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 pur-
poses. 
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 fol-
lowing bill; which was referred to the Committee on Science, and in addi-
tion to the Committee on Energy and Commerce, for a period to be sub-
sequently 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 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.
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 2004’’. 
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—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.
Sec. 335. Initial allocations for early participation and accelerated partici-
pation. 
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. 
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 
201(c)(1); and 
(B) relevant standards and methods devel-
oped under this title. 
(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 electricity, transportation, indus-
try, 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 petroleum products for use in 
transportation, 
or 
produces 
or 
imports 
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 produces or imports— 
(i) petroleum products that, when 
combusted, will emit, 
(ii) 
hydrofluorocarbons, 
perfluoro-
carbons, or sulfur hexafluoride that, when 
used, will emit, or
(iii) other greenhouse 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 201. 
(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.
(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.
(14) REGISTRY.—The term ‘‘registry’’ means 
the registry of greenhouse gas emission reductions 
established under section 201(b)(2). 
(15) 
SECRETARY.—The 
term 
‘‘Secretary’’ 
means the Secretary of Commerce. 
(16) SEQUESTRATION.— 
(A) IN GENERAL.—The term ‘‘sequestra-
tion’’ means the capture, long-term separation, 
isolation, or removal of greenhouse gases from 
the atmosphere. 
(B) INCLUSIONS.—The term ‘‘sequestra-
tion’’ includes— 
(i) agricultural and conservation prac-
tices; 
(ii) reforestation; 
(iii) forest preservation; and 
(iv) any other appropriate method of 
capture, long-term separation, isolation, or 
removal of greenhouse gases from the at-
mosphere, as determined by the Adminis-
trator. 
(C) EXCLUSIONS.—The term ‘‘sequestra-
tion’’ does not include— 
(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 generally any source of 
greenhouse gases except those emissions resulting di-
rectly from an engine for transportation purposes. 
TITLE 
I—FEDERAL 
CLIMATE 
CHANGE RESEARCH AND RE-
LATED ACTIVITIES 
SEC. 101. NATIONAL SCIENCE FOUNDATION FELLOWSHIPS. 
The Director of the National Science Foundation 
shall establish a fellowship program for students pursuing 
graduate studies in global climate change, including capa-
bility in observation, analysis, modeling, paleoclimatology, 
consequences, and adaptation. 
SEC. 102. RESEARCH GRANTS. 
Section 105 of the Global Change Research Act of 
1990 (15 U.S.C. 2935) is amended— 
(1) by redesignating subsection (c) as sub-
section (d); and
(2) by inserting after subsection (b) the fol-
lowing: 
‘‘(c) RESEARCH GRANTS.— 
‘‘(1) COMMITTEE TO DEVELOP LIST OF PRI-
ORITY RESEARCH AREAS.—The Committee shall de-
velop a list of priority areas for research and devel-
opment on climate change that are not being ad-
dressed by Federal agencies. 
‘‘(2) DIRECTOR OF OSTP TO TRANSMIT LIST TO 
NSF.—The Director of the Office of Science and 
Technology Policy shall transmit the list to the Na-
tional Science Foundation. 
‘‘(3) FUNDING THROUGH NSF.— 
‘‘(A) BUDGET
REQUEST.—The National 
Science Foundation shall include, as part of the 
annual request for appropriations for the 
Science and Technology Policy Institute, a re-
quest for appropriations to fund research in the 
priority areas on the list developed under para-
graph (1). 
‘‘(B) AUTHORIZATION.—For fiscal year 
2005 and each fiscal year thereafter, there are 
authorized to be appropriated to the National 
Science Foundation not less than $25,000,000, 
to be made available through the Science and
Technology Policy Institute, for research in 
those priority areas.’’. 
SEC. 103. ABRUPT CLIMATE CHANGE RESEARCH. 
(a) IN GENERAL.—The Secretary, through the Na-
tional Oceanic and Atmospheric Administration, shall 
carry out a program of scientific research on potential ab-
rupt climate change designed— 
(1) to develop a global array of terrestrial and 
oceanographic indicators of paleoclimate in order 
sufficiently to identify and describe past instances of 
abrupt climate change; 
(2) to improve understanding of thresholds and 
nonlinearities in geophysical systems related to the 
mechanisms of abrupt climate change; 
(3) to incorporate these mechanisms into ad-
vanced geophysical models of climate change; and 
(4) to test the output of these models against 
an improved global array of records of past abrupt 
climate changes. 
(b) ABRUPT CLIMATE CHANGE DEFINED.—In this 
section, the term ‘‘abrupt climate change’’ means a change 
in climate that occurs so rapidly or unexpectedly that 
human or natural systems may have difficulty adapting 
to it.
(c) AUTHORIZATION
OF APPROPRIATIONS.—There 
are authorized to be appropriated to the Secretary for fis-
cal year 2005 $60,000,000 to carry out this section, such 
sum to remain available until expended. 
SEC. 104. NIST GREENHOUSE GAS FUNCTIONS. 
Section 2(c) of the National Institute of Standards 
and Technology Act (15 U.S.C. 272(c)) is amended— 
(1) by striking ‘‘and’’ after the semicolon in 
paragraph (21); 
(2) by redesignating paragraph (22) as para-
graph (23); and 
(3) by inserting after paragraph (21) the fol-
lowing: 
‘‘(22) perform research to develop enhanced 
measurements, calibrations, standards, and tech-
nologies which will facilitate activities that reduce 
emissions of greenhouse gases or increase sequestra-
tion of greenhouse gases, including carbon dioxide, 
methane, nitrous oxide, ozone, perfluorocarbons, 
hydrofluorocarbons, and sulfur hexafluoride; and’’. 
SEC. 105. DEVELOPMENT OF NEW MEASUREMENT TECH-
NOLOGIES. 
To facilitate implementation of section 204, the Sec-
retary shall initiate a program to develop, with technical 
assistance from appropriate Federal agencies, innovative
standards and measurement technologies to calculate 
greenhouse gas emissions or reductions for which no accu-
rate or reliable measurement technology exists. The pro-
gram shall include— 
(1) technologies (including remote sensing tech-
nologies) to measure carbon changes and other 
greenhouse gas emissions and reductions from agri-
culture, forestry, and other land use practices; and 
(2) technologies to calculate non-carbon dioxide 
greenhouse gas emissions from transportation. 
SEC. 106. ENHANCED ENVIRONMENTAL MEASUREMENTS 
AND STANDARDS. 
The National Institute of Standards and Technology 
Act (15 U.S.C. 271 et seq.) is amended— 
(1) by redesignating sections 17 through 32 as 
sections 18 through 33, respectively; and 
(2) by inserting after section 16 the following: 
‘‘SEC. 17. CLIMATE CHANGE STANDARDS AND PROCESSES. 
‘‘(a) IN GENERAL.—The Director shall establish 
within the Institute a program to perform and support re-
search on global climate change standards and processes, 
with the goal of providing scientific and technical knowl-
edge applicable to the reduction of greenhouse gases (as 
defined in section 3 of the Climate Stewardship Act of
2004) and of facilitating implementation of section 204 
of that Act. 
‘‘(b) RESEARCH PROGRAM.— 
‘‘(1) IN GENERAL.—The Director is authorized 
to conduct, directly or through contracts or grants, 
a global climate change standards and processes re-
search program. 
‘‘(2) RESEARCH PROJECTS.—The specific con-
tents and priorities of the research program shall be 
determined in consultation with appropriate Federal 
agencies, including the Environmental Protection 
Agency, the National Oceanic and Atmospheric Ad-
ministration, and the National Aeronautics and 
Space Administration. The program generally shall 
include basic and applied research— 
‘‘(A) to develop and provide the enhanced 
measurements, calibrations, data, models, and 
reference material standards which will enable 
the monitoring of greenhouse gases; 
‘‘(B) to assist in establishing a baseline 
reference point for future trading in greenhouse 
gases and the measurement of progress in emis-
sions reduction; 
‘‘(C) that will be exchanged internationally 
as scientific or technical information which has
the stated purpose of developing mutually rec-
ognized measurements, standards, and proce-
dures for reducing greenhouse gases; and 
‘‘(D) to assist in developing improved in-
dustrial processes designed to reduce or elimi-
nate greenhouse gases. 
‘‘(c) NATIONAL MEASUREMENT LABORATORIES.— 
‘‘(1) IN GENERAL.—In carrying out this sec-
tion, the Director shall utilize the collective skills of 
the National Measurement Laboratories of the Na-
tional Institute of Standards and Technology to im-
prove the accuracy of measurements that will permit 
better understanding and control of industrial chem-
ical processes and result in the reduction or elimi-
nation of greenhouse gases. 
‘‘(2) MATERIAL, PROCESS, AND BUILDING RE-
SEARCH.—The National Measurement Laboratories 
shall conduct research under this subsection that in-
cludes— 
‘‘(A) developing material and manufac-
turing processes which are designed for energy 
efficiency and reduced greenhouse gas emissions 
into the environment; 
‘‘(B) developing chemical processes to be 
used by industry that, compared to similar
processes in commercial use, result in reduced 
emissions of greenhouse gases or increased se-
questration of greenhouse gases; and 
‘‘(C) enhancing building performance with 
a focus in developing standards or tools which 
will help incorporate low- or no-emission tech-
nologies into building designs. 
‘‘(3) STANDARDS
AND
TOOLS.—The National 
Measurement Laboratories shall develop standards 
and tools under this subsection that include software 
to assist designers in selecting alternate building 
materials, performance data on materials, artificial 
intelligence-aided design procedures for building sub-
systems and ‘smart buildings’, and improved test 
methods and rating procedures for evaluating the 
energy performance of residential and commercial 
appliances and products. 
‘‘(d) NATIONAL VOLUNTARY LABORATORY ACCREDI-
TATION PROGRAM.—The Director shall utilize the Na-
tional Voluntary Laboratory Accreditation Program under 
this section to establish a program to include specific cali-
bration or test standards and related methods and proto-
cols assembled to satisfy the unique needs for accredita-
tion in measuring the production of greenhouse gases. In 
carrying out this subsection the Director may cooperate
with other departments and agencies of the Federal Gov-
ernment, State and local governments, and private organi-
zations.’’. 
SEC. 107. TECHNOLOGY DEVELOPMENT AND DIFFUSION. 
The Director of the National Institute of Standards 
and Technology, through the Manufacturing Extension 
Partnership Program, may develop a program to promote 
the use, by the more than 380,000 small manufacturers, 
of technologies and techniques that result in reduced emis-
sions of greenhouse gases or increased sequestration of 
greenhouse gases. 
SEC. 108. AGRICULTURAL OUTREACH PROGRAM. 
(a) IN GENERAL.—The Secretary of Agriculture, act-
ing through the Global Change Program Office and in 
consultation with the heads of other appropriate depart-
ments and agencies, shall establish the Climate Change 
Education and Outreach Initiative Program to educate, 
and reach out to, agricultural organizations and individual 
farmers on global climate change. 
(b) PROGRAM COMPONENTS.—The program— 
(1) shall be designed to ensure that agricultural 
organizations and individual farmers receive detailed 
information about— 
(A) the potential impact of climate change 
on their operations and well-being;
(B) market-driven economic opportunities 
that may come from storing carbon in soils and 
vegetation, including emerging private sector 
markets for carbon storage; and 
(C) techniques for measuring, monitoring, 
verifying, and inventorying such carbon capture 
efforts; 
(2) may incorporate existing efforts in any area 
of activity referenced in paragraph (1) or in related 
areas of activity; 
(3) shall provide— 
(A) outreach materials to interested par-
ties; 
(B) workshops; and 
(C) technical assistance; and 
(4) may include the creation and development 
of regional centers on climate change or coordination 
with existing centers (including such centers within 
NRCS and the Cooperative State Research Edu-
cation and Extension Service). 
SEC. 109. NOAA REPORT ON CLIMATE CHANGE EFFECTS; 
PREPARATION ASSISTANCE. 
The Coastal Zone Management Act of 1972 (16 
U.S.C. 1451 et seq.) is amended by adding at the end 
the following:
‘‘REPORT ON EFFECTS OF CLIMATE CHANGE 
‘‘SEC. 320. (a) IN GENERAL.—The Secretary shall 
report to the Congress not later than 2 years after the 
date of enactment of this section, and every 5 years there-
after, on the possible and projected impacts of climate 
change on— 
‘‘(1) oceanic and coastal ecosystems, including 
marine fish and wildlife and their habitat, and the 
commercial and recreational fisheries and tourism 
industries associated with them; and 
‘‘(2) coastal communities, including private resi-
dential and commercial development and public in-
frastructure in the coastal zone. 
‘‘(b) CONTENTS.—Each report under this section 
shall include information regarding— 
‘‘(1) the impacts that may be due to climate 
change that have occurred as of the date of the sub-
mission of the report; and 
‘‘(2) the projected future impacts of climate 
change. 
‘‘(c) IMPACTS.—The impacts reported on under sub-
section (b) shall include any— 
‘‘(1) increases in sea level; 
‘‘(2) increases in storm activity and intensity;
‘‘(3) increases in floods, droughts, and other ex-
tremes of weather; 
‘‘(4) increases in the temperature of the air and 
the water on oceanic and coastal ecosystems, with a 
particular focus on vulnerable fisheries and eco-
systems; and 
‘‘(5) changes in the acidity of the ocean surface 
associated with an increase in concentration of car-
bon dioxide in the atmosphere. 
‘‘CLIMATE CHANGE PREPARATION ASSISTANCE 
‘‘SEC. 321. (a) IN GENERAL.—The Secretary shall 
provide technical assistance to each coastal state that has 
an approved coastal zone management plan under this 
title, to assist such States in preparing persons living with-
in their coastal zones to adapt to climate change. 
‘‘(b) IDENTIFICATION OF AFFECTED AREAS AND AD-
APTATIONS.—In carrying out this section, the Secretary 
shall— 
‘‘(1) identify the projected impacts of climate 
change to which persons located in coastal zones 
may need to adapt, including— 
‘‘(A) increases in sea level; 
‘‘(B) increases in storm activity and inten-
sity; and 
‘‘(C) increases in floods, droughts, and 
other extremes of weather;
‘‘(2) identify the specific coastal areas of the 
United States, and the public and private develop-
ment in coastal communities and the natural re-
sources of the coastal zone, that are vulnerable to 
the impacts identified under paragraph (1); 
‘‘(3) identify the various adaptation measures 
that may be used to protect the areas and resources 
identified under paragraph (2) from the impacts 
identified under paragraph (1); and 
‘‘(4) estimate the costs of the adaptation meas-
ures identified under paragraph (3).’’. 
TITLE II—NATIONAL 
GREENHOUSE GAS DATABASE 
SEC. 201. 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, and private sector and non-
governmental organizations, shall establish, operate, and 
maintain a database, to be known as the ‘‘National Green-
house Gas Database’’, to collect, verify, and analyze infor-
mation 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 greenhouse gas sequestra-
tions. 
(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 reductions 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 information re-
ported; and 
(ii) minimize costs incurred by entities 
in measuring and reporting greenhouse gas 
emissions; and 
(B) the regulations promulgated under 
paragraph (1) establish procedures and proto-
cols necessary—
(i) to prevent the double-counting of 
greenhouse gas emissions or emission re-
ductions 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; 
(v) to account for changes in registra-
tion of ownership of emission reductions 
resulting from a voluntary private trans-
action between reporting entities; and 
(vi) to clarify the responsibility for re-
porting 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 verification of submitted emis-
sions reductions registered under section 203; 
(B) for the provision of unique serial num-
bers to identify the registered emission reduc-
tions made by an entity relative to the baseline 
of the entity; 
(C) for the tracking of the registered re-
ductions associated with the serial numbers; 
and 
(D) for such action as may be necessary to 
prevent counterfeiting of the registered reduc-
tions. 
SEC. 202. INVENTORY OF GREENHOUSE GAS EMISSIONS 
FOR COVERED ENTITIES. 
(a) IN GENERAL.—Not later than July 1st of each 
calendar year after 2008, 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 (as reported at the facility level), including— 
(1) the total quantity of direct greenhouse gas 
emissions from stationary sources, expressed in units 
of carbon dioxide equivalents, except those reported 
under paragraph (3);
(2) the amount of petroleum products sold or 
imported by the entity 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 in the United 
States, as determined by the Administrator under 
section 301(b); 
(3) 
the 
amount 
of 
hydrofluorocarbons, 
perfluorocarbons, or sulfur hexafluoride, expressed 
in units of carbon dioxide equivalents, that are sold 
or imported by the entity and will ultimately be 
emitted in the United States, as determined by the 
Administrator under section 301(d); and 
(4) such other categories of emissions as the 
Administrator determines in the regulations promul-
gated under section 201(c)(1) may be practicable 
and useful for the purposes of this Act, such as— 
(A) indirect emissions from imported elec-
tricity, heat, and steam; 
(B) process and fugitive emissions; and 
(C) production or importation of green-
house gases. 
(b) COLLECTION AND ANALYSIS OF DATA.—The Ad-
ministrator shall collect and analyze information reported 
under subsection (a) for use under title III.
SEC. 203. GREENHOUSE GAS REDUCTION REPORTING. 
(a) IN GENERAL.—Subject to the requirements de-
scribed in subsection (b)— 
(1) a covered entity may register greenhouse 
gas emission reductions achieved after 1990 and be-
fore 2010 under this section; and 
(2) an entity that is not a covered entity may 
register greenhouse gas emission reductions 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 
(B) submit the report described in sub-
section (c)(1). 
(2) REQUIREMENTS APPLICABLE TO ENTITIES 
ENTERING INTO CERTAIN AGREEMENTS.—An entity 
that enters into an agreement with a participant in 
the registry for the purpose of a carbon sequestra-
tion project shall not be required to comply with the 
requirements specified in paragraph (1) unless that 
entity is required to comply with the requirements 
by reason of an activity other than the agreement. 
(c) REPORTS.—
(1) REQUIRED REPORT.—Not later than July 
1st of each calendar year beginning more than 2 
years after the date of enactment of this Act, but 
subject to paragraph (3), an entity described in sub-
section (a) shall submit to the Administrator a re-
port that states, for the preceding calendar year, the 
entity-wide greenhouse gas emissions (as reported at 
the facility level), including— 
(A) the total quantity of direct greenhouse 
gas emissions from stationary sources, ex-
pressed in units of carbon dioxide equivalents; 
(B) the amount of petroleum products sold 
or imported by the entity and the amount of 
greenhouse gases, expressed in units of carbon 
dioxide equivalents, that would be emitted when 
these products are used for transportation in 
the United States, as determined by the Admin-
istrator under section 301(b); 
(C) the amount of hydrofluorocarbons, 
perfluorocarbons, or sulfur hexafluoride, ex-
pressed in units of carbon dioxide equivalents, 
that are sold or imported by the entity and will 
ultimately be emitted in the United States, as 
determined by the Administrator under section 
301(d); and
(D) such other categories of emissions as 
the Administrator determines in the regulations 
promulgated under section 201(c)(1) may be 
practicable and useful for the purposes of this 
Act, such as— 
(i) indirect emissions from imported 
electricity, heat, and steam; 
(ii) process and fugitive emissions; 
and 
(iii) production or importation of 
greenhouse gases. 
(2) VOLUNTARY
REPORTING.—An entity de-
scribed in subsection (a) may (along with estab-
lishing a baseline and reporting emissions under this 
section)— 
(A) submit a report described in paragraph 
(1) before the date specified in that paragraph 
for 
the 
purposes 
of 
achieving 
and 
commoditizing 
greenhouse 
gas 
reductions 
through use of the registry and for other pur-
poses; and 
(B) submit to the Administrator, for inclu-
sion in the registry, information that has been 
verified in accordance with regulations promul-
gated under section 201(c)(1) and that relates 
to— 
(i) any activity that resulted in the 
net reduction of the greenhouse gas emis-
sions of the entity or a net increase in se-
questration by the entity that were carried 
out during or after 1990 and before the es-
tablishment of the database, verified in ac-
cordance with regulations promulgated 
under section 201(c)(1), and submitted to 
the Administrator before the date that is 4 
years after the date of enactment of this 
Act; and 
(ii) with respect to the calendar year 
preceding the calendar year in which the 
information is submitted, any project or 
activity that resulted in the net reduction 
of the greenhouse gas emissions of the en-
tity or a net increase in net sequestration 
by the entity. 
(3) PROVISION OF VERIFICATION INFORMATION 
BY REPORTING ENTITIES.—Each entity that submits 
a report under this subsection shall provide informa-
tion sufficient for the Administrator to verify, in ac-
cordance with measurement and verification methods
and standards developed under section 204, that the 
greenhouse gas report of the reporting entity— 
(A) has been accurately reported; and 
(B) in the case of each voluntary report 
under paragraph (2), represents— 
(i) actual reductions in direct green-
house gas emissions— 
(I) relative to historic emission 
levels of the entity; and 
(II) after accounting for any in-
creases in indirect emissions described 
in paragraph (1)(D)(i); or 
(ii) actual increases in net sequestra-
tion. 
(4) FAILURE TO SUBMIT REPORT.—An entity 
that participates or has participated 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-
ductions or increases in sequestration to satisfy the 
requirements of section 301. 
(5) INDEPENDENT
THIRD-PARTY
VERIFICA-
TION.—To meet the requirements of this section and 
section 204, an entity that is required to submit a 
report under this section may—
(A) 
obtain 
independent 
third-party 
verification; and 
(B) present the results of the third-party 
verification to the Administrator. 
(6) 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 poses a risk to national security 
or discloses confidential business information 
that cannot be derived from information that is 
otherwise publicly available and that would 
cause competitive harm if published. 
(7) 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 in effect as of 
the date of enactment of this Act. 
(8) ADDITIONAL ISSUES TO BE CONSIDERED.— 
In promulgating the regulations under section 
201(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 fossil 
fuels, greenhouse gas emissions, and greenhouse 
gas production and importation data are ade-
quate 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 emissions 
and emission reductions reported to the database 
during the year covered by the report; 
(2) provides entity-by-entity and sector-by-sec-
tor analyses of the emissions and emission reduc-
tions 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 period in the trading of greenhouse gas 
emission allowances. 
SEC. 204. MEASUREMENT AND VERIFICATION. 
(a) STANDARDS.— 
(1) IN GENERAL.—Not later than 1 year after 
the date of enactment of this Act, the Secretary 
shall establish by rule, in coordination with the Ad-
ministrator, the Secretary of Energy, and the Sec-
retary of Agriculture, comprehensive measurement 
and verification methods and standards to ensure a
consistent and technically accurate record of green-
house gas emissions, emission reductions, sequestra-
tion, and atmospheric concentrations for use in the 
registry. 
(2) REQUIREMENTS.—The methods and stand-
ards established under paragraph (1) shall include— 
(A) a requirement that a covered entity 
use a continuous emissions monitoring system, 
or another system of measuring or estimating 
emissions that is determined by the Secretary 
to provide information with precision, reli-
ability, accessibility, and timeliness similar to 
that provided by a continuous emissions moni-
toring system where technologically feasible; 
(B) establishment of standardized meas-
urement and verification practices for reports 
made by all entities participating in the reg-
istry, taking into account— 
(i) protocols and standards in use by 
entities requiring or desiring to participate 
in the registry as of the date of develop-
ment of the methods and standards under 
paragraph (1); 
(ii) boundary issues, such as leakage;
(iii) avoidance of double counting of 
greenhouse gas emissions and emission re-
ductions; 
(iv) protocols to prevent a covered en-
tity from avoiding the requirements of this 
Act by reorganization into multiple entities 
that are under common control; and 
(v) such other factors as the Sec-
retary, in consultation with the Adminis-
trator, determines to be appropriate; 
(C) establishment of methods of— 
(i) estimating greenhouse gas emis-
sions, for those cases in which the Sec-
retary determines that methods of moni-
toring, measuring or estimating such emis-
sions with precision, reliability, accessi-
bility, and timeliness similar to that pro-
vided by a continuous emissions monitoring 
system 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, avoid, or sequester greenhouse 
gas emissions; 
(E) in coordination with the Secretary of 
Agriculture, standards to measure the results of 
the use of carbon sequestration and carbon re-
capture technologies, including— 
(i) soil carbon sequestration practices; 
and 
(ii) forest preservation and reforest-
ation activities that adequately address the 
issues 
of 
permanence, 
leakage, 
and 
verification; 
(F) establishment of such other measure-
ment and verification standards as the Sec-
retary, in consultation with the Secretary of Ag-
riculture, the Administrator, and the Secretary 
of Energy, determines to be appropriate; 
(G) establishment of standards for obtain-
ing the Secretary’s approval of the suitability of 
geological storage sites that include evaluation 
of both the geology of the site and the entity’s 
capacity to manage the site; and 
(H) establishment of other features that, 
as determined by the Secretary, will allow enti-
ties to adequately establish a fair and reliable 
measurement and reporting system. 
(b) REVIEW AND REVISION.—The Secretary shall pe-
riodically review, and revise as necessary, the methods and 
standards developed under subsection (a). 
(c) PUBLIC PARTICIPATION.—The Secretary shall— 
(1) 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 sub-
section (a); and 
(2) after the 90-day period referred to in para-
graph (1), in coordination with the Secretary of En-
ergy, the Secretary of Agriculture, and the Adminis-
trator, adopt the methods and standards developed 
under subsection (a) for use in implementing the 
database. 
(d) EXPERTS AND CONSULTANTS.— 
(1) IN GENERAL.—The Secretary may obtain 
the services of experts and consultants in the private 
and nonprofit sectors 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 Sec-
retary may use any available grant, contract, cooper-
ative agreement, or other arrangement authorized by 
law. 
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. 
(a) IN GENERAL.—Beginning with calendar year 
2010— 
(1) each covered entity in the electric genera-
tion, industrial, 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 stationary sources, except those described in 
paragraph (2); 
(2) 
each 
producer 
or 
importer 
of 
hydrofluorocarbons, 
perfluorocarbons, 
or 
sulfur 
hexafluoride 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 will ultimately be emitted in the United States, 
as determined by the Administrator under sub-
section (d) and 
(3) each petroleum 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, meas-
ured in units of carbon dioxide equivalents, as deter-
mined by the Administrator under subsection (b), 
when used for transportation. 
(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 emitted when petroleum products are used for trans-
portation. 
(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 204(a)(2)(G); and 
(2) the entity agrees to submit tradeable allow-
ances for any portion of the deposited emission that 
is subsequently emitted from that facility. 
(d) 
DETERMINATION
OF
HYDROFLUROCARBON, 
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. 
SEC. 302. COMPLIANCE. 
(a) IN GENERAL.— 
(1) SOURCE
OF
TRADEABLE
ALLOWANCES 
USED.—A covered entity may use a tradeable allow-
ance to meet the requirements of this section with-
out regard to whether the tradeable allowance was 
allocated to it under subtitle B or acquired from an-
other entity or the Climate Change Credit Corpora-
tion established under section 351. 
(2) VERIFICATION
BY
ADMINISTRATOR.—At 
various times during each year, the Administrator 
shall determine whether each covered entity has met
the requirements of this section. In making that de-
termination, the Administrator shall— 
(A) take into account the tradeable allow-
ances submitted by the covered entity to the 
Administrator; and 
(B) retire the serial number assigned to 
each such tradeable allowance. 
(b) ALTERNATIVE MEANS OF COMPLIANCE.—For the 
years after 2010, a covered entity may satisfy up to 15 
percent of its total allowance submission requirement 
under this section by— 
(1) submitting tradeable allowances from an-
other nation’s market in greenhouse gas emissions 
if— 
(A) the Secretary 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, 
if necessary, to comply with the accounting stand-
ards and methods established under section 371; 
(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; or 
(4) submitting credits obtained from the Ad-
ministrator under section 303. 
(c) DEDICATED PROGRAM FOR SEQUESTRATION IN 
AGRICULTURAL SOILS.—If a covered entity chooses to 
satisfy 15 percent of its total allowance submission re-
quirements under the provisions of subsection (b), it shall 
satisfy up to 1.5 percent of its total allowance submission 
requirement by submitting registered net increases in se-
questration in agricultural soils, as registered in the data-
base, adjusted, if necessary, to comply with the accounting 
standards and methods established under section 371. 
SEC. 303. 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 Act for the 
current calendar year, subject to the limitation im-
posed by section 302(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 Act 
for a calendar year (referred to as the use year), the 
tradeable allowance requirement for the year from which 
the credit was taken (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 beginning after the use 
year and before the source year. 
(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 Act 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 
(3) the covered entity may not use credits 
under this section to meet the increased require-
ments. 
SEC. 304. OTHER USES OF TRADEABLE ALLOWANCES. 
(a) IN GENERAL.—Tradeable allowances may be sold, 
exchanged, purchased, retired, or used as provided in this 
section. 
(b) INTERSECTOR TRADING.—Covered entities may 
purchase or otherwise acquire tradeable allowances from 
other covered sectors to satisfy the requirements of section 
301. 
(c) CLIMATE CHANGE CREDIT ORGANIZATION.—The 
Climate Change Credit Corporation established under sec-
tion 351 may sell tradeable allowances allocated to it 
under section 332(a)(2) to any covered entity or to any 
investor, broker, or dealer in such tradeable allowances. 
The Climate Change Credit Corporation shall use all pro-
ceeds from such sales in accordance with the provisions 
of section 352. 
(d) BANKING OF TRADEABLE ALLOWANCES.—Not-
withstanding the requirements of section 301, a covered 
entity that has more than a sufficient amount of tradeable
allowances to satisfy the requirements of section 301, may 
refrain from submitting a tradeable allowance to satisfy 
the requirements in order to sell, exchange, or use the 
tradeable allowance in the future. 
SEC. 305. EXEMPTION OF SOURCE CATEGORIES. 
(a) IN GENERAL.—The Administrator may grant an 
exemption from the requirements of this Act to a source 
category if the Administrator determines, after public no-
tice and comment, that it is not feasible to measure 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 331(a)(1) by the amount of green-
house 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.
Subtitle B—Establishment and 
Allocation of Tradeable Allowances 
SEC. 331. 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, for calendar 
years beginning after 2009, equal to— 
(1) 5896 million metric tons, measured in units 
of carbon dioxide equivalents, reduced by 
(2) the amount of emissions of greenhouse 
gases in calendar year 2000 from non-covered enti-
ties. 
(b) SERIAL NUMBERS.—The Administrator shall as-
sign a unique serial number to each tradeable allowance 
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.—In this section: 
(1) IN GENERAL.—The term ‘non-covered enti-
ty’ means an entity 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 petroleum products for use in 
transportation, 
or 
produces 
or 
imports 
hydrofluorocarbons, perfluorocarbons, or sulfur 
hexafluoride; and 
(B) is not a covered entity. 
(2) EXCEPTION.—Notwithstanding paragraph 
(1), an entity that is a covered entity for any cal-
endar year beginning after 2009 shall not be consid-
ered to be a non-covered entity for purposes of sub-
section (a) only because it emitted, or its products 
would have emitted, 10,000 metric tons or less of 
greenhouse gas, measured in units of carbon dioxide 
equivalents, in the year 2000. 
SEC. 332. DETERMINATION OF TRADEABLE ALLOWANCE 
ALLOCATIONS. 
(a) IN GENERAL.—The Secretary shall determine— 
(1) the amount of tradeable allowances to be al-
located to each covered sector of that sector’s allot-
ments; and
(2) the amount of tradeable allowances to be al-
located to the Climate Change Credit Corporation 
established under section 351. 
(b) ALLOCATION FACTORS.—In making the deter-
mination required by subsection (a), the Secretary 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; 
(6) the degree to which the amount of alloca-
tions to the covered sectors should decrease over 
time; and 
(7) the need to maintain the international com-
petitiveness of United States manufacturing and 
avoid the additional loss of United States manufac-
turing jobs. 
(c) ALLOCATION RECOMMENDATIONS
AND IMPLE-
MENTATION.—Before allocating or providing tradeable al-
lowances under subsection (a) and within 24 months after 
the date of enactment of this Act, the Secretary shall sub-
mit the determinations under subsection (a) to the Senate 
Committee on Commerce, Science, and Transportation, 
the Senate Committee on Environment and Public Works, 
the House of Representatives Committee on Science, and 
the House of Representatives Committee on Energy and 
Commerce. The Secretary’s determinations under sub-
section (a)(1), including the allocations and provision of 
tradeable allowances pursuant 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 provi-
sions of chapter 8 of that title. 
SEC. 333. ALLOCATION OF TRADEABLE ALLOWANCES. 
(a) IN GENERAL.—Beginning with calendar year 
2010 and after taking into account any initial allocations 
under section 334, the Administrator shall— 
(1) allocate to each covered sector that sector’s 
allotments determined by the Administrator under 
section 332 (adjusted for any such initial allocations 
and the allocation to the Climate Change Credit 
Corporation established under section 351); and 
(2) allocate to the Climate Change Credit Cor-
poration established under section 351 the tradeable 
allowances allocable to that Corporation.
(b) INTRASECTORIAL ALLOTMENTS.—The Adminis-
trator shall, by regulation, establish a process for the allo-
cation of tradeable allowances under this section, without 
cost to covered entities, 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 al-
locating the tradeable allowances; 
(3) not penalize a covered entity for emissions 
reductions made before 2010 and registered with the 
database; and 
(4) provide sufficient allocation for new en-
trants into the sector. 
(c) POINT SOURCE ALLOCATION.—The Adminis-
trator shall allocate the tradeable allowances for the elec-
tricity generation, industrial, and commercial sectors to 
the entities owning or controlling the point sources of 
greenhouse gas emissions within that sector. 
(d) HYDROFLUOROCARBONS, PERFLUOROCARBONS, 
AND SULFUR HEXAFLUORIDE.—The Administrator shall 
allocate the tradeable allowances for producers or import-
ers of hydrofluorocarbons, perfluorocarbons, or sulfur 
hexafluoride to such producers or importers.
(e) SPECIAL RULE FOR ALLOCATION WITHIN THE 
TRANSPORTATION SECTOR.—The Administrator shall al-
locate the tradeable allowances for the transportation sec-
tor to petroleum refiners or importers that produce or im-
port petroleum products that will be used as fuel for trans-
portation. 
(f) ALLOCATIONS TO RURAL ELECTRIC COOPERA-
TIVES.— 
(1) IN
GENERAL.—The Administrator shall 
make the allocations described in paragraph (2) each 
year at no cost. The allocations shall be offset from 
the allowances allocated to the Climate Change 
Credit Corporation. 
(2) RURAL
ELECTRIC
COOPERATIVES.—For 
each electric generating unit that is owned or oper-
ated by a rural electric cooperative, the Adminis-
trator shall allocate allowances in an amount equal 
to the greenhouse gas emissions of each such unit in 
2000, plus an amount equal to the average emis-
sions growth expected for all such units. 
SEC. 334. 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 allow-
ances established by section 331 no less frequently 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 allowances established by sub-
section (a) continue 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 inter-
ference with the climate system. 
(b) REVIEW OF 2010 LEVELS.—The Under Secretary 
shall specifically review in 2008 the level established under 
section 331(a)(1), and transmit a report on his reviews, 
together with any recommendations, including legislative 
recommendations, for modification of the levels, to the 
Senate Committee on Commerce, Science, and Transpor-
tation, the Senate Committee on Environment and Public 
Works, the House of Representatives Committee on 
Science, and the House of Representatives Committee on 
Energy and Commerce.
SEC. 335. INITIAL ALLOCATIONS FOR EARLY PARTICIPA-
TION AND ACCELERATED PARTICIPATION. 
Before making any allocations under section 333, the 
Administrator shall allocate— 
(1) to any covered entity an amount of 
tradeable allowances equivalent to the amount of 
greenhouse gas emissions reductions registered by 
that covered entity in the national greenhouse gas 
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 
2010; and 
(C) the Administrator retires the unique 
serial number assigned to the reduction under 
section 201(c)(3); and 
(2) to any covered entity that has entered into 
an accelerated participation agreement under section 
336, such tradeable allowances as the Administrator 
has determined to be appropriate under that section. 
SEC. 336. 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 2010, then, for the 
6-year period beginning with calendar year 2010, the Ad-
ministrator shall— 
(1) provide additional tradeable allowances to 
that entity when allocating allowances under section 
334 in order to recognize the additional emissions 
reductions that will be required of the covered entity; 
(2) allow that entity to satisfy 20 percent of its 
requirements under section 301 by— 
(A) submitting tradeable allowances from 
another nation’s market in greenhouse gas 
emissions under the conditions described in sec-
tion 302(b)(1); 
(B) submitting a registered net increase in 
sequestration, as registered in the National 
Greenhouse Gas Database established under 
section 201, and as adjusted by the appropriate 
sequestration discount rate established under 
section 371; or 
(C) submitting a greenhouse gas emission 
reduction (other than a registered net increase 
in sequestration) that was registered in the Na-
tional Greenhouse Gas Database by a person 
that is not a covered entity.
(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 2010— 
(1) its requirements under section 301 shall be 
increased by the amount of any tradeable allowances 
provided to it under subsection (a)(1); and 
(2) any tradeable allowances submitted there-
after shall be counted first against the increase in 
those requirements. 
Subtitle C—Climate Change Credit 
Corporation 
SEC. 351. ESTABLISHMENT. 
(a) IN GENERAL.—The Climate Change Credit Cor-
poration is established as a nonprofit corporation without 
stock. The Corporation shall not be considered to be an 
agency or establishment of the United States Government. 
(b) APPLICABLE LAWS.—The Corporation shall be 
subject to the provisions of this title and, to the extent 
consistent with this title, to the District of Columbia Busi-
ness Corporation Act.
(c) BOARD OF DIRECTORS.—The Corporation shall 
have a board of directors of 5 individuals who are citizens 
of the United States, of whom 1 shall be elected annually 
by the board to serve as chairman. No more than 3 mem-
bers of the board serving at any time may be affiliated 
with the same political party. The members of the board 
shall be appointed by the President of the United States, 
by and with the advice and consent of the Senate and shall 
serve for terms of 5 years. 
SEC. 352. PURPOSES AND FUNCTIONS. 
(a) TRADING.—The Corporation— 
(1) shall receive and manage tradeable allow-
ances allocated to it under section 333(a)(2); and 
(2) shall buy and sell tradeable allowances, 
whether allocated to it under that section or ob-
tained by purchase, trade, or donation from other 
entities; but 
(3) may not retire tradeable allowances unused. 
(b) USE OF TRADEABLE ALLOWANCES AND PRO-
CEEDS.— 
(1) IN GENERAL.—The Corporation shall use 
the tradeable allowances, and proceeds derived from 
its trading activities in tradeable allowances, to re-
duce costs borne by consumers as a result of the
greenhouse gas reduction requirements of this Act. 
The reductions— 
(A) may be obtained by buy-down, subsidy, 
negotiation of discounts, consumer rebates, or 
otherwise; 
(B) shall be, as nearly as possible, equi-
tably distributed across all regions of the 
United States; and 
(C) may include arrangements for pref-
erential treatment to consumers who can least 
afford any such increased costs. 
(2) TRANSITION ASSISTANCE TO DISLOCATED 
WORKERS
AND
COMMUNITIES.—The Corporation 
shall allocate a percentage of the proceeds derived 
from its trading activities in tradeable allowances to 
provide transition assistance to dislocated workers 
and communities. Transition assistance may take 
the form of— 
(A) grants to employers, employer associa-
tions, and representatives of employees— 
(i) to provide training, adjustment as-
sistance, and employment services to dis-
located workers; and
(ii) to make income-maintenance and 
needs-related payments to dislocated work-
ers; and 
(B) grants to State and local governments 
to assist communities in attracting new employ-
ers or providing essential local government serv-
ices. 
(3) PHASE-OUT OF TRANSITION ASSISTANCE.— 
The percentage allocated by the Corporation under 
paragraph (2)— 
(A) shall be 20 percent for 2010; 
(B) shall be reduced by 2 percentage 
points each year thereafter; and 
(C) may not be reduced below zero. 
(4) TECHNOLOGY DEPLOYMENT PROGRAMS.— 
The Corporation shall establish and carry out a pro-
gram, through direct grants, revolving loan pro-
grams, or other financial measures, to provide sup-
port for the deployment of technology to assist in 
compliance with this Act by distributing the pro-
ceeds from no less than 10 percent of the total al-
lowances allocated to it. The support shall include 
the following: 
(A) COAL GASIFICATION COMBINED-CYCLE 
AND
GEOLOGICAL
CARBON
STORAGE
PRO-
GRAM.—The Corporation shall establish and 
carry out a program, through direct grants, to 
provide incentives for the repowering of existing 
facilities or construction of new facilities pro-
ducing electricity or other products from coal 
gasification combined-cycle plants that capture 
and geologically store at least 90 percent of the 
carbon dioxide produced at the facility in ac-
cordance with requirements established by the 
Administrator to ensure the permanence of the 
storage and that such storage will not cause or 
contribute to significant adverse effects on pub-
lic health or the environment. The Corporation 
shall ensure that no less than 20 percent of the 
funding under this program is distributed to 
rural electric cooperatives. 
(B) AGRICULTURAL PROGRAMS.—The Cor-
poration shall establish and carry out a pro-
gram, through direct grants, revolving loan pro-
grams, or other financial measures, to provide 
incentives for greenhouse gas emissions reduc-
tions or net increases in greenhouse gas seques-
tration on agricultural lands. The program shall 
include incentives for—
(i) production of wind energy on agri-
cultural lands; 
(ii) agricultural management practices 
that achieve verified, incremental increases 
in net carbon sequestration, in accordance 
with the requirements established by the 
Administrator under section 371; and 
(iii) production of renewable fuels 
that, after consideration of the energy 
needed to produce such fuels, result in a 
net reduction in greenhouse gas emissions. 
Subtitle D—Sequestration 
Accounting; Penalties 
SEC. 371. SEQUESTRATION ACCOUNTING. 
(a) SEQUESTRATION ACCOUNTING.—If a covered en-
tity uses a registered net increase in sequestration to sat-
isfy the requirements of section 301 for any year, that 
covered entity shall submit information to the Adminis-
trator every 5 years thereafter sufficient to allow the Ad-
ministrator to determine, using the methods and stand-
ards created under section 204, whether that net increase 
in sequestration still exists. Unless the Administrator de-
termines that the net increase in sequestration continues 
to exist, the covered entity shall offset any loss of seques-
tration by submitting additional tradeable allowances of
equivalent amount in the calender year following that de-
termination. 
(b) REGULATIONS REQUIRED.—The Secretary, act-
ing through the Under Secretary of Commerce for Science 
and Technology, in coordination with the Secretary of Ag-
riculture, the Secretary of Energy, and the Administrator, 
shall issue regulations establishing the sequestration ac-
counting rules for all classes of sequestration projects. 
(c) CRITERIA FOR REGULATIONS.—In issuing regula-
tions under this section, the Secretary shall use the fol-
lowing criteria: 
(1) If the range of possible amounts of net in-
crease in sequestration for a particular class of se-
questration project is not more than 10 percent of 
the median of that range, the amount of sequestra-
tion awarded shall be equal to the median value of 
that range. 
(2) If the range of possible amounts of net in-
crease in sequestration for a particular class of se-
questration project is more than 10 percent of the 
median of that range, the amount of sequestration 
awarded shall be equal to the fifth percentile of that 
range. 
(3) The regulations shall include procedures for 
accounting for potential leakage from sequestration
projects and for ensuring that any registered in-
crease in sequestration is in addition to that which 
would have occurred if this Act had not been en-
acted. 
(d) UPDATES.—The Secretary shall update the se-
questration accounting rules for every class of sequestra-
tion project at least once every 5 years. 
SEC. 372. PENALTIES. 
Any covered entity that fails to meet the require-
ments of section 301 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-
essary for that covered entity to meet those requirements 
on the date of the emission that resulted in the violation. 
Æ