I 
113TH CONGRESS 
2D SESSION 
H. R. 5271 
To cap the emissions of greenhouse gases through a requirement to purchase 
carbon permits, to distribute the proceeds of such purchases to eligible 
individuals, and for other purposes. 
IN THE HOUSE OF REPRESENTATIVES 
JULY 30, 2014 
Mr. VAN HOLLEN (for himself, Mr. CARTWRIGHT, Mr. LOWENTHAL, Mr. 
CONNOLLY, Mr. BLUMENAUER, Mr. HOLT, Ms. NORTON, Mr. GRIJALVA, 
Mr. WELCH, and Mr. THOMPSON of California) introduced the following 
bill; which was referred to the Committee on Energy and Commerce, and 
in addition to the Committee on Ways and Means, 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 cap the emissions of greenhouse gases through a require-
ment to purchase carbon permits, to distribute the pro-
ceeds of such purchases to eligible individuals, 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 ‘‘Healthy Climate and 
Family Security Act of 2014’’. 
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SEC. 2. FINDINGS. 
The Congress finds the following: 
(1) Carbon dioxide and other greenhouse gas 
emissions continue to rise, with CO2 in the atmos-
phere reaching 400 parts per million in 2013 for the 
first time in human history. 
(2) The warming of our planet has led to more 
frequent, dangerous and expensive extreme weather 
events, including heat waves, storms, fires, droughts, 
floods and tornadoes. 
(3) More than 97 percent of climate scientists 
agree that our planet is warming, primarily because 
of the extraction and burning of fossil fuels. 
(4) The atmosphere is a common resource that 
belongs equally to all. 
(5) Stabilizing the climate can and must be 
done in a way that supports vibrant economic 
growth and a thriving middle class. 
(6) Legislation to address climate change and 
accelerate the transition to a clean energy economy 
must be fair, transparent and built to last. 
SEC. 3. AUCTION OF CARBON PERMITS AND DISTRIBUTION 
OF HEALTHY CLIMATE DIVIDENDS. 
(a) IN GENERAL.—The Internal Revenue Code of 
1986 is amended by adding at the end the following new 
subtitle: 
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‘‘Subtitle 
L—Auction 
of 
Carbon 
Permits 
and 
Distribution 
of 
Healthy Climate Dividends 
‘‘Chapter 101. Cap and Dividend Program Rules. 
‘‘Chapter 102. Healthy Climate Dividends. 
‘‘Chapter 103. Border Adjustments. 
‘‘CHAPTER 101—CAP AND DIVIDEND 
PROGRAM RULES 
‘‘Sec. 9901. Definitions. 
‘‘Sec. 9902. Carbon permits. 
‘‘Sec. 9903. Auctions. 
‘‘Sec. 9904. Compliance obligation. 
‘‘Sec. 9905. Penalty for noncompliance. 
‘‘Sec. 9906. Carbon capture and sequestration. 
‘‘Sec. 9907. Trading. 
‘‘Sec. 9908. Banking and borrowing. 
‘‘SEC. 9901. DEFINITIONS. 
‘‘For purposes of this subtitle: 
‘‘(1) ADMINISTRATOR.—The term ‘Adminis-
trator’ means the Administrator of the Environ-
mental Protection Agency. 
‘‘(2) CARBON PERMIT.—The term ‘carbon per-
mit’ means a carbon permit established by the Sec-
retary under section 9902(a). 
‘‘(3) COVERED ENTITY.—The term ‘covered en-
tity’ means— 
‘‘(A) in the case of crude oil— 
‘‘(i) a refinery operating in the United 
States which is designed to serve the pri-
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mary purpose of processing liquid fuel 
from crude oil, and 
‘‘(ii) any importer of any petroleum or 
petroleum product (not including crude oil) 
into the United States, 
‘‘(B) in the case of coal— 
‘‘(i) any coal mine operating in the 
United States, and 
‘‘(ii) any importer of coal into the 
United States, and 
‘‘(C) in the case of natural gas— 
‘‘(i) any person required to submit a 
report to the Energy Information Agency 
on Form 176 by reason of delivering nat-
ural gas to an end user, and 
‘‘(ii) any natural gas processor not de-
scribed in clause (i) with respect to sales of 
natural gas in the United States. 
‘‘(4) COVERED FUEL.—The term ‘covered fuel’ 
means crude oil, natural gas, coal, or any other 
product derived therefrom for use as a combustible 
fuel offered for sale in United States markets. 
‘‘(5) CRUDE OIL.—The term ‘crude oil’ includes 
crude oil condensates, natural gasoline, shale oil, any 
bitumen or bituminous mixture, any oil derived from 
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a bitumen or bituminous mixture, and any oil de-
rived from kerogen-bearing sources. 
‘‘(6) FAIR
MARKET
VALUE.—The term ‘fair 
market value’ means the average auction price for 
carbon permits during the 4 quarters immediately 
preceding a failure to surrender, when required 
under section 9904, the required number of carbon 
permits under such section. 
‘‘(7) STATE.—The term ‘State’ means the sev-
eral States, the District of Columbia, the Common-
wealth of Puerto Rico, the United States Virgin Is-
lands, Guam, American Samoa, the Commonwealth 
of the Northern Mariana Islands, and any other 
commonwealth, territory, or possession of the United 
States. 
‘‘(8) VINTAGE YEAR.—The term ‘vintage year’ 
means the calendar year for which a carbon permit 
is established under section 9902. 
‘‘SEC. 9902. CARBON PERMITS. 
‘‘(a) IN GENERAL.—The Secretary, in consultation 
with the Administrator, shall establish a separate quantity 
of carbon permits for calendar year 2015 and each cal-
endar year thereafter, as set forth under subsection (b). 
‘‘(b) EMISSIONS REDUCTION SCHEDULE.— 
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‘‘(1) IN
GENERAL.—The quantity of carbon 
permits established by the Secretary, in consultation 
with the Administrator, under subsection (a) for any 
calendar year before 2050 that is between the near-
est target years specified in paragraph (2) preceding 
and succeeding such calendar year shall be the quan-
tity of such permits that represents an equal, pro 
rata reduction from the preceding year to the suc-
ceeding year. 
‘‘(2) TARGETS.— 
‘‘(A) INITIAL
TARGET.—The quantity of 
carbon permits established for 2016 shall be 
equal to 10 percent less than the number of 
metric tons of carbon dioxide emitted in the 
United States in 2005. 
‘‘(B) DECADAL
TARGETS.—The quantity 
of carbon permits established for— 
‘‘(i) 2020 shall be equal to 20 percent 
less than the number of metric tons of car-
bon dioxide emitted in the United States in 
2005; 
‘‘(ii) 2025 shall be equal to 30 percent 
less than the number of metric tons of car-
bon dioxide emitted in the United States in 
2005; 
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tablished under this subtitle for years after 
2050, including the quantity of carbon permits 
to be established and any reductions that may 
be necessary to ensure a healthy climate. 
‘‘(B) AVERTING CATASTROPHIC CLIMATIC 
IMPACT.—The Secretary shall report to Con-
gress if the Secretary, after consultation with 
the Administrator, determines the emissions re-
ductions targets under this subsection should be 
revised in order to avert catastrophic climate 
impacts. 
Such 
report 
shall 
include 
rec-
ommended revisions to the existing emissions 
reduction schedule and the basis for those rec-
ommendations. 
‘‘(c) IDENTIFICATION
NUMBERS.—The Secretary 
shall assign to each carbon permit established under sub-
section (a) a unique identification number that includes 
the vintage year for that carbon permit. 
‘‘(d) LEGAL STATUS OF CARBON PERMITS.— 
‘‘(1) IN GENERAL.—A carbon permit does not 
constitute a property right. 
‘‘(2) TERMINATION OR LIMITATION.—Nothing 
in this subtitle or any other provision of law shall be 
construed to limit or alter the authority of the 
United States, including the Secretary acting pursu-
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ant to statutory authority, to terminate or limit a 
carbon permit. 
‘‘(3) OTHER PROVISIONS UNAFFECTED.—Noth-
ing in this subtitle relating to carbon permits issued 
under this section shall affect the application of any 
other provision of law to a covered entity (including 
the Clean Air Act), or the responsibility for a cov-
ered entity to comply with any such provision of law. 
Regional and State greenhouse gas initiatives are 
not preempted by this subtitle. 
‘‘(e) REGULATIONS.—Not later than June 30, 2015, 
the Secretary shall promulgate regulations to carry out the 
provisions of this subtitle. 
‘‘SEC. 9903. AUCTIONS. 
‘‘(a) PERIODIC AUCTIONS.—The Secretary shall con-
duct periodic public auctions of carbon permits established 
under section 9902(a). The Secretary shall conduct at 
least 4 such auctions in each year for which carbon per-
mits are established. 
‘‘(b) AUCTION RULES.—The Secretary shall— 
‘‘(1) limit auction participation only to covered 
entities; 
‘‘(2) establish a limit on the amount of carbon 
permits that can be purchased by a single entity at 
each auction and an aggregate limit on the total 
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amount of permits that can be held by a single enti-
ty at any one time that— 
‘‘(A) reflects anticipated sector and partici-
pant demand; 
‘‘(B) prevents speculation, manipulation, 
or hoarding of permits; and 
‘‘(C) does not interfere with normal mar-
ket competition; and 
‘‘(3) have the authority to set a minimum per-
mit price at auction. 
‘‘(c) UNSOLD PERMITS.—Any carbon permit unsold 
at auction may be offered at the next quarterly auction 
in the calendar year. Any carbon permit unsold after the 
last auction for a calendar year shall be transferred to the 
reserve established under section 9908. 
‘‘SEC. 9904. COMPLIANCE OBLIGATION. 
‘‘(a) IN GENERAL.—Not later than April 1, 2017, 
and April 1 of each year thereafter, a covered entity shall 
surrender to the Secretary a quantity of carbon permits 
at least as great as the number of metric tons of carbon 
dioxide that the Secretary, in consultation with the Ad-
ministrator, determines would be emitted by the combus-
tion of covered fuels with respect to which the covered en-
tity made the first sale in United States markets during 
the previous calendar year. 
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‘‘(b) USE TREATED AS SALE.—For purposes of sub-
section (a), consumption for an emitting use by the cov-
ered entity of covered fuels produced by the covered entity 
shall be treated as a first sale. 
‘‘(c) EXEMPTION.—A covered entity shall not have to 
surrender a carbon permit for the sale of a covered fuel 
consumed for a non-emitting use, as defined and verified 
by the Secretary in consultation with the Administrator, 
unless such covered fuel is sold to a person issued carbon 
permits under section 9906. 
‘‘SEC. 9905. PENALTY FOR NONCOMPLIANCE. 
‘‘(a) IN GENERAL.—Any covered entity that fails for 
any year to surrender, by the deadline described in section 
9904, one or more of the carbon permits due pursuant 
to such section shall be liable for payment to the Secretary 
of a penalty in the amount described in subsection (b). 
‘‘(b) AMOUNT.—The amount of a penalty required to 
be paid under subsection (a) shall be equal to the product 
obtained by multiplying— 
‘‘(1) the number of carbon permits that the cov-
ered entity failed to surrender by the deadline; by 
‘‘(2) 3 times the fair market value of carbon 
permits issued for emissions occurring in the cal-
endar year for which the carbon permits were due. 
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‘‘(c) TIMING.—A penalty required under this section 
shall be immediately due and payable to the Secretary, 
without demand, in accordance with regulations promul-
gated by the Secretary, which shall be issued not later 
than 1 year after the date of enactment of this subtitle. 
‘‘(d) NO EFFECT ON LIABILITY.—A penalty due and 
payable by the covered entity under this section shall not 
diminish the liability of the covered entity for any fine, 
penalty, or assessment against the covered entity for the 
same violation under any other provision of law. 
‘‘(e) PENALTY NOT DEDUCTIBLE.—No deduction 
shall be allowed under subtitle A for a penalty paid under 
this section. 
‘‘SEC. 9906. CARBON CAPTURE AND SEQUESTRATION. 
‘‘(a) IN GENERAL.—The Secretary shall issue a car-
bon permit to any person who the Secretary, in consulta-
tion with the Administrator, determines has safely and 
verifiably captured and sequestered carbon dioxide from 
the combustion of covered fuels in the United States. 
‘‘(b) QUANTITY.—The quantity of each permit issued 
under subsection (a) shall be in the amount equivalent to 
the number of metric tons of carbon dioxide so captured 
and sequestered. 
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