I 
119TH CONGRESS 
1ST SESSION H. R. 2177 
To amend the Clean Air Act to establish a tradeable energy performance 
standard for large electricity generators and thermal energy users, and 
for other purposes. 
IN THE HOUSE OF REPRESENTATIVES 
MARCH 18, 2025 
Mr. CASTEN introduced the following bill; which was referred to the 
Committee on Energy and Commerce 
A BILL 
To amend the Clean Air Act to establish a tradeable energy 
performance standard for large electricity generators and 
thermal energy users, and for other purposes. 
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. SHORT TITLE. 
This Act may be cited as the ‘‘Tradeable Energy Per-
formance Standards Act’’. 
SEC. 2. ESTABLISHING TRADEABLE ENERGY PERFORM-
ANCE STANDARDS. 
The Clean Air Act (42 U.S.C. 7401 et seq.) is amend-
ed by adding after title VI the following: 
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‘‘TITLE 
VII—TRADEABLE 
EN-
ERGY PERFORMANCE STAND-
ARDS 
‘‘Sec. 701. Definitions. 
‘‘Sec. 702. Emission allowance submission requirement. 
‘‘Sec. 703. Emission allowance distribution. 
‘‘Sec. 704. Trading of emission allowances. 
‘‘Sec. 705. Emission allowance bilateral purchase agreements. 
‘‘Sec. 706. Voluntary program participation. 
‘‘Sec. 707. Emission allowance tracking system. 
‘‘Sec. 708. Offset program. 
‘‘Sec. 709. Penalty for noncompliance. 
‘‘Sec. 710. Comptroller general reports. 
‘‘Sec. 711. Final regulations. 
‘‘Sec. 712. Savings provisions. 
‘‘SEC. 701. DEFINITIONS. 
‘‘In this title: 
‘‘(1) ALTERNATIVE
COMPLIANCE
PAYMENT.— 
The term ‘Alternative Compliance Payment’ means a 
payment made under section 703(e) in lieu of the 
submission of an emission allowance. 
‘‘(2) BILATERAL PURCHASE AGREEMENT.—The 
term ‘bilateral purchase agreement’ means an agree-
ment— 
‘‘(A) entered into after the date of enact-
ment of this title; 
‘‘(B) for a term of at least 10 years; 
‘‘(C) between the owner or operator of an 
Existing Covered Facility and the owner or op-
erator of a Newly Constructed Low-Emission 
Covered Facility; and 
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‘‘(D) in which the owner or operator of an 
Existing Covered Facility agrees to purchase 
some or all of the emissions allowances distrib-
uted to the owner or operator of a Newly Con-
structed Low-Emission Covered Facility. 
‘‘(3) COVERED COGENERATION FACILITY.—The 
term ‘Covered Cogeneration Facility’ means a facil-
ity that simultaneously produces useful thermal en-
ergy output and electricity and— 
‘‘(A) has a rated electric capacity of 2 
megawatts or greater; or 
‘‘(B) is a facility for which the Adminis-
trator has approved a request under section 
706(a)(3). 
‘‘(4) COVERED ELECTRIC FACILITY.—The term 
‘Covered Electric Facility’ means a facility that pro-
duces electricity and— 
‘‘(A) has a rated electric capacity of 2 
megawatts or greater; or 
‘‘(B) is a facility for which the Adminis-
trator has approved a request under section 
706(a)(1). 
‘‘(5) COVERED FACILITY.—The term ‘Covered 
Facility’ means a Covered Electric Facility, a Cov-
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ered Thermal Facility, or a Covered Cogeneration 
Facility. 
‘‘(6) COVERED THERMAL FACILITY.—The term 
‘Covered Thermal Facility’ means a facility— 
‘‘(A) that produces useful thermal energy 
output at a Rated Fuel-Based Capacity of at 
least 50 million British thermal units per hour, 
calculated on a higher heating value basis, ex-
cluding any facility that the Administrator de-
termines is used to wholly or partially provide 
carbon as a chemical ingredient for a process to 
manufacture goods; or 
‘‘(B) for which the Administrator has ap-
proved a request under section 706(a)(2). 
‘‘(7) 
DESIGNATED
REPRESENTATIVE.—The 
term ‘designated representative’ means an individual 
for which a certificate of representation has been 
submitted under section 703(e)(3). 
‘‘(8) EMISSION ALLOWANCE.—The term ‘emis-
sion allowance’ means a limited authorization to 
emit 1 metric ton of carbon dioxide that is distrib-
uted under section 703. 
‘‘(9) EXISTING COVERED FACILITY.—The term 
‘Existing Covered Facility’ means a Covered Facil-
ity— 
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‘‘(A) the owner or operator of which is a 
party to a bilateral purchase agreement; and 
‘‘(B) that produced electricity or useful 
thermal energy output as of the date on which 
the owner or operator entered into such agree-
ment. 
‘‘(10) FOSSIL FUEL.—The term ‘fossil fuel’— 
‘‘(A) means a carbon compound formed in 
the crust of the Earth from decayed organic 
material; and 
‘‘(B) includes natural gas, petroleum, and 
coal. 
‘‘(11) HIGHER
HEATING
VALUE
BASIS.—The 
term ‘higher heating value basis’ means that a given 
calculation regarding the total energy content of a 
fuel is made on the basis of the heat produced per 
unit of fuel when— 
‘‘(A) complete combustion takes place at 
constant pressure; 
‘‘(B) the products of combustion are cooled 
to the initial temperature of the fuel and air; 
and 
‘‘(C) the water vapor formed during com-
bustion is condensed. 
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‘‘(12) HOLD.—The term ‘hold’ means, with re-
spect to an emission allowance, to have in the appro-
priate account created pursuant to the process under 
section 707(a)(2). 
‘‘(13) NEWLY
CONSTRUCTED
LOW-EMISSION 
COVERED FACILITY.—The term ‘Newly Constructed 
Low-Emission Covered Facility’ means a Covered 
Facility— 
‘‘(A) the owner or operator of which is a 
party to a bilateral purchase agreement; 
‘‘(B) that did not produce electricity or 
useful thermal energy output prior to the date 
on which the owner or operator entered into 
such agreement; 
‘‘(C) that, in the first full calendar year 
during which the Covered Facility produces 
electricity or useful thermal energy output, 
emits a lesser quantity of carbon dioxide per 
megawatt-hour of electricity production or per 
million British thermal units of useful thermal 
energy output than the average Covered Facil-
ity. 
‘‘(14) OUTPUT-BASED
CO2
EMISSIONS.—The 
term ‘Output-Based CO2 Emissions’ means the fol-
lowing: 
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‘‘(A) COVERED ELECTRIC FACILITY.—For 
a Covered Electric Facility, the number that 
equals— 
‘‘(i) the total number of metric tons of 
carbon dioxide emissions released by all 
Covered Electric Facilities in a calendar 
year; divided by 
‘‘(ii) the total number of megawatt- 
hours of electricity produced by all Covered 
Electric Facilities in such calendar year. 
‘‘(B) COVERED THERMAL FACILITY.—For 
a Covered Thermal Facility, the number that 
equals— 
‘‘(i) the total number of metric tons of 
carbon dioxide emissions from all Covered 
Thermal Facilities in a calendar year; di-
vided by 
‘‘(ii) the total number of millions of 
British thermal units of useful thermal en-
ergy output from all Covered Thermal Fa-
cilities in such calendar year. 
‘‘(15) OUTPUT-BASED
CO2
EMISSIONS
BASE-
LINE.—The term ‘Output-Based CO2 Emissions 
Baseline’ means, with respect to a category of Cov-
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ered Facility, the Output-Based CO2 Emissions in 
calendar year 2027. 
‘‘(16) OUTPUT-BASED
CO2
EMISSIONS
TAR-
GET.—The term ‘Output-Based CO2 Emissions Tar-
get’ means the number of metric tons of carbon di-
oxide per megawatt-hour or per million British ther-
mal units, as applicable, that is used to calculate the 
number of emission allowances distributed by the 
Administrator to each Covered Facility under section 
703. 
‘‘(17) 
PERMANENTLY
SEQUESTERED.—The 
term ‘Permanently Sequestered’, with respect to car-
bon dioxide, means the carbon dioxide shall not 
enter the atmosphere for at least 200 years, accord-
ing to the best available science. 
‘‘(18) RATED
FUEL-BASED
CAPACITY.—The 
term ‘Rated Fuel-Based Capacity’ means— 
‘‘(A) for facilities that produce useful ther-
mal energy output with the combustion of fuel, 
the peak fuel combustion rate, expressed in mil-
lions of British thermal units per hour; and 
‘‘(B) for facilities that produce useful ther-
mal energy output without the combustion of 
fuel, the peak useful thermal energy output rate 
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divided by 0.7, expressed in millions of British 
thermal units per hour. 
‘‘(19) SOCIAL
COST
OF
CARBON.—The term 
‘Social Cost of Carbon’ means the amount, in dol-
lars, of the economic damages that would result 
from emitting one additional metric ton of carbon 
dioxide into the atmosphere, as determined by the 
Administrator in accordance with the method de-
scribed in the document titled ‘Report on the Social 
Cost of Greenhouse Gases: Estimates Incorporating 
Recent Scientific Advances’ as published by the En-
vironmental Protection Agency in November 2023. 
‘‘(20) TOTAL EMISSION ADJUSTMENT INDEX.— 
The term ‘Total Emission Adjustment Index’ means, 
with respect to a given year, the number used to ad-
just the amount of emission allowances distributed 
for each megawatt-hour and for each million British 
thermal units, as applicable, as described under sec-
tion 703(c). 
‘‘(21) TOTAL U.S. CO2 EMISSIONS.—The term 
‘Total U.S. CO2 Emissions’ means, with respect to 
a given calendar year, the total amount of carbon di-
oxide that would be produced if all the fossil fuels 
imported into the United States or extracted within 
the United States were fully combusted. 
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‘‘(22) USEFUL THERMAL ENERGY OUTPUT.— 
The term ‘useful thermal energy output’— 
‘‘(A) means the net amount of thermal en-
ergy produced by a facility, including thermal 
energy produced through the use of electricity; 
and 
‘‘(B) does not include energy in inlet com-
bustion air, feedwater, or other fluids not used 
as fuels for combustion. 
‘‘SEC. 702. EMISSION ALLOWANCE SUBMISSION REQUIRE-
MENT. 
‘‘(a) IN GENERAL.—Beginning in calendar year 
2028, not later than June 1 of each calendar year, the 
owner or operator of each Covered Facility shall submit 
to the Administrator one emission allowance for each met-
ric ton of carbon dioxide released directly to the atmos-
phere by the facility during the preceding calendar year. 
‘‘(b) ACQUISITION OF EMISSION ALLOWANCES.—The 
owner or operator of a Covered Facility may acquire an 
emission allowance— 
‘‘(1) by receiving an emission allowance distrib-
uted under section 703; and 
‘‘(2) by purchasing, exchanging, or transferring 
an emission allowance in accordance with section 
704. 
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‘‘(c) PERIOD OF USE.—An emission allowance may 
be used by the owner or operator of a Covered Facility 
to comply with subsection (a) only for— 
‘‘(1) the calendar year for which the emission 
allowance is distributed; or 
‘‘(2) the following calendar year. 
‘‘(d) ROUNDING OF EMISSION ALLOWANCES.—Any 
fraction of an emission allowance shall be rounded to the 
nearest whole emission allowance. 
‘‘SEC. 703. EMISSION ALLOWANCE DISTRIBUTION. 
‘‘(a) DISTRIBUTION.— 
‘‘(1) COVERED
ELECTRIC
FACILITIES.—For 
each of calendar years 2028 through 2048, the Ad-
ministrator shall, not later than March 1 of a given 
calendar year, distribute to the owner or operator of 
each Covered Electric Facility a number of emission 
allowances equal to the product of— 
‘‘(A) the number of megawatt-hours of 
electricity produced by the Covered Electric Fa-
cility during the previous calendar year; and 
‘‘(B) the Output-Based CO2 Emissions 
Target for the calendar year. 
‘‘(2) COVERED
THERMAL
FACILITIES.—For 
each of calendar years 2028 through 2048, the Ad-
ministrator shall, not later than March 1 of a given 
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calendar year, distribute to the owner or operator of 
each Covered Thermal Facility a number of emission 
allowances equal to the product of— 
‘‘(A) the number of millions of British 
thermal units of useful thermal energy output 
produced by the Covered Thermal Facility dur-
ing the previous calendar year; and 
‘‘(B) the Output-Based CO2 Emissions 
Target for the calendar year. 
‘‘(3) COVERED
COGENERATION
FACILITIES.— 
For each of calendar years 2028 through 2048, the 
Administrator shall, not later than March 1 of a 
given calendar year, distribute to the owner or oper-
ator of each Covered Cogeneration Facility— 
‘‘(A) for each megawatt hour of electricity 
produced by the Covered Cogeneration Facility, 
a number of emission allowances calculated in 
accordance with paragraph (1); and 
‘‘(B) for each million British thermal units 
of useful thermal energy output produced by 
the Covered Cogeneration Facility, a number of 
emission allowances calculated in accordance 
with paragraph (2). 
‘‘(b) CALCULATION
OF
THE OUTPUT-BASED CO2 
EMISSIONS TARGET.— 
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‘‘(1) 2028.—The Output-Based CO2 Emissions 
Target for calendar year 2028 shall equal the Out-
put-Based CO2 Emissions Baseline. 
‘‘(2) SUBSEQUENT YEARS.—In a given calendar 
year other than calendar year 2028, the Output- 
Based CO2 Emissions Target shall be the greater 
of— 
‘‘(A) zero; and 
‘‘(B) the lesser of— 
‘‘(i) the Output-Based CO2 Emissions 
Target of the preceding calendar year 
minus 5 percent of the Output-Based CO2 
Emissions Baseline; 
‘‘(ii) the Output-Based CO2 Emis-
sions of the preceding calendar year minus 
5 percent of the Output-Based CO2 Emis-
sions Baseline; 
‘‘(iii) the Output-Based CO2 Emis-
sions Target of preceding calendar year 
minus 10 percent of the Output-Based 
CO2 Emissions Baseline minus the Total 
Emission Adjustment Index of the given 
calendar year; and 
‘‘(iv) the Output-Based CO2 Emis-
sions of preceding calendar year minus 10 
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percent of the Output-Based CO2 Emis-
sions Baseline minus the Total Emission 
Adjustment Index of the given calendar 
year. 
‘‘(c) CALCULATION OF TOTAL EMISSION ADJUST-
MENT INDEX.—With respect to a given calendar year, the 
Total Emission Adjustment Index shall be calculated as 
1 minus the ratio of— 
‘‘(1) the Total U.S. CO2 Emissions in the pre-
vious calendar year; to 
‘‘(2) the Total U.S. CO2 Emissions in the cal-
endar year that began two years before the given 
year. 
‘‘(d) GENERAL RULES.— 
‘‘(1) IDENTIFICATION NUMBERS.—The Admin-
istrator shall assign to each emission allowance dis-
tributed under this section a unique identification 
number. 
‘‘(2) 
DESIGNATED
REPRESENTATIVES.—The 
owner or operator of each Covered Facility, and the 
owner or operator of each other entity holding an 
emission allowance or receiving an emission allow-
ance from the Administrator under this title, shall 
submit to the Administrator a certificate of rep-
resentation designating a designated representative. 
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‘‘(3) PREVENTION
OF
DOUBLE
COUNTING.— 
The Administrator shall not consider any Covered 
Facility to which the Administrator distributes emis-
sion allowances under this section to be more than 
one type of facility as defined under paragraphs (3), 
(4), or (6) of section 701. 
‘‘(e) ALTERNATIVE COMPLIANCE PAYMENTS.— 
‘‘(1) IN GENERAL.—The owner or operator of a 
Covered Facility may satisfy the requirements of 
section 702(a), in whole or in part, with respect to 
any calendar year, by submitting to the Adminis-
trator an Alternative Compliance Payment in lieu of 
an emission allowance that would otherwise be due. 
‘‘(2) AMOUNTS.— 
‘‘(A) CALENDAR
YEARS
2028
THROUGH 
2038.—For calendar years 2028 through 2038, 
the amount of an Alternative Compliance Pay-
ment shall be as follows, except as the Adminis-
trator shall adjust for inflation: 
‘‘Calendar Year 
Alternative Compliance Payment 
2028 ......................................................
$50.00 
2029 ......................................................
$52.00 
2030 ......................................................
$54.00 
2031 ......................................................
$56.00 
2032 ......................................................
$58.00 
2033 ......................................................
$60.00 
2034 ......................................................
$62.00 
2035 ......................................................
$64.00 
2036 ......................................................
$66.00 
2037 ......................................................
$68.00 
2038 ......................................................
$70.00 
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‘‘(B) CALENDAR
YEARS
2039
THROUGH 
2048.—For calendar years 2039 through 2048, 
the amount of the Alternative Compliance Pay-
ment for a given year shall annually increase by 
an equal amount from $70 in 2038, adjusted 
for inflation under subparagraph (A), to the So-
cial Cost of Carbon in 2048. 
‘‘(C) CALENDAR YEAR 2048 AND THERE-
AFTER.—The amount of an Alternative Compli-
ance Payment for calendar year 2048 and 
thereafter shall be equal to the Social Cost of 
Carbon. 
‘‘SEC. 704. TRADING OF EMISSION ALLOWANCES. 
‘‘(a) PERMITTED TRANSACTIONS.—An entity that 
holds an emission allowance may— 
‘‘(1) submit the emission allowances to the Ad-
ministrator; and 
‘‘(2) sell, exchange, and transfer the emission 
allowance to another entity in accordance with sub-
section (c). 
‘‘(b) LEGAL STATUS OF EMISSION ALLOWANCES.— 
‘‘(1) IN GENERAL.—An emission allowance dis-
tributed by the Administrator under this title does 
not constitute a property right. 
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‘‘(2) TERMINATION OR LIMITATION.—Nothing 
in this title shall be construed to limit or alter the 
authority of the United States to terminate or limit 
the sale, exchange, transfer, holding, or submission 
of emission allowances. 
‘‘(c) EFFECTIVENESS
OF EMISSION ALLOWANCE 
TRANSACTIONS.—No sale, exchange, transfer, or submis-
sion of an emission allowance shall be effective for pur-
poses of this title until a certification of the sale, transfer, 
exchange, or submission is— 
‘‘(1) signed by the designated representative of 
the entity holding the emission allowance; and 
‘‘(2) received and recorded by the Adminis-
trator in accordance with regulations issued under 
section 707. 
‘‘SEC. 705. EMISSION ALLOWANCE BILATERAL PURCHASE 
AGREEMENTS. 
‘‘(a) DISTRIBUTION OF ALLOWANCES TO AN EXIST-
ING COVERED FACILITY.— 
‘‘(1) IN GENERAL.—For a calendar year that is 
covered by a bilateral purchase agreement, beginning 
with the first full calendar year during which the 
Newly Constructed Low-Emission Covered Facility 
produces electricity or useful thermal energy output, 
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the Administrator shall distribute to the owner or 
operator of the Existing Covered Facility— 
‘‘(A) for megawatt hours of electricity or 
million British thermal units of useful thermal 
energy output, as applicable, produced by the 
Existing Covered Facility that are covered by 
the agreement, a number of emission allowances 
that is equal to— 
‘‘(i) such number of megawatt hours 
or million British thermal units, as appli-
cable; multiplied by 
‘‘(ii) the Output-Based CO2 Emis-
sions for Covered Electric Facilities or 
Covered Thermal Facilities, as applicable, 
for such first full calendar year; and 
‘‘(B) for megawatt hours of electricity or 
million British thermal units of useful thermal 
energy output, as applicable, produced by the 
Existing Facility that are not covered by the 
agreement, the number of emission allowances 
calculated under section 703(a). 
‘‘(2) CALCULATION OF MEGAWATT HOURS OR 
MILLION
BRITISH
THERMAL
UNITS
COVERED
BY 
AGREEMENT.—For purposes of paragraph (1), the 
number of megawatt hours of electricity or million 
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British thermal units of useful thermal energy out-
put, as applicable, produced by an Existing Covered 
Facility that are covered by the agreement shall be 
equal to— 
‘‘(A) the number of emission allowances 
sold to the owner or operator of the Existing 
Covered Facility pursuant to the agreement for 
the first full calendar year described in para-
graph (1), divided by the difference of— 
‘‘(i) the number of emission allow-
ances submitted to the Administrator by 
the owner or operator of the Existing Cov-
ered Facility for such first full calendar 
year; minus 
‘‘(ii) the number of emission allow-
ances distributed to the owner or operator 
of the Existing Covered Facility by the Ad-
ministrator for such first full calendar 
year; multiplied by 
‘‘(B) the total number of megawatt hours 
of electricity or million British thermal units of 
useful thermal energy output, as applicable, 
produced by the Existing Covered Facility in 
such first full calendar year. 
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‘‘(b) DISTRIBUTION OF ALLOWANCES TO A NEWLY 
CONSTRUCTED LOW-EMISSION COVERED FACILITY.— 
‘‘(1) IN GENERAL.—For calendar years that are 
covered by an agreement described in subsection (a), 
beginning with the first full calendar year during 
which the Newly Constructed Low-Emission Covered 
Facility produces at least 1 megawatt-hour of elec-
tricity or 1 million British thermal units of useful 
thermal energy output, the Administrator shall dis-
tribute to the owner or operator of the Newly Con-
structed Low-Emission Covered Facility— 
‘‘(A) for megawatt hours of electricity or 
million British thermal units of useful thermal 
energy output, as applicable, produced by the 
Newly Constructed Low-Emission Covered Fa-
cility that are covered by the agreement, a num-
ber of emission allowances that is equal to— 
‘‘(i) such number of megawatt hours 
or million British thermal units of useful 
thermal energy output; multiplied by 
‘‘(ii) the Output-Based CO2 Emis-
sions for Covered Electric Facilities or 
Covered Thermal Facilities, as applicable, 
for such first full calendar year; and 
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‘‘(B) for megawatt hours of electricity or 
million British thermal units of useful thermal 
energy output, as applicable, produced by the 
Newly Constructed Low-Emission Covered Fa-
cility that are not covered by the agreement, the 
number of emission allowances calculated under 
section 703(a). 
‘‘(2) CALCULATION OF MEGAWATT HOURS OR 
MILLION
BRITISH
THERMAL
UNITS
COVERED
BY 
AGREEMENT.—For purposes of paragraph (1), the 
number of megawatt hours of electricity or million 
British thermal units of useful thermal energy out-
put, as applicable, produced by a Newly Constructed 
Low-Emission Covered Facility that are covered by 
the agreement shall be equal to— 
‘‘(A) the number of emission allowances 
sold to the owner or operator of the Existing 
Covered Facility pursuant to the agreement for 
the first full calendar year described in para-
graph (1), divided by the difference of— 
‘‘(i) the number of emission allow-
ances submitted to the Administrator by 
the owner or operator of the Newly Con-
structed Low-Emission Covered Facility 
for such first full calendar year; minus 
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‘‘(ii) the number of emission allow-
ances distributed to the owner or operator 
of the Newly Constructed Low-Emission 
Covered Facility by the Administrator for 
such first full calendar year; multiplied by 
‘‘(B) the total number of megawatt hours 
of electricity or million British thermal units of 
useful thermal energy output, as applicable, 
produced by the Existing Facility in such first 
full calendar year. 
‘‘(c) CONDITIONS.—The owner or operator of an ex-
isting Covered Facility or Newly Constructed Low-Emis-
sion Covered Facility that is a party to a bilateral pur-
chase agreement may receive emission allowances under 
this section only if such owner or operator provides to the 
Administrator a copy of— 
‘‘(1) the applicable bilateral purchase agree-
ment; and 
‘‘(2) any amendment to such bilateral purchase 
agreement within 30 days of the amendment being 
made. 
‘‘(d) REGULATIONS.—The Administrator shall pro-
mulgate regulation to ensure the integrity and enforce-
ability of contracts executed under this section. 
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‘‘SEC. 706. VOLUNTARY PROGRAM PARTICIPATION. 
‘‘(a) ELIGIBLE ENTITIES.—The Administrator may, 
upon the request of the owner or operator, classify— 
‘‘(1) as a Covered Electric Facility, any facility 
that produces electricity at a Rated Fuel-Based Ca-
pacity of less than 2 megawatts; 
‘‘(2) as a Covered Thermal Facility, any facility 
that produces useful thermal energy output at a 
Rated Fuel-Based Capacity of less than 50 million 
British thermal units per hour, calculated on a high-
er heating value basis; and 
‘‘(3) as a Covered Cogeneration Facility, any 
facility that— 
‘‘(A) simultaneously produces useful ther-
mal energy output and electricity; and 
‘‘(B) has a rated electric capacity of less 
than 2 megawatts. 
‘‘(b) DESIGNATION OF REPRESENTATIVE.—The Ad-
ministrator shall approve a request submitted under sub-
section (a) if the owner or operator of the facility des-
ignates a representative under section 703(d)(2). 
‘‘(c) DEADLINE FOR NOTIFICATION.—Not later than 
90 days after receipt of a request submitted under sub-
section (a), the Administrator shall notify the owner or 
operator of the facility whether the Administrator ap-
proves or disapproves the request. 
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‘‘(d) TERMINATION OF CLASSIFICATION.—The Ad-
ministrator shall terminate the classification of a facility 
as a Covered Facility under subsection (a) if, during the 
previous calendar year, the facility did not— 
‘‘(1) produce electricity; or 
‘‘(2) produce useful thermal energy output. 
‘‘SEC. 707. EMISSION ALLOWANCE TRACKING SYSTEM. 
‘‘(a) REGULATIONS.—The Administrator shall issue 
regulations to provide for— 
‘‘(1) the establishment of a system to process 
the distribution of emission allowances to Covered 
Facilities under section 703 and section 705; 
‘‘(2) a process to create accounts in which Cov-
ered Facilities and other entities may hold emission 
allowances; 
‘‘(3) the establishment of an emission allowance 
tracking system to track— 
‘‘(A) the number of emission allowances 
sold, exchanged, transferred, and submitted; 
‘‘(B) the price or monetary value of such 
emission allowances; 
‘‘(C) the date of each such sale, exchange, 
transfer, and submission; 
‘‘(D) the parties involved in each such sale, 
exchange, transfer, and submission; and 
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‘‘(E) any additional information the Ad-
ministrator determines necessary to ensure the 
integrity and efficiency of the market for emis-
sion allowances; and 
‘‘(4) the weekly publication by the Adminis-
trator on the website of the Environmental Protec-
tion Agency, in a publicly available and searchable 
format, of— 
‘‘(A) a summary of average prices or mon-
etary values of emission allowances, the total 
number of emission allowances sold, exchanged, 
transferred, or submitted, and any other addi-
tional information determined by the Adminis-
trator as necessary to ensure the integrity and 
efficiency of the market for emission allow-
ances; 
‘‘(B) the number of emission allowances 
distributed by the Administrator under section 
703 and section 705; 
‘‘(C) the number of emission allowances 
distributed by the Administrator under section 
703 and section 705 during the calendar year 
before the year of publication that are held at 
the end of each month of the current calendar 
year by each category of Covered Facility; and 
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‘‘(D) the number of emission allowances 
submitted to the Administrator each year by 
each category of Covered Facility. 
‘‘(b) POSITION LIMITS.—The Administrator, in con-
sultation with the Commodity Futures Trading Commis-
sion, shall establish by regulation limits on the number 
of emission allowances that an entity may hold so that, 
in the determination of the Administrator— 
‘‘(1) no entity shall hold a number of emission 
allowances that may influence the price or monetary 
value of emission allowances; and 
‘‘(2) adequate liquidity for buyers and sellers of 
emission allowances shall be ensured. 
‘‘(c) STATUS
OF SUBMITTED EMISSION ALLOW-
ANCES.—Once an emission allowance is submitted to the 
Administrator under section 702, the emission allowance 
shall be disqualified from subsequent use under this title, 
including subsequent sale, exchange, transfer, and submis-
sion. 
‘‘(d) ORDERLY AND COMPETITIVE MARKET.—The 
Administrator shall issue regulations as necessary in the 
determination of the Administrator for an orderly and 
competitive market for selling, exchanging, transferring, 
and submitting emission allowances. 
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‘‘SEC. 708. OFFSET PROGRAM. 
‘‘(a) CARBON MITIGATION FUND.— 
‘‘(1) CREATION OF FUND.—The Administrator 
shall establish a fund to be known as the ‘Carbon 
Mitigation Fund’. 
‘‘(2) ADMINISTRATION.—The Carbon Mitiga-
tion Fund shall be administered by the Adminis-
trator. 
‘‘(3) DEPOSITS.—There shall be deposited into 
the Carbon Mitigation Fund the following: 
‘‘(A) The amounts paid as Alternative 
Compliance Payments pursuant to section 
703(e). 
‘‘(B) The amounts collected as civil pen-
alties under section 709. 
‘‘(4) APPROPRIATION.—Amounts in the Carbon 
Mitigation Fund shall be available without further 
appropriation or fiscal year limitation to carry out 
the Offset Program under subsection (b). 
‘‘(b) OFFSET PROGRAM.— 
‘‘(1) IN
GENERAL.—The Administrator shall 
carry out a program (to be known as the ‘Offset 
Program’) to award grants to entities to carry out 
activities that avoid emissions of greenhouse gases 
or permanently sequester carbon dioxide from the 
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atmosphere, as determined in accordance with para-
graph (3). 
‘‘(2) ACTIVITIES.—The activities described in 
paragraph (1) may include— 
‘‘(A) improvements to the energy efficiency 
of existing facilities and devices; 
‘‘(B) improvements to the electrical grid; 
‘‘(C) the replacement of natural gas space 
heaters, natural gas water heaters, and natural 
gas stoves with electric appliances; 
‘‘(D) the replacement of fossil fuel-powered 
vehicles owned by State or local agencies with 
electric vehicles or other low-carbon fuel vehi-
cles; 
‘‘(E) the replacement of fossil fuel-powered 
ground airport and seaport vehicles with electric 
vehicles or other low-carbon fuel vehicles; 
‘‘(F) installation of charging stations for 
electric vehicles along highways and other pub-
lic roads in urban areas and rural areas in 
which the availability of such charging stations 
is significantly below the national average; and 
‘‘(G) beneficial electrification-related re-
ductions not otherwise identified in this para-
graph. 
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‘‘(3) CRITERIA.—The Administrator may only 
award grants under the Offset Program for an activ-
ity for which the Administrator determines that— 
‘‘(A) the amount of greenhouse gas emis-
sions to be avoided or permanently sequestered 
from the atmosphere by the activity will be ade-
quately confirmed through monitoring, report-
ing, and verification; 
‘‘(B) the risk that some amount of the car-
bon dioxide that is to be sequestered from the 
atmosphere by the activity may reenter the at-
mosphere at a later date is adequately reflected 
through a discounting of the amount described 
in paragraph (4)(C)(ii); 
‘‘(C) the risk that some amount of the 
greenhouse gases, the emission of which is 
avoided by the activity, may enter the atmos-
phere at a later date is adequately reflected 
through a discounting of the amount described 
in paragraph (4)(C)(i); 
‘‘(D) the risk that the activity may directly 
or indirectly increase the release of greenhouse 
gases from another location has been ade-
quately addressed; 
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‘‘(E) the activity is not required, or being 
supported financially (except pursuant to this 
subsection), by a Federal, State, or local law, 
program, or activity; and 
‘‘(F) if the activity involves land use, the 
activity— 
‘‘(i) aligns with the Sustainable Devel-
opment Goals, as adopted by of the United 
Nations under the Post-2015 Development 
Agenda, and amended by the United Na-
tions, including being consistent with the 
conservation of biological diversity and nat-
ural ecosystems (including forests and 
grasslands); and 
‘‘(ii) maintains ecosystem services and 
other social and environmental benefits. 
‘‘(4) PROPOSALS.—In order to apply for a 
grant awarded under the Offset Program, an entity 
shall submit to the Administrator a proposal that— 
‘‘(A) describes the activity to be carried 
out with the grant; 
‘‘(B) identifies the amount of money for 
which the entity is applying; 
‘‘(C) identifies the amount (to be measured 
in one-year increments) of, as applicable— 
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‘‘(i) greenhouse gas emissions to be 
avoided by the activity; and 
‘‘(ii) carbon dioxide to be permanently 
sequestered from the atmosphere by the 
activity; 
‘‘(D) identifies the bid amount, expressed 
as dollars per metric ton, which shall be the 
quotient obtained by dividing the amount iden-
tified under subparagraph (B) by the amount 
identified under subparagraph (C); 
‘‘(E) provides any information required by 
the Administrator in order to make a deter-
mination described in paragraph (3); and 
‘‘(F) provides any other certifications the 
Administrator determines appropriate. 
‘‘(5) DEADLINES.— 
‘‘(A) SOLICITATION.—Not later than Feb-
ruary 1, 2028, and each February 1 thereafter, 
the Administrator shall solicit proposals for ac-
tivities described in paragraph (1) for which the 
Administrator may award grants under the Off-
set Program. 
‘‘(B) IDENTIFICATION.—Not later than 
June 1, 2028, and each June 1 thereafter, the 
Administrator shall identify and publish a list 
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of proposals that have been submitted by March 
1 of the applicable year for activities described 
in paragraph (1) that qualify for an award of 
a grant under the Offset Program. 
‘‘(C) AWARD OF GRANTS.—Not later than 
August 1, 2028, and each August 1 thereafter, 
the Administrator shall, to the extent amounts 
are available in the Carbon Mitigation Fund, 
award grants to entities that submitted a pro-
posal that is listed pursuant to subparagraph 
(B). 
‘‘(6) AWARDS TO MOST COST-EFFECTIVE AC-
TIVITIES.—The Administrator shall award funds to 
entities for activities described in proposals identi-
fied under paragraph (5)(B)— 
‘‘(A) beginning by awarding funds to the 
entity submitting such a proposal with the low-
est bid amount identified pursuant to para-
graph (4)(D); and 
‘‘(B) then awarding funds to entities se-
quentially by entity submitting such a proposal 
with the next lowest bid amount so identified 
until all funds are awarded. 
‘‘(c) REGULATIONS REGARDING CARBON DIOXIDE 
SEQUESTRATION.— 
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‘‘(1) REGULATIONS.—Under section 711, the 
Administrator shall issue regulations establishing— 
‘‘(A) the conditions under which carbon di-
oxide may be safely and permanently seques-
tered; 
‘‘(B) the methods and processes by which 
carbon dioxide may be safely and permanently 
sequestered, including by incorporating the car-
bon in a commercial product; and 
‘‘(C) requirements to account for the risk 
that some fraction of the carbon dioxide in-
tended to be permanently sequestered may be 
emitted into the atmosphere. 
‘‘(2) EXISTING
REQUIREMENTS.—In issuing 
regulations described in this subsection, the Admin-
istrator shall incorporate to the extent practicable 
any existing requirements for the sequestration of 
carbon dioxide, including any requirements promul-
gated under section 45Q of the Internal Revenue 
Code of 1986. 
‘‘(d) CONSULTATION.—The Administrator shall con-
sult with the Secretary of the Interior and the Secretary 
of Agriculture in issuing regulations to measure, monitor, 
and verify any natural sequestration activities carried out 
using a grant awarded under the Offset Program. 
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‘‘SEC. 709. PENALTY FOR NONCOMPLIANCE. 
‘‘(a) CIVIL PENALTY.— 
‘‘(1) IN GENERAL.—The owner or operator of a 
Covered Facility that fails to submit an emission al-
lowance as required by section 702(a) shall be liable 
for payment to the Administrator of a penalty in the 
amount described in paragraph (2). 
‘‘(2) AMOUNT.—The amount of a penalty de-
scribed in this paragraph shall be equal to the prod-
uct of— 
‘‘(A) three times the highest price or mon-
etary value during the previous calendar year 
(as indicated by the emission allowance tracking 
system established pursuant to section 707) for 
the sale, exchange, or transfer of an emission 
allowance; and 
‘‘(B) the number of emission allowances 
that the owner or operator of the Covered Fa-
cility failed to submit as described in paragraph 
(1). 
‘‘(3) TIMING.—A penalty required under this 
subsection shall be immediately due to the Adminis-
trator, without demand by the Administrator. 
‘‘(4) NO EFFECT ON LIABILITY.—A penalty due 
by the owner or operator of a Covered Facility under 
this subsection shall not diminish the liability of the 
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