I 
110TH CONGRESS 
1ST SESSION 
H. R. 620 
To accelerate the reduction of greenhouse gas emissions in the United States 
by establishing a market-driven system of greenhouse gas tradeable allow-
ances 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 
JANUARY 22, 2007 
Mr. OLVER (for himself, Mr. GILCHREST, Mr. INSLEE, Mr. WALSH of New 
York, Mr. CUMMINGS, Mr. KIRK, Ms. SOLIS, Mr. CASTLE, Mr. HINCHEY, 
Mr. SHAYS, Ms. HARMAN, Mr. SAXTON, Mr. DICKS, Ms. MCCOLLUM of 
Minnesota, Ms. DEGETTE, Mr. THOMPSON of California, Mr. CARDOZA, 
and Mr. HARE) introduced the following bill; which was referred to the 
Committee on Energy and Commerce, and in addition to the Committees 
on Science and Technology and Natural Resources, 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 con-
cerned 
A BILL 
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 con-
sumers from the trading in such allowances, and for 
other purposes. 
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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 ‘‘Climate Stewardship 
Act of 2007’’. 
SEC. 2. TABLE OF CONTENTS. 
The table of contents for this Act is as follows: 
Sec. 1. Short title. 
Sec. 2. Table of contents. 
Sec. 3. Definitions. 
TITLE I—MARKET TO REDUCE GREENHOUSE GAS EMISSIONS 
Subtitle A—Tracking Emissions 
Sec. 101. National Greenhouse Gas Database and registry established. 
Sec. 102. Inventory of greenhouse gas emissions for covered entities. 
Sec. 103. Greenhouse gas reduction registration. 
Sec. 104. Measurement and verification. 
Subtitle B—Mandating Emission Reductions 
Sec. 121. Covered entities must submit allowances for emissions. 
Sec. 122. Compliance. 
Sec. 123. Exemption of source categories. 
Sec. 124. Establishment of tradeable allowances. 
Sec. 125. Penalties. 
Subtitle C—Controlling Compliance Costs 
Sec. 141. Trading. 
Sec. 142. Banking. 
Sec. 143. Borrowing against future reductions. 
Sec. 144. Domestic offsets. 
Sec. 145. International credits plan. 
Subtitle D—Establishment and Allocation of Tradeable Allowances 
Sec. 161. Determination of tradeable allowance allocations. 
Sec. 162. Provision of tradeable allowances. 
Sec. 163. Ensuring target adequacy. 
Sec. 164. Initial allocations for early participation and accelerated participation. 
Sec. 165. Bonus for accelerated participation. 
TITLE II—CLIMATE CHANGE CREDIT CORPORATION 
Sec. 201. Establishment. 
Sec. 202. Purposes and functions. 
TITLE III—MISCELLANEOUS 
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Sec. 301. NOAA report on climate change effects; preparation assistance. 
Sec. 302. Adaptation technologies. 
Sec. 303. Mitigating climate change’s impacts on the poor. 
Sec. 304. Wildlife conservation. 
SEC. 3. DEFINITIONS. 
In this Act: 
(1) ADMINISTRATOR.—The term ‘‘Adminis-
trator’’ means the Administrator of the Environ-
mental Protection Agency. 
(2) BASELINE.—The term ‘‘baseline’’ means 
the historic greenhouse gas emission levels of an en-
tity, as adjusted upward by the Administrator to re-
flect actual reductions that are verified in accord-
ance with— 
(A) regulations promulgated under section 
101(c)(1); and 
(B) relevant standards and methods devel-
oped under this Act. 
(3) CARBON DIOXIDE EQUIVALENTS.—The term 
‘‘carbon dioxide equivalents’’ means, for each green-
house gas, the amount of each such greenhouse gas 
that makes the same contribution to global warming 
as one metric ton of carbon dioxide, as determined 
by the Administrator. 
(4) COVERED
SECTORS.—The term ‘‘covered 
sectors’’ means the electric power, transportation, 
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industrial, and commercial sectors, as such terms 
are used in the Inventory. 
(5) COVERED ENTITY.—The term ‘‘covered en-
tity’’ means an entity (including a branch, depart-
ment, agency, or instrumentality of Federal, State, 
or local government) that— 
(A) owns or controls a source of green-
house gas emissions in the electric power, in-
dustrial, or commercial sector of the United 
States economy (as defined in the Inventory), 
refines or imports refined petroleum products 
for use in transportation, or produces or im-
ports hydrofluorocarbons, perfluorocarbons, or 
sulfur hexafluoride; and 
(B) emits, from any single facility owned 
by the entity, over 10,000 metric tons of green-
house gas per year, measured in units of carbon 
dioxide equivalents, or— 
(i) refines or imports refined petro-
leum products that, when combusted, will 
emit; 
(ii) produces or imports hydrofluoro-
carbons, 
perfluorocarbons, 
or 
sulfur 
hexafluoride that, when used, will emit; or 
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(iii) produces or imports other green-
house gases that, when used, will emit, 
over 10,000 metric tons of greenhouse gas per 
year, measured in units of carbon dioxide 
equivalents. 
(6) DATABASE.—The term ‘‘database’’ means 
the National Greenhouse Gas Database established 
under section 101. 
(7) DIRECT
EMISSIONS.—The term ‘‘direct 
emissions’’ means greenhouse gas emissions by an 
entity from a facility that is owned or controlled by 
that entity. 
(8) FACILITY.—The term ‘‘facility’’ means a 
building, structure, or installation located on any 1 
or more contiguous or adjacent properties of an enti-
ty in the United States. 
(9) GREENHOUSE GAS.—The term ‘‘greenhouse 
gas’’ means— 
(A) carbon dioxide; 
(B) methane; 
(C) nitrous oxide; 
(D) hydrofluorocarbons; 
(E) perfluorocarbons; or 
(F) sulfur hexafluoride. 
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(10) INDIRECT EMISSIONS.—The term ‘‘indirect 
emissions’’ means greenhouse gas emissions that 
are— 
(A) a result of the activities of an entity; 
but 
(B) emitted from a facility owned or con-
trolled by another entity. 
(11) 
INVENTORY.—The 
term 
‘‘Inventory’’ 
means the Inventory of U.S. Greenhouse Gas Emis-
sions and Sinks, prepared in compliance with the 
United Nations Framework Convention on Climate 
Change Decision 3/CP.5. 
(12) LEAKAGE.—The term ‘‘leakage’’ means— 
(A) an increase in greenhouse gas emis-
sions by one facility or entity caused by a re-
duction in greenhouse gas emissions by another 
facility or entity; or 
(B) a decrease in sequestration that is 
caused by an increase in sequestration at an-
other location. 
(13) PERMANENCE.—The term ‘‘permanence’’ 
means the extent to which greenhouse gases that are 
sequestered will not later be returned to the atmos-
phere. 
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(14) REGISTRY.—The term ‘‘registry’’ means 
the registry of greenhouse gas emission reductions 
and increases in sequestration established under sec-
tion 101(b)(2). 
(15) 
SECRETARY.—The 
term 
‘‘Secretary’’ 
means the Secretary of Commerce. 
(16) SEQUESTRATION.— 
(A) IN GENERAL.—The term ‘‘sequestra-
tion’’ means the long-term capture, separation, 
isolation, or removal of greenhouse gases from 
the atmosphere. 
(B) INCLUSIONS.—The term ‘‘sequestra-
tion’’ includes, as the Administrator determines 
appropriate for carrying out this Act— 
(i) agricultural and conservation prac-
tices; 
(ii) reforestation; 
(iii) forest preservation; 
(iv) production of cellulosic biomass 
crops; and 
(v) any other method of long-term 
capture, separation, isolation, or removal 
of greenhouse gases from the atmosphere. 
(C) EXCLUSIONS.—The term ‘‘sequestra-
tion’’ does not include— 
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(i) any conversion of, or negative im-
pact on, a native ecosystem; or 
(ii) any introduction of non-native 
species. 
(17) SOURCE
CATEGORY.—The term ‘‘source 
category’’ means a process or activity that leads to 
direct emissions of greenhouse gases, as listed in the 
Inventory. 
(18) STATIONARY
SOURCE.—The term ‘‘sta-
tionary source’’ means any source of greenhouse gas 
emissions except those emissions resulting directly 
from an engine for transportation purposes. 
TITLE I—MARKET TO REDUCE 
GREENHOUSE GAS EMISSIONS 
Subtitle A—Tracking Emissions 
SEC. 101. NATIONAL GREENHOUSE GAS DATABASE AND 
REGISTRY ESTABLISHED. 
(a) ESTABLISHMENT.—As soon as practicable after 
the date of enactment of this Act, the Administrator, in 
coordination with the Secretary, the Secretary of Energy, 
the Secretary of Agriculture, State governments, and pri-
vate sector and nongovernmental organizations, shall es-
tablish, operate, and maintain a database, to be known 
as the ‘‘National Greenhouse Gas Database’’, to collect, 
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verify, and analyze data on greenhouse gas emissions by 
entities. 
(b) NATIONAL GREENHOUSE GAS DATABASE COM-
PONENTS.—The database shall consist of— 
(1) an inventory of greenhouse gas emissions; 
and 
(2) a registry of greenhouse gas emission reduc-
tions and increases in sequestrations. 
(c) COMPREHENSIVE SYSTEM.— 
(1) IN GENERAL.—Not later than 2 years after 
the date of enactment of this Act, the Administrator 
shall promulgate regulations to implement a com-
prehensive system for greenhouse gas emissions re-
porting, inventorying, and reduction and sequestra-
tion registration. 
(2) REQUIREMENTS.—The Administrator shall 
ensure, to the maximum extent practicable, that— 
(A) the comprehensive system described in 
paragraph (1) is designed to— 
(i) maximize completeness, trans-
parency, and accuracy of data reported; 
and 
(ii) minimize costs incurred by entities 
in measuring and reporting greenhouse gas 
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emissions, emission reductions, and seques-
trations; and 
(B) the regulations promulgated under 
paragraph (1) establish procedures and proto-
cols necessary— 
(i) to prevent the double-counting of 
greenhouse gas emissions, emission reduc-
tions, or sequestrations reported by more 
than 1 reporting entity; 
(ii) to provide for corrections to errors 
in data submitted to the database; 
(iii) to provide for adjustment to data 
by reporting entities that have had a sig-
nificant organizational change (including 
mergers, acquisitions, and divestiture), in 
order to maintain comparability among 
data in the database over time; 
(iv) to provide for adjustments to re-
flect new technologies or methods for 
measuring or calculating greenhouse gas 
emissions, emission reductions, or seques-
trations; 
(v) to account for changes in registra-
tion of ownership of emission reductions or 
increases in sequestration resulting from a 
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voluntary private transaction between re-
porting entities; 
(vi) to prevent a covered entity from 
avoiding the requirements of this Act by 
reorganization into multiple entities that 
are under common control; and 
(vii) to clarify the responsibility for 
reporting in the case of any facility owned 
or controlled by more than 1 entity. 
(3) SERIAL
NUMBERS.—Through regulations 
promulgated under paragraph (1), the Administrator 
shall develop and implement a system that pro-
vides— 
(A) for the provision of unique serial num-
bers to identify the registered emission reduc-
tions or increases in sequestration made by an 
entity; 
(B) for the tracking of the registered re-
ductions or sequestrations associated with the 
serial numbers; and 
(C) for such action as may be necessary to 
prevent counterfeiting of the registered reduc-
tions or sequestrations. 
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SEC. 102. INVENTORY OF GREENHOUSE GAS EMISSIONS 
FOR COVERED ENTITIES. 
(a) IN GENERAL.—Not later than July 1st of each 
calendar year after 2011, each covered entity shall submit 
to the Administrator a report that states, for the pre-
ceding calendar year, the entity-wide greenhouse gas emis-
sions in the United States (as reported at the facility 
level), including— 
(1) the total quantity of direct emissions from 
stationary sources, including process and fugitive 
emissions, expressed in units of carbon dioxide 
equivalents, except those reported under paragraph 
(3); 
(2) the amount of petroleum products refined 
or refined petroleum products imported by the entity 
for use in transportation and the amount of green-
house gases, expressed in units of carbon dioxide 
equivalents, that would be emitted when these prod-
ucts are used for transportation, as determined by 
the Administrator under section 121(b); 
(3) 
the 
amount 
of 
hydrofluorocarbons, 
perfluorocarbons, or sulfur hexafluoride, expressed 
in units of carbon dioxide equivalents, that are pro-
duced or imported by the entity and will ultimately 
be emitted in the United States, as determined by 
the Administrator under section 121(d); and 
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(4) such other categories of greenhouse gas 
emissions in the United States as the Administrator 
determines in the regulations promulgated under 
section 101(c)(1) may be practicable and useful for 
the purposes of this Act, such as indirect emissions. 
(b) COLLECTION AND ANALYSIS OF DATA.—The Ad-
ministrator shall collect and analyze data reported under 
subsection (a) for use under this title. 
SEC. 103. GREENHOUSE GAS REDUCTION REGISTRATION. 
(a) IN GENERAL.—Subject to the requirements de-
scribed in subsection (b)— 
(1) a covered entity may register greenhouse 
gas emission reductions and increases in sequestra-
tion achieved after 1990 and before 2012 under this 
section; and 
(2) an entity that is not a covered entity may 
register greenhouse gas emission reductions and in-
creases in sequestration achieved at any time since 
1990 under this section. 
(b) REQUIREMENTS.— 
(1) IN GENERAL.—The requirements referred 
to in subsection (a) are that an entity (other than 
an entity described in paragraph (2)) shall— 
(A) establish a baseline; and 
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(B) submit the report described in section 
102(a)(1). 
(2) REQUIREMENTS NOT APPLICABLE TO ENTI-
TIES ENTERING INTO CERTAIN AGREEMENTS.—An 
entity that enters into an agreement with a partici-
pant in the registry for the purpose of a carbon se-
questration project may register greenhouse gas 
emission reductions or sequestrations without being 
required to comply with the requirements specified 
in paragraph (1), unless that entity is required to 
comply with those requirements by reason of an ac-
tivity other than the agreement. 
(c) PROCEDURE.— 
(1) VOLUNTARY
REPORTING.—An entity de-
scribed in subsection (a) may submit to the Adminis-
trator for inclusion in the registry— 
(A) before January 1, 2012, data that re-
lates to any activity that resulted in the net re-
duction of the greenhouse gas emissions of the 
entity or an increase in sequestration by the en-
tity that were carried out during or after 1990 
and before the establishment of the database; 
and 
(B) with respect to the calendar year pre-
ceding the calendar year in which the data is 
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submitted, data that relates to any project or 
activity that resulted in the net reduction of the 
greenhouse gas emissions of the entity or a net 
increase in net sequestration by the entity. 
(2) PROVISION OF VERIFICATION INFORMATION 
BY REPORTING ENTITIES.—Each entity that submits 
a report under section 102(a) or this subsection 
shall provide information sufficient for the Adminis-
trator to verify, in accordance with measurement 
and verification methods and standards developed 
under section 104, that the report— 
(A) has been accurately reported; and 
(B) in the case of each voluntary report 
under paragraph (1), represents— 
(i) actual reductions in greenhouse 
gas emissions relative to historic emission 
levels of the entity; or 
(ii) actual increases in net sequestra-
tion. 
(3) FAILURE TO SUBMIT REPORT.—An entity 
that submits data for registration of emission reduc-
tions or increases in sequestration in the registry 
and that fails to submit a report required under this 
subsection shall be prohibited from using, or allow-
ing another entity to use, its registered emissions re-
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ductions or increases in sequestration to satisfy the 
requirements of section 121. 
(4) 
INDEPENDENT
THIRD-PARTY 
VERIFICATION.—To meet the requirements of this 
section and section 104, an entity that submits a re-
port under this section may— 
(A) 
obtain 
independent 
third-party 
verification; and 
(B) present the results of the third-party 
verification to the Administrator. 
(5) AVAILABILITY OF DATA.— 
(A) IN
GENERAL.—The Administrator 
shall ensure that information in the database 
is— 
(i) published; and 
(ii) accessible to the public, including 
in electronic format on the Internet. 
(B) EXCEPTION.—Subparagraph (A) shall 
not apply in any case in which the Adminis-
trator determines that publishing or otherwise 
making available information described in that 
subparagraph— 
(i) poses a risk to national security; or 
(ii) discloses confidential business in-
formation that can not be derived from in-
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formation that is otherwise publicly avail-
able and that would cause competitive 
harm if published. 
(6) DATA
INFRASTRUCTURE.—The Adminis-
trator shall ensure, to the maximum extent prac-
ticable, that the database uses, and is integrated 
with, Federal, State, and regional greenhouse gas 
data collection and reporting systems. 
(7) ADDITIONAL ISSUES TO BE CONSIDERED.— 
In promulgating the regulations under section 
101(c)(1) and implementing the database, the Ad-
ministrator shall take into consideration a broad 
range of issues involved in establishing an effective 
database, including— 
(A) the data and information systems and 
measures necessary to identify, track, and 
verify greenhouse gas emissions in a manner 
that will encourage private sector trading and 
exchanges; 
(B) the greenhouse gas reduction and se-
questration measurement and estimation meth-
ods and standards applied in other countries, as 
applicable or relevant; 
(C) the extent to which available data on 
fossil fuels, greenhouse gas emissions, and 
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greenhouse gas production, refining, and impor-
tation are adequate to implement the database; 
and 
(D) the differences in, and potential 
uniqueness of, the facilities, operations, and 
business and other relevant practices of persons 
and entities in the private and public sectors 
that may be expected to participate in the data-
base. 
(d) ANNUAL REPORT.—The Administrator shall pub-
lish an annual report that— 
(1) describes the total greenhouse gas emis-
sions, emission reductions, and increases in seques-
tration reported to the database during the year cov-
ered by the report; 
(2) provides entity-by-entity and sector-by-sec-
tor analyses of the emissions, emission reductions, 
and increases in sequestration reported; 
(3) describes the atmospheric concentrations of 
greenhouse gases; 
(4) provides a comparison of current and past 
atmospheric concentrations of greenhouse gases; and 
(5) describes the activity during the year cov-
ered by the report in the trading of greenhouse gas 
emission allowances. 
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SEC. 104. MEASUREMENT AND VERIFICATION. 
(a) METHODS AND STANDARDS.— 
(1) IN GENERAL.—Not later than 1 year after 
the date of enactment of this Act, the Administrator 
shall establish by rule, in coordination with the Sec-
retary, the Secretary of Energy, and the Secretary 
of Agriculture, comprehensive measurement and 
verification methods and standards to ensure a con-
sistent and technically accurate record of greenhouse 
gas emissions, emission reductions, sequestration, 
and atmospheric concentrations for use in the reg-
istry. 
(2) REQUIREMENTS.—The methods and stand-
ards established under paragraph (1) shall include— 
(A) a requirement that an entity submit-
ting data for the database use a continuous 
emissions monitoring system, or another system 
of measuring emissions, emission reductions, or 
increases in sequestration that is determined by 
the Administrator to provide information with 
precision, reliability, accessibility, and timeli-
ness similar to that provided by a continuous 
emissions monitoring system where techno-
logically feasible; 
(B) establishment of standardized meas-
urement and verification practices for reports 
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are not technologically feasible at present; 
and 
(ii) reporting the accuracy of such es-
timations; 
(D) establishment of measurement and 
verification standards applicable to actions 
taken to reduce or sequester greenhouse gas 
emissions; 
(E) in coordination with the Secretary of 
Agriculture, standards to measure the results of 
the use of carbon sequestration, including— 
(i) soil carbon sequestration practices; 
(ii) forest preservation and reforest-
ation activities that adequately address the 
issues 
of 
permanence, 
leakage, 
and 
verification; and 
(iii) production of cellulosic biomass 
crops; 
(F) establishment of standards for obtain-
ing the Administrator’s approval of the suit-
ability of geological storage sites that include 
evaluation of both the geology of the site and 
the entity’s capacity to manage the site; 
(G) establishment of other features that, 
as determined by the Administrator, will allow 
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entities to adequately establish a fair and reli-
able measurement and reporting system; and 
(H) establishment of such other measure-
ment and verification standards as the Adminis-
trator, in consultation with the Secretary of Ag-
riculture, the Secretary, and the Secretary of 
Energy, determines to be appropriate. 
(b) PUBLIC
PARTICIPATION.—The Administrator 
shall make available to the public for comment, in draft 
form and for a period of at least 90 days, the methods 
and standards developed under subsection (a) before 
issuing final regulations under this section. 
(c) EXPERTS AND CONSULTANTS.— 
(1) IN GENERAL.—The Administrator may ob-
tain the services of experts and consultants in the 
private and nonprofit sectors for the purpose of car-
rying out this section in accordance with section 
3109 of title 5, United States Code, in the areas of 
greenhouse gas measurement, certification, and 
emission trading. 
(2) AVAILABLE ARRANGEMENTS.—In obtaining 
any service described in paragraph (1), the Adminis-
trator may use any available grant, contract, cooper-
ative agreement, or other arrangement authorized by 
law. 
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(d) REVIEW
AND REVISION.—The Administrator 
shall periodically review, and revise as necessary, the 
methods and standards developed under subsection (a). 
Subtitle B—Mandating Emission 
Reductions 
SEC. 121. COVERED ENTITIES MUST SUBMIT ALLOWANCES 
FOR EMISSIONS. 
(a) IN GENERAL.—Beginning with calendar year 
2012— 
(1) each covered entity in the electric power, in-
dustrial, and commercial sectors shall submit to the 
Administrator one tradeable allowance for every 
metric ton of greenhouse gases, measured in units of 
carbon dioxide equivalents, that it emits from sta-
tionary sources, except those described in paragraph 
(2); 
(2) each producer or importer of hydro-
fluorocarbons, perfluorocarbons, or sulfur hexa-
fluoride that is a covered entity shall submit to the 
Administrator one tradeable allowance for every 
metric ton of hydrofluorocarbons, perfluorocarbons, 
or sulfur hexafluoride, measured in units of carbon 
dioxide equivalents, that it produces or imports and 
that are deemed under subsection (d) to be emitted 
in the United States; and 
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(3) each petroleum product refiner or importer 
that is a covered entity shall submit one tradeable 
allowance for every unit of petroleum product it sells 
that will produce one metric ton of greenhouse gases 
when used for transportation, measured in units of 
carbon dioxide equivalents, as determined by the Ad-
ministrator under subsection (b). 
(b) DETERMINATION OF TRANSPORTATION SECTOR 
AMOUNT.—For the transportation sector, the Adminis-
trator shall determine the amount of greenhouse gases, 
measured in units of carbon dioxide equivalents, that will 
be deemed to be emitted when petroleum products are 
used for transportation. 
(c) EXCEPTION
FOR CERTAIN DEPOSITED EMIS-
SIONS.—Notwithstanding subsection (a), a covered entity 
is not required to submit a tradeable allowance for any 
amount of greenhouse gas that would otherwise have been 
emitted from a facility under the ownership or control of 
that entity if— 
(1) the emission is deposited in a geological 
storage facility approved by the Administrator de-
scribed in section 104(a)(2)(F); and 
(2) the entity agrees to submit tradeable allow-
ances for any portion of the deposited emission that 
is subsequently emitted from that facility. 
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(d) DETERMINATION
OF
HYDROFLUOROCARBON, 
PERFLUOROCARBON, 
AND
SULFUR
HEXAFLUORIDE 
AMOUNT.—The 
Administrator 
shall 
determine 
the 
amounts of hydrofluorocarbons, perfluorocarbons, or sul-
fur hexafluoride, measured in units of carbon dioxide 
equivalents, that will be deemed to be emitted for purposes 
of this Act. 
(e) ALLOWANCES
RETIRED.—Upon receiving a 
tradeable allowance pursuant to a requirement under this 
subtitle, the Administrator shall retire the serial number 
assigned to that allowance. 
SEC. 122. COMPLIANCE. 
(a) SOURCE OF TRADEABLE ALLOWANCES USED.— 
A covered entity may use a tradeable allowance to meet 
the requirements of this subtitle without regard to whether 
the tradeable allowance was allocated to it under subtitle 
D or acquired from another entity or the Climate Change 
Credit Corporation established under section 201. 
(b) VERIFICATION BY ADMINISTRATOR.—At various 
times during each year, the Administrator shall determine 
whether each covered entity has met the requirements of 
this subtitle. In making that determination, the Adminis-
trator shall take into account the tradeable allowances 
submitted by the covered entity to the Administrator. 
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SEC. 123. EXEMPTION OF SOURCE CATEGORIES. 
(a) IN GENERAL.—The Administrator may grant an 
exemption from the requirements of this subtitle to a 
source category if the Administrator determines, after 
public notice and comment, that it is not feasible to meas-
ure or estimate emissions from that source category, until 
such time as measurement or estimation becomes feasible. 
(b) REDUCTION OF LIMITATIONS.—If the Adminis-
trator exempts a source category under subsection (a), the 
Administrator shall also reduce the total tradeable allow-
ances under section 124(a)(1), (2), (3), or (4), as applica-
ble, by the amount of greenhouse gas emissions that the 
exempted source category emitted in calendar year 2000, 
as identified in the 2000 Inventory. 
(c) LIMITATION ON EXEMPTION.—The Administrator 
may not grant an exemption under subsection (a) to car-
bon dioxide produced from fossil fuel. 
SEC. 124. ESTABLISHMENT OF TRADEABLE ALLOWANCES. 
(a) IN GENERAL.—The Administrator shall promul-
gate regulations to establish tradeable allowances, denomi-
nated in units of carbon dioxide equivalents, as follows: 
(1) For the first 8 calendar years beginning 
after 2011, the number of tradeable allowances shall 
be equal to 6,150 million metric tons, measured in 
units of carbon dioxide equivalents, reduced by the 
amount of emissions of greenhouse gases in calendar 
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established under subsection (a), and shall take such ac-
tion as may be necessary to prevent counterfeiting of 
tradeable allowances. 
(c) NATURE
OF
TRADEABLE
ALLOWANCES.—A 
tradeable allowance is not a property right, and nothing 
in this title or any other provision of law limits the author-
ity of the United States to terminate or limit a tradeable 
allowance. 
(d) NON-COVERED ENTITY.—For purposes of this 
section only, the term ‘‘non-covered entity’’ means an enti-
ty that— 
(1) owns or controls a source of greenhouse gas 
emissions in the electric power, industrial, or com-
mercial sector of the United States economy (as de-
fined in the Inventory), refines or imports refined 
petroleum products for use in transportation, or pro-
duces or imports hydrofluorocarbons, perfluorocar-
bons, or sulfur hexafluoride; and 
(2) is not a covered entity. 
SEC. 125. PENALTIES. 
Any covered entity that fails to meet the require-
ments of this subtitle for a year shall be liable for a civil 
penalty, payable to the Administrator, equal to thrice the 
market value (determined as of the last day of the year 
at issue) of the tradeable allowances that would be nec-
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essary for that covered entity to meet those requirements 
on the date that the tradeable allowances were due. 
Subtitle C—Controlling 
Compliance Costs 
SEC. 141. TRADING. 
(a) IN GENERAL.—Tradeable allowances may be sold, 
exchanged, purchased, retired, or used as provided in this 
Act. 
(b) INTERSECTOR TRADING.—Covered entities may 
purchase or otherwise acquire tradeable allowances from 
other covered sectors to satisfy the requirements of this 
title, in addition to those from within their own sector. 
SEC. 142. BANKING. 
Tradeable allowances not used to satisfy the require-
ments of this title in a year may be used to satisfy the 
requirements in a later year. 
SEC. 143. BORROWING AGAINST FUTURE REDUCTIONS. 
(a) IN GENERAL.—The Administrator shall establish 
a program under which a covered entity may— 
(1) receive a credit in the current calendar year 
for anticipated reductions in emissions in a future 
calendar year; and 
(2) use the credit in lieu of a tradeable allow-
ance to meet the requirements of this title for the 
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current calendar year, subject to the limitation im-
posed by subsection (b). 
(b) DETERMINATION OF TRADEABLE ALLOWANCE 
CREDITS.—The Administrator may make credits available 
under subsection (a) only for anticipated reductions in 
emissions that— 
(1) are attributable to the realization of capital 
investments in equipment, the construction, recon-
struction, or acquisition of facilities, or the deploy-
ment of new technologies— 
(A) for which the covered entity has exe-
cuted a binding contract and secured, or ap-
plied for, all necessary permits and operating or 
implementation authority; 
(B) that will not become operational within 
the current calendar year; and 
(C) that will become operational and begin 
to reduce emissions from the covered entity 
within 5 years after the year in which the credit 
is used; and 
(2) will be realized within 5 years after the year 
in which the credit is used. 
(c) CARRYING COST.—If a covered entity uses a cred-
it under this section to meet the requirements of this title 
for a calendar year (in this subsection referred to as the 
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use year), the tradeable allowance requirement for the 
year from which the credit was taken (in this subsection 
referred to as the source year) shall be increased by an 
amount equal to— 
(1) 10 percent for each credit borrowed from 
the source year; multiplied by 
(2) the number of years after the use year that 
the source year occurs. 
(d) MAXIMUM BORROWING PERIOD.—A credit from 
a year beginning more than 5 years after the current year 
may not be used to meet the requirements of this title 
for the current year. 
(e) FAILURE TO ACHIEVE REDUCTIONS GENER-
ATING CREDIT.—If a covered entity that uses a credit 
under this section fails to achieve the anticipated reduc-
tion for which the credit was granted for the year from 
which the credit was taken, then— 
(1) the covered entity’s requirements under this 
Act for that year shall be increased by the amount 
of the credit, plus the amount determined under 
subsection (c); 
(2) any tradeable allowances submitted by the 
covered entity for that year shall be counted first 
against the increase in those requirements; and 
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(3) the covered entity may not use credits 
under this section to meet the increased require-
ments. 
SEC. 144. DOMESTIC OFFSETS. 
(a) ALTERNATIVE MEANS OF COMPLIANCE.—A cov-
ered entity may satisfy up to 15 percent of its total allow-
ance submission requirement under section 121 by any 
combination of the following: 
(1) Submitting tradeable allowances from an-
other nation’s market in greenhouse gas emissions 
if— 
(A) the Administrator determines that the 
other nation’s system for trading in greenhouse 
gas emissions is complete, accurate, and trans-
parent and reviews that determination at least 
once every 5 years; 
(B) the other nation has adopted enforce-
able limits on its greenhouse gas emissions 
which the tradeable allowances were issued to 
implement; and 
(C) the covered entity certifies that the 
tradeable allowance has been retired unused in 
the other nation’s market. 
(2) Submitting a registered net increase in se-
questration, as registered in the database, adjusted, 
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if necessary, to comply with the accounting stand-
ards and methods described in subsection (c). An in-
crease in sequestration submitted under this para-
graph need not have been registered by the covered 
entity submitting it. 
(3) Submitting a greenhouse gas emissions re-
duction (other than a registered net increase in se-
questration) that was registered in the database by 
a person that is not a covered entity. 
(4) Submitting credits obtained by the submit-
ting covered entity from the Administrator under 
section 143 or section 145. 
(b) DEDICATED PROGRAM FOR SEQUESTRATION IN 
AGRICULTURAL SOILS.—If a covered entity satisfies a full 
15 percent of its total allowance submission requirements 
pursuant to subsection (a), it shall satisfy up to 1.5 per-
cent of its total allowance submission requirement by sub-
mitting registered net increases in sequestration in agri-
cultural soils, as registered in the database, adjusted, if 
necessary, to comply with the accounting standards and 
methods described in subsection (c). 
(c) SEQUESTRATION ACCOUNTING.— 
(1) SEQUESTRATION
ACCOUNTING.—If a cov-
ered entity uses a registered net increase in seques-
tration to satisfy the requirements of section 121 for 
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any year, that covered entity shall submit informa-
tion to the Administrator every 5 years thereafter 
sufficient to allow the Administrator to determine, 
using the methods and standards created under sec-
tion 104, whether that net increase in sequestration 
still exists. The covered entity shall offset any loss 
of sequestration by submitting additional tradeable 
allowances of equivalent amount in the calender year 
following that determination. 
(2) REGULATIONS
REQUIRED.—The Adminis-
trator, in coordination with the Secretary of Agri-
culture, the Secretary of Energy, and the Secretary, 
shall issue regulations establishing the sequestration 
accounting rules for all classes of sequestration 
projects. 
(3) CRITERIA FOR REGULATIONS.—In issuing 
regulations under this subsection, the Administrator 
shall use the following criteria: 
(A) If the range of possible amounts of net 
increase in sequestration for a particular class 
of sequestration project is not more than 10 
percent of the median of that range, the 
amount of sequestration credited shall be equal 
to the median value of that range. 
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(B) If the range of possible amounts of net 
increase in sequestration for a particular class 
of sequestration project is more than 10 percent 
of the median of that range, the amount of se-
questration awarded shall be equal to the fifth 
percentile of that range. 
(C) The regulations shall include proce-
dures for accounting for potential leakage from 
sequestration projects and for ensuring that 
any registered increase in sequestration is in 
addition that which would have occurred if this 
Act had not been enacted. 
(4) UPDATES.—The Administrator shall update 
the sequestration accounting rules for every class of 
sequestration project at least once every 5 years. 
SEC. 145. INTERNATIONAL CREDITS PLAN. 
(a) ESTABLISHMENT.—The Administrator shall es-
tablish a program the purposes of which are— 
(1) to assist developing countries in achieving 
sustainable development and in contributing to the 
objective of reducing the greenhouse gas emissions; 
and 
(2) to assist covered entities in achieving com-
pliance with the requirements of section 121. 
(b) PROGRAM COMPONENTS.— 
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(1) IN GENERAL.—The program shall provide 
for the earning of tradable allowances by covered en-
tities from project activities in developing countries 
resulting in certified emission reductions. The Ad-
ministrator shall ensure tradability of emission re-
ductions earned under this program with reductions 
earned under other similar international programs. 
(2) APPROVAL
CRITERIA
AND
REVIEW
PROC-
ESS.—By no later than 2011, the Administrator 
shall— 
(A) develop criteria for the approval of 
projects submitted for review; and 
(B) establish a review process for sub-
mitted projects that includes a procedure for 
providing the results of the review, together 
with an explanation of the reasons for approv-
ing or denying approval of a submitted project, 
to the entity that submitted the project. 
(3) FEES.—The Administrator may charge an 
application fee for the review of project proposals to 
cover the administrative costs of the program. 
(4) CERTIFICATION OF RESULTS REQUIRED.— 
The Administrator shall require entities partici-
pating in this program to obtain independent third- 
party verification that— 
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(A) participation by all parties involved in 
the project is voluntary; and 
(B) the project produces— 
(i) real, measurable, and long-term 
benefits related to the mitigation of climate 
change; and 
(ii) reductions in emissions that are 
additional to any that would occur in the 
absence of the certified project activity. 
(c) USE OF ALLOWANCES.—Subject to the limitation 
in section 144(a), tradable allowances earned under the 
program may be used to meet the requirements of section 
121. 
(d) STUDY.—Within 3 years after the date of enact-
ment of this Act, the Administrator, in coordination with 
the Secretary, shall conduct a study of the impacts of the 
compliance cost reduction measures of this section and 
section 144 on achieving the purposes of this Act. The 
Administrator shall submit the results of the study to the 
Congress along with any recommendations the Adminis-
trator considers appropriate. 
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Subtitle D—Establishment and 
Allocation of Tradeable Allowances 
SEC. 161. DETERMINATION OF TRADEABLE ALLOWANCE 
ALLOCATIONS. 
(a) IN GENERAL.—The Administrator shall annually 
determine— 
(1) the amount of tradeable allowances to be al-
located to each covered sector; and 
(2) the amount of tradeable allowances to be al-
located to the Climate Change Credit Corporation 
established under section 201. 
(b) ALLOCATION FACTORS.—In making the deter-
mination required by subsection (a), the Administrator 
shall consider— 
(1) the distributive effect of the allocations on 
household income and net worth of individuals; 
(2) the impact of the allocations on corporate 
income, taxes, and asset value; 
(3) the impact of the allocations on income lev-
els of consumers and on their energy consumption; 
(4) the effects of the allocations in terms of eco-
nomic efficiency; 
(5) the ability of covered entities to pass 
through compliance costs to their customers; 
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(6) the degree to which the amount of alloca-
tions to the covered sectors should decrease over 
time; 
(7) the need to maintain the international com-
petitiveness of United States manufacturing and 
avoid the additional loss of United States manufac-
turing jobs; and 
(8) the necessary funding levels for the initia-
tives and programs described in section 202. 
(c) ALLOCATION RECOMMENDATIONS
AND IMPLE-
MENTATION.—Not later than 24 months after the date of 
enactment of this Act, and annually thereafter, the Ad-
ministrator shall submit the determinations under sub-
section (a) to the Committee on Commerce, Science, and 
Transportation and the Committee on Environment and 
Public Works of the Senate, and to the Committee on 
Science and Technology and the Committee on Energy 
and Commerce of the House of Representatives. The Ad-
ministrator’s determinations under subsection (a)(1), and 
the allocations and provision of tradeable allowances pur-
suant to that determination, are deemed to be a major 
rule (as defined in section 804(2) of title 5, United States 
Code), and subject to the provisions of chapter 8 of that 
title. 
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SEC. 162. PROVISION OF TRADEABLE ALLOWANCES. 
(a) IN GENERAL.—The Administrator shall, by regu-
lation, establish a process for providing tradeable allow-
ances without cost to covered entities described in sub-
paragraphs (A) and (B)(i) and (ii) of section 3(5) that 
will— 
(1) encourage investments that increase the ef-
ficiency of the processes that produce greenhouse 
gas emissions; 
(2) minimize the costs to the Government of 
providing the tradeable allowances; 
(3) give credit to covered entities for emissions 
reductions made before 2012 and registered with the 
database; and 
(4) provide sufficient tradeable allowances for 
new entrants into the sector. 
(b) ALLOCATION TO COVERED ENTITIES IN STATES 
ADOPTING MANDATORY GREENHOUSE GAS EMISSIONS 
REDUCTION PROGRAMS.—For a covered entity operating 
in any State that has adopted a legally binding and en-
forceable program to achieve and maintain greenhouse gas 
emission reductions that are consistent with, or more 
stringent than, reductions mandated by this Act, and 
which requirements are effective prior to 2012, the Ad-
ministrator shall consider such binding State actions in 
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making the final determination of allocation to such cov-
ered entities. 
SEC. 163. ENSURING TARGET ADEQUACY. 
(a) IN GENERAL.—Beginning 2 years after the date 
of enactment of this Act, the Under Secretary of Com-
merce for Oceans and Atmosphere shall review the amount 
of allowances established under section 124 no less fre-
quently than biennially— 
(1) to re-evaluate the levels established by that 
section, after taking into account the best available 
science and the most currently available data; and 
(2) to re-evaluate the environmental and public 
health impacts of specific concentration levels of 
greenhouse gases, 
to determine whether the amount of those allowances con-
tinues to be consistent with the objective of the United 
Nations’ Framework Convention on Climate Change of 
stabilizing levels of greenhouse gas emissions at a level 
that will prevent dangerous anthropogenic interference 
with the climate system. 
(b) REVIEW OF 2012 LEVELS.—The Under Secretary 
shall specifically review in 2010 the level established under 
section 124(a)(1), and transmit a report on his reviews, 
together with any recommendations, including legislative 
recommendations, for modification of the levels, to the 
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Committee on Commerce, Science, and Transportation 
and the Committee on Environment and Public Works of 
the Senate, and to the Committee on Science and Tech-
nology and the Committee on Energy and Commerce of 
the House of Representatives. 
SEC. 164. INITIAL ALLOCATIONS FOR EARLY PARTICIPA-
TION AND ACCELERATED PARTICIPATION. 
Before providing any tradeable allowances under sec-
tion 162, the Administrator shall allocate— 
(1) to any covered entity an amount of 
tradeable allowances equivalent to the amount of 
greenhouse gas emission reductions registered by 
that covered entity in the database if— 
(A) the covered entity has requested to use 
the registered reduction in the year of alloca-
tion; 
(B) the reduction was registered prior to 
2012; and 
(C) the Administrator retires the unique 
serial number assigned to the reduction under 
section 101(c)(3); and 
(2) to any covered entity that has entered into 
an accelerated participation agreement under section 
165, such tradeable allowances as the Administrator 
has determined to be appropriate under that section. 
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SEC. 165. BONUS FOR ACCELERATED PARTICIPATION. 
(a) IN GENERAL.—If a covered entity executes an 
agreement with the Administrator under which it agrees 
to reduce its level of greenhouse gas emissions to a level 
no greater than the level of its greenhouse gas emissions 
for calendar year 1990 by the year 2012, then, for the 
6-year period beginning with calendar year 2012, the Ad-
ministrator shall— 
(1) provide additional tradeable allowances to 
that entity when allocating allowances under section 
164 in order to recognize the additional emission re-
ductions that will be required of the covered entity; 
(2) allow that entity to satisfy 20 percent (in 
addition to the amount authorized under section 
144(a)) of its requirements under section 121 by 
any combination of— 
(A) submitting tradeable allowances from 
another nation’s market in greenhouse gas 
emissions under the conditions described in sec-
tion 144(a)(1); 
(B) submitting a registered net increase in 
sequestration, as registered in the database, ad-
justed, if necessary, to comply with the account-
ing standards and methods described in section 
144(c); and 
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(C) submitting a greenhouse gas emission 
reduction (other than a registered net increase 
in sequestration) that was registered in the 
database by a person that is not a covered enti-
ty. 
(b) TERMINATION.—An entity that executes an 
agreement described in subsection (a) may terminate the 
agreement at any time. 
(c) FAILURE TO MEET COMMITMENT.—If an entity 
that executes an agreement described in subsection (a) 
fails to achieve the level of emissions to which it committed 
by calendar year 2012, including through termination 
under subsection (b)— 
(1) its requirements under section 121 shall be 
increased by the amount of any tradeable allowances 
provided to it under subsection (a)(1) of this section; 
and 
(2) any tradeable allowances submitted there-
after shall be counted first against the increase in 
those requirements. 
TITLE II—CLIMATE CHANGE 
CREDIT CORPORATION 
SEC. 201. ESTABLISHMENT. 
(a) IN GENERAL.—The Climate Change Credit Cor-
poration (in this title referred to as the ‘‘Corporation’’) 
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