I 

108TH CONGRESS 

2D SESSION H. R. 4067 

To provide for a program of scientific research on abrupt climate change, 

to accelerate the reduction of greenhouse gas emissions in the United 

States by establishing a market-driven system of greenhouse gas 

tradeable allowances that will limit greenhouse gas emissions in the 

United States, reduce dependence upon foreign oil, and ensure benefits 

to consumers from the trading in such allowances, and for other purposes. 

IN THE HOUSE OF REPRESENTATIVES 

MARCH 30, 2004 

Mr. GILCHREST (for himself, Mr. OLVER, Mr. SHAYS, Mr. VAN HOLLEN, Mr. 

BOEHLERT, Mr. INSLEE, Mrs. JOHNSON of Connecticut, Mr. MENENDEZ, 

Mr. SIMMONS, Mr. WAXMAN, Mr. GREENWOOD, Ms. DEGETTE, Mr. 

HOUGHTON, Ms. LOFGREN, Mr. EHLERS, Mr. FORD, Mr. WALSH, Mr. 

UDALL of Colorado, Mrs. KELLY, and Ms. SOLIS) introduced the following bill; which was referred to the Committee on Science, and in addition to the Committee on Energy and Commerce, for a period to be subsequently determined by the Speaker, in each case for consideration of 

such provisions as fall within the jurisdiction of the committee concerned 

A BILL 

To provide for a program of scientific research on abrupt 

climate change, to accelerate the reduction of greenhouse 

gas emissions in the United States by establishing a 

market-driven system of greenhouse gas tradeable allowances that will limit greenhouse gas emissions in the 

United States, reduce dependence upon foreign oil, and 

ensure benefits to consumers from the trading in such 

allowances, and for other purposes. 
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1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Climate Stewardship 

5 Act of 2004’’. 

6 SEC. 2. TABLE OF CONTENTS. 

7 The table of contents for this Act is as follows: 

Sec. 1. Short title. 

Sec. 2. Table of contents. 

Sec. 3. Definitions. 

TITLE I—FEDERAL CLIMATE CHANGE RESEARCH AND RELATED 

ACTIVITIES 

Sec. 101. National Science Foundation fellowships. 

Sec. 102. Research grants. 

Sec. 103. Abrupt climate change research. 

Sec. 104. NIST greenhouse gas functions. 

Sec. 105. Development of new measurement technologies. 

Sec. 106. Enhanced environmental measurements and standards. 

Sec. 107. Technology development and diffusion. 

Sec. 108. Agricultural outreach program. 

Sec. 109. NOAA Report on climate change effects; preparation assistance. 

TITLE II—NATIONAL GREENHOUSE GAS DATABASE 

Sec. 201. National greenhouse gas database and registry established. 

Sec. 202. Inventory of greenhouse gas emissions for covered entities. 

Sec. 203. Greenhouse gas reduction reporting. 

Sec. 204. Measurement and verification. 

TITLE III—MARKET-DRIVEN GREENHOUSE GAS REDUCTIONS 

SUBTITLE A—EMISSION REDUCTION REQUIREMENTS; USE OF TRADEABLE

ALLOWANCES

Sec. 301. Covered entities must submit allowances for emissions. 

Sec. 302. Compliance. 

Sec. 303. Borrowing against future reductions. 

Sec. 304. Other uses of tradeable allowances. 

Sec. 305. Exemption of source categories. 

SUBTITLE B—ESTABLISHMENT AND ALLOCATION OF TRADEABLE

ALLOWANCES

Sec. 331. Establishment of tradeable allowances. 

Sec. 332. Determination of tradeable allowance allocations. 

Sec. 333. Allocation of tradeable allowances. 

Sec. 334. Ensuring target adequacy. 
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Sec. 335. Initial allocations for early participation and accelerated participation. 

Sec. 336. Bonus for accelerated participation. 

SUBTITLE C—CLIMATE CHANGE CREDIT CORPORATION

Sec. 351. Establishment. 

Sec. 352. Purposes and functions. 

SUBTITLE D—SEQUESTRATION ACCOUNTING; PENALTIES

Sec. 371. Sequestration accounting. 

Sec. 372. Penalties. 

1 SEC. 3. DEFINITIONS. 

2 In this Act: 

3 (1) ADMINISTRATOR.—The term ‘‘Adminis4 trator’’ means the Administrator of the Environ5 mental Protection Agency. 

6 (2) BASELINE.—The term ‘‘baseline’’ means 

7 the historic greenhouse gas emission levels of an en8 tity, as adjusted upward by the Administrator to re9 flect actual reductions that are verified in accord10 ance with— 

11 (A) regulations promulgated under section 

12 201(c)(1); and 

13 (B) relevant standards and methods devel14 oped under this title. 

15 (3) CARBON DIOXIDE EQUIVALENTS.—The term 

16 ‘‘carbon dioxide equivalents’’ means, for each green17 house gas, the amount of each such greenhouse gas 

18 that makes the same contribution to global warming 

19 as one metric ton of carbon dioxide, as determined 

20 by the Administrator. 
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1 (4) COVERED SECTORS.—The term ‘‘covered 

2 sectors’’ means the electricity, transportation, indus3 try, and commercial sectors, as such terms are used 

4 in the Inventory. 

5 (5) COVERED ENTITY.—The term ‘‘covered en6 tity’’ means an entity (including a branch, depart7 ment, agency, or instrumentality of Federal, State, 

8 or local government) that— 

9 (A) owns or controls a source of green10 house gas emissions in the electric power, in11 dustrial, or commercial sector of the United 

12 States economy (as defined in the Inventory), 

13 refines or imports petroleum products for use in 

14 transportation, or produces or imports 

15 hydrofluorocarbons, perfluorocarbons, or sulfur 

16 hexafluoride; and 

17 (B) emits, from any single facility owned 

18 by the entity, over 10,000 metric tons of green19 house gas per year, measured in units of carbon 

20 dioxide equivalents, or produces or imports— 

21 (i) petroleum products that, when 

22 combusted, will emit, 

23 (ii) hydrofluorocarbons, perfluoro24 carbons, or sulfur hexafluoride that, when 

25 used, will emit, or 
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1 (iii) other greenhouse gases that, 

2 when used, will emit, 

3 over 10,000 metric tons of greenhouse gas per 

4 year, measured in units of carbon dioxide 

5 equivalents. 

6 (6) DATABASE.—The term ‘‘database’’ means 

7 the national greenhouse gas database established 

8 under section 201. 

9 (7) DIRECT EMISSIONS.—The term ‘‘direct 

10 emissions’’ means greenhouse gas emissions by an 

11 entity from a facility that is owned or controlled by 

12 that entity. 

13 (8) FACILITY.—The term ‘‘facility’’ means a 

14 building, structure, or installation located on any 1 

15 or more contiguous or adjacent properties of an enti16 ty in the United States. 

17 (9) GREENHOUSE GAS.—The term ‘‘greenhouse 

18 gas’’ means— 

19 (A) carbon dioxide; 

20 (B) methane; 

21 (C) nitrous oxide; 

22 (D) hydrofluorocarbons; 

23 (E) perfluorocarbons; or 

24 (F) sulfur hexafluoride. 
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1 (10) INDIRECT EMISSIONS.—The term ‘‘indirect 

2 emissions’’ means greenhouse gas emissions that 

3 are— 

4 (A) a result of the activities of an entity; 

5 but 

6 (B) emitted from a facility owned or con7 trolled by another entity. 

8 (11) INVENTORY.—The term ‘‘Inventory’’ 

9 means the Inventory of U.S. Greenhouse Gas Emis10 sions and Sinks, prepared in compliance with the 

11 United Nations Framework Convention on Climate 

12 Change Decision 3/CP.5. 

13 (12) LEAKAGE.—The term ‘‘leakage’’ means— 

14 (A) an increase in greenhouse gas emis15 sions by one facility or entity caused by a re16 duction in greenhouse gas emissions by another 

17 facility or entity; or 

18 (B) a decrease in sequestration that is 

19 caused by an increase in sequestration at an20 other location. 

21 (13) PERMANENCE.—The term ‘‘permanence’’ 

22 means the extent to which greenhouse gases that are 

23 sequestered will not later be returned to the atmos24 phere. 
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1 (14) REGISTRY.—The term ‘‘registry’’ means 

2 the registry of greenhouse gas emission reductions 

3 established under section 201(b)(2). 

4 (15) SECRETARY.—The term ‘‘Secretary’’ 

5 means the Secretary of Commerce. 

6 (16) SEQUESTRATION.— 

7 (A) IN GENERAL.—The term ‘‘sequestra8 tion’’ means the capture, long-term separation, 

9 isolation, or removal of greenhouse gases from 

10 the atmosphere. 

11 (B) INCLUSIONS.—The term ‘‘sequestra12 tion’’ includes— 

13 (i) agricultural and conservation prac14 tices; 

15 (ii) reforestation; 

16 (iii) forest preservation; and 

17 (iv) any other appropriate method of 

18 capture, long-term separation, isolation, or 

19 removal of greenhouse gases from the at20 mosphere, as determined by the Adminis21 trator. 

22 (C) EXCLUSIONS.—The term ‘‘sequestra23 tion’’ does not include— 

24 (i) any conversion of, or negative im25 pact on, a native ecosystem; or 
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1 (ii) any introduction of non-native 

2 species. 

3 (17) SOURCE CATEGORY.—The term ‘‘source 

4 category’’ means a process or activity that leads to 

5 direct emissions of greenhouse gases, as listed in the 

6 Inventory. 

7 (18) STATIONARY SOURCE.—The term ‘‘sta8 tionary source’’ means generally any source of 

9 greenhouse gases except those emissions resulting di10 rectly from an engine for transportation purposes. 

11 TITLE I—FEDERAL CLIMATE 

12 CHANGE RESEARCH AND RE13 LATED ACTIVITIES 

14 SEC. 101. NATIONAL SCIENCE FOUNDATION FELLOWSHIPS. 

15 The Director of the National Science Foundation 

16 shall establish a fellowship program for students pursuing 

17 graduate studies in global climate change, including capa18 bility in observation, analysis, modeling, paleoclimatology, 

19 consequences, and adaptation. 

20 SEC. 102. RESEARCH GRANTS. 

21 Section 105 of the Global Change Research Act of 

22 1990 (15 U.S.C. 2935) is amended— 

23 (1) by redesignating subsection (c) as sub24 section (d); and 
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1 (2) by inserting after subsection (b) the fol2 lowing: 

3 ‘‘(c) RESEARCH GRANTS.— 

4 ‘‘(1) COMMITTEE TO DEVELOP LIST OF PRI5 ORITY RESEARCH AREAS.—The Committee shall de6 velop a list of priority areas for research and devel7 opment on climate change that are not being ad8 dressed by Federal agencies. 

9 ‘‘(2) DIRECTOR OF OSTP TO TRANSMIT LIST TO

10 NSF.—The Director of the Office of Science and 

11 Technology Policy shall transmit the list to the Na12 tional Science Foundation. 

13 ‘‘(3) FUNDING THROUGH NSF.— 

14 ‘‘(A) BUDGET REQUEST.—The National 

15 Science Foundation shall include, as part of the 

16 annual request for appropriations for the 

17 Science and Technology Policy Institute, a re18 quest for appropriations to fund research in the 

19 priority areas on the list developed under para20 graph (1). 

21 ‘‘(B) AUTHORIZATION.—For fiscal year 

22 2005 and each fiscal year thereafter, there are 

23 authorized to be appropriated to the National 

24 Science Foundation not less than $25,000,000, 

25 to be made available through the Science and 
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1 Technology Policy Institute, for research in 

2 those priority areas.’’. 

3 SEC. 103. ABRUPT CLIMATE CHANGE RESEARCH. 

4 (a) IN GENERAL.—The Secretary, through the Na5 tional Oceanic and Atmospheric Administration, shall 

6 carry out a program of scientific research on potential ab7 rupt climate change designed— 

8 (1) to develop a global array of terrestrial and 

9 oceanographic indicators of paleoclimate in order 

10 sufficiently to identify and describe past instances of 

11 abrupt climate change; 

12 (2) to improve understanding of thresholds and 

13 nonlinearities in geophysical systems related to the 

14 mechanisms of abrupt climate change; 

15 (3) to incorporate these mechanisms into ad16 vanced geophysical models of climate change; and 

17 (4) to test the output of these models against 

18 an improved global array of records of past abrupt 

19 climate changes. 

20 (b) ABRUPT CLIMATE CHANGE DEFINED.—In this 

21 section, the term ‘‘abrupt climate change’’ means a change 

22 in climate that occurs so rapidly or unexpectedly that 

23 human or natural systems may have difficulty adapting 

24 to it. 
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1 (c) AUTHORIZATION OF APPROPRIATIONS.—There 

2 are authorized to be appropriated to the Secretary for fis3 cal year 2005 $60,000,000 to carry out this section, such 

4 sum to remain available until expended. 

5 SEC. 104. NIST GREENHOUSE GAS FUNCTIONS. 

6 Section 2(c) of the National Institute of Standards 

7 and Technology Act (15 U.S.C. 272(c)) is amended— 

8 (1) by striking ‘‘and’’ after the semicolon in 

9 paragraph (21); 

10 (2) by redesignating paragraph (22) as para11 graph (23); and 

12 (3) by inserting after paragraph (21) the fol13 lowing: 

14 ‘‘(22) perform research to develop enhanced 

15 measurements, calibrations, standards, and tech16 nologies which will facilitate activities that reduce 

17 emissions of greenhouse gases or increase sequestra18 tion of greenhouse gases, including carbon dioxide, 

19 methane, nitrous oxide, ozone, perfluorocarbons, 

20 hydrofluorocarbons, and sulfur hexafluoride; and’’. 

21 SEC. 105. DEVELOPMENT OF NEW MEASUREMENT TECH22 NOLOGIES. 

23 To facilitate implementation of section 204, the Sec24 retary shall initiate a program to develop, with technical 

25 assistance from appropriate Federal agencies, innovative 
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1 standards and measurement technologies to calculate 

2 greenhouse gas emissions or reductions for which no accu3 rate or reliable measurement technology exists. The pro4 gram shall include— 

5 (1) technologies (including remote sensing tech6 nologies) to measure carbon changes and other 

7 greenhouse gas emissions and reductions from agri8 culture, forestry, and other land use practices; and 

9 (2) technologies to calculate non-carbon dioxide 

10 greenhouse gas emissions from transportation. 

11 SEC. 106. ENHANCED ENVIRONMENTAL MEASUREMENTS 

12 AND STANDARDS. 

13 The National Institute of Standards and Technology 

14 Act (15 U.S.C. 271 et seq.) is amended— 

15 (1) by redesignating sections 17 through 32 as 

16 sections 18 through 33, respectively; and 

17 (2) by inserting after section 16 the following: 

18 ‘‘SEC. 17. CLIMATE CHANGE STANDARDS AND PROCESSES. 

19 ‘‘(a) IN GENERAL.—The Director shall establish 

20 within the Institute a program to perform and support re21 search on global climate change standards and processes, 

22 with the goal of providing scientific and technical knowl23 edge applicable to the reduction of greenhouse gases (as 

24 defined in section 3 of the Climate Stewardship Act of 
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1 2004) and of facilitating implementation of section 204 

2 of that Act. 

3 ‘‘(b) RESEARCH PROGRAM.— 

4 ‘‘(1) IN GENERAL.—The Director is authorized 

5 to conduct, directly or through contracts or grants, 

6 a global climate change standards and processes re7 search program. 

8 ‘‘(2) RESEARCH PROJECTS.—The specific con9 tents and priorities of the research program shall be 

10 determined in consultation with appropriate Federal 

11 agencies, including the Environmental Protection 

12 Agency, the National Oceanic and Atmospheric Ad13 ministration, and the National Aeronautics and 

14 Space Administration. The program generally shall 

15 include basic and applied research— 

16 ‘‘(A) to develop and provide the enhanced 

17 measurements, calibrations, data, models, and 

18 reference material standards which will enable 

19 the monitoring of greenhouse gases; 

20 ‘‘(B) to assist in establishing a baseline 

21 reference point for future trading in greenhouse 

22 gases and the measurement of progress in emis23 sions reduction; 

24 ‘‘(C) that will be exchanged internationally 

25 as scientific or technical information which has 
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1 the stated purpose of developing mutually rec2 ognized measurements, standards, and proce3 dures for reducing greenhouse gases; and 

4 ‘‘(D) to assist in developing improved in5 dustrial processes designed to reduce or elimi6 nate greenhouse gases. 

7 ‘‘(c) NATIONAL MEASUREMENT LABORATORIES.— 

8 ‘‘(1) IN GENERAL.—In carrying out this sec9 tion, the Director shall utilize the collective skills of 

10 the National Measurement Laboratories of the Na11 tional Institute of Standards and Technology to im12 prove the accuracy of measurements that will permit 

13 better understanding and control of industrial chem14 ical processes and result in the reduction or elimi15 nation of greenhouse gases. 

16 ‘‘(2) MATERIAL, PROCESS, AND BUILDING RE17 SEARCH.—The National Measurement Laboratories 

18 shall conduct research under this subsection that in19 cludes— 

20 ‘‘(A) developing material and manufac21 turing processes which are designed for energy 

22 efficiency and reduced greenhouse gas emissions 

23 into the environment; 

24 ‘‘(B) developing chemical processes to be 

25 used by industry that, compared to similar 
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1 processes in commercial use, result in reduced 

2 emissions of greenhouse gases or increased se3 questration of greenhouse gases; and 

4 ‘‘(C) enhancing building performance with 

5 a focus in developing standards or tools which 

6 will help incorporate low- or no-emission tech7 nologies into building designs. 

8 ‘‘(3) STANDARDS AND TOOLS.—The National 

9 Measurement Laboratories shall develop standards 

10 and tools under this subsection that include software 

11 to assist designers in selecting alternate building 

12 materials, performance data on materials, artificial 

13 intelligence-aided design procedures for building sub14 systems and ‘smart buildings’, and improved test 

15 methods and rating procedures for evaluating the 

16 energy performance of residential and commercial 

17 appliances and products. 

18 ‘‘(d) NATIONAL VOLUNTARY LABORATORY ACCREDI19 TATION PROGRAM.—The Director shall utilize the Na20 tional Voluntary Laboratory Accreditation Program under 

21 this section to establish a program to include specific cali22 bration or test standards and related methods and proto23 cols assembled to satisfy the unique needs for accredita24 tion in measuring the production of greenhouse gases. In 

25 carrying out this subsection the Director may cooperate 
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1 with other departments and agencies of the Federal Gov2 ernment, State and local governments, and private organi3 zations.’’. 

4 SEC. 107. TECHNOLOGY DEVELOPMENT AND DIFFUSION. 

5 The Director of the National Institute of Standards 

6 and Technology, through the Manufacturing Extension 

7 Partnership Program, may develop a program to promote 

8 the use, by the more than 380,000 small manufacturers, 

9 of technologies and techniques that result in reduced emis10 sions of greenhouse gases or increased sequestration of 

11 greenhouse gases. 

12 SEC. 108. AGRICULTURAL OUTREACH PROGRAM. 

13 (a) IN GENERAL.—The Secretary of Agriculture, act14 ing through the Global Change Program Office and in 

15 consultation with the heads of other appropriate depart16 ments and agencies, shall establish the Climate Change 

17 Education and Outreach Initiative Program to educate, 

18 and reach out to, agricultural organizations and individual 

19 farmers on global climate change. 

20 (b) PROGRAM COMPONENTS.—The program— 

21 (1) shall be designed to ensure that agricultural 

22 organizations and individual farmers receive detailed 

23 information about— 

24 (A) the potential impact of climate change 

25 on their operations and well-being; 
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1 (B) market-driven economic opportunities 

2 that may come from storing carbon in soils and 

3 vegetation, including emerging private sector 

4 markets for carbon storage; and 

5 (C) techniques for measuring, monitoring, 

6 verifying, and inventorying such carbon capture 

7 efforts; 

8 (2) may incorporate existing efforts in any area 

9 of activity referenced in paragraph (1) or in related 

10 areas of activity; 

11 (3) shall provide— 

12 (A) outreach materials to interested par13 ties; 

14 (B) workshops; and 

15 (C) technical assistance; and 

16 (4) may include the creation and development 

17 of regional centers on climate change or coordination 

18 with existing centers (including such centers within 

19 NRCS and the Cooperative State Research Edu20 cation and Extension Service). 

21 SEC. 109. NOAA REPORT ON CLIMATE CHANGE EFFECTS; 

22 PREPARATION ASSISTANCE. 

23 The Coastal Zone Management Act of 1972 (16 

24 U.S.C. 1451 et seq.) is amended by adding at the end 

25 the following: 
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1 ‘‘REPORT ON EFFECTS OF CLIMATE CHANGE

2 ‘‘SEC. 320. (a) IN GENERAL.—The Secretary shall 

3 report to the Congress not later than 2 years after the 

4 date of enactment of this section, and every 5 years there5 after, on the possible and projected impacts of climate 

6 change on— 

7 ‘‘(1) oceanic and coastal ecosystems, including 

8 marine fish and wildlife and their habitat, and the 

9 commercial and recreational fisheries and tourism 

10 industries associated with them; and 

11 ‘‘(2) coastal communities, including private resi12 dential and commercial development and public in13 frastructure in the coastal zone. 

14 ‘‘(b) CONTENTS.—Each report under this section 

15 shall include information regarding— 

16 ‘‘(1) the impacts that may be due to climate 

17 change that have occurred as of the date of the sub18 mission of the report; and 

19 ‘‘(2) the projected future impacts of climate 

20 change. 

21 ‘‘(c) IMPACTS.—The impacts reported on under sub22 section (b) shall include any— 

23 ‘‘(1) increases in sea level; 

24 ‘‘(2) increases in storm activity and intensity; 
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1 ‘‘(3) increases in floods, droughts, and other ex2 tremes of weather; 

3 ‘‘(4) increases in the temperature of the air and 

4 the water on oceanic and coastal ecosystems, with a 

5 particular focus on vulnerable fisheries and eco6 systems; and 

7 ‘‘(5) changes in the acidity of the ocean surface 

8 associated with an increase in concentration of car9 bon dioxide in the atmosphere. 

10 ‘‘CLIMATE CHANGE PREPARATION ASSISTANCE

11 ‘‘SEC. 321. (a) IN GENERAL.—The Secretary shall 

12 provide technical assistance to each coastal state that has 

13 an approved coastal zone management plan under this 

14 title, to assist such States in preparing persons living with15 in their coastal zones to adapt to climate change. 

16 ‘‘(b) IDENTIFICATION OF AFFECTED AREAS AND AD17 APTATIONS.—In carrying out this section, the Secretary 

18 shall— 

19 ‘‘(1) identify the projected impacts of climate 

20 change to which persons located in coastal zones 

21 may need to adapt, including— 

22 ‘‘(A) increases in sea level; 

23 ‘‘(B) increases in storm activity and inten24 sity; and 

25 ‘‘(C) increases in floods, droughts, and 

26 other extremes of weather; 
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1 ‘‘(2) identify the specific coastal areas of the 

2 United States, and the public and private develop3 ment in coastal communities and the natural re4 sources of the coastal zone, that are vulnerable to 

5 the impacts identified under paragraph (1); 

6 ‘‘(3) identify the various adaptation measures 

7 that may be used to protect the areas and resources 

8 identified under paragraph (2) from the impacts 

9 identified under paragraph (1); and 

10 ‘‘(4) estimate the costs of the adaptation meas11 ures identified under paragraph (3).’’. 

12 TITLE II—NATIONAL 

13 GREENHOUSE GAS DATABASE 

14 SEC. 201. NATIONAL GREENHOUSE GAS DATABASE AND 

15 REGISTRY ESTABLISHED. 

16 (a) ESTABLISHMENT.—As soon as practicable after 

17 the date of enactment of this Act, the Administrator, in 

18 coordination with the Secretary, the Secretary of Energy, 

19 the Secretary of Agriculture, and private sector and non20 governmental organizations, shall establish, operate, and 

21 maintain a database, to be known as the ‘‘National Green22 house Gas Database’’, to collect, verify, and analyze infor23 mation on greenhouse gas emissions by entities. 

24 (b) NATIONAL GREENHOUSE GAS DATABASE COM25 PONENTS.—The database shall consist of— 
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1 (1) an inventory of greenhouse gas emissions; 

2 and 

3 (2) a registry of greenhouse gas emission reduc4 tions and increases in greenhouse gas sequestra5 tions. 

6 (c) COMPREHENSIVE SYSTEM.— 

7 (1) IN GENERAL.—Not later than 2 years after 

8 the date of enactment of this Act, the Administrator 

9 shall promulgate regulations to implement a com10 prehensive system for greenhouse gas emissions re11 porting, inventorying, and reductions registration. 

12 (2) REQUIREMENTS.—The Administrator shall 

13 ensure, to the maximum extent practicable, that— 

14 (A) the comprehensive system described in 

15 paragraph (1) is designed to— 

16 (i) maximize completeness, trans17 parency, and accuracy of information re18 ported; and 

19 (ii) minimize costs incurred by entities 

20 in measuring and reporting greenhouse gas 

21 emissions; and 

22 (B) the regulations promulgated under 

23 paragraph (1) establish procedures and proto24 cols necessary— 
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1 (i) to prevent the double-counting of 

2 greenhouse gas emissions or emission re3 ductions reported by more than 1 reporting 

4 entity; 

5 (ii) to provide for corrections to errors 

6 in data submitted to the database; 

7 (iii) to provide for adjustment to data 

8 by reporting entities that have had a sig9 nificant organizational change (including 

10 mergers, acquisitions, and divestiture), in 

11 order to maintain comparability among 

12 data in the database over time; 

13 (iv) to provide for adjustments to re14 flect new technologies or methods for 

15 measuring or calculating greenhouse gas 

16 emissions; 

17 (v) to account for changes in registra18 tion of ownership of emission reductions 

19 resulting from a voluntary private trans20 action between reporting entities; and 

21 (vi) to clarify the responsibility for re22 porting in the case of any facility owned or 

23 controlled by more than 1 entity. 

24 (3) SERIAL NUMBERS.—Through regulations 

25 promulgated under paragraph (1), the Administrator 
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1 shall develop and implement a system that pro2 vides— 

3 (A) for the verification of submitted emis4 sions reductions registered under section 203; 

5 (B) for the provision of unique serial num6 bers to identify the registered emission reduc7 tions made by an entity relative to the baseline 

8 of the entity; 

9 (C) for the tracking of the registered re10 ductions associated with the serial numbers; 

11 and 

12 (D) for such action as may be necessary to 

13 prevent counterfeiting of the registered reduc14 tions. 

15 SEC. 202. INVENTORY OF GREENHOUSE GAS EMISSIONS 

16 FOR COVERED ENTITIES. 

17 (a) IN GENERAL.—Not later than July 1st of each 

18 calendar year after 2008, each covered entity shall submit 

19 to the Administrator a report that states, for the pre20 ceding calendar year, the entity-wide greenhouse gas emis21 sions (as reported at the facility level), including— 

22 (1) the total quantity of direct greenhouse gas 

23 emissions from stationary sources, expressed in units 

24 of carbon dioxide equivalents, except those reported 

25 under paragraph (3); 
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1 (2) the amount of petroleum products sold or 

2 imported by the entity and the amount of green3 house gases, expressed in units of carbon dioxide 

4 equivalents, that would be emitted when these prod5 ucts are used for transportation in the United 

6 States, as determined by the Administrator under 

7 section 301(b); 

8 (3) the amount of hydrofluorocarbons, 

9 perfluorocarbons, or sulfur hexafluoride, expressed 

10 in units of carbon dioxide equivalents, that are sold 

11 or imported by the entity and will ultimately be 

12 emitted in the United States, as determined by the 

13 Administrator under section 301(d); and 

14 (4) such other categories of emissions as the 

15 Administrator determines in the regulations promul16 gated under section 201(c)(1) may be practicable 

17 and useful for the purposes of this Act, such as— 

18 (A) indirect emissions from imported elec19 tricity, heat, and steam; 

20 (B) process and fugitive emissions; and 

21 (C) production or importation of green22 house gases. 

23 (b) COLLECTION AND ANALYSIS OF DATA.—The Ad24 ministrator shall collect and analyze information reported 

25 under subsection (a) for use under title III. 
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1 SEC. 203. GREENHOUSE GAS REDUCTION REPORTING. 

2 (a) IN GENERAL.—Subject to the requirements de3 scribed in subsection (b)— 

4 (1) a covered entity may register greenhouse 

5 gas emission reductions achieved after 1990 and be6 fore 2010 under this section; and 

7 (2) an entity that is not a covered entity may 

8 register greenhouse gas emission reductions achieved 

9 at any time since 1990 under this section. 

10 (b) REQUIREMENTS.— 

11 (1) IN GENERAL.—The requirements referred 

12 to in subsection (a) are that an entity (other than 

13 an entity described in paragraph (2)) shall— 

14 (A) establish a baseline; and 

15 (B) submit the report described in sub16 section (c)(1). 

17 (2) REQUIREMENTS APPLICABLE TO ENTITIES

18 ENTERING INTO CERTAIN AGREEMENTS.—An entity 

19 that enters into an agreement with a participant in 

20 the registry for the purpose of a carbon sequestra21 tion project shall not be required to comply with the 

22 requirements specified in paragraph (1) unless that 

23 entity is required to comply with the requirements 

24 by reason of an activity other than the agreement. 

25 (c) REPORTS.— 
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1 (1) REQUIRED REPORT.—Not later than July 

2 1st of each calendar year beginning more than 2 

3 years after the date of enactment of this Act, but 

4 subject to paragraph (3), an entity described in sub5 section (a) shall submit to the Administrator a re6 port that states, for the preceding calendar year, the 

7 entity-wide greenhouse gas emissions (as reported at 

8 the facility level), including— 

9 (A) the total quantity of direct greenhouse 

10 gas emissions from stationary sources, ex11 pressed in units of carbon dioxide equivalents; 

12 (B) the amount of petroleum products sold 

13 or imported by the entity and the amount of 

14 greenhouse gases, expressed in units of carbon 

15 dioxide equivalents, that would be emitted when 

16 these products are used for transportation in 

17 the United States, as determined by the Admin18 istrator under section 301(b); 

19 (C) the amount of hydrofluorocarbons, 

20 perfluorocarbons, or sulfur hexafluoride, ex21 pressed in units of carbon dioxide equivalents, 

22 that are sold or imported by the entity and will 

23 ultimately be emitted in the United States, as 

24 determined by the Administrator under section 

25 301(d); and 
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1 (D) such other categories of emissions as 

2 the Administrator determines in the regulations 

3 promulgated under section 201(c)(1) may be 

4 practicable and useful for the purposes of this 

5 Act, such as— 

6 (i) indirect emissions from imported 

7 electricity, heat, and steam; 

8 (ii) process and fugitive emissions; 

9 and 

10 (iii) production or importation of 

11 greenhouse gases. 

12 (2) VOLUNTARY REPORTING.—An entity de13 scribed in subsection (a) may (along with estab14 lishing a baseline and reporting emissions under this 

15 section)— 

16 (A) submit a report described in paragraph 

17 (1) before the date specified in that paragraph 

18 for the purposes of achieving and 

19 commoditizing greenhouse gas reductions 

20 through use of the registry and for other pur21 poses; and 

22 (B) submit to the Administrator, for inclu23 sion in the registry, information that has been 

24 verified in accordance with regulations promul-
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1 gated under section 201(c)(1) and that relates 

2 to— 

3 (i) any activity that resulted in the 

4 net reduction of the greenhouse gas emis5 sions of the entity or a net increase in se6 questration by the entity that were carried 

7 out during or after 1990 and before the es8 tablishment of the database, verified in ac9 cordance with regulations promulgated 

10 under section 201(c)(1), and submitted to 

11 the Administrator before the date that is 4 

12 years after the date of enactment of this 

13 Act; and 

14 (ii) with respect to the calendar year 

15 preceding the calendar year in which the 

16 information is submitted, any project or 

17 activity that resulted in the net reduction 

18 of the greenhouse gas emissions of the en19 tity or a net increase in net sequestration 

20 by the entity. 

21 (3) PROVISION OF VERIFICATION INFORMATION

22 BY REPORTING ENTITIES.—Each entity that submits 

23 a report under this subsection shall provide informa24 tion sufficient for the Administrator to verify, in ac25 cordance with measurement and verification methods 
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1 and standards developed under section 204, that the 

2 greenhouse gas report of the reporting entity— 

3 (A) has been accurately reported; and 

4 (B) in the case of each voluntary report 

5 under paragraph (2), represents— 

6 (i) actual reductions in direct green7 house gas emissions— 

8 (I) relative to historic emission 

9 levels of the entity; and 

10 (II) after accounting for any in11 creases in indirect emissions described 

12 in paragraph (1)(D)(i); or 

13 (ii) actual increases in net sequestra14 tion. 

15 (4) FAILURE TO SUBMIT REPORT.—An entity 

16 that participates or has participated in the registry 

17 and that fails to submit a report required under this 

18 subsection shall be prohibited from using, or allow19 ing another entity to use, its registered emissions re20 ductions or increases in sequestration to satisfy the 

21 requirements of section 301. 

22 (5) INDEPENDENT THIRD-PARTY VERIFICA23 TION.—To meet the requirements of this section and 

24 section 204, an entity that is required to submit a 

25 report under this section may— 
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1 (A) obtain independent third-party 

2 verification; and 

3 (B) present the results of the third-party 

4 verification to the Administrator. 

5 (6) AVAILABILITY OF DATA.— 

6 (A) IN GENERAL.—The Administrator 

7 shall ensure that information in the database 

8 is— 

9 (i) published; and 

10 (ii) accessible to the public, including 

11 in electronic format on the Internet. 

12 (B) EXCEPTION.—Subparagraph (A) shall 

13 not apply in any case in which the Adminis14 trator determines that publishing or otherwise 

15 making available information described in that 

16 subparagraph poses a risk to national security 

17 or discloses confidential business information 

18 that cannot be derived from information that is 

19 otherwise publicly available and that would 

20 cause competitive harm if published. 

21 (7) DATA INFRASTRUCTURE.—The Adminis22 trator shall ensure, to the maximum extent prac23 ticable, that the database uses, and is integrated 

24 with, Federal, State, and regional greenhouse gas 
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1 data collection and reporting systems in effect as of 

2 the date of enactment of this Act. 

3 (8) ADDITIONAL ISSUES TO BE CONSIDERED.— 

4 In promulgating the regulations under section 

5 201(c)(1) and implementing the database, the Ad6 ministrator shall take into consideration a broad 

7 range of issues involved in establishing an effective 

8 database, including— 

9 (A) the data and information systems and 

10 measures necessary to identify, track, and 

11 verify greenhouse gas emissions in a manner 

12 that will encourage private sector trading and 

13 exchanges; 

14 (B) the greenhouse gas reduction and se15 questration measurement and estimation meth16 ods and standards applied in other countries, as 

17 applicable or relevant; 

18 (C) the extent to which available fossil 

19 fuels, greenhouse gas emissions, and greenhouse 

20 gas production and importation data are ade21 quate to implement the database; and 

22 (D) the differences in, and potential 

23 uniqueness of, the facilities, operations, and 

24 business and other relevant practices of persons 

25 and entities in the private and public sectors 
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1 that may be expected to participate in the data2 base. 

3 (d) ANNUAL REPORT.—The Administrator shall pub4 lish an annual report that— 

5 (1) describes the total greenhouse gas emissions 

6 and emission reductions reported to the database 

7 during the year covered by the report; 

8 (2) provides entity-by-entity and sector-by-sec9 tor analyses of the emissions and emission reduc10 tions reported; 

11 (3) describes the atmospheric concentrations of 

12 greenhouse gases; 

13 (4) provides a comparison of current and past 

14 atmospheric concentrations of greenhouse gases; and 

15 (5) describes the activity during the year cov16 ered by the period in the trading of greenhouse gas 

17 emission allowances. 

18 SEC. 204. MEASUREMENT AND VERIFICATION. 

19 (a) STANDARDS.— 

20 (1) IN GENERAL.—Not later than 1 year after 

21 the date of enactment of this Act, the Secretary 

22 shall establish by rule, in coordination with the Ad23 ministrator, the Secretary of Energy, and the Sec24 retary of Agriculture, comprehensive measurement 

25 and verification methods and standards to ensure a 
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1 consistent and technically accurate record of green2 house gas emissions, emission reductions, sequestra3 tion, and atmospheric concentrations for use in the 

4 registry. 

5 (2) REQUIREMENTS.—The methods and stand6 ards established under paragraph (1) shall include— 

7 (A) a requirement that a covered entity 

8 use a continuous emissions monitoring system, 

9 or another system of measuring or estimating 

10 emissions that is determined by the Secretary 

11 to provide information with precision, reli12 ability, accessibility, and timeliness similar to 

13 that provided by a continuous emissions moni14 toring system where technologically feasible; 

15 (B) establishment of standardized meas16 urement and verification practices for reports 

17 made by all entities participating in the reg18 istry, taking into account— 

19 (i) protocols and standards in use by 

20 entities requiring or desiring to participate 

21 in the registry as of the date of develop22 ment of the methods and standards under 

23 paragraph (1); 

24 (ii) boundary issues, such as leakage; 
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1 (iii) avoidance of double counting of 

2 greenhouse gas emissions and emission re3 ductions; 

4 (iv) protocols to prevent a covered en5 tity from avoiding the requirements of this 

6 Act by reorganization into multiple entities 

7 that are under common control; and 

8 (v) such other factors as the Sec9 retary, in consultation with the Adminis10 trator, determines to be appropriate; 

11 (C) establishment of methods of— 

12 (i) estimating greenhouse gas emis13 sions, for those cases in which the Sec14 retary determines that methods of moni15 toring, measuring or estimating such emis16 sions with precision, reliability, accessi17 bility, and timeliness similar to that pro18 vided by a continuous emissions monitoring 

19 system are not technologically feasible at 

20 present; and 

21 (ii) reporting the accuracy of such es22 timations; 

23 (D) establishment of measurement and 

24 verification standards applicable to actions 
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1 taken to reduce, avoid, or sequester greenhouse 

2 gas emissions; 

3 (E) in coordination with the Secretary of 

4 Agriculture, standards to measure the results of 

5 the use of carbon sequestration and carbon re6 capture technologies, including— 

7 (i) soil carbon sequestration practices; 

8 and 

9 (ii) forest preservation and reforest10 ation activities that adequately address the 

11 issues of permanence, leakage, and 

12 verification; 

13 (F) establishment of such other measure14 ment and verification standards as the Sec15 retary, in consultation with the Secretary of Ag16 riculture, the Administrator, and the Secretary 

17 of Energy, determines to be appropriate; 

18 (G) establishment of standards for obtain19 ing the Secretary’s approval of the suitability of 

20 geological storage sites that include evaluation 

21 of both the geology of the site and the entity’s 

22 capacity to manage the site; and 

23 (H) establishment of other features that, 

24 as determined by the Secretary, will allow enti-
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1 ties to adequately establish a fair and reliable 

2 measurement and reporting system. 

3 (b) REVIEW AND REVISION.—The Secretary shall pe4 riodically review, and revise as necessary, the methods and 

5 standards developed under subsection (a). 

6 (c) PUBLIC PARTICIPATION.—The Secretary shall— 

7 (1) make available to the public for comment, 

8 in draft form and for a period of at least 90 days, 

9 the methods and standards developed under sub10 section (a); and 

11 (2) after the 90-day period referred to in para12 graph (1), in coordination with the Secretary of En13 ergy, the Secretary of Agriculture, and the Adminis14 trator, adopt the methods and standards developed 

15 under subsection (a) for use in implementing the 

16 database. 

17 (d) EXPERTS AND CONSULTANTS.— 

18 (1) IN GENERAL.—The Secretary may obtain 

19 the services of experts and consultants in the private 

20 and nonprofit sectors in accordance with section 

21 3109 of title 5, United States Code, in the areas of 

22 greenhouse gas measurement, certification, and 

23 emission trading. 

24 (2) AVAILABLE ARRANGEMENTS.—In obtaining 

25 any service described in paragraph (1), the Sec-
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1 retary may use any available grant, contract, cooper2 ative agreement, or other arrangement authorized by 

3 law. 

4 TITLE III—MARKET-DRIVEN 

5 GREENHOUSE GAS REDUCTIONS 

6 Subtitle A—Emission Reduction 

7 Requirements; Use of Tradeable 

8 Allowances 

9 SEC. 301. COVERED ENTITIES MUST SUBMIT ALLOWANCES 

10 FOR EMISSIONS. 

11 (a) IN GENERAL.—Beginning with calendar year 

12 2010— 

13 (1) each covered entity in the electric genera14 tion, industrial, and commercial sectors shall submit 

15 to the Administrator one tradeable allowance for 

16 every metric ton of greenhouse gases, measured in 

17 units of carbon dioxide equivalents, that it emits 

18 from stationary sources, except those described in 

19 paragraph (2); 

20 (2) each producer or importer of 

21 hydrofluorocarbons, perfluorocarbons, or sulfur 

22 hexafluoride that is a covered entity shall submit to 

23 the Administrator one tradeable allowance for every 

24 metric ton of hydrofluorocarbons, perfluorocarbons, 

25 or sulfur hexafluoride, measured in units of carbon 
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1 dioxide equivalents, that it produces or imports and 

2 that will ultimately be emitted in the United States, 

3 as determined by the Administrator under sub4 section (d) and 

5 (3) each petroleum refiner or importer that is 

6 a covered entity shall submit one tradeable allowance 

7 for every unit of petroleum product it sells that will 

8 produce one metric ton of greenhouse gases, meas9 ured in units of carbon dioxide equivalents, as deter10 mined by the Administrator under subsection (b), 

11 when used for transportation. 

12 (b) DETERMINATION OF TRANSPORTATION SECTOR

13 AMOUNT.—For the transportation sector, the Adminis14 trator shall determine the amount of greenhouse gases, 

15 measured in units of carbon dioxide equivalents, that will 

16 be emitted when petroleum products are used for trans17 portation. 

18 (c) EXCEPTION FOR CERTAIN DEPOSITED EMIS19 SIONS.—Notwithstanding subsection (a), a covered entity 

20 is not required to submit a tradeable allowance for any 

21 amount of greenhouse gas that would otherwise have been 

22 emitted from a facility under the ownership or control of 

23 that entity if— 
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1 (1) the emission is deposited in a geological 

2 storage facility approved by the Administrator de3 scribed in section 204(a)(2)(G); and 

4 (2) the entity agrees to submit tradeable allow5 ances for any portion of the deposited emission that 

6 is subsequently emitted from that facility. 

7 (d) DETERMINATION OF HYDROFLUROCARBON, 

8 PERFLUOROCARBON, AND SULFUR HEXAFLUORIDE

9 AMOUNT.—The Administrator shall determine the 

10 amounts of hydrofluorocarbons, perfluorocarbons, or sul11 fur hexafluoride, measured in units of carbon dioxide 

12 equivalents, that will be deemed to be emitted for purposes 

13 of this Act. 

14 SEC. 302. COMPLIANCE. 

15 (a) IN GENERAL.— 

16 (1) SOURCE OF TRADEABLE ALLOWANCES

17 USED.—A covered entity may use a tradeable allow18 ance to meet the requirements of this section with19 out regard to whether the tradeable allowance was 

20 allocated to it under subtitle B or acquired from an21 other entity or the Climate Change Credit Corpora22 tion established under section 351. 

23 (2) VERIFICATION BY ADMINISTRATOR.—At 

24 various times during each year, the Administrator 

25 shall determine whether each covered entity has met 
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1 the requirements of this section. In making that de2 termination, the Administrator shall— 

3 (A) take into account the tradeable allow4 ances submitted by the covered entity to the 

5 Administrator; and 

6 (B) retire the serial number assigned to 

7 each such tradeable allowance. 

8 (b) ALTERNATIVE MEANS OF COMPLIANCE.—For the 

9 years after 2010, a covered entity may satisfy up to 15 

10 percent of its total allowance submission requirement 

11 under this section by— 

12 (1) submitting tradeable allowances from an13 other nation’s market in greenhouse gas emissions 

14 if— 

15 (A) the Secretary determines that the 

16 other nation’s system for trading in greenhouse 

17 gas emissions is complete, accurate, and trans18 parent and reviews that determination at least 

19 once every 5 years; 

20 (B) the other nation has adopted enforce21 able limits on its greenhouse gas emissions 

22 which the tradeable allowances were issued to 

23 implement; and 
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1 (C) the covered entity certifies that the 

2 tradeable allowance has been retired unused in 

3 the other nation’s market; 

4 (2) submitting a registered net increase in se5 questration, as registered in the database, adjusted, 

6 if necessary, to comply with the accounting stand7 ards and methods established under section 371; 

8 (3) submitting a greenhouse gas emissions re9 duction (other than a registered net increase in se10 questration) that was registered in the database by 

11 a person that is not a covered entity; or 

12 (4) submitting credits obtained from the Ad13 ministrator under section 303. 

14 (c) DEDICATED PROGRAM FOR SEQUESTRATION IN

15 AGRICULTURAL SOILS.—If a covered entity chooses to 

16 satisfy 15 percent of its total allowance submission re17 quirements under the provisions of subsection (b), it shall 

18 satisfy up to 1.5 percent of its total allowance submission 

19 requirement by submitting registered net increases in se20 questration in agricultural soils, as registered in the data21 base, adjusted, if necessary, to comply with the accounting 

22 standards and methods established under section 371. 

23 SEC. 303. BORROWING AGAINST FUTURE REDUCTIONS. 

24 (a) IN GENERAL.—The Administrator shall establish 

25 a program under which a covered entity may— 
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1 (1) receive a credit in the current calendar year 

2 for anticipated reductions in emissions in a future 

3 calendar year; and 

4 (2) use the credit in lieu of a tradeable allow5 ance to meet the requirements of this Act for the 

6 current calendar year, subject to the limitation im7 posed by section 302(b). 

8 (b) DETERMINATION OF TRADEABLE ALLOWANCE

9 CREDITS.—The Administrator may make credits available 

10 under subsection (a) only for anticipated reductions in 

11 emissions that— 

12 (1) are attributable to the realization of capital 

13 investments in equipment, the construction, recon14 struction, or acquisition of facilities, or the deploy15 ment of new technologies— 

16 (A) for which the covered entity has exe17 cuted a binding contract and secured, or ap18 plied for, all necessary permits and operating or 

19 implementation authority; 

20 (B) that will not become operational within 

21 the current calendar year; and 

22 (C) that will become operational and begin 

23 to reduce emissions from the covered entity 

24 within 5 years after the year in which the credit 

25 is used; and 
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1 (2) will be realized within 5 years after the year 

2 in which the credit is used. 

3 (c) CARRYING COST.—If a covered entity uses a cred4 it under this section to meet the requirements of this Act 

5 for a calendar year (referred to as the use year), the 

6 tradeable allowance requirement for the year from which 

7 the credit was taken (referred to as the source year) shall 

8 be increased by an amount equal to— 

9 (1) 10 percent for each credit borrowed from 

10 the source year; multiplied by 

11 (2) the number of years beginning after the use 

12 year and before the source year. 

13 (d) MAXIMUM BORROWING PERIOD.—A credit from 

14 a year beginning more than 5 years after the current year 

15 may not be used to meet the requirements of this Act for 

16 the current year. 

17 (e) FAILURE TO ACHIEVE REDUCTIONS GENER18 ATING CREDIT.—If a covered entity that uses a credit 

19 under this section fails to achieve the anticipated reduc20 tion for which the credit was granted for the year from 

21 which the credit was taken, then— 

22 (1) the covered entity’s requirements under this 

23 Act for that year shall be increased by the amount 

24 of the credit, plus the amount determined under 

25 subsection (c); 
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1 (2) any tradeable allowances submitted by the 

2 covered entity for that year shall be counted first 

3 against the increase in those requirements; and 

4 (3) the covered entity may not use credits 

5 under this section to meet the increased require6 ments. 

7 SEC. 304. OTHER USES OF TRADEABLE ALLOWANCES. 

8 (a) IN GENERAL.—Tradeable allowances may be sold, 

9 exchanged, purchased, retired, or used as provided in this 

10 section. 

11 (b) INTERSECTOR TRADING.—Covered entities may 

12 purchase or otherwise acquire tradeable allowances from 

13 other covered sectors to satisfy the requirements of section 

14 301. 

15 (c) CLIMATE CHANGE CREDIT ORGANIZATION.—The 

16 Climate Change Credit Corporation established under sec17 tion 351 may sell tradeable allowances allocated to it 

18 under section 332(a)(2) to any covered entity or to any 

19 investor, broker, or dealer in such tradeable allowances. 

20 The Climate Change Credit Corporation shall use all pro21 ceeds from such sales in accordance with the provisions 

22 of section 352. 

23 (d) BANKING OF TRADEABLE ALLOWANCES.—Not24 withstanding the requirements of section 301, a covered 

25 entity that has more than a sufficient amount of tradeable 
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1 allowances to satisfy the requirements of section 301, may 

2 refrain from submitting a tradeable allowance to satisfy 

3 the requirements in order to sell, exchange, or use the 

4 tradeable allowance in the future. 

5 SEC. 305. EXEMPTION OF SOURCE CATEGORIES. 

6 (a) IN GENERAL.—The Administrator may grant an 

7 exemption from the requirements of this Act to a source 

8 category if the Administrator determines, after public no9 tice and comment, that it is not feasible to measure or 

10 estimate emissions from that source category, until such 

11 time as measurement or estimation becomes feasible. 

12 (b) REDUCTION OF LIMITATIONS.—If the Adminis13 trator exempts a source category under subsection (a), the 

14 Administrator shall also reduce the total tradeable allow15 ances under section 331(a)(1) by the amount of green16 house gas emissions that the exempted source category 

17 emitted in calendar year 2000, as identified in the 2000 

18 Inventory. 

19 (c) LIMITATION ON EXEMPTION.—The Administrator 

20 may not grant an exemption under subsection (a) to car21 bon dioxide produced from fossil fuel. 
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1 Subtitle B—Establishment and 

2 Allocation of Tradeable Allowances 

3 SEC. 331. ESTABLISHMENT OF TRADEABLE ALLOWANCES. 

4 (a) IN GENERAL.—The Administrator shall promul5 gate regulations to establish tradeable allowances, denomi6 nated in units of carbon dioxide equivalents, for calendar 

7 years beginning after 2009, equal to— 

8 (1) 5896 million metric tons, measured in units 

9 of carbon dioxide equivalents, reduced by 

10 (2) the amount of emissions of greenhouse 

11 gases in calendar year 2000 from non-covered enti12 ties. 

13 (b) SERIAL NUMBERS.—The Administrator shall as14 sign a unique serial number to each tradeable allowance 

15 established under subsection (a), and shall take such ac16 tion as may be necessary to prevent counterfeiting of 

17 tradeable allowances. 

18 (c) NATURE OF TRADEABLE ALLOWANCES.—A 

19 tradeable allowance is not a property right, and nothing 

20 in this title or any other provision of law limits the author21 ity of the United States to terminate or limit a tradeable 

22 allowance. 

23 (d) NON-COVERED ENTITY.—In this section: 

24 (1) IN GENERAL.—The term ‘non-covered enti25 ty’ means an entity that— 
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1 (A) owns or controls a source of green2 house gas emissions in the electric power, in3 dustrial, or commercial sector of the United 

4 States economy (as defined in the Inventory), 

5 refines or imports petroleum products for use in 

6 transportation, or produces or imports 

7 hydrofluorocarbons, perfluorocarbons, or sulfur 

8 hexafluoride; and 

9 (B) is not a covered entity. 

10 (2) EXCEPTION.—Notwithstanding paragraph 

11 (1), an entity that is a covered entity for any cal12 endar year beginning after 2009 shall not be consid13 ered to be a non-covered entity for purposes of sub14 section (a) only because it emitted, or its products 

15 would have emitted, 10,000 metric tons or less of 

16 greenhouse gas, measured in units of carbon dioxide 

17 equivalents, in the year 2000. 

18 SEC. 332. DETERMINATION OF TRADEABLE ALLOWANCE 

19 ALLOCATIONS. 

20 (a) IN GENERAL.—The Secretary shall determine— 

21 (1) the amount of tradeable allowances to be al22 located to each covered sector of that sector’s allot23 ments; and 
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1 (2) the amount of tradeable allowances to be al2 located to the Climate Change Credit Corporation 

3 established under section 351. 

4 (b) ALLOCATION FACTORS.—In making the deter5 mination required by subsection (a), the Secretary shall 

6 consider— 

7 (1) the distributive effect of the allocations on 

8 household income and net worth of individuals; 

9 (2) the impact of the allocations on corporate 

10 income, taxes, and asset value; 

11 (3) the impact of the allocations on income lev12 els of consumers and on their energy consumption; 

13 (4) the effects of the allocations in terms of eco14 nomic efficiency; 

15 (5) the ability of covered entities to pass 

16 through compliance costs to their customers; 

17 (6) the degree to which the amount of alloca18 tions to the covered sectors should decrease over 

19 time; and 

20 (7) the need to maintain the international com21 petitiveness of United States manufacturing and 

22 avoid the additional loss of United States manufac23 turing jobs. 

24 (c) ALLOCATION RECOMMENDATIONS AND IMPLE25 MENTATION.—Before allocating or providing tradeable al-
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1 lowances under subsection (a) and within 24 months after 

2 the date of enactment of this Act, the Secretary shall sub3 mit the determinations under subsection (a) to the Senate 

4 Committee on Commerce, Science, and Transportation, 

5 the Senate Committee on Environment and Public Works, 

6 the House of Representatives Committee on Science, and 

7 the House of Representatives Committee on Energy and 

8 Commerce. The Secretary’s determinations under sub9 section (a)(1), including the allocations and provision of 

10 tradeable allowances pursuant to that determination, are 

11 deemed to be a major rule (as defined in section 804(2) 

12 of title 5, United States Code), and subject to the provi13 sions of chapter 8 of that title. 

14 SEC. 333. ALLOCATION OF TRADEABLE ALLOWANCES. 

15 (a) IN GENERAL.—Beginning with calendar year 

16 2010 and after taking into account any initial allocations 

17 under section 334, the Administrator shall— 

18 (1) allocate to each covered sector that sector’s 

19 allotments determined by the Administrator under 

20 section 332 (adjusted for any such initial allocations 

21 and the allocation to the Climate Change Credit 

22 Corporation established under section 351); and 

23 (2) allocate to the Climate Change Credit Cor24 poration established under section 351 the tradeable 

25 allowances allocable to that Corporation. 
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1 (b) INTRASECTORIAL ALLOTMENTS.—The Adminis2 trator shall, by regulation, establish a process for the allo3 cation of tradeable allowances under this section, without 

4 cost to covered entities, that will— 

5 (1) encourage investments that increase the ef6 ficiency of the processes that produce greenhouse 

7 gas emissions; 

8 (2) minimize the costs to the Government of al9 locating the tradeable allowances; 

10 (3) not penalize a covered entity for emissions 

11 reductions made before 2010 and registered with the 

12 database; and 

13 (4) provide sufficient allocation for new en14 trants into the sector. 

15 (c) POINT SOURCE ALLOCATION.—The Adminis16 trator shall allocate the tradeable allowances for the elec17 tricity generation, industrial, and commercial sectors to 

18 the entities owning or controlling the point sources of 

19 greenhouse gas emissions within that sector. 

20 (d) HYDROFLUOROCARBONS, PERFLUOROCARBONS, 

21 AND SULFUR HEXAFLUORIDE.—The Administrator shall 

22 allocate the tradeable allowances for producers or import23 ers of hydrofluorocarbons, perfluorocarbons, or sulfur 

24 hexafluoride to such producers or importers. 
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1 (e) SPECIAL RULE FOR ALLOCATION WITHIN THE

2 TRANSPORTATION SECTOR.—The Administrator shall al3 locate the tradeable allowances for the transportation sec4 tor to petroleum refiners or importers that produce or im5 port petroleum products that will be used as fuel for trans6 portation. 

7 (f) ALLOCATIONS TO RURAL ELECTRIC COOPERA8 TIVES.— 

9 (1) IN GENERAL.—The Administrator shall 

10 make the allocations described in paragraph (2) each 

11 year at no cost. The allocations shall be offset from 

12 the allowances allocated to the Climate Change 

13 Credit Corporation. 

14 (2) RURAL ELECTRIC COOPERATIVES.—For 

15 each electric generating unit that is owned or oper16 ated by a rural electric cooperative, the Adminis17 trator shall allocate allowances in an amount equal 

18 to the greenhouse gas emissions of each such unit in 

19 2000, plus an amount equal to the average emis20 sions growth expected for all such units. 

21 SEC. 334. ENSURING TARGET ADEQUACY. 

22 (a) IN GENERAL.—Beginning 2 years after the date 

23 of enactment of this Act, the Under Secretary of Com24 merce for Oceans and Atmosphere shall review the allow-
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1 ances established by section 331 no less frequently than 

2 biennially— 

3 (1) to re-evaluate the levels established by that 

4 section, after taking into account the best available 

5 science and the most currently available data, and 

6 (2) to re-evaluate the environmental and public 

7 health impacts of specific concentration levels of 

8 greenhouse gases, 

9 to determine whether the allowances established by sub10 section (a) continue to be consistent with the objective of 

11 the United Nations’ Framework Convention on Climate 

12 Change of stabilizing levels of greenhouse gas emissions 

13 at a level that will prevent dangerous anthropogenic inter14 ference with the climate system. 

15 (b) REVIEW OF 2010 LEVELS.—The Under Secretary 

16 shall specifically review in 2008 the level established under 

17 section 331(a)(1), and transmit a report on his reviews, 

18 together with any recommendations, including legislative 

19 recommendations, for modification of the levels, to the 

20 Senate Committee on Commerce, Science, and Transpor21 tation, the Senate Committee on Environment and Public 

22 Works, the House of Representatives Committee on 

23 Science, and the House of Representatives Committee on 

24 Energy and Commerce. 
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1 SEC. 335. INITIAL ALLOCATIONS FOR EARLY PARTICIPA2 TION AND ACCELERATED PARTICIPATION. 

3 Before making any allocations under section 333, the 

4 Administrator shall allocate— 

5 (1) to any covered entity an amount of 

6 tradeable allowances equivalent to the amount of 

7 greenhouse gas emissions reductions registered by 

8 that covered entity in the national greenhouse gas 

9 database if— 

10 (A) the covered entity has requested to use 

11 the registered reduction in the year of alloca12 tion; 

13 (B) the reduction was registered prior to 

14 2010; and 

15 (C) the Administrator retires the unique 

16 serial number assigned to the reduction under 

17 section 201(c)(3); and 

18 (2) to any covered entity that has entered into 

19 an accelerated participation agreement under section 

20 336, such tradeable allowances as the Administrator 

21 has determined to be appropriate under that section. 

22 SEC. 336. BONUS FOR ACCELERATED PARTICIPATION. 

23 (a) IN GENERAL.—If a covered entity executes an 

24 agreement with the Administrator under which it agrees 

25 to reduce its level of greenhouse gas emissions to a level 

26 no greater than the level of its greenhouse gas emissions 
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1 for calendar year 1990 by the year 2010, then, for the 

2 6-year period beginning with calendar year 2010, the Ad3 ministrator shall— 

4 (1) provide additional tradeable allowances to 

5 that entity when allocating allowances under section 

6 334 in order to recognize the additional emissions 

7 reductions that will be required of the covered entity; 

8 (2) allow that entity to satisfy 20 percent of its 

9 requirements under section 301 by— 

10 (A) submitting tradeable allowances from 

11 another nation’s market in greenhouse gas 

12 emissions under the conditions described in sec13 tion 302(b)(1); 

14 (B) submitting a registered net increase in 

15 sequestration, as registered in the National 

16 Greenhouse Gas Database established under 

17 section 201, and as adjusted by the appropriate 

18 sequestration discount rate established under 

19 section 371; or 

20 (C) submitting a greenhouse gas emission 

21 reduction (other than a registered net increase 

22 in sequestration) that was registered in the Na23 tional Greenhouse Gas Database by a person 

24 that is not a covered entity. 
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1 (b) TERMINATION.—An entity that executes an 

2 agreement described in subsection (a) may terminate the 

3 agreement at any time. 

4 (c) FAILURE TO MEET COMMITMENT.—If an entity 

5 that executes an agreement described in subsection (a) 

6 fails to achieve the level of emissions to which it committed 

7 by calendar year 2010— 

8 (1) its requirements under section 301 shall be 

9 increased by the amount of any tradeable allowances 

10 provided to it under subsection (a)(1); and 

11 (2) any tradeable allowances submitted there12 after shall be counted first against the increase in 

13 those requirements. 

14 Subtitle C—Climate Change Credit 

15 Corporation 

16 SEC. 351. ESTABLISHMENT. 

17 (a) IN GENERAL.—The Climate Change Credit Cor18 poration is established as a nonprofit corporation without 

19 stock. The Corporation shall not be considered to be an 

20 agency or establishment of the United States Government. 

21 (b) APPLICABLE LAWS.—The Corporation shall be 

22 subject to the provisions of this title and, to the extent 

23 consistent with this title, to the District of Columbia Busi24 ness Corporation Act. 
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1 (c) BOARD OF DIRECTORS.—The Corporation shall 

2 have a board of directors of 5 individuals who are citizens 

3 of the United States, of whom 1 shall be elected annually 

4 by the board to serve as chairman. No more than 3 mem5 bers of the board serving at any time may be affiliated 

6 with the same political party. The members of the board 

7 shall be appointed by the President of the United States, 

8 by and with the advice and consent of the Senate and shall 

9 serve for terms of 5 years. 

10 SEC. 352. PURPOSES AND FUNCTIONS. 

11 (a) TRADING.—The Corporation— 

12 (1) shall receive and manage tradeable allow13 ances allocated to it under section 333(a)(2); and 

14 (2) shall buy and sell tradeable allowances, 

15 whether allocated to it under that section or ob16 tained by purchase, trade, or donation from other 

17 entities; but 

18 (3) may not retire tradeable allowances unused. 

19 (b) USE OF TRADEABLE ALLOWANCES AND PRO20 CEEDS.— 

21 (1) IN GENERAL.—The Corporation shall use 

22 the tradeable allowances, and proceeds derived from 

23 its trading activities in tradeable allowances, to re24 duce costs borne by consumers as a result of the 
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1 greenhouse gas reduction requirements of this Act. 

2 The reductions— 

3 (A) may be obtained by buy-down, subsidy, 

4 negotiation of discounts, consumer rebates, or 

5 otherwise; 

6 (B) shall be, as nearly as possible, equi7 tably distributed across all regions of the 

8 United States; and 

9 (C) may include arrangements for pref10 erential treatment to consumers who can least 

11 afford any such increased costs. 

12 (2) TRANSITION ASSISTANCE TO DISLOCATED

13 WORKERS AND COMMUNITIES.—The Corporation 

14 shall allocate a percentage of the proceeds derived 

15 from its trading activities in tradeable allowances to 

16 provide transition assistance to dislocated workers 

17 and communities. Transition assistance may take 

18 the form of— 

19 (A) grants to employers, employer associa20 tions, and representatives of employees— 

21 (i) to provide training, adjustment as22 sistance, and employment services to dis23 located workers; and 
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1 (ii) to make income-maintenance and 

2 needs-related payments to dislocated work3 ers; and 

4 (B) grants to State and local governments 

5 to assist communities in attracting new employ6 ers or providing essential local government serv7 ices. 

8 (3) PHASE-OUT OF TRANSITION ASSISTANCE.— 

9 The percentage allocated by the Corporation under 

10 paragraph (2)— 

11 (A) shall be 20 percent for 2010; 

12 (B) shall be reduced by 2 percentage 

13 points each year thereafter; and 

14 (C) may not be reduced below zero. 

15 (4) TECHNOLOGY DEPLOYMENT PROGRAMS.— 

16 The Corporation shall establish and carry out a pro17 gram, through direct grants, revolving loan pro18 grams, or other financial measures, to provide sup19 port for the deployment of technology to assist in 

20 compliance with this Act by distributing the pro21 ceeds from no less than 10 percent of the total al22 lowances allocated to it. The support shall include 

23 the following: 

24 (A) COAL GASIFICATION COMBINED-CYCLE

25 AND GEOLOGICAL CARBON STORAGE PRO-
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1 GRAM.—The Corporation shall establish and 

2 carry out a program, through direct grants, to 

3 provide incentives for the repowering of existing 

4 facilities or construction of new facilities pro5 ducing electricity or other products from coal 

6 gasification combined-cycle plants that capture 

7 and geologically store at least 90 percent of the 

8 carbon dioxide produced at the facility in ac9 cordance with requirements established by the 

10 Administrator to ensure the permanence of the 

11 storage and that such storage will not cause or 

12 contribute to significant adverse effects on pub13 lic health or the environment. The Corporation 

14 shall ensure that no less than 20 percent of the 

15 funding under this program is distributed to 

16 rural electric cooperatives. 

17 (B) AGRICULTURAL PROGRAMS.—The Cor18 poration shall establish and carry out a pro19 gram, through direct grants, revolving loan pro20 grams, or other financial measures, to provide 

21 incentives for greenhouse gas emissions reduc22 tions or net increases in greenhouse gas seques23 tration on agricultural lands. The program shall 

24 include incentives for— 
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1 (i) production of wind energy on agri2 cultural lands; 

3 (ii) agricultural management practices 

4 that achieve verified, incremental increases 

5 in net carbon sequestration, in accordance 

6 with the requirements established by the 

7 Administrator under section 371; and 

8 (iii) production of renewable fuels 

9 that, after consideration of the energy 

10 needed to produce such fuels, result in a 

11 net reduction in greenhouse gas emissions. 

12 Subtitle D—Sequestration 

13 Accounting; Penalties 

14 SEC. 371. SEQUESTRATION ACCOUNTING. 

15 (a) SEQUESTRATION ACCOUNTING.—If a covered en16 tity uses a registered net increase in sequestration to sat17 isfy the requirements of section 301 for any year, that 

18 covered entity shall submit information to the Adminis19 trator every 5 years thereafter sufficient to allow the Ad20 ministrator to determine, using the methods and stand21 ards created under section 204, whether that net increase 

22 in sequestration still exists. Unless the Administrator de23 termines that the net increase in sequestration continues 

24 to exist, the covered entity shall offset any loss of seques25 tration by submitting additional tradeable allowances of 
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1 equivalent amount in the calender year following that de2 termination. 

3 (b) REGULATIONS REQUIRED.—The Secretary, act4 ing through the Under Secretary of Commerce for Science 

5 and Technology, in coordination with the Secretary of Ag6 riculture, the Secretary of Energy, and the Administrator, 

7 shall issue regulations establishing the sequestration ac8 counting rules for all classes of sequestration projects. 

9 (c) CRITERIA FOR REGULATIONS.—In issuing regula10 tions under this section, the Secretary shall use the fol11 lowing criteria: 

12 (1) If the range of possible amounts of net in13 crease in sequestration for a particular class of se14 questration project is not more than 10 percent of 

15 the median of that range, the amount of sequestra16 tion awarded shall be equal to the median value of 

17 that range. 

18 (2) If the range of possible amounts of net in19 crease in sequestration for a particular class of se20 questration project is more than 10 percent of the 

21 median of that range, the amount of sequestration 

22 awarded shall be equal to the fifth percentile of that 

23 range. 

24 (3) The regulations shall include procedures for 

25 accounting for potential leakage from sequestration 
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1 projects and for ensuring that any registered in2 crease in sequestration is in addition to that which 

3 would have occurred if this Act had not been en4 acted. 

5 (d) UPDATES.—The Secretary shall update the se6 questration accounting rules for every class of sequestra7 tion project at least once every 5 years. 

8 SEC. 372. PENALTIES. 

9 Any covered entity that fails to meet the require10 ments of section 301 for a year shall be liable for a civil 

11 penalty, payable to the Administrator, equal to thrice the 

12 market value (determined as of the last day of the year 

13 at issue) of the tradeable allowances that would be nec14 essary for that covered entity to meet those requirements 

15 on the date of the emission that resulted in the violation. 

Æ