I 
111TH CONGRESS 
1ST SESSION H. R. 1759 
To distribute emission allowances under a domestic cap-and-trade program 
to facilities in certain domestic energy-intensive industrial sectors and 
subsectors to prevent an increase in greenhouse gas emissions by manu-
facturing facilities located in countries without commensurate greenhouse 
gas regulation, and for other purposes. 
IN THE HOUSE OF REPRESENTATIVES 
MARCH 26, 2009 
Mr. INSLEE (for himself and Mr. DOYLE) introduced the following bill; which 
was referred to the Committee on Energy and Commerce 
A BILL 
To distribute emission allowances under a domestic cap-and- 
trade program to facilities in certain domestic energy- 
intensive industrial sectors and subsectors to prevent an 
increase in greenhouse gas emissions by manufacturing 
facilities located in countries without commensurate 
greenhouse gas regulation, 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 ‘‘EMPLOY Act’’ or the 
‘‘Emission Migration Prevention with Long-term Output 
Yields Act’’. 
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SEC. 2. FINDINGS. 
The Congress finds the following: 
(1) All domestic and foreign industries should 
contribute to climate stabilization. 
(2) Domestic producers of certain energy-inten-
sive products subject to international competition 
present a unique challenge for United States climate 
policy because the increased costs associated with 
compliance may unintentionally cause domestic in-
dustry to divert new investments and production to 
facilities located in countries without commensurate 
greenhouse gas regulation. 
(3) Without exempting any industries, the 
United States must move forward with economy- 
wide action on climate change while reducing incen-
tives for producers to relocate to unregulated coun-
tries, which could displace both jobs and emissions. 
(4) International agreements are the most ap-
propriate means to reduce emissions from energy-in-
tensive industries because unilateral domestic efforts 
to reduce greenhouse gas emissions could accelerate 
the relocation of energy-intensive manufacturing 
abroad. 
(5) Carbon leakage can be mitigated substan-
tially through the output-based distribution of emis-
sion allowances. 
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(6) Output-based emission allowance distribu-
tion is an appropriate temporary measure that 
should complement other targeted domestic and 
international policies and agreements meant to en-
courage United States trading partners to substan-
tially reduce global greenhouse gas emissions. 
SEC. 3. PURPOSES. 
The purposes of this Act are as follows: 
(1) To compensate the owners and operators of 
facilities in eligible domestic industrial sectors and 
subsectors for carbon emission costs incurred under 
any domestic cap-and-trade program. 
(2) To limit compensation to the owners and 
operators of facilities in eligible industrial sectors 
and subsectors to an amount of emission allowances 
that will prevent carbon leakage while also reward-
ing innovation and facility-level investments in en-
ergy efficiency performance improvements. 
(3) To provide compensation to the owners and 
operators of facilities in eligible industrial sectors 
and subsectors for both the direct and indirect costs 
of purchasing emission allowances needed for com-
pliance with a domestic cap-and-trade program, but 
not for costs associated with other related or unre-
lated market dynamics. 
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(4) To prevent carbon leakage resulting from 
direct and indirect compliance costs incurred under 
a domestic cap-and-trade program. 
(5) To eliminate or reduce emission allowance 
distribution under this Act when such distribution is 
no longer necessary to prevent carbon leakage from 
eligible sectors or subsectors. 
SEC. 4. DEFINITIONS. 
In this Act: 
(1) The term ‘‘Administrator’’ means the Ad-
ministrator of the Environmental Protection Agency. 
(2) The term ‘‘cap-and-trade program’’ means 
an economy-wide program enacted by Congress that 
distributes or auctions emission allowances for the 
control of greenhouse gas emissions under the Clean 
Air Act. 
(3) The term ‘‘carbon dioxide equivalent’’ 
means, for each greenhouse gas, the quantity of 
greenhouse gas that the Administrator determines 
makes the same contribution to global warming as 
1 metric ton of carbon dioxide. 
(4) The term ‘‘carbon leakage’’ means any sub-
stantial increase (as determined by the Adminis-
trator) in greenhouse gas emissions by manufac-
turing facilities located in countries without com-
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mensurate greenhouse gas regulation which increase 
is caused by an incremental cost of production in-
crease in the United States as a result of a domestic 
cap-and-trade program. 
(5) The term ‘‘covered facility’’ means, for each 
calendar year, a facility that emits greenhouse gases 
in that year and that has an obligation to submit 
emission allowances for such greenhouse gas emis-
sions under any cap-and-trade program. 
(6) The term ‘‘emission allowance’’ means an 
authorization, under any cap-and-trade program, to 
emit 1 carbon dioxide equivalent of greenhouse gas. 
(7) The term ‘‘facility’’ means 1 or more build-
ings, structures, or installations of an entity on 1 or 
more contiguous or adjacent properties located in 
the United States. 
(8) The term ‘‘greenhouse gas’’ means any gas 
designated as a greenhouse gas under a cap-and- 
trade program. 
(9) The term ‘‘output’’ means the total tonnage 
or other standard unit of production (as determined 
by the Administrator) produced by a manufacturing 
facility. 
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(10) The term ‘‘vintage year’’ means the cal-
endar year for which an emission allowance is estab-
lished under a domestic cap-and-trade program. 
(11) The term ‘‘NAICS’’ means the 2007 
North American Industrial Classification System. 
SEC. 5. DISTRIBUTION OF EMISSION ALLOWANCES TO CER-
TAIN ENERGY-INTENSIVE MANUFACTURING 
FACILITIES. 
(a) DISTRIBUTION OF EMISSION ALLOWANCES.— 
(1) IN GENERAL.—The Administrator shall an-
nually distribute emission allowances, in amounts 
calculated under subsection (c), to the owners and 
operators of facilities in eligible industrial sectors 
and subsectors designated under subsection (b), sub-
ject to the maximum quantity limitation established 
under paragraph (2) of this subsection. 
(2) MAXIMUM.—The maximum quantity of 
emission allowances distributed under paragraph (1) 
each year shall equal 15 percent of the total quan-
tity of allowances distributed or auctioned during 
the first year under a cap-and-trade program for 
which allowances are required to be submitted under 
such program. If the total allowances calculated 
under subsection (c) exceed such maximum, the Ad-
ministrator shall reduce the amount distributed to 
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owners and operators under paragraph (1) on a pro 
rata basis. 
(b) ELIGIBLE INDUSTRIAL SECTORS AND SUBSEC-
TORS.— 
(1) IN GENERAL.—Not later than January 1, 
2011, the Administrator shall promulgate a rule des-
ignating, based on the criteria under paragraph (2), 
the industrial sectors and subsectors in which an 
owner or operator of a facility in such a sector or 
subsector may receive emission allowances under this 
Act. 
(2) PRESUMPTIVELY
ELIGIBLE
SECTORS
AND 
SUBSECTORS.—An owner or operator of a facility 
shall receive emission allowances under subsection 
(a) if such facility is in a sector or subsector that 
is included in a six-digit classification of the NAICS 
and that meets either the energy intensity criteria or 
greenhouse gas intensity criteria under subpara-
graph (A) (or both the energy intensity criteria and 
greenhouse gas criteria under subparagraph (A)) 
and the trade intensity criteria under subparagraph 
(B). The Administrator, in consultation with other 
Federal agencies, as appropriate, may rescind the 
eligibility of a sector or subsector only if the Admin-
istrator determines, after notice and opportunity for 
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public comment, that such sector or subsector does 
not meet the energy intensity criteria or the green-
house gas intensity criteria under subparagraph (A) 
and the trade intensity criteria under subparagraph 
(B), and such sector or subsector would not be sub-
ject to carbon leakage in the absence of the allow-
ance distribution under this section. 
(A) ENERGY INTENSITY OR GREENHOUSE 
GAS INTENSITY.— 
(i) ENERGY INTENSITY.—The sector 
or subsector has an energy intensity of at 
least 5 percent, calculated by dividing the 
cost of the purchased electricity and fuel 
costs of the sector or subsector by the 
value of the shipments of the sector or 
subsector, based on data described in sub-
paragraph (C). 
(ii) GREENHOUSE GAS INTENSITY.— 
The sector or subsector has a greenhouse 
gas intensity of at least 5 percent, cal-
culated by dividing 40 times the tons of 
carbon dioxide equivalent greenhouse gas 
emissions (including direct emissions from 
fuel combustion, process emissions, and in-
direct emissions from the generation of 
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electricity used to produce output) of the 
sector or subsector by the value of the 
shipments of the sector or subsector, based 
on data described in subparagraph (C) 
from the most recent calendar year for 
which reliable data is available. When cal-
culating the greenhouse gas intensity, the 
Administrator may, to the extent nec-
essary, use economic and engineering mod-
els and the best available information on 
technology performance levels for such sec-
tor or subsector. 
(B) TRADE
INTENSITY.—The sector or 
subsector has a trade intensity of at least 15 
percent, calculated by dividing the value of the 
total imports and exports of such sector or sub-
sector by the value of the shipments plus the 
value of imports of such sector or subsector, 
based on data described in subparagraph (C). 
(C) DATA SOURCES.— 
(i) ELECTRICITY
AND
FUEL
COSTS, 
VALUE OF SHIPMENTS.—For purposes of 
this subsection, the Administrator shall de-
termine electricity and fuel costs and the 
value of shipments for data from years 
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2006, 2007, or 2008 from the United 
States Census of Mineral Industries and 
the United States Census Annual Survey 
of Manufacturers, or, if such data is un-
available, from data from the 2002 or 
2006 Energy Information Agency’s Manu-
facturing Energy Consumption Survey and 
the 2002 or 2007 Economic Census of the 
United States. The Administrator shall use 
data from the most detailed industrial clas-
sification level if such data is available. If 
data are unavailable for any sector or sub-
sector at the six-digit classification level in 
the NAICS, then the Administrator may 
extrapolate the information necessary to 
determine the eligibility of a sector or sub-
sector under this paragraph from available 
data pertaining to a broader industrial cat-
egory classified in the NAICS. 
(ii) IMPORTS
AND
EXPORTS.—For 
purposes of this subsection, the Adminis-
trator shall establish the value of imports 
and exports by using United States Inter-
national Trade Commission data. 
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(iii) PERCENTAGES.—The Adminis-
trator shall round the energy intensity and 
greenhouse gas intensity percentages under 
subparagraph (A) and the trade intensity 
percentage under subparagraph (B) to the 
nearest whole number. 
(iv) GREENHOUSE
GAS
INTENSITY 
DATA.—To determine greenhouse gas in-
tensity under subparagraph (A), the Ad-
ministrator may use the Bureau of Eco-
nomic Analysis Benchmark Input-Output 
Accounts or the 2002 or 2006 Energy In-
formation Agency’s Manufacturing Energy 
Consumption Survey. The Administrator 
shall use emissions data from a United 
States Registry of Greenhouse Gas Emis-
sions for the purposes of determining eligi-
bility under this subsection when such data 
becomes available. 
(v) METAL PRODUCTION CLASSIFIED 
UNDER MORE THAN ONE NAICS CODE.—In 
determining eligibility under this sub-
section, the Administrator shall— 
(I) 
aggregate 
data 
for 
the 
beneficiation or other processing of 
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metal ores with subsequent steps in 
the process of metal manufacturing 
regardless of the NAICS code under 
which such activity is classified; and 
(II) aggregate data for the man-
ufacturing of steel with the manufac-
turing of steel pipe and tube made 
from purchased steel in a non-inte-
grated process. 
(3) INDIVIDUAL SHOWING.—Regardless of the 
section of the NAICS code under which a sector or 
subsector is classified, the owners or operators of a 
manufacturing facility (or facilities) in such sector 
or subsector shall receive emission allowances under 
subsection (a) if sufficient evidence exists, from 
sources other than, and in addition to, those de-
scribed in paragraph (2), that such facility (or facili-
ties) meets either the energy intensity criteria or the 
greenhouse gas intensity criteria (or both the energy 
intensity criteria and the greenhouse gas intensity 
criteria) and the trade intensity criteria under para-
graph (2). For the purposes of this paragraph, the 
Administrator may accept data submitted by the 
owners or operators of a manufacturing facility (or 
facilities). 
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(4) ADMINISTRATIVE DETERMINATION OF ADDI-
TIONAL ELIGIBLE SECTORS OR SUBSECTORS.—Any 
person may petition the Administrator to designate 
as eligible under this subsection any sector or sub-
sector that does not meet the criteria under para-
graph (2) or (3) but demonstrates to the satisfaction 
of the Administrator that it is subject to carbon 
leakage, comparable to that of sectors or subsectors 
that meet the criteria under paragraphs (2) or (3). 
In determining whether a sector or subsector is sub-
ject to carbon leakage, the Administrator, in con-
sultation with other Federal agencies, as appro-
priate, shall take into account, in addition to the 
sector or subsector’s energy intensity, greenhouse 
gas intensity, and trade intensity, as calculated 
under paragraph (2), each of the following: 
(A) The potential for greater foreign 
sourcing of production or services and the effect 
of international competition on domestic pro-
duction. 
(B) The effect of international markets on 
product pricing. 
(C) The potential for net imports to in-
crease or exports to decrease (resulting in a loss 
of market share held by domestic manufactur-
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ers to manufacturers located in other countries) 
caused by the direct and indirect compliance 
costs under a domestic cap-and-trade program. 
(D) The state of international negotiations, 
agreements, and activities to reduce global 
greenhouse gas emissions. 
(c) CALCULATION OF ALLOWANCES.— 
(1) COVERED FACILITIES.—Except as provided 
in subsection (a)(2), the quantity of emission allow-
ances distributed by the Administrator under this 
section for a calendar year to the owner or operator 
of a covered facility shall be equal to the sum of the 
facility’s direct compliance allowance factor and the 
facility’s indirect carbon allowance factor. Calcula-
tions under this paragraph shall be based on the av-
erage of data from the calendar years that are 2 and 
3 calendar years prior to the calendar year of dis-
tribution. 
For 
purposes 
of 
determining 
such 
amounts for each calendar year: 
(A) DIRECT
COMPLIANCE
ALLOWANCE 
FACTOR.—The direct compliance allowance fac-
tor for a facility for a calendar year is the prod-
uct of— 
(i) the output of the facility; and 
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(ii) 85 percent of the average tonnage 
(adjusted on a carbon dioxide equivalency 
basis) of greenhouse gas emissions per unit 
of output for all facilities in the sector or 
subsector, as determined by the Adminis-
trator based on reports provided under 
subparagraph (C). 
(B) INDIRECT CARBON ALLOWANCE FAC-
TOR.—The indirect carbon allowance factor for 
a facility for a calendar year is the product ob-
tained by multiplying the total output of the fa-
cility by the fraction set forth in clause (i) (the 
emissions intensity factor) and the fraction set 
forth in clause (ii) (the electricity efficiency fac-
tor) for the year concerned. 
(i) EMISSIONS INTENSITY FACTOR.— 
(I) 
REGULATED
ELECTRICITY 
MARKETS.—In a regulated electricity 
market, the emissions intensity factor 
is the average tonnage (adjusted on a 
carbon dioxide equivalency basis) of 
greenhouse gas emissions per kilowatt 
hour of the electricity purchased by 
the facility, as determined by Admin-
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istrator based on reports provided 
under subparagraph (D). 
(II) WHOLESALE
COMPETITIVE 
ELECTRICITY MARKETS.—In a whole-
sale competitive electricity market, the 
emissions intensity factor is the aver-
age tonnage (adjusted on a carbon di-
oxide equivalency basis) of greenhouse 
gas emissions per kilowatt hour of the 
marginal source of supply of elec-
tricity purchased by the facility, as de-
termined by the Administrator based 
on reports provided under subpara-
graph (D). 
(ii) ELECTRICITY
EFFICIENCY
FAC-
TOR.—The electricity efficiency factor is 
85 percent of the average amount of elec-
tricity (in kilowatt hours) used per unit of 
output for all facilities in the sector or sub-
sector concerned, as determined by the Ad-
ministrator based on reports provided 
under subparagraph (C). 
(C) REPORT
TO
ADMINISTRATOR.—Each 
owner or operator of a facility in any sector or 
subsector designated under subsection (b) and 
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each department, agency, and instrumentality 
of the United States shall provide the Adminis-
trator with such information as the Adminis-
trator finds necessary to determine the direct 
compliance allowance factor and the indirect 
carbon allowance factor for each facility subject 
to this section. 
(D) GREENHOUSE
GASES
FROM
ELEC-
TRICITY.—Each person selling electricity to the 
owner or operator of a facility in any sector or 
subsector designated under subsection (b) shall 
provide the owner or operator of the facility and 
the Administrator, on a quarterly basis, such 
information as is required to determine the 
emissions intensity factor under subparagraph 
(B)(i). 
(E) EMISSIONS
INTENSITY
FACTOR
RE-
DUCTION.—In calculating the average tonnage 
(adjusted on a carbon dioxide equivalency basis) 
of greenhouse gas emissions for the numerator 
of the emissions intensity factor under subpara-
graph (B)(i), the Administrator shall reduce the 
actual, total tonnage (adjusted on a carbon di-
oxide equivalency basis) used by the tonnage of 
allowances the Administrator determines are 
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distributed at no cost under any cap-and-trade 
program to the person making the sale of elec-
tricity and are used by such person to prevent 
electricity rate increases to the owner or oper-
ator of the facility. 
(F) IRON AND STEEL SECTOR OR SUBSEC-
TORS.—For the purposes of determining the 
quantity of emission allowances to be distrib-
uted under this section to the owner or operator 
of any iron and steel manufacturing facility in 
a sector or subsector designated under sub-
section (b), the Administrator shall consider as 
in different sectors and subsectors facilities 
using integrated iron and steelmaking tech-
nologies (including coke ovens, blast furnaces, 
and other iron-making technologies) and facili-
ties using electric arc furnace technologies when 
calculating sector or subsector averages under 
subparagraphs (A) and (B). 
(2) OTHER ELIGIBLE ENTITIES.—The quantity 
of emission allowances distributed by the Adminis-
trator for a calendar year to an owner or operator 
of a facility in an eligible industrial sector or sub-
sector that is not a covered facility shall be equal to 
the indirect carbon allowance factor for the facility, 
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as determined under paragraph (1)(B). Calculations 
under this paragraph shall be based on the average 
of data from the calendar years that are 2 and 3 
calendar years prior to the calendar year of distribu-
tion. 
(3) INITIAL YEARS OF OPERATION.—The Ad-
ministrator shall issue regulations governing the dis-
tribution of emission allowances to a facility entitled 
to emission allowances under this Act for such facili-
ty’s first and second years of operation. These regu-
lations shall provide for— 
(A) the distribution of emission allowances 
to such facilities based on comparable facilities 
in the same sector or subsector; and 
(B) an adjustment in the third year of op-
eration to reconcile the total quantity of emis-
sion allowances received during the first and 
second years of operation to the quantity the 
facility would have received during the first and 
second years of operation had the appropriate 
data been available. 
SEC. 6. REPORTS TO CONGRESS. 
Not later than one year after the first year in which 
allowances are distributed pursuant to this Act, and at 
least every two years thereafter, the Administrator, in con-
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sultation with other Federal agencies, as appropriate, shall 
transmit to Congress a report on the carbon leakage of 
domestic industrial manufacturers and the effectiveness of 
the distribution of emission allowances under section 5 in 
achieving the purposes of this Act. Such reports shall in-
clude recommendations on how to better achieve the pur-
poses of this Act. 
SEC. 7. MODIFICATION OR ELIMINATION OF DISTRIBUTION 
OF 
ALLOWANCES 
TO 
ENERGY-INTENSIVE 
MANUFACTURING FACILITIES. 
(a) ANNUAL PHASE DOWN SUBJECT TO REVIEW.— 
(1) REDUCTION.—Subject to paragraph (2), be-
ginning in calendar year 2026, and in each calendar 
year thereafter, the Administrator shall reduce, on a 
pro-rata basis, the amount of emission allowances 
distributed under this Act by an amount equal to 10 
percent of the amount of emission allowances dis-
tributed in calendar year 2025. 
(2) REVIEW.—If the Administrator, in con-
sultation with other Federal agencies, as appro-
priate, determines that less than 90 percent of the 
global output from a sector or subsector is manufac-
tured in countries subject to commensurate green-
house gas regulation, then the Administrator shall, 
by rule, eliminate the reduction under paragraph 
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(1). The Administrator may eliminate the reduction 
under paragraph (1) for individual sectors or aggre-
gates of sectors and subsectors, as appropriate. In 
making such determination, the Administrator shall 
consider a country to have commensurate green-
house gas regulation if— 
(A) such country’s annual greenhouse gas 
intensity or energy intensity (as described in 
section (5)(b)) for a sector or subsector is less 
than the greenhouse gas intensity or energy in-
tensity for such sector or subsector in the 
United States in the most recent calendar year 
for which reliable data are available; and 
(B) such country has implemented policies, 
including cap-and-trade systems, export tariffs, 
electricity generation regulations, and green-
house gas emission fees, that individually or col-
lectively impose a incremental cost of produc-
tion increase associated with greenhouse gas 
emissions from a sector or subsector that is at 
least 70 percent of the cost of complying with 
a domestic cap-and-trade program in the 
United States for comparable facilities in the 
same sector or subsector, averaged over a two 
year period. 
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(b) PRESIDENTIAL DETERMINATION AND MODIFICA-
TION.—Notwithstanding subsection (a), if the President 
determines that other countries have taken actions that 
have substantially mitigated the risk that companies in a 
particular sector or subsector will reduce existing or not 
initiate new production in the same sector or subsector 
in the United States due to the costs of complying with 
a domestic cap-and-trade program, then the President 
shall so notify the Administrator. Upon such notification, 
the Administrator, in consultation with other Federal 
agencies, as appropriate, shall by rule reduce the amount 
of emission allowances distributed under this Act to reflect 
the reduced risk. The Administrator shall take no action 
under this subsection unless the Administrator deter-
mines, by clear and convincing evidence, such risk has 
been reduced. No reduction in the distribution of emission 
allowances under this paragraph shall be effective before 
January 1, 2020. 
SEC. 8. CESSATION OF QUALIFYING ACTIVITIES. 
If, as determined by the Administrator, a facility is 
no longer in an eligible sector or subsector designated 
under section 5(b)— 
(1) the Administrator shall not distribute emis-
sion allowances to the owner or operator of such fa-
cility under this Act; and 
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(2) the owner or operator of such facility shall 
return to the Administrator all allowances that have 
been distributed to it for future vintage years and 
the number of emission allowances equal to the 
product of— 
(A) the number of emission allowances dis-
tributed to the facility under this Act for the 
vintage year in which the facility ceases to be 
in an eligible sector or subsector designated 
under section 5(b); and 
(B) one-twelfth of the number of months 
that the facility or entity was in an eligible sec-
tor or subsector designated under section 5(b). 
Æ 
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