program, the Administrator shall--
            ``(1) identify and provide such reward as the Administrator 
        determines to be appropriate to each of the first 30 entities 
        to complete construction of a new coal-fired electric 
        generating unit that meets each applicable new source 
        performance standard under section 102 after the date of 
        enactment of this title; and
            ``(2) distribute to the 30 entities identified under 
        paragraph (1) the carbon dioxide allowances reserved for the 
        entities for the calendar year under section 705(b)(2).

``SEC. 708. AUCTION OF CARBON DIOXIDE ALLOWANCES.

    ``(a) In General.--Not later than 2 years after the date of 
enactment of this title, the Administrator shall promulgate regulations 
establishing a procedure for the auction of 25 percent of the quantity 
of carbon dioxide allowances available for calendar year 2011 and each 
calendar year thereafter.
    ``(b) Deposit of Proceeds.--The Administrator shall deposit the 
proceeds from each auction carried out pursuant to this section into a 
fund of the Administrator for use, without further appropriation, for 
mitigating any increase in the cost of electricity to electricity 
consumers and energy-intensive industries, as determined by the 
Administrator.''.

SEC. 104. REVISIONS TO SULFUR DIOXIDE ALLOWANCE PROGRAM.

    (a) In General.--Title IV of the Clean Air Act (relating to acid 
deposition control) (42 U.S.C. 7651 et seq.) is amended by adding at 
the end the following:

``SEC. 417. REVISIONS TO SULFUR DIOXIDE ALLOWANCE PROGRAM.

    ``(a) Regulations.--Not later than 2 years after the date of 
enactment of the Clean Air/Climate Change Act of 2007, the 
Administrator shall promulgate such revisions to the regulations to 
implement this title as the Administrator determines to be necessary to 
implement section 702(a).
    ``(b) Sulfur Dioxide Allocations.--
            ``(1) Allocations to allowance tracking system accounts.--
                    ``(A) In general.--The Administrator shall allocate 
                95 percent of the quantity of sulfur dioxide allowances 
                provided to achieve compliance with the requirement 
                under section 702(a)(2) to accounts of the allowance 
                tracking system under section 403(d) in accordance with 
                the calculation under subparagraph (B).
                    ``(B) Calculation for allocations.--
                            ``(i) Definition of existing quantity.--In 
                        this subparagraph, the term `existing 
                        quantity', with respect to sulfur dioxide 
                        allowances, means, as determined by the 
                        Administrator in accordance with part 73 of 
                        title 40, Code of Federal Regulations (or 
                        successor regulations)--
                                    ``(I) for sulfur dioxide allowances 
                                allocated for any calendar year before 
                                calendar year 2016, the quantity of 
                                sulfur dioxide allowances allocated for 
                                the calendar year under sections 404 
                                through 406, and recorded in an account 
                                of the allowance tracking system under 
                                section 403(d), as of 12:00 p.m., 
                                Eastern Standard Time, on the date that 
                                is 180 days after the date of enactment 
                                of the Clean Air/Climate Change Act of 
                                2007; and
                                    ``(II) for sulfur dioxide 
                                allowances allocated for calendar year 
                                2016 or any calendar year thereafter, 
                                the quantity described in subclause 
                                (I), reduced by--
                                            ``(aa) 7 percent for 
                                        calendar year 2016; and
                                            ``(bb) an additional 7 
                                        percent for each calendar year 
                                        thereafter.
                            ``(ii) Calculation.--For calendar year 2015 
                        and each calendar year thereafter, the 
                        Administrator shall allocate to each account of 
                        the allowance tracking system under section 
                        403(d) a quantity of sulfur dioxide allowances 
                        equal to the product obtained by multiplying--
                                    ``(I) the total quantity of 
                                allowances to be allocated under 
                                subparagraph (A); and
                                    ``(II) the proportion that--
                                            ``(aa) the total existing 
                                        quantity of sulfur dioxide 
                                        allowances for all calendar 
                                        years in the account; bears to
                                            ``(bb) the total existing 
                                        quantities of sulfur dioxide 
                                        allowances for all calendar 
                                        years in all accounts.
            ``(2) Allocations to certain existing units.--
                    ``(A) Definition of existing affected unit.--In 
                this paragraph, the term `existing affected unit' means 
                an affected unit that--
                            ``(i) was an affected unit on December 31, 
                        2006;
                            ``(ii) began operation before January 1, 
                        2001; and
                            ``(iii) does not receive any sulfur dioxide 
                        allowance for a calendar year under section 
                        404, 405, 406, or 410.
                    ``(B) Allocation.--For calendar year 2015 and each 
                calendar year thereafter, the Administrator shall 
                allocate 3\1/2\ percent of the quantity of sulfur 
                dioxide allowances provided to achieve compliance with 
                the requirement under section 702(a)(2) to existing 
                affected units in accordance with the applicable 
                calculation under subparagraph (C).
                    ``(C) Calculations.--
                            ``(i) Coal-fired existing affected units.--
                        For calendar year 2015 and each calendar year 
                        thereafter, the Administrator shall allocate to 
                        each existing affected unit that is a coal-
                        fired existing affected unit a quantity of 
                        sulfur dioxide allowances equal to the product 
                        (expressed in tons) obtained by multiplying--
                                    ``(I) the total baseline heat input 
                                of the existing affected unit, as 
                                determined under paragraph (4) 
                                (expressed in mmBtus); and
                                    ``(II) 0.40 lb/mmBtu.
                            ``(ii) Oil-fired existing affected units.--
                        For calendar year 2015 and each calendar year 
                        thereafter, the Administrator shall allocate to 
                        each existing affected unit that is an oil-
                        fired existing affected unit a quantity of 
                        sulfur dioxide allowances equal to the product 
                        (expressed in tons) obtained by multiplying--
                                    ``(I) the total baseline heat input 
                                of the existing affected unit, as 
                                determined under paragraph (4) 
                                (expressed in mmBtus); and
                                    ``(II) 0.20 lb/mmBtu.
                            ``(iii) Other existing affected units.--For 
                        calendar year 2015 and each calendar year 
                        thereafter, the Administrator shall allocate to 
                        each existing affected unit that is not a coal-
                        fired or oil-fired existing affected unit a 
                        quantity of sulfur dioxide allowances equal to 
                        the product (expressed in tons) obtained by 
                        multiplying--
                                    ``(I) the total baseline heat input 
                                of the existing affected unit, as 
                                determined under paragraph (4) 
                                (expressed in mmBtus); and
                                    ``(II) 0.05 lb/mmBtu.
                    ``(D) Adjustment of allocations.--If the total 
                quantity of sulfur dioxide allowances to be allocated 
                under subparagraph (C) for a calendar year is more than 
                the total quantity of sulfur dioxide allowances 
                available for allocation under subparagraph (B) for the 
                calendar year, the Administrator shall allocate to each 
                existing affected unit a quantity of sulfur dioxide 
                allowances equal to the product obtained by 
                multiplying--
                            ``(i) the quantity of sulfur dioxide 
                        allowances to be allocated to the existing 
                        affected unit under subparagraph (C) for the 
                        calendar year; and
                            ``(ii) the proportion that--
                                    ``(I) the quantity of sulfur 
                                dioxide allowances to be allocated to 
                                the existing affected unit under 
                                subparagraph (C) for the calendar year; 
                                bears to
                                    ``(II) the total quantity of sulfur 
                                dioxide allowances to be allocated to 
                                all existing affected units under 
                                subparagraph (C) for the calendar year.
                    ``(E) Excess supply of sulfur dioxide allowances.--
                Any sulfur dioxide allowance that is available for 
                allocation under subparagraph (B) for a calendar year, 
                but that is not allocated for the calendar year under 
                subparagraph (C), shall be allocated in accordance with 
                paragraph (3).
            ``(3) Allocation to certain new units.--
                    ``(A) Definition of new affected unit.--In this 
                paragraph, the term `new affected unit' means an 
                affected unit that--
                            ``(i) was an affected unit on December 31, 
                        2006;
                            ``(ii) began operation during the period 
                        beginning on January 1, 2001, and ending on 
                        December 31, 2006; and
                            ``(iii) does not receive any sulfur dioxide 
                        allowance for a calendar year under section 
                        404, 405, 406, or 410.
                    ``(B) Allocation.--For calendar year 2015 and each 
                calendar year thereafter, the Administrator shall 
                allocate 1\1/2\ percent of the quantity of sulfur 
                dioxide allowances provided to achieve compliance with 
                the requirement under section 702(a)(2) to new affected 
                units in accordance with the applicable calculation 
                under subparagraph (C).
                    ``(C) Calculations.--
                            ``(i) Coal-fired and oil-fired new affected 
                        units.--For calendar year 2015 and each 
                        calendar year thereafter, the Administrator 
                        shall allocate to each new affected unit that 
                        is a coal-fired or oil-fired new affected unit 
                        a quantity of sulfur dioxide allowances equal 
                        to the product (expressed in tons) obtained by 
                        multiplying--
                                    ``(I) the total baseline heat input 
                                of the new affected unit, as determined 
                                under paragraph (4) (expressed in 
                                mmBtus); and
                                    ``(II) 0.19 lb/mmBtu.
                            ``(ii) Other new affected units.--For 
                        calendar year 2015 and each calendar year 
                        thereafter, the Administrator shall allocate to 
                        each new affected unit that is not a coal-fired 
                        or oil-fired new affected unit a quantity of 
                        sulfur dioxide allowances equal to the product 
                        (expressed in tons) obtained by multiplying--
                                    ``(I) the total baseline heat input 
                                of the new affected unit, as determined 
                                under paragraph (4) (expressed in 
                                mmBtus); and
                                    ``(II) 0.02 lb/mmBtu.
                    ``(D) Adjustment of allocations.--If the total 
                quantity of sulfur dioxide allowances to be allocated 
                under subparagraph (C) for a calendar year is more than 
                the total quantity of sulfur dioxide allowances 
                available for allocation under subparagraph (B) for the 
                calendar year, the Administrator shall allocate to each 
                new affected unit a quantity of sulfur dioxide 
                allowances equal to the product obtained by 
                multiplying--
                            ``(i) the quantity of sulfur dioxide 
                        allowances to be allocated to the new affected 
                        unit under subparagraph (C) for the calendar 
                        year; and
                            ``(ii) the proportion that--
                                    ``(I) the quantity of sulfur 
                                dioxide allowances to be allocated to 
                                the new affected unit under 
                                subparagraph (C) for the calendar year; 
                                bears to
                                    ``(II) the total quantity of sulfur 
                                dioxide allowances to be allocated to 
                                all new affected units under 
                                subparagraph (C) for the calendar year.
                    ``(E) Use of other excess sulfur dioxide 
                allowances.--The Administrator shall allocate to new 
                affected units any excess allowance provided pursuant 
                to paragraph (2)(E) in accordance with subparagraphs 
                (C) and (D).
                    ``(F) Remaining sulfur dioxide allowances.--The 
                Administrator shall allocate, on a pro rata basis in 
                accordance with paragraphs (1) and (2), any sulfur 
                dioxide allowance that is available for allocation, but 
                that is not allocated, for a calendar year under 
                subparagraph (C) to--
                            ``(i) appropriate accounts of the allowance 
                        tracking system under section 403(d); and
                            ``(ii) existing affected units (as defined 
                        in paragraph (2)(A)).
            ``(4) Determination of baseline heat input.--For purposes 
        of calculations under paragraphs (2)(C) and (3)(C), the 
        baseline heat input of an existing affected unit (as defined in 
        paragraph (2)(A)) or a new affected unit (as defined in 
        paragraph (3)(A)) shall be equal to the quotient obtained by 
        dividing--
                    ``(A) the sum of the heat input of the affected 
                unit for each of calendar years 2005 through 2007; by
                    ``(B) 3.
            ``(5) Withdrawal of allowances.--After completing the 
        allocations of sulfur dioxide allowances under paragraphs (1), 
        (2), and (3), the Administrator shall withdraw from each 
        compliance account and general account in the allowance 
        tracking system under section 403(d), and from the special 
        allowance reserve under section 416, all sulfur dioxide 
        allowances allocated or deposited for calendar year 2015 or any 
        calendar year thereafter.
            ``(6) Timing of allocations.--The Administrator shall carry 
        out each allocation of sulfur dioxide allowances required under 
        this subsection for calendar year 2015 or any calendar year 
        thereafter by not later than December 31, 2011.
            ``(7) No judicial review.--An allocation of sulfur dioxide 
        allowances by the Administrator under this subsection, and the 
        determination of a value used in calculating such an 
        allocation, shall not be subject to judicial review.''.
    (b) Definitions.--Section 402 of the Clean Air Act (relating to 
acid deposition control) (42 U.S.C. 7651a) is amended--
            (1) by striking paragraph (2) and inserting the following:
            ``(2) Affected unit.--
                    ``(A) In general.--The term `affected unit' means--
                            ``(i) for a calendar year before calendar 
                        year 2015, a unit that is subject to emission 
                        reduction requirements or limitations under 
                        section 404, 405, 406, 409, or 410; and
                            ``(ii) subject to subparagraph (B), for 
                        calendar year 2015 and each calendar year 
                        thereafter, a fossil fuel-fired electric 
                        generating unit that, on or after January 1, 
                        1985, served a generator with a nameplate 
                        capacity greater than 25 megawatts producing 
                        electricity for sale.
                    ``(B) Exclusion.--For purposes of subparagraph 
                (A)(ii), the term `affected unit' does not include a 
                unit that--
                            ``(i) cogenerates steam and electricity; 
                        but
                            ``(ii) is not a cogeneration unit.
                    ``(C) Related definitions.--For purposes of this 
                paragraph, the terms `cogeneration unit', `fossil fuel-
                fired', and `unit' have the meanings given the terms in 
                section 701.''; and
            (2) by striking paragraph (3) and inserting the following:
            ``(3) Allowance.--
                    ``(A) In general.--Notwithstanding any other 
                provision of this title, the term `allowance' or 
                `sulfur dioxide allowance' means--
                            ``(i) except as provided in clause (ii), an 
                        authorization allocated by the Administrator 
                        under this title to an affected unit to emit, 
                        during or after a specified calendar year, a 
                        quantity of sulfur dioxide emissions equal to 1 
                        ton of sulfur dioxide; and
                            ``(ii) with respect to a sulfur dioxide 
                        allowance allocated to a unit in a CAIR State 
                        for any of calendar years 2010 through 2014, an 
                        authorization allocated by the Administrator 
                        under this title, or under CAIR, to a unit to 
                        emit, during or after the applicable calendar 
                        year, a quantity of sulfur dioxide emissions 
                        equal to \1/2\ ton of sulfur dioxide.
                    ``(B) Related definitions.--For purposes of 
                subparagraph (A), the terms `CAIR' and `CAIR State' 
                have the meanings given the terms in section 701.''.
    (c) Compliance.--
            (1) Prohibition.--Section 403(g) of the Clean Air Act 
        (relating to acid deposition control) (42 U.S.C. 7651b(g)) is 
        amended by striking the second sentence and inserting the 
        following: ``It shall be unlawful for the affected units of any 
        affected source to emit sulfur dioxide during a calendar year 
        in excess of the tons of sulfur dioxide emissions authorized by 
        the allowances held by the owner or operator of the affected 
        source for the affected source for the calendar year.''.
            (2) Permits and compliance plans.--Section 408 of the Clean 
        Air Act (relating to acid deposition control) (42 U.S.C. 7651g) 
        is amended--
                    (A) in subsection (a), by striking paragraph (1) 
                and inserting the following:
            ``(1) annual emissions of sulfur dioxide in excess of the 
        tons of sulfur dioxide emissions authorized by the allowances 
        held by the owner or operator, or the designated representative 
        of an owner or operator, of the affected source for the 
        affected source for the calendar year,''; and
                    (B) in subsection (b), in the fourth sentence, by 
                striking ``to emit not less than the total annual 
                emissions of the unit'' and inserting ``authorizing 
                tons of emissions not less than the total annual 
                emissions of the unit''.
    (d) Excess Emissions.--Section 411 of the Clean Air Act (relating 
to acid deposition control) (42 U.S.C. 7651j) is amended by striking 
subsection (e) and inserting the following:
    ``(e) Excess Emissions of Sulfur Dioxide.--
            ``(1) Penalty.--
                    ``(A) In general.--Notwithstanding subsections (a), 
                (b), and (c), the owner and operator of an affected 
                source the affected units of which emit, during 
                calendar year 2007 or any calendar year thereafter, 
                sulfur dioxide in excess of the tons of sulfur dioxide 
                emissions authorized by the allowances held for use by 
                the affected source for that calendar year shall 
                offset, and pay an excess emissions penalty for, the 
                excess emissions by surrendering to the Administrator a 
                quantity of sulfur dioxide allowances for the following 
                calendar year, or such earlier period as the 
                Administrator may prescribe, authorizing a number of 
                tons of sulfur dioxide emissions equal to the product 
                obtained by multiplying--
                            ``(i) subject to subparagraph (B), the 
                        number of tons of the excess emissions; and
                            ``(ii) 2.
                    ``(B) Treatment of certain quantities of 
                emissions.--For purposes of subparagraph (A)(i), a 
                quantity of excess emissions equal to less than 1 ton 
                shall be considered to be a quantity of excess 
                emissions equal to 1 ton.
            ``(2) Treatment of penalty.--An offset and penalty imposed 
        under paragraph (1) shall be in lieu of any offset and penalty 
        required under subsection (a), (b), or (c) with respect to 
        sulfur dioxide emissions.
    ``(f) Savings Provision.--Nothing in this section limits or 
otherwise affects the application of section 113, 114, 120, or 304.''.
    (e) Technical Amendments.--
            (1) Title IV of the Clean Air Act (relating to noise 
        pollution) (42 U.S.C. 7641 et seq.)--
                    (A) is amended by redesignating sections 401 
                through 403 as sections 801 through 803, respectively; 
                and
                    (B) is redesignated as title VIII and moved to 
                appear at the end of that Act.
            (2) The table of contents for title IV of the Clean Air Act 
        (relating to acid deposition control) (42 U.S.C. prec. 7651) is 
        amended by adding at the end the following:

``Sec. 417. Revisions to sulfur dioxide allowance program.''.

SEC. 105. AIR QUALITY FORECASTS AND WARNINGS.

    (a) Requirement for Forecasts and Warnings.--The Secretary of 
Commerce, acting through the Administrator of the National Oceanic and 
Atmospheric Administration, in cooperation with the Administrator of 
the Environmental Protection Agency, shall issue air quality forecasts 
and air quality warnings as part of the mission of the Department of 
Commerce.
    (b) Regional Warnings.--In carrying out subsection (a), the 
Secretary of Commerce shall establish within the National Oceanic and 
Atmospheric Administration a program to provide region-oriented 
forecasts and warnings regarding air quality for each of the following 
regions of the United States:
            (1) The Northeast, composed of Connecticut, Maine, 
        Massachusetts, New Hampshire, New York, Rhode Island, and 
        Vermont.
            (2) The Mid-Atlantic, composed of Delaware, the District of 
        Columbia, Maryland, New Jersey, Pennsylvania, Virginia, and 
        West Virginia.
            (3) The Southeast, composed of Alabama, Florida, Georgia, 
        North Carolina, and South Carolina.
            (4) The South, composed of Arkansas, Louisiana, 
        Mississippi, Oklahoma, Tennessee, and Texas.
            (5) The Midwest, composed of Illinois, Indiana, Iowa, 
        Kentucky, Michigan, Minnesota, Missouri, Ohio, and Wisconsin.
            (6) The High Plains, composed of Kansas, Nebraska, North 
        Dakota, and South Dakota.
            (7) The Northwest, composed of Idaho, Montana, Oregon, 
        Washington, and Wyoming.
            (8) The Southwest, composed of Arizona, California, 
        Colorado, New Mexico, Nevada, and Utah.
            (9) Alaska.
            (10) Hawaii.
    (c) Priority Area.--In establishing the program described in 
subsection (a), the Secretary of Commerce and the Administrator shall 
identify and expand, to the maximum extent practicable, Federal air 
quality forecast and warning programs in effect as of the date of 
establishment of the program.
    (d) Authorization of Appropriations.--There are authorized to be 
appropriated such sums as are necessary to carry out this section.

SEC. 106. RELATIONSHIP TO OTHER LAW.

    (a) Regulation of Hazardous Air Pollutants.--Section 112(n)(1) of 
the Clean Air Act (42 U.S.C. 7412(n)(1)) is amended by striking 
subparagraph (A) and inserting the following:
                    ``(A) Regulations.--
                            ``(i) In general.--Not later than 18 months 
                        after the date of enactment of the Clean Air/
                        Climate Change Act of 2007, the Administrator 
                        shall promulgate regulations under this section 
                        limiting the emission from electric utility 
                        steam generating units of hazardous air 
                        pollutants, other than mercury, as the 
                        Administrator determines to be appropriate and 
                        necessary in accordance with the standards 
                        under this section, including subsections 
                        (b)(2) and (f).
                            ``(ii) Requirements.--The regulations under 
                        clause (i) shall--
                                    ``(I) require compliance with 
                                applicable standards as expeditiously 
                                as practicable, but not later than 3 
                                years after the effective date of the 
                                regulations; and
                                    ``(II) be in accordance with other 
                                applicable requirements under this 
                                section.
                            ``(iii) Effective date.--The regulations 
                        under clause (i) shall be effective on the date 
                        of promulgation of the regulations.''.
    (b) Safe Drinking Water Act.--Section 1412(b) of the Safe Drinking 
Water Act (42 U.S.C. 300g-1(b)) is amended by adding at the end the 
following:
            ``(16) Carbon dioxide.--Not later than 2 years after the 
        date of enactment of the Clean Air/Climate Change Act of 2007, 
        the Administrator shall promulgate regulations establishing 
        standards for underground injection of carbon dioxide in a 
        manner that protects human health and the environment.''.
    (c) No Effect on Other Federal and State Requirements.--Except as 
otherwise specifically provided in this Act, nothing in this Act or an 
amendment made by this Act--
            (1) affects any permitting, monitoring, or enforcement 
        obligation of the Administrator of the Environmental Protection 
        Agency under the Clean Air Act (42 U.S.C. 7401 et seq.) or any 
        remedy provided under that Act;
            (2) affects any requirement applicable to, or liability of, 
        an electric generating unit under that Act;
            (3) requires a change in, affects, or limits any State law 
        that regulates electric utility rates or charges, including 
        prudence review under State law; or
            (4) precludes a State or political subdivision of a State 
        from adopting and enforcing any requirement for the control or 
        abatement of air pollution, except that a State or political 
        subdivision may not adopt or enforce any emission standard or 
        limitation that is less stringent than the requirements imposed 
        under that Act.

                    TITLE II--GREENHOUSE GAS OFFSETS

SEC. 201. GREENHOUSE GAS OFFSETS.

    The Clean Air Act (42 U.S.C. 7401 et seq.) (as amended by section 
101) is amended by adding at the end the following:

                  ``TITLE VIII--GREENHOUSE GAS OFFSETS

                  ``TITLE VIII--GREENHOUSE GAS OFFSETS

``Sec. 801. Definitions.
``Sec. 802. General requirements.
``Sec. 803. Standards for offset allowances.

``SEC. 801. DEFINITIONS.

    ``In this title:
            ``(1) Allowance.--The term `allowance' means--
                    ``(A) a carbon dioxide allowance, as defined in 
                section 701; and
                    ``(B) an offset allowance.
            ``(2) Anaerobic digester.--
                    ``(A) In general.--The term `anaerobic digester' 
                means a device that promotes the decomposition of 
                organic material to simple organic and gaseous biogas 
                products, usually by collecting the material under 
                controlled temperature and volume.
                    ``(B) Inclusion.--The term `anaerobic digester' 
                includes a biogas recovery system.
            ``(3) Anaerobic storage.--The term `anaerobic storage' 
        means storage of organic material in an oxygen-free environment 
        or under oxygen-free conditions, including by using holding 
        tanks, ponds, or lagoons.
            ``(4) ANSI.--The term `ANSI' means the American National 
        Standards Institute.
            ``(5) ASHRAE.--The term `ASHRAE' means the American Society 
        of Heating, Refrigerating and Air Conditioning Engineers.
            ``(6) Biogas.--The term `biogas' means a gas--
                    ``(A) the principal components of which are methane 
                and carbon dioxide; and
                    ``(B) that results from the decomposition of 
                organic matter under anaerobic conditions.
            ``(7) Boiler.--The term `boiler' means a self-contained, 
        low-pressure appliance for supplying heat in the form of steam 
        or hot water to a residential building or commercial building.
            ``(8) Commercial building.--The term `commercial building' 
        means a building to which ANSI/ASHRAE/IESNA Standard 90.1 
        applies.
            ``(9) Eligible biomass.--The term `eligible biomass' 
        includes sustainable harvested woody or herbaceous fuel sources 
        that are available on a renewable or recurring basis (excluding 
        old-growth timber), as determined by the Administrator, 
        including--
                    ``(A) dedicated energy crops and trees;
                    ``(B) agricultural food and feed crop residues;
                    ``(C) aquatic plants;
                    ``(D) unadulterated wood and wood residues;
                    ``(E) animal wastes;
                    ``(F) other clean organic wastes not mixed with 
                other solid wastes;
                    ``(G) biogas; and
                    ``(H) other neat liquid biofuels derived from any 
                fuel source described in subparagraphs (A) through (G).
            ``(10) Energy conservation measure.--The term `energy 
        conservation measure' means an activity the purpose of which is 
        to increase the energy efficiency of a building or to improve 
        the management of energy demand, including through--
                    ``(A) physical changes to equipment;
                    ``(B) modifications to the building;
                    ``(C) revisions of operating and maintenance 
                procedures;
                    ``(D) software changes; and
                    ``(E) new methods of training or managing users of 
                the building or operations and maintenance staff.
            ``(11) Energy performance.--The term `energy performance' 
        means the relative energy efficiency of a building, building 
        equipment, or building component, measured based on--
                    ``(A) for a building, the quantity of energy 
                required to provide building services; and
                    ``(B) for building equipment and components, the 
                impact of equipment or components on energy usage.
            ``(12) Forested condition.--The term `forested condition', 
        with respect to land, means land--
                    ``(A) the area of which is at least 1 acre, with 
                strips of forest at least 120 feet wide, measured stem-
                to-stem from the outer-most edge, for a continuous 
                length of at least 363 feet; and
                    ``(B)(i) at least 10 percent of the area of which 
                is stocked by trees of any size, or has been at least 
                10-percent stocked by trees at any time, and that is 
                not subject to any nonforest-related use that prevents 
                normal tree regeneration and succession, such as 
                regular mowing, intensive grazing, or recreation 
                activities; or
                    ``(ii) for any western woodland species for which 
                the stocking described in clause (i) cannot be 
                determined, at least 5 percent of which has a crown 
                cover of trees of any size, or has had at least 5-
                percent cover at any time, and that is not subject to 
                any nonforest-related use that prevents normal tree 
                regeneration and succession, such as regular mowing, 
                intensive grazing, or recreation activities.
            ``(13) Furnace.--The term `furnace' means a self-contained, 
        indirect-fired appliance that--
                    ``(A) supplies heated air to a residential building 
                or commercial building through ducts to conditioned 
                spaces; and
                    ``(B) has a heat input rate of less than 225,000 
                Btu per hour.
            ``(14) HVAC system.--
                    ``(A) In general.--The term `HVAC system' means any 
                system or combination of systems that provides, 
                collectively or individually, heating, ventilation, or 
                air conditioning to a building.
                    ``(B) Inclusions.--The term `HVAC system' includes 
                equipment, distribution networks, and terminals for a 
                system described in subparagraph (A).
            ``(15) IESNA.--The term `IESNA' means the Illuminating 
        Engineering Society of North America.
            ``(16) Market penetration rate.--The term `market 
        penetration rate' means, as determined by the Administrator, 
        the rate of diffusion of a technology, product, or practice in 
        a defined market, expressed as--
                    ``(A) a percentage of annual sales of the 
                technology, product, or practice; or
                    ``(B) a percentage of existing installed stock--
                            ``(i) for a product or category of 
                        products; or
                            ``(ii) that uses a technology, product, or 
                        practice.
            ``(17) Offset allowance.--The term `offset allowance' means 
        an allowance awarded under this title for--
                    ``(A) each sequestration of, reduction in, or 
                prevention of, 1 ton of carbon dioxide or carbon 
                dioxide-equivalent emissions, as determined by the 
                Administrator; or
                    ``(B) an eligible emission credit retirement under 
                section 802(a).
            ``(18) Offset project.--The term `offset project' means a 
        project that--
                    ``(A) provides for a reduction in greenhouse gases 
                or greenhouse gas emissions through--
                            ``(i) the capture and destruction of 
                        methane from a landfill;
                            ``(ii) a reduction in emissions of sulfur 
                        hexafluoride;
                            ``(iii) the sequestration of carbon through 
                        afforestation;
                            ``(iv) a reduction or avoidance of carbon 
                        dioxide emissions from natural gas, oil, or 
                        propane end-use combustion through end-use 
                        energy efficiency; or
                            ``(v) the prevention of methane emissions 
                        through the use of agricultural manure 
                        management operations;
                    ``(B) is carried out in any State or other United 
                States jurisdiction pursuant to a memorandum of 
                understanding between the project sponsor and the 
                Administrator; and
                    ``(C) begins operation on or after the date of 
                enactment of this title.
            ``(19) Residential building.--The term `residential 
        building' means a low-rise building (including a single family 
        home, a multifamily structure of 3 stories or less above grade, 
        and a manufactured modular or mobile home) to which ANSI/
        ASHRAE/IESNA Standard 90.1 does not apply.
            ``(20) RESNET.--The term `RESNET' means the Residential 
        Energy Services Network.
            ``(21) SF<INF>6</INF>-containing operating equipment.--The 
        term `SF<INF>6</INF>-containing operating equipment' means any 
        equipment that--
                    ``(A) is used for the transmission or distribution 
                of electricity; and
                    ``(B) contains sulfur hexafluoride.
            ``(22) Total solids.--The term `total solids' means the 
        content of solid materials in a given sample, including 
        suspended solids, dissolved solids, and suspended volatile 
        solids.
            ``(23) Transmission or distribution entity.--
                    ``(A) In general.--The term `transmission or 
                distribution entity' means an entity that transmits or 
                distributes electricity from an electric generator to 
                the electrical load of a customer.
                    ``(B) Inclusions.--The term `transmission or 
                distribution entity' includes all related assets and 
                equipment of an entity described in subparagraph (A) 
                that are located within the service area of the entity, 
                as defined by the applicable State regulatory agency.
            ``(24) Verification.--The term `verification' means any 
        activity conducted by a project sponsor to ensure the adequacy 
        and consistency of a component of an offset project, including 
        monitoring and reporting to the Administrator on any violation 
        of this title.
            ``(25) UNFCCC.--The term `UNFCCC' means the United Nations 
        Framework Convention on Climate Change, done at New York on May 
        9, 1992.
            ``(26) Volatile solids.--The term `volatile solids' means 
        the fraction of total solids of a given sample that is 
        comprised primarily of organic matter.

``SEC. 802. GENERAL REQUIREMENTS.

    ``(a) Eligible Carbon Dioxide Emission Offset Projects and Eligible 
Emission Credit Retirements.--Subject to subsection (c) and in 
accordance with the calculations and other requirements of section 803, 
the Administrator may award offset allowances to the sponsor of any 
offset project or eligible emission credit retirement if the sponsor 
has met all applicable requirements of this title.
    ``(b) Project Sponsor.--Any person may act as the sponsor of an 
offset project or eligible emission credit retirement if the person 
meets all the requirements established by the Administrator.
    ``(c) Requirements for the Award of Offset Allowances.--Except as 
provided in section 803, with respect to the awarding of offset 
allowances under this section--
            ``(1) an offset allowance may not be awarded for an offset 
        project that is required to be carried out pursuant to any 
        Federal, State, or local law (including a regulation), other 
        than this Act, or administrative or judicial order;
            ``(2) offset allowances shall not be awarded to an offset 
        project that includes an electric generation component; and
            ``(3) an offset allowance shall not be awarded to an offset 
        project that is awarded credits or allowances under any other 
        mandatory or voluntary greenhouse gas program, as determined by 
        the Administrator.
    ``(d) Offset Project Audit.--The sponsor of an offset project shall 
provide to the Administrator (or a designee) access to the physical 
location at which the offset project is carried out to ensure 
compliance with this title.
    ``(e) Ineligibility Because of Noncompliance.--If the Administrator 
determines that an offset project or sponsor of an offset project has 
not complied, or is not in compliance, with this title, the 
Administrator may--
            ``(1) revoke and retire any offset allowances in the 
        account of the sponsor of the offset project; and
            ``(2) revoke any other approvals issued by the 
        Administrator with respect to the offset project.
    ``(f) Regulations.--
            ``(1) In general.--Not later than 2 years after the date of 
        enactment of this title, the Administrator shall promulgate 
        regulations to carry out this title.
            ``(2) Interaction with department of agriculture.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), the Administrator shall promulgate 
                all regulations relating to greenhouse gas offsets 
                under this title.
                    ``(B) Offsets.--The Administrator, in consultation 
                with the Secretary of Agriculture, shall promulgate 
                regulations, in accordance with the requirements of 
                this title, relating to greenhouse gas offsets produced 
                by agricultural sequestration practices.
            ``(3) Additional project types.--In promulgating 
        regulations pursuant to this subsection, the Administrator 
        shall establish requirements, in accordance with the 
        requirements of this title, relating to types of greenhouse gas 
        offset projects not otherwise addressed under this title.

``SEC. 803. STANDARDS FOR OFFSET ALLOWANCES.

    ``(a) Landfill Methane Capture and Destruction Offset Projects.--
            ``(1) In general.--An offset project for the capture and 
        destruction of methane shall be eligible to receive allowances 
        under this title if the offset project--
                    ``(A) captures and destroys methane from a landfill 
                that is not subject to--
                            ``(i) the regulations entitled `Standards 
                        of Performance for New Stationary Sources; 
                        Municipal Solid Waste Landfills' under subpart 
                        www of part 60 of title 40, Code of Federal 
                        Regulations (or successor regulations); or
                            ``(ii) any other relevant Federal 
                        regulations, including emissions guidelines for 
                        municipal solid waste landfills under--
                                    ``(I) subpart cc of part 60 of that 
                                title; or
                                    ``(II) subpart aaaa of part 63 of 
                                that title; and
                    ``(B) meets the requirements of this subsection.
            ``(2) Requirement.--To be eligible to receive an allowance 
        under this subsection, an offset project described in paragraph 
        (1) shall use a landfill gas collection system that provides 
        for continuous metering and data computation of--
                    ``(A) the landfill gas volumetric flow rate; and
                    ``(B) methane concentration.
            ``(3) Emissions calculations.--
                    ``(A) Emissions baseline.--
                            ``(i) In general.--The emissions baseline 
                        of an offset project that receives allowances 
                        under this subsection shall be the potential 
                        fugitive landfill emissions of methane 
                        (measured in tons of carbon dioxide 
                        equivalent), as calculated based on the 
                        quantity of methane collected and metered for 
                        thermal destruction as part of the offset 
                        project in accordance with the following 
                        formula: Emissions (tons of carbon dioxide 
                        equivalent) = (V  x  M  x  (1-OX)  x  GWP)/
                        2000.
                            ``(ii) Abbreviations.--In the formula 
                        contained in clause (i)--
                                    ``(I) `V' represents the volume of 
                                methane collected (expressed in cubic 
                                feet);
                                    ``(II) `M' represents the mass of 
                                methane per cubic foot (with a default 
                                value of 0.04246 pounds per cubic foot 
                                at 1 atmosphere and 20 C);
                                    ``(III) `OX' represents the 
                                oxidation factor, which is the 
                                estimated portion of collected methane 
                                that would have oxidized to carbon 
                                dioxide if not collected (with a 
                                default value of 0.10); and
                                    ``(IV) `GWP' represents the carbon 
                                dioxide-equivalent global warming 
                                potential of methane (with a default 
                                value of 23).
                    ``(B) Emissions reductions.--
                            ``(i) In general.--The emissions reductions 
                        of an offset project under this subsection 
                        shall be the potential fugitive landfill 
                        emissions of methane (measured in tons of 
                        carbon dioxide equivalent) that would have 
                        occurred if metered methane collected from the 
                        landfill for thermal destruction as part of the 
                        offset project was not collected and destroyed, 
                        as calculated in accordance with the following 
                        formula: Emissions reductions (tons of carbon 
                        dioxide equivalent) = (V  x  M  x  (1-OX)  x  
                        C<INF>ef</INF>  x  GWP)/2000.
                            ``(ii) Abbreviations.--In the formula 
                        contained in clause (i)--
                                    ``(I) `V' represents the volume of 
                                methane collected (expressed in cubic 
                                feet);
                                    ``(II) `M' represents the mass of 
                                methane pre cubic foot (with a default 
                                value of 0.04246 pounds per cubic foot 
                                at 1 atmosphere and 20 C);
                                    ``(III) `OX' represents the 
                                oxidation factor, which is the 
                                estimated portion of collected methane 
                                that would have oxidized to carbon 
                                dioxide if not collected (with a 
                                default value of 0.10);
                                    ``(IV) `C<INF>ef</INF>' represents 
                                the combustion efficiency of methane 
                                control technology (with a default 
                                value of 0.98); and
                                    ``(V) `GWP' represents the carbon 
                                dioxide-equivalent global warming 
                                potential of methane (with a default 
                                value of 23).
            ``(4) Monitoring and verification.--Not less frequently 
        than once each year, the sponsor of an offset project that 
        receives an allowance under this subsection shall submit to the 
        Administrator a monitoring and verification report, including--
                    ``(A) data relating to monthly volumetric flow rate 
                and methane concentration of the offset project, 
                including documentation that the methane was actually 
                supplied to an applicable combustion source; and
                    ``(B) verification of landfill gas methane 
                composition through landfill gas sampling and 
                independent laboratory analysis using applicable 
                laboratory test methods of the Environmental Protection 
                Agency.
    ``(b) Sulfur Hexafluoride Offset Projects.--
            ``(1) In general.--An offset project to prevent, through 
        capture and storage, recycling, or destruction, the emission 
        into the atmosphere of sulfur hexafluoride from equipment in 
        the electricity transmission and distribution sector shall be 
        eligible to receive allowances under this title.
            ``(2) Requirements.--
                    ``(A) In general.--To be eligible to receive an 
                allowance under this subsection, an offset project 
                described in paragraph (1) shall include incremental 
                action beyond action taken with respect to the offset 
                project during the calendar year preceding the year in 
                which an application is submitted (referred to in this 
                subsection as the `baseline year') to achieve a 
                reduction in sulfur hexafluoride emissions, in 
                accordance with the guidance under--
                            ``(i) the International Electrotechnical 
                        Commission document numbered 1634 and entitled 
                        `High-voltage switchgear and control gear--Use 
                        and handling of sulfur hexafluoride 
                        (SF<INF>6</INF>) in high-voltage switchgear and 
                        control gear' (CEI/IEC 1634, 1995-04); and
                            ``(ii) the Electric Power Research 
                        Institute document entitled `Practical Guide to 
                        SF<INF>6</INF> Handling Practices' (TR-113933, 
                        2002).
                    ``(B) Entity-wide emissions rates.--
                            ``(i) Calculation.--
                                    ``(I) In general.--The entity-wide 
                                sulfur hexafluoride emissions rate of 
                                an offset project, measured as a 
                                percentage, shall be calculated in 
                                accordance with the following formula: 
                                SF<INF>6</INF> emissions rate (%) = 
                                (total SF<INF>6</INF> emissions for 
                                reporting year)/(total SF<INF>6</INF> 
                                nameplate capacity at end of reporting 
                                year).
                                    ``(II) Description.--In the formula 
                                contained in subclause (I), 
                                `SF<INF>6</INF> nameplate capacity' 
                                means the capacity of all 
                                SF<INF>6</INF>-containing operating 
                                equipment owned or operated as part of 
                                the offset project, measured at the 
                                full and proper SF<INF>6</INF>-charge 
                                of that equipment, rather than the 
                                actual charge of the equipment, which 
                                may reflect leakage.
                            ``(ii) Requirement.--
                                    ``(I) In general.--Subject to 
                                subclauses (II) and (III) and except as 
                                provided in clause (iii), to be 
                                eligible to receive allowances under 
                                this subsection, the entity-wide 
                                emissions rate for the baseline year of 
                                an offset project shall be lower than 
                                the applicable emissions rate contained 
                                in the following table:

                       ``Emissions Rates by Region
 
                 Region                           Emissions rate
 
  A....................................  9.68%
  B....................................  5.22%
  C....................................  9.68%
  D....................................  5.77%
  E....................................  3.65%
  National.............................  9.68%

                                    ``(II) Adjustment.--
                                            ``(aa) Finding.--Congress 
                                        finds that the emissions rates 
                                        contained in the table under 
                                        subclause (I) are based on 
                                        weighted average emissions 
                                        rates for calendar year 2004 
                                        for the Environmental 
                                        Protection Agency sulfur 
                                        hexafluoride partnership 
                                        utilities in each region.
                                            ``(bb) Determination.--If 
                                        the Administrator determines 
                                        that an emissions rate 
                                        contained in the table under 
                                        subclause (I) for any region is 
                                        in error and is higher than the 
                                        national weighted average 
                                        emissions rate, the national 
                                        emissions rate contained in 
                                        that table shall apply with 
                                        respect to the region.
                                    ``(III) Region descriptions.--For 
                                purposes of the table under in 
                                subclause (I)--
                                            ``(aa) Region A is 
                                        comprised of the States of 
                                        Connecticut, Delaware, Maine, 
                                        Massachusetts, New Jersey, New 
                                        York, New Hampshire, 
                                        Pennsylvania, Rhode Island, and 
                                        Vermont;
                                            ``(bb) Region B is 
                                        comprised of the States of 
                                        Alabama, Florida, Georgia, 
                                        Kentucky, Maryland, 
                                        Mississippi, North Carolina, 
                                        South Carolina, Tennessee, 
                                        Virginia, West Virginia, and 
                                        the District of Columbia;
                                            ``(cc) Region C is 
                                        comprised of the States of 
                                        Colorado, Illinois, Indiana, 
                                        Michigan, Minnesota, Montana, 
                                        North Dakota, Ohio, South 
                                        Dakota, Utah, Wisconsin, and 
                                        Wyoming;
                                            ``(dd) Region D is 
                                        comprised of the States of 
                                        Arkansas, Iowa, Kansas, 
                                        Louisiana, Missouri, Nebraska, 
                                        New Mexico, Oklahoma, and 
                                        Texas; and
                                            ``(ee) Region E is 
                                        comprised of the States of 
                                        Alaska, Arizona, California, 
                                        Hawaii, Idaho, Nevada, Oregon, 
                                        and Washington.
                            ``(iii) Exception.--Notwithstanding clause 
                        (ii), an offset project shall be eligible to 
                        receive allowances under this subsection 
                        regardless of the entity-wide emissions rate 
                        for the baseline year of the offset project if 
                        the sponsor of the offset project demonstrates 
                        to the satisfaction of the Administrator that 
                        each of the following conditions is met:
                                    ``(I) The offset project is being 
                                carried out at a transmission or 
                                distribution entity the service area of 
                                which is predominantly urban.
                                    ``(II) The optimal management of 
                                sulfur hexafluoride is prevented by at 
                                least 2 of the following factors:
                                            ``(aa) The transmission or 
                                        distribution entity for which 
                                        the offset project is being 
                                        carried out is comprised of 
                                        older-than-average installed 
                                        transmission or distribution 
                                        equipment compared to the 
                                        national average age of the 
                                        equipment.
                                            ``(bb) A majority of the 
                                        electricity load of the 
                                        transmission or distribution 
                                        entity for which the offset 
                                        project is being carried out is 
                                        served by equipment that is 
                                        located underground, precluding 
                                        management of sulfur 
                                        hexafluoride emissions through 
                                        regular ongoing maintenance.
                                            ``(cc) The transmission or 
                                        distribution entity for which 
                                        the offset project is being 
                                        carried out is unable to remove 
                                        a substantial portion of 
                                        equipment from service because 
                                        doing so would impair system 
                                        reliability.
                                            ``(dd) The required 
                                        equipment purpose or design for 
                                        a substantial portion of the 
                                        equipment of the transmission 
                                        or distribution entity for 
                                        which the offset project is 
                                        being carried out results in 
                                        inherently leak-prone 
                                        equipment.
            ``(3) Emissions calculations.--
                    ``(A) In general.--To be eligible to receive 
                allowances under this subsection, the sponsor of an 
                offset project shall submit to the Administrator an 
                annual report describing the sulfur hexafluoride 
                emissions of the offset project (including such 
                supporting documentation as the Administrator 
                determines to be appropriate), calculated in accordance 
                with this paragraph.
                    ``(B) Determination of baseline emissions.--
                            ``(i) In general.--The baseline sulfur 
                        hexafluoride emissions of an offset project 
                        that receives an allowance under this 
                        subsection shall be determined based on the 
                        sulfur hexafluoride emissions emitted by the 
                        transmission or distribution entity for the 
                        baseline year of the offset project.
                            ``(ii) Limitation.--The baseline year for 
                        an offset project an application of which is 
                        submitted before January 1, 2009, shall be not 
                        earlier than 2005.
                            ``(iii) Monitoring.--The sponsor of an 
                        offset project that receives an allowance under 
                        this subsection shall systematically track and 
                        account for all uses of sulfur hexafluoride by 
                        the transmission or distribution entity for 
                        which the offset project is being carried out 
                        to determine entity-wide emissions of sulfur 
                        hexafluoride, including monitoring all electric 
                        transmission and distribution assets and all 
                        SF<INF>6</INF>-containing operating equipment 
                        owned or operated by the transmission or 
                        distribution entity.
                    ``(C) Mass balance method.--
                            ``(i) In general.--For purposes of this 
                        paragraph, the sulfur hexafluoride emissions of 
                        an offset project for a calendar year shall be 
                        determined based on the following mass balance 
                        formula: SF<INF>6</INF> emissions (lbs) = 
                        (SF<INF>6</INF> change in inventory) + 
                        (SF<INF>6</INF> purchases and acquisitions) - 
                        (SF<INF>6</INF> sales and disbursements) - 
                        (change in total SF<INF>6</INF> nameplate 
                        capacity of equipment).
                            ``(ii) Description.--In the formula 
                        contained in clause (i)--
                                    ``(I) `SF<INF>6</INF> change in 
                                inventory' means the difference 
                                between, with respect to the applicable 
                                offset project--
                                            ``(aa) the quantity of 
                                        sulfur hexafluoride gas in 
                                        storage (including gas held in 
                                        cylinders and gas carts, but 
                                        not including gas held in 
                                        SF<INF>6</INF>-containing 
                                        operating equipment) on January 
                                        1 of the applicable calendar 
                                        year; and
                                            ``(bb) the quantity of 
                                        sulfur hexafluoride gas in 
                                        storage on December 31 of the 
                                        applicable calendar year;
                                    ``(II) `SF<INF>6</INF> purchases 
                                and acquisitions' means the total 
                                quantity of sulfur hexafluoride gas 
                                acquired from other entities during the 
                                applicable calendar year, as contained 
                                in storage containers or 
                                SF<INF>6</INF>-containing operating 
                                equipment;
                                    ``(III) `SF<INF>6</INF> sales and 
                                disbursements' means the total quantity 
                                of sulfur hexafluoride gas sold or 
                                otherwise distributed to other entities 
                                during the applicable calendar year, as 
                                contained in storage containers or 
                                SF<INF>6</INF>-containing operating 
                                equipment; and
                                    ``(IV) `change in total 
                                SF<INF>6</INF> nameplate capacity of 
                                equipment' (measured at the full and 
                                proper SF<INF>6</INF>-charge of that 
                                equipment, rather than the actual 
                                charge of the equipment, which may 
                                reflect leakage), means the net change 
                                in the total volume of SF<INF>6</INF>-
                                containing operating equipment during 
                                the applicable calendar year, equal to 
                                the difference between--
                                            ``(aa) the total volume of 
                                        SF<INF>6</INF>-containing 
                                        operating equipment obtained 
                                        during the applicable calendar 
                                        year; and
                                            ``(bb) the total volume of 
                                        SF<INF>6</INF>-containing 
                                        operating equipment retired 
                                        during the applicable calendar 
                                        year.
                    ``(D) Emissions.--
                            ``(i) In general.--The sulfur hexafluoride 
                        emissions of an offset project for a calendar 
                        year shall be calculated in accordance with the 
                        following formula: Emissions (tons of carbon 
                        dioxide equivalent) = [(V<INF>iby</INF> - 
                        V<INF>iey</INF>) + (PA<INF>psd</INF> + 
                        PA<INF>e</INF> + PA<INF>rre</INF>) - 
                        (SD<INF>op</INF> + SD<INF>rs</INF> + 
                        SD<INF>df</INF> + SD<INF>sor</INF>) - 
                        (CNP<INF>ne</INF> - CNP<INF>rse</INF>)]  x  
                        GWP/2000.
                            ``(ii) Description.--In the formula 
                        contained in clause (i), in which each sulfur 
                        hexafluoride value shall be expressed in 
                        pounds--
                                    ``(I) `V<INF>iby</INF>' represents 
                                the sulfur hexafluoride inventory of 
                                the offset project in cylinders, gas 
                                carts, and other storage containers 
                                (not including SF<INF>6</INF>-
                                containing operating equipment) on 
                                January 1 of the applicable calendar 
                                year;
                                    ``(II) `V<INF>iey</INF>' represents 
                                the sulfur hexafluoride inventory of 
                                the offset project in cylinders, gas 
                                carts, and other storage containers 
                                (not including SF<INF>6</INF>-
                                containing operating equipment) on 
                                December 31 of the applicable calendar 
                                year;
                                    ``(III) `PA<INF>psd</INF>' 
                                represents the quantity of sulfur 
                                hexafluoride purchased from suppliers 
                                and distributors in cylinders for the 
                                offset project during the applicable 
                                calendar year;
                                    ``(IV) `PA<INF>e</INF>' represents 
                                the quantity of sulfur hexafluoride 
                                provided by equipment manufacturers in 
                                SF<INF>6</INF>-containing operating 
                                equipment during the applicable 
                                calendar year;
                                    ``(V) `PA<INF>rre</INF>' represents 
                                the quantity of sulfur hexafluoride 
                                returned to the offset project entity 
                                after off-site recycling during the 
                                applicable calendar year;
                                    ``(VI) `SD<INF>op</INF>' represents 
                                sales of sulfur hexafluoride by the 
                                offset project to other entities during 
                                the applicable calendar year, including 
                                through sulfur hexafluoride gas 
                                remaining in SF<INF>6</INF>-containing 
                                operating equipment sold by the offset 
                                project;
                                    ``(VII) `SD<INF>rs</INF>' 
                                represents the quantity of sulfur 
                                hexafluoride returned by the offset 
                                project to the supplier during the 
                                applicable calendar year;
                                    ``(VIII) `SD<INF>df</INF>' 
                                represents the quantity of sulfur 
                                hexafluoride sent by the offset project 
                                to destruction facilities during the 
                                applicable calendar year;
                                    ``(IX) `SD<INF>sor</INF>' 
                                represents the quantity of sulfur 
                                hexafluoride sent off-site for 
                                recycling by the offset project during 
                                the applicable calendar year;
                                    ``(X) `CNP<INF>ne</INF>' represents 
                                the total sulfur hexafluoride nameplate 
                                capacity (measured at full and proper 
                                charge) of SF<INF>6</INF>-containing 
                                operating equipment of the offset 
                                project acquired during the applicable 
                                calendar year;
                                    ``(XI) `CNP<INF>rse</INF>' 
                                represents the total sulfur 
                                hexafluoride nameplate capacity 
                                (measured at full and proper charge) of 
                                SF<INF>6</INF>-containing operating 
                                equipment retired or sold by the offset 
                                project during the applicable calendar 
                                year; and
                                    ``(XII) `GWP' represents the carbon 
                                dioxide equivalent global warming 
                                potential of sulfur hexafluoride (the 
                                default value of which is 22,200).
                    ``(E) Emissions reductions.--
                            ``(i) In general.--The emissions reduction 
                        of an offset project for a calendar year shall 
                        be determined in accordance with the following 
                        formula: Emissions reduction (tons of carbon 
                        dioxide equivalent) = (total pounds of 
                        SF<INF>6</INF> emissions in baseline year) - 
                        (total pounds of SF<INF>6</INF> emissions in 
                        reporting year)  x  GWP/2000.
                            ``(ii) Description.--For purposes of the 
                        formula contained in clause (i)--
                                    ``(I) each value shall be 
                                determined in accordance with the 
                                calculations described in this 
                                paragraph; and
                                    ``(II) `GWP' represents the carbon 
                                dioxide equivalent global warming 
                                potential of sulfur hexafluoride (the 
                                default value of which is 22,200).
            ``(4) Monitoring and verification.--
                    ``(A) In general.--Not less frequently than once 
                each year, the sponsor of an offset project that 
                receives an allowance under this subsection shall 
                submit to the Administrator a monitoring and 
                verification report that includes--
                            ``(i) the information and documentation 
                        described in paragraph (3)(A);
                            ``(ii) an identification of each facility 
                        managed by the transmission or distribution 
                        entity for which the offset project is being 
                        carried out from which sulfur hexafluoride gas 
                        is acquired or disbursed, including--
                                    ``(I) a log of each such 
                                acquisition or dispersal describing--
                                            ``(aa) the weight of each 
                                        cylinder transported before 
                                        shipment from the facility; and
                                            ``(bb) the weight of each 
                                        cylinder after return to the 
                                        facility; and
                                    ``(II) a cylinder-specific log 
                                (including the location, weight, and 
                                specific identifying information of any 
                                applicable equipment) for each cylinder 
                                used at the facility--
                                            ``(aa) to fill equipment 
                                        with sulfur hexafluoride; or
                                            ``(bb) to reclaim sulfur 
                                        hexafluoride from equipment; 
                                        and
                            ``(iii) an inventory of all SF<INF>6</INF>-
                        containing operating equipment and all other 
                        sulfur hexafluoride-related items (including 
                        cylinders, gas carts, and other storage 
                        containers) used by the transmission or 
                        distribution entity for which the offset 
                        project is being carried out.
                    ``(B) Return of logs.--The project sponsor shall 
                submit to the facility in control of each applicable 
                cylinder a copy of each log described in subparagraph 
                (A)(ii)(II) relating to the cylinder by not later than 
                the earlier of--
                            ``(i) the date on which the sponsor 
                        completes use of the cylinder; and
                            ``(ii) the date on which the cylinder is 
                        empty.
    ``(c) Sequestration of Carbon Due to Afforestation or 
Reforestation.--
            ``(1) In general.--An offset project that sequesters carbon 
        through the conversion of nonforested land to a forested 
        condition may receive allowances under this title if--
                    ``(A) the offset project occurs on land that has 
                been in a nonforested state for at least 10 years 
                immediately preceding the date of implementation of the 
                offset project;
                    ``(B) the offset project is, as determined by the 
                Administrator--
                            ``(i) not common practice in the geographic 
                        area in which the offset project will occur;
                            ``(ii) managed in accordance with widely-
                        accepted environmentally sustainable forestry 
                        practices; and
                            ``(iii) designed to promote restoration of 
                        native forests by using mainly native species 
                        and avoiding the introduction of invasive 
                        nonnative species; and
                            ``(iv) before any commercial timber 
                        harvest-related activity occurs pursuant to the 
                        offset project, an appropriate certification is 
                        obtained by the sponsor of the offset project 
                        through--
                                    ``(I) the Forest Stewardship 
                                Council;
                                    ``(II) the Sustainable Forestry 
                                Institute;
                                    ``(III) the American Tree Farm 
                                System; or
                                    ``(IV) such other similar 
                                organization as the Administrator 
                                determines to be appropriate.
            ``(2) Carbon sequestration baseline.--
                    ``(A) In general.--To be eligible to receive 
                allowances under this subsection, the sponsor of an 
                offset project shall determine, using data from the 1-
                year period ending on the date on which the offset 
                project begins operation, the carbon content of certain 
                carbon pools in accordance with this paragraph.
                    ``(B) Carbon pools.--
                            ``(i) Mandatory.--As a condition of 
                        receiving allowances under this subsection, the 
                        sponsor of an offset project shall determine 
                        the carbon content of the following carbon 
                        pools:
                                    ``(I) Live above-ground tree 
                                biomass.
                                    ``(II) Live below-ground tree 
                                biomass.
                                    ``(III) Soil carbon.
                                    ``(IV)(aa) Except as provided in 
                                item (bb), dead organic matter and 
                                coarse woody debris.
                                    ``(bb) If the Administrator 
                                determines that the baseline 
                                measurement of the dead organic matter 
                                or coarse woody debris carbon pool for 
                                an offset project is at or near zero, 
                                the determination of the carbon content 
                                of that carbon pool shall be 
                                discretionary under clause (ii).
                            ``(ii) Discretionary.--The sponsor of an 
                        offset project may elect to determine the 
                        carbon content of the following carbon pools:
                                    ``(I) Live above-ground non-tree 
                                biomass.
                                    ``(II) Dead organic matter and 
                                forest floor.
                            ``(iii) Division into subpopulations.--
                                    ``(I) In general.--To increase the 
                                accuracy of the calculation of carbon 
                                content under this subparagraph, the 
                                sponsor of the offset project shall 
                                divide the land within the jurisdiction 
                                of the offset project into 
                                subpopulations that form relatively 
                                homogenous units.
                                    ``(II) Factors for consideration.--
                                In dividing land of the offset project 
                                under subclause (I), the sponsor shall 
                                take into consideration--
                                            ``(aa) vegetation and tree 
                                        species (including existing 
                                        vegetation and trees and 
                                        vegetation and trees to be used 
                                        as part of the offset project); 
                                        and
                                            ``(bb) site-specific 
                                        factors, such as soil type, 
                                        elevation, slope, and age 
                                        class.
                            ``(iv) Subpopulation calculation.--
                                    ``(I) In general.--The carbon 
                                content of each subpopulation of a 
                                carbon pool under this subparagraph 
                                shall be calculated in accordance with 
                                the following formula: carbon dioxide 
                                (tons) = [(A  x  C/ha)(44/12)] / 
                                0.9072.
                                    ``(II) Description.--In the formula 
                                contained in subclause (I)--
                                            ``(aa) `A' represents the 
                                        area in hectares of the 
                                        applicable subpopulation; and
                                            ``(bb) `C/ha' represents 
                                        the average carbon content per 
                                        hectare of each carbon pool.
                            ``(v) Carbon pool calculations.--
                                    ``(I) In general.--The carbon 
                                content of each carbon pool shall be 
                                calculated using a measurement protocol 
                                and sample size that achieves 
                                demonstrated, quantified accuracy for 
                                the combined carbon pool calculation 
                                under subparagraph (C), such that the 
                                Administrator is 95-percent confident 
                                that the calculated value is within 10 
                                percent of the true mean.
                                    ``(II) Requirements.--Measurement 
                                and sampling practices under this 
                                subparagraph shall meet the following 
                                requirements:
                                            ``(aa) Adequate sample size 
                                        that meets each applicable 
                                        requirement with respect to 
                                        each applicable subpopulation.
                                            ``(bb) Minimum required 
                                        number of sampling plots for 
                                        each subpopulation, as 
                                        determined in accordance with 
                                        the formula contained in 
                                        subclause (III).
                                    ``(III) Formula.--
                                            ``(aa) In general.--The 
                                        formula referred to in 
                                        subclause (II)(bb) is the 
                                        following: n = (s  x  1.960)/
                                        (mean  x  re)<SUP>2</SUP>.
                                            ``(bb) Description.--In the 
                                        formula contained in item 
                                        (aa)--

                                                    ``(AA) `n' 
                                                represents the required 
                                                number of sample plots 
                                                for each applicable 
                                                subpopulation;

                                                    ``(BB) `s' 
                                                represents the standard 
                                                deviation;

                                                    ``(CC) `mean' 
                                                represents the average 
                                                carbon content 
                                                calculated for the 
                                                sample population; and

                                                    ``(DD) `re' 
                                                represents the level of 
                                                sampling error (with a 
                                                default value of 0.08) 
                                                to ensure a total 
                                                maximum error of not 
                                                more than 10 percent, 
                                                assuming a total error 
                                                due to measurement 
                                                error of 0.02.

                    ``(C) Total carbon content calculation.--
                            ``(i) In general.--The carbon content of 
                        all carbon pools within the jurisdiction of an 
                        offset project shall be determined, based on 
                        the values calculated under subparagraph 
                        (B)(iv), in accordance with the following 
                        formula: TC<INF>pb</INF> = TC<INF>latb</INF> + 
                        TC<INF>lbtb</INF> + TC<INF>s</INF> [+ 
                        TC<INF>lantb</INF> + TC<INF>doff</INF> + 
                        TC<INF>docwd</INF>].
                            ``(ii) Description.--In the formula 
                        contained in clause (i)--
                                    ``(I) `TC<INF>pb</INF>' represents 
                                the total carbon content of all carbon 
                                pools within the jurisdiction of an 
                                offset project;
                                    ``(II) `TC<INF>latb</INF>' 
                                represents the total carbon content of 
                                live above-ground tree biomass in all 
                                applicable subpopulations;
                                    ``(III) `TC<INF>lbtb</INF>' 
                                represents the total carbon content of 
                                live below-ground tree biomass in all 
                                applicable subpopulations;
                                    ``(IV) `TC<INF>s</INF>' represents 
                                the total carbon content of soil carbon 
                                in all applicable subpopulations;
                                    ``(V) `TC<INF>lantb</INF>' 
                                represents the total carbon content of 
                                live above-ground non-tree biomass in 
                                all applicable subpopulations;
                                    ``(VI) `TC<INF>doff</INF>' 
                                represents the total carbon content of 
                                dead organic matter and forest floor in 
                                all applicable subpopulations; and
                                    ``(VII) `TC<INF>docwd</INF>' 
                                represents the total carbon content of 
                                dead organic matter and coarse woody 
                                debris in all applicable 
                                subpopulations.
                    ``(D) Requirement.--Calculations under this 
                paragraph shall be in accordance with applicable 
                forestry best practices and guidance contained in 
                section 3 of part 1 of chapter 1 of the technical 
                guidelines for the voluntary reporting of greenhouse 
                gases program of the Department of Energy, dated March 
                2006 (or successor guidelines).
            ``(3) Calculating sequestration allowances.--
                    ``(A) In general.--For any year, the Administrator 
                shall allocate allowances under this subsection based 
                on the quantity of carbon sequestered as a result of 
                the applicable offset project, based on the difference 
                between, expressed as tons of carbon dioxide--
                            ``(i) the aggregate carbon uptake and 
                        carbon emissions of the carbon pools of the 
                        offset project during the applicable year; and
                            ``(ii) the carbon content of the carbon 
                        pools of the offset project for the preceding 
                        year or the baseline year, as appropriate.
                    ``(B) Formula.--
                            ``(i) In general.--For purposes of 
                        allocating allowances under this subsection, 
                        the quantity of carbon sequestered shall be 
                        calculated using a stock-change approach, in 
                        accordance with the following formula: 
                        NCS<INF>t</INF> = I<INF>t</INF> - 
                        I<INF>t-1</INF>.
                            ``(ii) Description.--In the formula 
                        contained in clause (i)--
                                    ``(I) `NCS<INF>t</INF>' represents 
                                the net carbon sequestered during 
                                reporting period t;
                                    ``(II) `I<INF>t</INF>' represents 
                                the inventory of carbon stock for all 
                                carbon pools in all applicable 
                                subpopulations within the jurisdiction 
                                of the offset project during reporting 
                                period t; and
                                    ``(III) `I<INF>t-1</INF>' 
                                represents the inventory of carbon 
                                stock for all carbon pools in all 
                                applicable subpopulations within the 
                                jurisdiction of the offset project 
                                during the reporting period immediately 
                                preceding reporting period t.
                    ``(C) Requirements.--
                            ``(i) Remeasurement.--Except as provided in 
                        paragraph (2)(B)(i)(IV)(bb), the carbon content 
                        of each carbon pool calculated under paragraph 
                        (2) shall be remeasured for each year during 
                        which the applicable offset project receives an 
                        allowance under this subsection, with equal or 
                        greater precision, in accordance with that 
                        paragraph.
                            ``(ii) Determination of carbon stock.--Each 
                        calculation of the carbon stock of a 
                        subpopulation of a carbon pool under this 
                        paragraph shall be made in accordance with 
                        paragraph (2).
                            ``(iii) Potential losses.--
                                    ``(I) In general.--Subject to 
                                subclause (II), the sponsor of an 
                                offset project shall decrease the net 
                                value of change in carbon stock 
                                calculated in accordance with this 
                                paragraph by not more than 10 percent 
                                of the value to account for potential 
                                losses of sequestered carbon in any 
                                carbon pool of the offset project.
                                    ``(II) Insurance.--The requirement 
                                under subclause (I) shall not apply to 
                                any offset project that obtains long-
                                term insurance approved by the 
                                Administrator to guarantee replacement 
                                of any lost sequestered carbon for 
                                which an allowance is issued under this 
                                subsection.
            ``(4) Monitoring and verification.--Not less frequently 
        than once every 5 years, the sponsor of an offset project that 
        receives allowances under this subsection shall submit to the 
        Administrator a monitoring and verification report, including--
                    ``(A) a calculation of total carbon stock within 
                the jurisdiction of the offset project; and
                    ``(B) data from the direct measurement of carbon 
                content for each carbon pool used to determine the 
                baseline and reporting period carbon content of the 
                offset project.
            ``(5) Carbon sequestration permanence.--
                    ``(A) In general.--To address the permanence of 
                sequestered carbon, the sponsor of each offset project 
                that receives an allowance under this subsection shall 
                place land within the jurisdiction of the offset 
                project under a legally-binding permanent conservation 
                easement, approved by the Administrator, that requires 
                the land to be maintained in a forested condition in 
                perpetuity.
                    ``(B) Requirements.--A conservation easement under 
                subparagraph (A) shall include a requirement that--
                            ``(i) the carbon density within the 
                        jurisdiction of the offset project shall be 
                        maintained at long-term levels; and
                            ``(ii) land within the jurisdiction of the 
                        offset project shall be managed in accordance 
                        with environmentally sustainable forestry 
                        practices.
    ``(d) Reduction and Avoidance of Carbon Dioxide Emissions From 
Natural Gas, Oil, and Propane End-Use Combustion Due to End-Use Energy 
Efficiency.--
            ``(1) Definitions.--In this subsection:
                    ``(A) Building envelope.--The term `building 
                envelope' means the elements of a building that 
                separate conditioned space from unconditioned space, or 
                that enclose semiheated space, through which thermal 
                energy may be transferred to or from the exterior, 
                unconditioned space, or conditioned space, including 
                any element that separates the interior of a building 
                from the outdoor environment (such as walls, windows, 
                foundation, basement slab, ceiling, roof, and 
                insulation).
                    ``(B) Passive solar.--The term `passive solar', 
                with respect to a building, means a combination of 
                building design features and building components that 
                use solar energy to reduce or eliminate the need for--
                            ``(i) mechanical heating and cooling; and
                            ``(ii) daytime artificial lighting.
                    ``(C) Whole-building retrofit.--The term `whole-
                building retrofit' means any building project that--
                            ``(i) involves the replacement of more than 
                        1 building system or set of building 
                        components; and
                            ``(ii) requires a building permit.
                    ``(D) Zero-net energy building.--The term `zero-net 
                energy building' means a building designed to produce 
                as much energy, using renewable energy sources, as the 
                building is projected to use, as measured on an annual 
                basis.
            ``(2) Eligibility.--An offset project shall be eligible to 
        receive allowances under this title if the offset project--
                    ``(A) reduces carbon dioxide emissions by reducing 
                on-site combustion of natural gas, oil, or propane for 
                end-use in a commercial building or a residential 
                building by improving the energy efficiency of fuel 
                usage or the energy-efficient delivery of energy 
                services; and
                    ``(B) meets the other requirements of this 
                subsection.
            ``(3) Requirements.--
                    ``(A) In general.--To be eligible to receive 
                allowances under this subsection, an offset project 
                shall reduce carbon dioxide emissions through 1 or more 
                of the following measures:
                            ``(i) Measures to improve the energy 
                        efficiency of combustion equipment that provide 
                        space heating and hot water, including a 
                        reduction in fossil fuel consumption through 
                        the use of renewable energy.
                            ``(ii) Measures to improve the efficiency 
                        of a heating distribution system, including 
                        proper sizing and commissioning of heating 
                        systems.
                            ``(iii) Installation or improvement of 
                        energy management systems.
                            ``(iv) Measures to improve the efficiency 
                        of hot water distribution systems and reduction 
                        in demand for hot water.
                            ``(v) Measures to improve the thermal 
                        performance of the building envelope or reduce 
                        building envelope air leakage.
                            ``(vi) Measures to improve the passive 
                        solar performance of buildings and use of 
                        active heating systems using renewable energy.
                            ``(vii) Use of a less carbon-intensive fuel 
                        in combustion systems, including the use of 
                        liquid or gaseous renewable fuels, but not 
                        including a conversion to electricity.
                    ``(B) New buildings.--To be eligible to receive 
                allowances under this subsection for an offset project 
                a component of which is a new building, the new 
                building shall be designed--
                            ``(i) to replace an existing building on 
                        the offset project site; or
                            ``(ii) to be a zero-net energy building.
                    ``(C) Performance standards.--
                            ``(i) In general.--To be eligible to 
                        receive allowances under this subsection, an 
                        offset project shall meet the applicable 
                        performance requirements of this subparagraph.
                            ``(ii) Sizing and installation.--Any 
                        combustion equipment and related air handling 
                        equipment (including any HVAC system) installed 
                        as part of an offset project shall be sized and 
                        installed in accordance with--
                                    ``(I) for commercial HVAC systems--
                                            ``(aa) ANSI/ASHRAE/IESNA 
                                        Standard 90.1-2004, entitled 
                                        `Energy Standard for Buildings 
                                        Except Low-Rise Residential 
                                        Buildings' (or a successor 
                                        standard); and
                                            ``(bb) ANSI/ASHRAE Standard 
                                        62.1-2004, entitled 
                                        `Ventilation for Acceptable 
                                        Indoor Air Quality' (or a 
                                        successor standard); and
                                    ``(II) for residential HVAC 
                                systems--
                                            ``(aa) for sizing 
                                        specifications, the eighth 
                                        edition of the Air Conditioner 
                                        Contractors of America Manual 
                                        J, entitled `Residential Load 
                                        Calculation' (or successor 
                                        specifications); and
                                            ``(bb) for applicable 
                                        installation specifications, 
                                        the document of the Consortium 
                                        for Energy Efficiency entitled 
                                        `Specification of Energy-
                                        Efficient Installation and 
                                        Maintenance Practices for 
                                        Residential HVAC Systems' and 
                                        dated 2000 (or a successor 
                                        document).
                            ``(iii) Whole-building energy 
                        performance.--Any eligible new building or 
                        whole-building retrofit that is part of an 
                        offset project shall meet the following 
                        requirements:
                                    ``(I) Commercial buildings.--
                                            ``(aa) In general.--Except 
                                        as provided in item (bb), 
                                        commercial buildings shall 
                                        exceed by at least 30 percent 
                                        the energy performance 
                                        requirements of ANSI/ASHRAE/
                                        IESNA Standard 90.1-2004, 
                                        entitled `Energy Standard for 
                                        Buildings Except Low-Rise 
                                        Residential Buildings' (or a 
                                        successor standard).
                                            ``(bb) Exception.--A 
                                        multifamily residential 
                                        building classified as a 
                                        commercial building under ANSI/
                                        ASHRAE/IESNA Standard 90.1-2004 
                                        (or a successor standard) shall 
                                        exceed the energy performance 
                                        requirements described in item 
                                        (aa) by at least 20 percent.
                                    ``(II) Residential buildings.--
                                Residential buildings shall exceed the 
                                energy performance requirements of the 
                                2004 International Energy Conservation 
                                Code (or a successor code) by at least 
                                30 percent.
                    ``(D) Offset projects initiated before january 1, 
                2009.--To be eligible to receive allowances under this 
                subsection, each energy conservation measure 
                implemented as part of an offset project initiated 
                before January 1, 2009, shall meet the following 
                requirements:
                            ``(i) Combustion equipment.--
                                    ``(I) In general.--Combustion 
                                equipment installed as part of the 
                                offset project shall meet the energy 
                                efficiency performance standards 
                                required under this clause.
                                    ``(II) Commercial boilers.--
                                            ``(aa) In general.--
                                        Commercial boilers shall meet 
                                        or exceed the energy efficiency 
                                        criteria specified in the 
                                        following table:

                                  ``Minimum Commercial Boiler Energy Efficiency
----------------------------------------------------------------------------------------------------------------
                                                                                                       Minimum
               Technology                       Size (Btu/hour)                Rating method         efficiency
----------------------------------------------------------------------------------------------------------------
Gas-fired                                             125,000-300,000   AFUE......................          88%
Gas-fired                                          300,000-12,500,000   Thermal efficiency........          90%
Oil-fired                                             300,000 or more   Thermal efficiency........          88%
----------------------------------------------------------------------------------------------------------------

                                            ``(bb) Gas-fired boilers.--
                                        A gas-fired boiler installed as 
                                        part of the offset project 
                                        shall be installed with--

                                                    ``(AA) controls 
                                                allowing the gas-fired 
                                                boiler to operate in 
                                                condensing mode, such 
                                                that the design and 
                                                operation of the boiler 
                                                leads to the production 
                                                of condensate in flue 
                                                gases; and

                                                    ``(BB) vents 
                                                designed for positive 
                                                vent static pressure 
                                                and vent gas 
                                                temperature that leads 
                                                to condensate 
                                                production in the vent.

                                            ``(cc) Thermal 
                                        efficiency.--For purposes of 
                                        the table contained in item 
                                        (aa), the term `thermal 
                                        efficiency' means the 
                                        percentage obtained by dividing 
                                        (as measured under steady-state 
                                        conditions, at full-rated 
                                        useful thermal output, with 
                                        140F supply from, and 120F 
                                        return water temperature to, 
                                        the boiler)--

                                                    ``(AA) the useful 
                                                energy output of a 
                                                boiler, expressed in 
                                                Btus; by

                                                    ``(BB) the energy 
                                                input of the boiler, 
                                                expressed in Btus.

                                    ``(III) Residential combustion 
                                equipment.--
                                            ``(aa) In general.--
                                        Residential combustion 
                                        equipment, including furnaces, 
                                        boilers, and water heaters, 
                                        shall meet or exceed the energy 
                                        efficiency criteria specified 
                                        in the following table:

      ``Minimum Residential Combustion Equipment Energy Efficiency
------------------------------------------------------------------------
                                                            Minimum
            Technology                Rating method        efficiency
------------------------------------------------------------------------
Gas-fired furnace................               AFUE   94%
Oil-fired furnace................               AFUE   92%
Gas- or oil-fired boiler.........               AFUE   90%
Gas- or oil-fired water heater...      Energy factor   0.62
------------------------------------------------------------------------

                                            ``(bb) Definitions.--In the 
                                        table contained in item (aa):

                                                    ``(AA) Boiler.--The 
                                                term `boiler' means any 
                                                equipment with a heat 
                                                input rate of less than 
                                                300,000 Btu per hour.

                                                    ``(BB) Furnace.--
                                                The term `furnace' 
                                                means any equipment 
                                                with a heat input rate 
                                                of less than 225,000 
                                                Btu per hour.

                                                    ``(CC) Water 
                                                heater.--The term 
                                                `water heater' has the 
                                                meaning given the term 
                                                in section 430.2 of 
                                                title 10, Code of 
                                                Federal Regulations (or 
                                                a successor 
                                                regulation).

                            ``(ii) Other energy conservation 
                        measures.--Each other energy conservation 
                        measure carried out as part of the offset 
                        project shall meet--
                                    ``(I) subject to subclause (II), 
                                the more stringent energy performance 
                                requirements of, as applicable--
                                            ``(aa) the requirements of 
                                        the document entitled `Energy 
                                        Benchmark for High Performance 
                                        Buildings, Version 1.1, New 
                                        Buildings Institute' and dated 
                                        2005 (or a successor document); 
                                        or
                                            ``(bb) the requirements of 
                                        State building energy codes; 
                                        and
                                    ``(II) for energy conservation 
                                measures not subject to the 
                                requirements of the document described 
                                in subclause (I)(aa), the more 
                                stringent energy performance 
                                requirements of, as applicable--
                                            ``(aa) the requirements of 
                                        the document entitled `Federal 
                                        Energy Management Program 
                                        Product Energy Efficiency 
                                        Recommendations', issued 
                                        pursuant to Executive orders 
                                        13123 and 13221 (64 Fed. Reg. 
                                        30851 (June 8, 1999); 66 Fed. 
                                        Reg. 40571 (August 2, 2001)) 
                                        (or a successor document); or
                                            ``(bb) the Energy Star 
                                        criteria issued jointly by the 
                                        Administrator and the Secretary 
                                        of Energy.
                    ``(E) Maximum market penetration rate for offset 
                projects commenced on or after january 1, 2009.--To be 
                eligible to receive allowances under this subsection 
                for an offset project initiated on or after January 1, 
                2009, the sponsor of the offset project shall 
                demonstrate to the satisfaction of the Administrator 
                that the energy conservation measures implemented as 
                part of the offset project have a market penetration 
                rate of less than 5 percent.
            ``(4) Emissions baseline determination.--
                    ``(A) Energy usage, emissions factors, and 
                oxidation factors.--
                            ``(i) In general.--The emissions baseline 
                        of an offset project that receives allowances 
                        under this subsection shall be determined by 
                        multiplying--
                                    ``(I) the energy usage (measured in 
                                MMBtus), by fuel type, for each energy 
                                conservation measure carried out under 
                                the offset project, as determined using 
                                historic fuel use data from the most 
                                recent calendar year for which data is 
                                available; and
                                    ``(II) the applicable emissions 
                                factor (measured in pounds of carbon 
                                dioxide per MMBtu) and oxidation factor 
                                for each fuel type, in accordance with 
                                the following table:

                    ``Emissions and Oxidation Factors
------------------------------------------------------------------------
                                 Emissions
           Fuel type               factor          Oxidation factor
------------------------------------------------------------------------
Natural gas...................       116.98  0.995
Propane.......................       139.04  0.995
Distillate fuel oil...........       161.27  0.99
Kerosene......................       159.41  0.99
------------------------------------------------------------------------

                            ``(ii) Energy usage determination.--
                                    ``(I) In general.--For purposes of 
                                the calculation under clause (i), the 
                                energy usage for each energy 
                                conservation measure carried out under 
                                the offset project shall be determined 
                                in accordance with the following 
                                formula: Energy usage (MMBtu) = 
                                BEU<INF>AECM</INF>  x  A.
                                    ``(II) Description.--In the formula 
                                contained in subclause (I)--
                                            ``(aa) `BEU<INF>AECM</INF>' 
                                        represents the annual pre-
                                        installation baseline energy 
                                        use (measured in MMBtus), by 
                                        fuel type, attributable to each 
                                        application to be targeted by 
                                        the energy conservation 
                                        measure, as determined in 
                                        accordance with paragraph (6); 
                                        and
                                            ``(bb) `A' represents 
                                        adjustments required to account 
                                        for differing conditions during 
                                        the pre-installation and post-
                                        installation periods, such as 
                                        weather, building occupancy, 
                                        and changes in building use or 
                                        function, as adjusted in 
                                        accordance with paragraph (6).
                                    ``(III) Additional requirements.--
                                            ``(aa) In general.--Subject 
                                        to item (bb), for purposes of 
                                        determining the variable under 
                                        subclause (II)(aa), if a 
                                        building code or equipment 
                                        standard requires that 
                                        equipment or materials 
                                        installed as part of the offset 
                                        project meet certain minimum 
                                        energy performance 
                                        requirements, the annual pre-
                                        installation baseline energy 
                                        usage for the applicable 
                                        application shall be determined 
                                        based on the assumption that 
                                        the equipment or materials are 
                                        installed in accordance with 
                                        those requirements.
                                            ``(bb) Replacement of 
                                        combustion equipment.--For an 
                                        offset project under which 
                                        existing combustion equipment 
                                        is replaced, the minimum energy 
                                        performance required by a 
                                        building code or equipment 
                                        standard shall be considered to 
                                        be the minimum energy 
                                        performance standard that 
                                        applies to new equipment that 
                                        uses the same fuel type as the 
                                        equipment being replaced.
                    ``(B) Annual baseline emissions.--
                            ``(i) In general.--The annual baseline 
                        emissions of an offset project that receives 
                        allowances under this subsection shall be 
                        calculated in accordance with the following 
                        formula: Emissions (pounds of carbon dioxide) = 
                        S BEU<INF>i</INF>  x  EF<INF>i</INF>  x  
                        OF<INF>i</INF>.
                            ``(ii) Description.--In the formula 
                        contained in clause (i)--
                                    ``(I)(aa) the figure above the 
                                sigma shall be `n'; and
                                    ``(bb) the figure below the sigma 
                                shall be `i = 1';
                                    ``(II) `BEU<INF>i</INF>' represents 
                                the annual baseline energy usage for 
                                fuel type i (measured in MMBtus), as 
                                determined in accordance with paragraph 
                                (6);
                                    ``(III) `EF<INF>i</INF>' represents 
                                the emissions factor (measured in 
                                pounds of carbon dioxide per MMBtu) for 
                                fuel type i, as determined in 
                                accordance with the table contained in 
                                subparagraph (A)(i)(II); and
                                    ``(IV) `OF<INF>i</INF>' represents 
                                the oxidation factor for fuel type i, 
                                as determined in accordance with the 
                                table contained in subparagraph 
                                (A)(i)(II).
            ``(5) Calculating emissions reductions.--
                    ``(A) In general.--The emissions reductions of an 
                offset project that receives allowances under this 
                subsection shall be determined, based on the annual 
                energy savings, by fuel type, for each energy 
                conservation measure carried out under the offset 
                project, in accordance with this paragraph.
                    ``(B) Annual energy savings.--
                            ``(i) In general.--The annual energy 
                        savings of an offset project that receives 
                        allowances under this subsection shall be 
                        determined in accordance with the following 
                        formula: Energy savings (MMBtu) = 
                        (BEU<INF>AECM</INF>  x  A) - 
                        (PIEU<INF>ECM</INF>  x  A).
                            ``(ii) Description.--In the formula 
                        contained in clause (i)--
                                    ``(I) `BEU<INF>AECM</INF>' 
                                represents the annual pre-installation 
                                baseline energy use (measured in 
                                MMBtus), by fuel type, of an 
                                application subject to an energy 
                                conservation measure under the offset 
                                project, as determined subject to 
                                clause (iii);
                                    ``(II) `PIEU<INF>ECM</INF>' 
                                represents the annual post-installation 
                                energy use (measured in MMBtus), by 
                                fuel type, attributable to the energy 
                                conservation measure, as verified in 
                                accordance with ASHRAE Guideline 14-
                                2002, entitled `Measurement of Energy 
                                and Demand Savings' (or a successor 
                                guideline); and
                                    ``(III) `A' represents adjustments 
                                required to account for differing 
                                conditions during the pre-installation 
                                and post-installation periods, such as 
                                weather, building occupancy, and 
                                changes in building use or function, as 
                                adjusted in accordance with--
                                            ``(aa) for commercial 
                                        buildings, ASHRAE Guideline 14-
                                        2002, entitled `Measurement of 
                                        Energy and Demand Savings', and 
                                        section 11 and appendix G of 
                                        ANSI/ASHRAE/IESNA Standard 
                                        90.1-2004 (or successor 
                                        specifications); and
                                            ``(bb) for residential 
                                        buildings, RESNET National Home 
                                        Energy Rating Technical 
                                        Guidelines, 2006 (Chapter 3 and 
                                        Appendix A of 2006 Mortgage 
                                        Industry National Home Energy 
                                        Rating System Standards) (or 
                                        successor guidelines).
                            ``(iii) Pre-installation baseline energy 
                        use determinations for new buildings.--The pre-
                        installation baseline energy use of any new 
                        building in which an energy conservation 
                        measure will be carried out under an offset 
                        project shall be determined based on a 
                        reference building that is equivalent in basic 
                        configuration, orientation, and location to the 
                        new building, in accordance with ASHRAE 
                        Guideline 14-2002, entitled `Measurement of 
                        Energy and Demand Savings' and section 11 and 
                        appendix G of ANSI/ASHRAE/IESNA Standard 90.1-
                        2004 (or successor specifications).
                    ``(C) Annual emissions reductions.--
                            ``(i) In general.--The annual emissions 
                        reductions of an offset project that receives 
                        allowances under this subsection shall be 
                        determined in accordance with the following 
                        formula: Emissions reduction (pounds of carbon 
                        dioxide) = S ES<INF>i</INF>  x  EF<INF>i</INF> 
                        x  OF<INF>i</INF>.
                            ``(ii) Description.--In the formula 
                        contained in clause (i)--
                                    ``(I)(aa) the figure above the 
                                sigma shall be `n'; and
                                    ``(bb) the figure below the sigma 
                                shall be `i = 1';
                                    ``(II) `ES<INF>i</INF>' represents 
                                the energy savings for fuel type i 
                                (measured in MMBtus), as determined in 
                                accordance with paragraph (6);
                                    ``(III) `EF<INF>i</INF>' represents 
                                the emissions factor (measured in 
                                pounds of carbon dioxide per MMBtu) for 
                                fuel type i, as determined in 
                                accordance with the table contained in 
                                subparagraph (A)(i)(II); and
                                    ``(IV) `OF<INF>i</INF>' represents 
                                the oxidation factor for fuel type i, 
                                as determined in accordance with the 
                                table contained in subparagraph 
                                (A)(i)(II).
            ``(6) Monitoring and verification.--
                    ``(A) In general.--Not less frequently than once 
                each year, the sponsor of each offset project that 
                receives an allowance under this subsection shall 
                submit to the Administrator a monitoring and 
                verification report.
                    ``(B) Certification.--Each report under 
                subparagraph (A) shall be certified.
                    ``(C) General energy requirements.--Monitoring and 
                verification of energy usage under this paragraph shall 
                be conducted in accordance with the following protocols 
                and procedures, as applicable:
                            ``(i) Commercial buildings.--
                                    ``(I) Existing buildings.--For 
                                commercial buildings in existence on 
                                the date on which the applicable offset 
                                project enters operation, baseline 
                                energy usage shall be determined in 
                                accordance with--
                                            ``(aa) the detailed 
                                        specifications in ASHRAE 
                                        Guideline 14-2002, entitled 
                                        `Measurement of Energy and 
                                        Demand Savings', as applicable 
                                        (or successor specifications); 
                                        and
                                            ``(bb)(AA) volume I of the 
                                        International Performance 
                                        Measurement and Verification 
                                        Protocol, entitled `Concepts 
                                        and Options for Determining 
                                        Energy and Water Savings', 
                                        specifically the documents 
                                        entitled `Option B. Retrofit 
                                        Isolation' and `Option D. 
                                        Calibrated Simulation' (or 
                                        successor specifications); or
                                            ``(BB) if a building 
                                        project carried out under the 
                                        offset project involves only 
                                        energy conservation measures 
                                        implemented as part of a carbon 
                                        dioxide emissions offset 
                                        project, the document of the 
                                        volume referred to in subitem 
                                        (AA) entitled `Option C. Whole 
                                        Facility' (or successor 
                                        specifications).
                                    ``(II) New buildings.--For new 
                                commercial buildings constructed under 
                                the applicable offset project, baseline 
                                energy usage shall be determined in 
                                accordance with--
                                            ``(aa) the detailed 
                                        specifications in ASHRAE 
                                        Guideline 14-2002, entitled 
                                        `Measurement of Energy and 
                                        Demand Savings', as applicable 
                                        (or successor specifications); 
                                        and
                                            ``(bb) volume III of the 
                                        International Performance 
                                        Measurement and Verification 
                                        Protocol, entitled `Concepts 
                                        and Options for Determining 
                                        Energy Savings in New 
                                        Construction', specifically the 
                                        document entitled `Option D. 
                                        Calibrated Simulation' (or 
                                        successor specifications).
                            ``(ii) Residential buildings.--For any 
                        residential building relating to the applicable 
                        offset project, baseline energy usage shall be 
                        determined in accordance with the RESNET 
                        National Home Energy Rating Technical 
                        Guidelines, 2006 (Chapter 3 and Appendix A of 
                        2006 Mortgage Industry National Home Energy 
                        Rating System Standards) (or successor 
                        guidelines).
                    ``(D) Isolation of energy conservation measures.--
                            ``(i) In general.--For purposes of 
                        calculating baseline energy usage and energy 
                        savings under this subsection, the sponsor of 
                        the offset project shall isolate the impact of 
                        each eligible energy conservation measure, to 
                        the maximum extent practicable, through direct 
                        metering or, subject to subparagraph (E), 
                        energy simulation modeling.
                            ``(ii) Projects with multiple measures.--
                                    ``(I) In general.--For offset 
                                projects under which multiple energy 
                                conservation measures are carried out, 
                                and for which individual energy 
                                conservation measures could affect the 
                                performance of other energy 
                                conservation measures, the total energy 
                                savings due to individual energy 
                                conservation measures shall be adjusted 
                                to account for the interaction of the 
                                energy conservation measures in 
                                accordance with this clause.
                                    ``(II) Commercial buildings.--For 
                                commercial buildings, the adjustment 
                                under subclause (I) shall be in 
                                accordance with ASHRAE Guideline 14-
                                2002, entitled `Measurement of Energy 
                                and Demand Savings', and ANSI/ASHRAE/
                                IESNA Standard 90.1-2004, entitled 
                                `Energy Standard for Buildings Except 
                                Low-Rise Residential Buildings' (or 
                                successor specifications).
                                    ``(III) Residential buildings.--For 
                                residential buildings, the adjustment 
                                under subclause (I) shall be in 
                                accordance with RESNET National Home 
                                Energy Rating Technical Guidelines, 
                                2006 (Chapter 3 and Appendix A of 2006 
                                Mortgage Industry National Home Energy 
                                Rating System Standards) (or successor 
                                guidelines).
                    ``(E) Simulation modeling.--
                            ``(i) In general.--Any reduction in energy 
                        usage due to an energy conservation measure 
                        under an offset project shall be calculated 
                        based only on actual energy usage data.
                            ``(ii) Limitation.--Energy simulation 
                        modeling--
                                    ``(I) shall only be used to 
                                determine the relative percentage 
                                contribution to total fuel usage, for 
                                each fuel type, of an application 
                                targeted by an energy conservation 
                                measure under an offset project; and
                                    ``(II) shall be carried out under 
                                subclause (I) in accordance with--
                                            ``(aa) for commercial 
                                        buildings in existence on the 
                                        date on which the applicable 
                                        offset project is commenced, 
                                        ASHRAE Guideline 14-2002, 
                                        entitled `Measurement of Energy 
                                        and Demand Savings' and section 
                                        11 and appendix G of ANSI/
                                        ASHRAE/IESNA Standard 90.1-2004 
                                        (or successor specifications); 
                                        and
                                            ``(bb) for residential 
                                        buildings, RESNET National Home 
                                        Energy Rating Technical 
                                        Guidelines, 2006 (Chapter 3 and 
                                        Appendix A of 2006 Mortgage 
                                        Industry National Home Energy 
                                        Rating System Standards) (or 
                                        successor guidelines).
                    ``(F) Sampling for residential buildings.--
                            ``(i) In general.--The sponsor of any 
                        offset project that carries out similar energy 
                        conservation measures in multiple residential 
                        buildings may use representative sampling of 
                        the residential buildings to determine the 
                        aggregate baseline energy usage and energy 
                        savings of the offset projects.
                            ``(ii) Requirements.--Representative 
                        sampling carried out under clause (i) shall be 
                        in accordance with sound statistical methods, 
                        such that there is 95 percent confidence that 
                        the reported value is within 10 percent of the 
                        true mean.
    ``(e) Avoided Methane Emissions From Agricultural Manure Management 
Operations.--
            ``(1) In general.--An offset project that captures and 
        destroys methane from animal manure and organic food waste 
        using an anaerobic digester in accordance with this subsection 
        shall be eligible to receive allowances under this title.
            ``(2) Requirements.--
                    ``(A) In general.--To be eligible to receive 
                allowances under this subsection, an offset project 
                described in paragraph (1) shall--
                            ``(i) involve the destruction of the 
                        portion of methane generated by an anaerobic 
                        digester that would have been generated in the 
                        absence of the offset project through the 
                        uncontrolled anaerobic storage of manure or 
                        organic food waste;
                            ``(ii) use only manure-based anaerobic 
                        digester systems, using livestock manure to 
                        provide greater than 50 percent of annual 
                        digester feedstock; and
                            ``(iii) use organic food waste for 
                        anaerobic digesters only in a quantity that 
                        would have been stored in anaerobic conditions 
                        in the absence of the offset project.
                    ``(B) Determination of market penetration rate.--
                            ``(i) In general.--The market penetration 
                        rate of a State shall be determined using the 
                        most recent market data available on the date 
                        of submission of an application, in accordance 
                        with the following formula: MP (%) = 
                        MG<INF>AD</INF> / MG<INF>STATE</INF>.
                            ``(ii) Description.--In the formula 
                        contained in clause (i)--
                                    ``(I) `MG<INF>AD</INF>' represents 
                                the average annual manure production 
                                for the number of dairy cows and swine 
                                serving all anaerobic digester projects 
                                in the applicable State on the date of 
                                submission of an application; and
                                    ``(II) `MG<INF>STATE</INF>' 
                                represents the average annual manure 
                                production of all dairy cows and swine 
                                in the State on the date of submission 
                                of the application).
            ``(3) Emissions baseline.--
                    ``(A) In general.--The emissions baseline of an 
                offset project that receives allowances under this 
                subsection shall represent the potential emissions of 
                the methane that, in the absence of the offset project, 
                would have been--
                            ``(i) produced in a baseline scenario under 
                        uncontrolled anaerobic storage conditions; and
                            ``(ii) released directly into the 
                        atmosphere.
                    ``(B) Calculation.--
                            ``(i) In general.--The baseline methane 
                        emissions of an offset project under this 
                        subsection shall be calculated in accordance 
                        with the following formula: CO<INF>2</INF>e 
                        (tons) = (V<INF>m</INF>  x  M)/2000  x  GWP.
                            ``(ii) Description.--In the formula 
                        contained in clause (i)--
                                    ``(I) `CO<INF>2</INF>e' represents 
                                the potential carbon dioxide-equivalent 
                                emissions due to calculated methane 
                                production under site-specific 
                                anaerobic storage and weather 
                                conditions;
                                    ``(II) `V<INF>m</INF>' (expressed 
                                in cubic feet) represents the volume of 
                                methane produced each month from 
                                degradation of volatile solids in a 
                                baseline uncontrolled anaerobic storage 
                                scenario (as calculated under clauses 
                                (iii) and (iv)) under site-specific 
                                storage and weather conditions for the 
                                facility at which the manure or organic 
                                food waste is generated;
                                    ``(III) `M' represents the mass of 
                                methane per cubic foot (with a default 
                                value of 0.04246 pounds per cubic foot 
                                at 1 atmosphere and 20 C); and
                                    ``(IV) `GWP' represents the global 
                                warming potential of methane (with a 
                                default value of 23).
                            ``(iii) Volatile solids.--
                                    ``(I) In general.--For purposes of 
                                clause (ii)(II), the estimated quantity 
                                of volatile solids degraded each month 
                                under the baseline uncontrolled 
                                anaerobic storage scenario (measured in 
                                kilograms) shall be calculated in 
                                accordance with the following formula: 
                                VS<INF>deg</INF> = VS<INF>avail</INF> 
                                x  f.
                                    ``(II) Volatile solids available 
                                for degradation.--
                                            ``(aa) In general.--In the 
                                        formula contained in subclause 
                                        (I), `VS<INF>avail</INF>' 
                                        represents the quantity of 
                                        volatile solids available for 
                                        degradation in manure or 
                                        organic food waste storage each 
                                        month, determined in accordance 
                                        with the following formula: 
                                        VS<INF>avail</INF> = 
                                        VS<INF>p</INF> + \1/2\ 
                                        VS<INF>in</INF> - 
                                        VS<INF>out</INF>.
                                            ``(bb) Description.--In the 
                                        formula contained in item 
                                        (aa)--

                                                    ``(AA) 
                                                `VS<INF>p</INF>' 
                                                represents the quantity 
                                                of volatile solids 
                                                (expressed in 
                                                kilograms) present in 
                                                manure or organic food 
                                                waste storage at the 
                                                beginning of the 
                                                applicable month 
                                                (including any manure 
                                                or waste remaining from 
                                                a preceding month);

                                                    ``(BB) 
                                                `VS<INF>in</INF>' 
                                                represents the quantity 
                                                of volatile solids 
                                                (expressed in 
                                                kilograms) added to 
                                                manure or organic food 
                                                waste storage during 
                                                the course of the 
                                                applicable month, which 
                                                is halved to represent 
                                                the average mass of 
                                                volatile solids 
                                                available for 
                                                degradation for the 
                                                month; and

                                                    ``(CC) 
                                                `VS<INF>out</INF>' 
                                                represents the quantity 
                                                (expressed in 
                                                kilograms) of volatile 
                                                solids removed from the 
                                                manure or organic food 
                                                waste storage for land 
                                                application or export, 
                                                which may be assumed 
                                                based on standard farm 
                                                practice.

                                    ``(III) Van't hoff-arrhenius 
                                factor.--
                                            ``(aa) In general.--In the 
                                        formula contained in subclause 
                                        (I), `f' represents the van't 
                                        Hoff-Arrhenius factor, which 
                                        measures the conversion 
                                        efficiency of volatile solids 
                                        to methane, for a given month, 
                                        determined using a base 
                                        temperature of 30 C in 
                                        accordance with the following 
                                        formula: f = 
                                        exp[E(T<INF>2</INF> - 
                                        T<INF>1</INF>)]/[(GC  x  
                                        T<INF>1</INF>  x  
                                        T<INF>2</INF>)].
                                            ``(bb) Description.--In the 
                                        formula contained in item 
                                        (aa)--

                                                    ``(AA) `E' 
                                                represents the 
                                                activation energy 
                                                constant (with a 
                                                default value of 15,175 
                                                cal/mol);

                                                    ``(BB) 
                                                `T<INF>2</INF>' 
                                                represents the average 
                                                monthly ambient 
                                                temperature for the 
                                                facility at which 
                                                manure or organic food 
                                                waste is generated (as 
                                                converted from Celsius 
                                                to Kelvin), as 
                                                determined by the 
                                                nearest National 
                                                Weather Service-
                                                certified weather 
                                                station (if reported 
                                                temperature C > 5 C; 
                                                if reported temperature 
                                                C < 5 C, then F = 
                                                0.104);

                                                    ``(CC) 
                                                `T<INF>1</INF>' equals 
                                                303.16; and

                                                    ``(DD) `GC' 
                                                represents the ideal 
                                                gas constant (with a 
                                                default value of 1.987 
                                                cal/K mol).

                                    ``(IV) General volatile solids 
                                calculations.--
                                            ``(aa) In general.--For 
                                        purposes of this clause, a 
                                        quantity of volatile solids may 
                                        be determined in accordance 
                                        with the following formula: VS 
                                        = M<INF>m</INF>  x  
                                        TS<INF>%</INF>  x  
                                        VS<INF>%</INF>.
                                            ``(bb) Description.--In the 
                                        formula contained in item 
                                        (aa)--

                                                    ``(AA) 
                                                `M<INF>m</INF>' 
                                                represents the mass 
                                                (expressed in 
                                                kilograms) of manure or 
                                                organic food waste 
                                                produced per month;

                                                    ``(BB) 
                                                `TS<INF>%</INF>' 
                                                represents the 
                                                concentration 
                                                (expressed as a 
                                                percentage) of total 
                                                solids in manure or 
                                                organic food waste, as 
                                                determined in 
                                                accordance with the 
                                                testing method of the 
                                                Environmental 
                                                Protection Agency 
                                                numbered 160.3 (as 
                                                contained in the 
                                                document of the 
                                                Environmental 
                                                Protection Agency 
                                                entitled `Methods for 
                                                the Chemical Analysis 
                                                of Water and Wastes' 
                                                (EPA/600/4-79/020)) (or 
                                                a successor document); 
                                                and

                                                    ``(CC) 
                                                `VS<INF>%</INF>' 
                                                represents the 
                                                concentration 
                                                (expressed as a 
                                                percentage) of volatile 
                                                solids in total solids, 
                                                as determined in 
                                                accordance with the 
                                                testing method of the 
                                                Environmental 
                                                Protection Agency 
                                                numbered 160.4 (as 
                                                contained in the 
                                                document of the 
                                                Environmental 
                                                Protection Agency 
                                                entitled `Methods for 
                                                the Chemical Analysis 
                                                of Water and Wastes' 
                                                (EPA/600/4-79/020)) (or 
                                                a successor document).

                            ``(iv) Volume of methane produced.--
                                    ``(I) In general.--For purposes of 
                                clause (ii)(II), the volume of methane 
                                produced each month from degradation of 
                                volatile solids in a baseline 
                                uncontrolled anaerobic storage scenario 
                                (measured in cubic feet) shall be 
                                calculated in accordance with the 
                                following formula: V<INF>m</INF> = 
                                (VS<INF>deg</INF>  x  B<INF>o</INF>) 
                                x  35.3147.
                                    ``(II) Description.--In the formula 
                                contained in subclause (I)--
                                            ``(aa) `VS<INF>deg</INF>' 
                                        represents the quantity 
                                        (measured in kilograms) of 
                                        volatile solids degraded, as 
                                        determined in accordance with 
                                        clause (iii); and
                                            ``(bb) `B<INF>o</INF>' 
                                        represents the quantity of 
                                        manure or organic food waste 
                                        type-specific maximum methane 
                                        generation constant (expressed 
                                        as cubic meters of methane per 
                                        kilogram of volatile solids 
                                        degraded), as determined in 
                                        accordance with subclause 
                                        (III).
                                    ``(III) Methane generation 
                                constant.--For purposes of subclause 
                                (II)(bb), the quantity of manure or 
                                organic food waste type-specific 
                                maximum methane generation constant 
                                shall be--
                                            ``(aa) for dairy cow 
                                        manure, 0.24 cubic meters of 
                                        methane per kilogram of 
                                        volatile solids degraded; and
                                            ``(bb) for any other type 
                                        of manure--

                                                    ``(AA) the constant 
                                                specified in the 
                                                document of the 
                                                Environmental 
                                                Protection Agency 
                                                entitled `Inventory of 
                                                United States 
                                                Greenhouse Gas 
                                                Emissions and Sinks: 
                                                1990-2004, Annex 3.10, 
                                                Table 3-89' and dated 
                                                April 2006 (or a 
                                                successor document); or

                                                    ``(BB) such other 
                                                methane generation 
                                                constant as the sponsor 
                                                of the applicable 
                                                offset project may 
                                                specify, if the sponsor 
                                                provides to the 
                                                Administrator 
                                                appropriate 
                                                justification and 
                                                documentation for the 
                                                constant.

            ``(4) Emissions reductions.--
                    ``(A) In general.--The emissions reductions of an 
                offset project that receives allowances under this 
                subsection shall be determined based on the potential 
                emissions (measured in tons of carbon dioxide 
                equivalent) of methane that would have been produced, 
                and released directly into the atmosphere, in the 
                absence of the offset project under a baseline scenario 
                that represents uncontrolled anaerobic storage 
                conditions, as determined in accordance with paragraph 
                (3), taking into account fugitive methane emissions 
                that may be released into the atmosphere through leaks 
                in the anaerobic digester equipment.
                    ``(B) Limitation.--The emissions reductions of an 
                offset project shall not exceed the potential emissions 
                of the anaerobic digester of the offset project, as 
                determined based on the annual volume of methane 
                produced by the anaerobic digester and monitored in 
                accordance with paragraph (5).
                    ``(C) Regional-type digester offset projects.--
                            ``(i) In general.--If an offset project is 
                        a regional-type digester offset project, as 
                        determined by the Administrator, carbon dioxide 
                        emissions due to transportation of manure and 
                        organic food waste from the site at which the 
                        manure and organic food waste was generated to 
                        the anaerobic digester shall be subtracted from 
                        the emissions reduction value determined under 
                        paragraph (3) for the offset project.
                            ``(ii) Determination of carbon dioxide 
                        emissions.--For purposes of clause (i), carbon 
                        dioxide emissions due to transportation of 
                        manure and organic food waste from the site at 
                        which the manure and organic food waste was 
                        generated to the anaerobic digester shall be 
                        determined in accordance with 1 of the 
                        following methods:
                                    ``(I) Documentation of all 
                                quantities of fuel used to transport 
                                from off-site all shipments of manure 
                                and organic food waste to the anaerobic 
                                digester of the offset project during 
                                the applicable year (including a log of 
                                transport miles for each shipment), 
                                from which carbon dioxide emissions 
                                shall be determined through the 
                                application of the following emissions 
                                factors (based on the type of fuel 
                                used):
                                            ``(aa) For diesel fuel, 
                                        22.912 pounds of carbon dioxide 
                                        per gallon.
                                            ``(bb) For gasoline, 19.878 
                                        pounds of carbon dioxide per 
                                        gallon.
                                            ``(cc) For any other fuel, 
                                        such emissions factor as the 
                                        Administrator determines to be 
                                        appropriate.
                                    ``(II) Documentation of the total 
                                quantity (expressed in tons) of manure 
                                and organic food waste transported from 
                                off-site for input into the anaerobic 
                                digester of the offset project during 
                                the applicable year (including a log of 
                                transport miles for each shipment), as 
                                monitored under paragraph (5), from 
                                which carbon dioxide emissions shall be 
                                determined through the application of 
                                the following ton-mile transport 
                                emission factors (based on the type of 
                                fuel used):
                                            ``(aa) For diesel fuel, 
                                        0.131 pounds of carbon dioxide 
                                        per ton-mile.
                                            ``(bb) For gasoline, 0.133 
                                        pounds of carbon dioxide per 
                                        ton-mile.
                                            ``(cc) For any other fuel, 
                                        such emissions factor as the 
                                        Administrator determines to be 
                                        appropriate.
            ``(5) Monitoring and verification.--
                    ``(A) In general.--The sponsor of each offset 
                project that receives allowances under this subsection 
                shall--
                            ``(i) ensure that the offset project uses a 
                        system that provides metering of biogas 
                        volumetric flow rate and determination of 
                        methane concentration; and
                            ``(ii) submit to the Administrator an 
                        annual report, including a description of the 
                        monthly biogas volumetric flow rate and methane 
                        concentration determinations for the offset 
                        project.
                    ``(B) Regional-type digester offset projects.--
                            ``(i) In general.--The sponsor of an offset 
                        project that is a regional-type digester offset 
                        project, as determined by the Administrator, 
                        shall ensure monthly sampling of the manure and 
                        organic food waste from each distinct source 
                        supplying the anaerobic digester to determine 
                        the quantity of volatile solids present in the 
                        manure and waste.
                            ``(ii) Supporting material.--In the annual 
                        report relating to the offset project submitted 
                        under subparagraph (A)(ii), the sponsor shall 
                        provide supporting material and receipts 
                        tracking the monthly receipt from each supplier 
                        to the offset project of quantities of manure 
                        and organic food waste (measured in kilograms) 
                        for the anaerobic digester.
                            ``(iii) Emissions reduction calculation 
                        requirement.--The emissions reduction of an 
                        offset project described in clause (i) shall be 
                        calculated according to, and apportioned among 
                        sources based on, as determined in accordance 
                        with paragraphs (3) and (4)--
                                    ``(I) the mass (measured in 
                                kilograms) of manure and organic food 
                                waste digested as a result of the 
                                offset project; and
                                    ``(II) the percentage of volatile 
                                solids present before digestion.
                    ``(C) Additional monthly samples.--The sponsor of 
                an offset project that includes the digestion of 
                organic food waste shall ensure monthly sampling of the 
                organic food waste to determine in accordance with 
                paragraphs (3) and (4), and apportion accordingly, the 
                quantity of volatile solids present in the waste before 
                digestion.
                    ``(D) Other monitoring requirements.--In addition 
                to the requirements of subparagraphs (A) through (C), 
                an offset project shall meet the applicable 
                requirements contained in the following table:

                                         ``Input Monitoring Requirements
----------------------------------------------------------------------------------------------------------------
           Input parameter                 Measurement unit      Frequency of sampling       Sampling method
----------------------------------------------------------------------------------------------------------------
Influent flow into digester..........  Kilograms per month      Monthly total into       Recorded weight;
                                        (wet weight).            digester                 digester influent pump
                                                                                          flow; livestock
                                                                                          population and
                                                                                          application of
                                                                                          standard
Influent total solids concentration..  Percent of sample......  Monthly, depending on    EPA Method Number
                                                                 recorded variations      160.3, Methods for the
                                                                                          Chemical Analysis of
                                                                                          Water and Wastes (EPA/
                                                                                          600/4-79/020)
Influent volatile solids               Percent of total solids  Monthly, depending on    EPA Method Number
 concentration.                                                  recorded variations      160.4, Methods for the
                                                                                          Chemical Analysis of
                                                                                          Water and Wastes (EPA/
                                                                                          600/4-79/020)
Average monthly ambient temperature..  Temperature (Celsius)..  Monthly (based on farm   Closest National
                                                                 averages)                Weather Service-
                                                                                          certified weather
                                                                                          station
----------------------------------------------------------------------------------------------------------------

    ``(f) Eligible Biomass.--
            ``(1) In general.--An offset project that co-fires eligible 
        biomass to reduce emissions of carbon dioxide and that meets 
        the requirements of this subsection shall be eligible to 
        receive allowances under this title.
            ``(2) Application.--To be eligible to receive an allowance 
        under this subsection, the owner or operator of an offset 
        project described in paragraph (1) shall submit to the 
        Administrator an application at such time, in such manner, and 
        containing such information as the Administrator may require.
            ``(3) Emissions calculations.--
                    ``(A) As-fired carbon dioxide emissions factor.--
                            ``(i) In general.--The as-fired carbon 
                        dioxide emissions factor of an offset project 
                        under this subsection may be determined--
                                    ``(I) as measured and recorded by a 
                                continuous emissions monitor of the 
                                offset project for each period during 
                                which only eligible biomass was fired 
                                by the offset project; or
                                    ``(II) in accordance with clause 
                                (ii) or (iii), as applicable.
                            ``(ii) Solid fuel.--
                                    ``(I) In general.--The as-fired 
                                carbon dioxide emissions factor of an 
                                offset project under this subsection 
                                that uses solid fuel shall be 
                                determined in accordance with the 
                                following formula: CO<INF>2</INF> lbs/
                                MMBtu = ((C  x  F<INF>IN</INF>)/HI) 
                                (44/12).
                                    ``(II) Abbreviations.--
                                            ``(aa) In general.--In the 
                                        formula contained in subclause 
                                        (I)--

                                                    ``(AA) `C' 
                                                represents the carbon 
                                                content of biomass 
                                                (expressed as a 
                                                percentage by dry 
                                                weight) for a distinct 
                                                fuel type;

                                                    ``(BB) 
                                                `F<INF>IN</INF>' 
                                                represents the total 
                                                biomass fuel input 
                                                (expressed in pounds) 
                                                for a distinct fuel 
                                                type; and

                                                    ``(CC) `HI' 
                                                represents the heat 
                                                input, as-fired 
                                                (expressed in MMBtus), 
                                                as determined in 
                                                accordance with the 
                                                following formula: HI = 
                                                S (HHV<INF>DRY</INF> 
                                                (1-MCW<INF>AS-FIRED-i</INF>
                                                ))  x  
                                                F<INF>IN-i</INF>.

                                            ``(bb) Description.--In the 
                                        formula contained in item 
                                        (aa)(CC)--

                                                    ``(AA) the figure 
                                                above the sigma shall 
                                                be `n';

                                                    ``(BB) the figure 
                                                below the sigma shall 
                                                be `i = 1';

                                                    ``(CC) 
                                                `HHV<INF>DRY</INF>' 
                                                represents the higher 
                                                heating value 
                                                (expressed in Btu/lb) 
                                                on a dry basis for a 
                                                distinct fuel type 
                                                fired;

                                                    ``(DD) 
                                                `MCW<INF>AS-FIRED-i</INF>
                                                ' represents the 
                                                moisture content on a 
                                                wet basis (expressed as 
                                                a percentage) for each 
                                                shipment i fired; and

                                                    ``(EE) 
                                                `F<INF>IN-i</INF>' 
                                                represents the biomass 
                                                fuel input (expressed 
                                                in pounds) for each 
                                                shipment i fired.

                            ``(iii) Gaseous fuel.--
                                    ``(I) In general.--The as-fired 
                                carbon dioxide emissions factor of an 
                                offset project under this subsection 
                                that uses gaseous fuel shall be 
                                determined in accordance with the 
                                following formula: CO<INF>2</INF> lbs/
                                MMBtu = (C  x  (F<INF>IN</INF>  x  D))/
                                HI) (44/12).
                                    ``(II) Abbreviations.--
                                            ``(aa) In general.--In the 
                                        formula contained in subclause 
                                        (I)--

                                                    ``(AA) `C' 
                                                represents the carbon 
                                                content of biomass 
                                                (expressed as a 
                                                percentage by weight) 
                                                for a distinct fuel 
                                                type;

                                                    ``(BB) 
                                                `F<INF>IN</INF>' 
                                                represents the total 
                                                biomass fuel input 
                                                (expressed in pounds) 
                                                for a distinct fuel 
                                                type;

                                                    ``(CC) `D' 
                                                represents the density 
                                                of biogas (expressed in 
                                                pounds per standard 
                                                cubic feet) for a 
                                                distinct fuel type; and

                                                    ``(DD) `HI' 
                                                represents the heat 
                                                input, as-fired 
                                                (expressed in MMBtus), 
                                                as determined in 
                                                accordance with the 
                                                following formula: HI = 
                                                HHV  x  F<INF>IN</INF>.

                                            ``(bb) Description.--In the 
                                        formula contained in item 
                                        (aa)(DD)--

                                                    ``(AA) `HHV' 
                                                represents the higher 
                                                heating value 
                                                (expressed in Btus per 
                                                standard cubic feet) 
                                                for a distinct fuel 
                                                type; and

                                                    ``(BB) 
                                                `F<INF>IN</INF>' 
                                                represents the biogas 
                                                fuel input (expressed 
                                                in standard cubic 
                                                feet).

                    ``(B) Carbon dioxide emissions due to firing of 
                eligible biomass.--
                            ``(i) In general.--The carbon dioxide 
                        emissions due to firing of eligible biomass of 
                        an offset project under this subsection shall 
                        be determined in accordance with the following 
                        formula: CO<INF>2</INF> tons = S 
                        (B<INF>HI-i</INF>  x  B<INF>EF-i</INF>  x  
                        B<INF>OF-i</INF>)/2000.
                            ``(ii) Abbreviations.--In the formula 
                        contained in clause (i)--
                                    ``(I)(aa) the figure above the 
                                sigma shall be `n'; and
                                    ``(bb) the figure below the sigma 
                                shall be `i = 1';
                                    ``(II) `B<INF>HI-i</INF>' 
                                represents the eligible biomass heat 
                                input, as-fired (expressed in MMBtus), 
                                for the reporting quarter for each 
                                distinct type i of eligible biomass 
                                fired;
                                    ``(III) `B<INF>EF-i</INF>' 
                                represents the eligible biomass 
                                emissions factor for the reporting 
                                quarter (expressed in pounds of carbon 
                                dioxide per MMBtu) for each distinct 
                                type i of eligible biomass fired; and
                                    ``(IV) `B<INF>OF-i</INF>' 
                                represents the eligible biomass 
                                oxidation factor for each distinct type 
                                i of eligible biomass fired, derived 
                                for solid fuel based on the ash content 
                                of the eligible biomass fired and the 
                                carbon content of that ash, as 
                                determined pursuant to paragraph (4)(A) 
                                (with a default value for gaseous 
                                biomass fuel of 0.995).
                    ``(C) Applicable standards.--Each fuel sampling 
                method and technology used to make a calculation under 
                this paragraph shall be in accordance with the 
                applicable standards contained in the New York State 
                Renewable Portfolio Standard Biomass Guidebook dated 
                May 2006 (or successor standards).
            ``(4) Monitoring and verification.--
                    ``(A) In general.--Not less frequently than once 
                each quarter of each calendar year during which an 
                offset project receives an allowance under this title, 
                the owner or operator of the offset project shall 
                submit to the Administrator a report describing--
                            ``(i) a chemical analysis (including carbon 
                        content and heating value) of eligible biomass 
                        fired by the offset project;
                            ``(ii) the moisture content of eligible 
                        biomass for each shipment received for firing 
                        by the offset project;
                            ``(iii) the total eligible biomass fuel 
                        input (expressed in units of mass or volume, as 
                        appropriate) to the offset project;
                            ``(iv) the total eligible biomass heat 
                        input, on an as-fired basis (expressed in 
                        MMBtus), to the offset project;
                            ``(v) the heat input rate (expressed in 
                        MMBtus per hour) of eligible biomass to the 
                        offset project;
                            ``(vi) the fuel feed rate of eligible 
                        biomass to the offset project (expressed in 
                        units of mass or volume per hour, as 
                        appropriate);
                            ``(vii) the total number of operating hours 
                        during which eligible biomass was fired by the 
                        offset project;
                            ``(viii) the number of tons of carbon 
                        dioxide emitted from the offset project due to 
                        firing of eligible biomass;
                            ``(ix) the fuel sampling frequency, 
                        monitoring technology, and methodology used by 
                        the offset project, including supporting 
                        documentation;
                            ``(x) the additional information required 
                        under subparagraph (B), if any; and
                            ``(xi) the carbon dioxide emissions factor 
                        of the offset project, calculated in accordance 
                        with paragraph (3).
                    ``(B) Additional data requirements.--
                            ``(i) Independent system operator data.--
                        The owner or operator of an offset project 
                        located in a State that requires the use of 
                        information submitted to an independent system 
                        operator to establish the megawatt-hours of the 
                        offset project shall submit to the 
                        Administrator, together with the report under 
                        subparagraph (A)--
                                    ``(I) the megawatt-hour value 
                                submitted to the independent system 
                                operator; and
                                    ``(II) a statement certifying that 
                                the megawatt-hour value reflects the 
                                total actual electrical output for all 
                                offset projects at the facility used by 
                                the independent system operator to 
                                determine the settlement resources of 
                                energy market participants.
                            ``(ii) Gross output data.--The owner or 
                        operator of an offset project that submits to 
                        the Administrator information described in 
                        clause (i), and that is located in a State that 
                        requires the use of gross output data with 
                        respect to the offset project, shall submit to 
                        the Administrator, together with the 
                        information under clause (i), an electronic 
                        data report describing the gross output 
                        (expressed in megawatts) of the offset project, 
                        as calculated by adding, for each hour of the 
                        applicable quarter during which the offset 
                        project was in operation, the product obtained 
                        by multiplying--
                                    ``(I) the gross output (expressed 
                                in megawatts) of the offset project for 
                                the hour; and
                                    ``(II) the proportion that--
                                            ``(aa) the number of 
                                        minutes of the hour during 
                                        which the offset project was in 
                                        operation; bears to
                                            ``(bb) 60.''.
                                 <all>
```