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deemed to be held or distributed in proportion to 
each holder’s legal, equitable, leasehold, or contrac-
tual reservation or entitlement; or 
‘‘(2) if such multiple holders have expressly pro-
vided for a different distribution of emission allow-
ances by contract, that emission allowances and the 
proceeds of transactions involving emission allow-
ances will be deemed to be held or distributed in ac-
cordance with the contract. 
A passive lessor, or a person who has an equitable interest 
through such lessor, whose rental payments are not based, 
either directly or indirectly, upon the revenues or income 
from the covered entity or other entity shall not be deemed 
to be a holder of a legal, equitable, leasehold, or contrac-
tual interest for the purpose of holding or distributing 
emission allowances as provided in this subsection, during 
either the term of such leasehold or thereafter, unless ex-
pressly provided for in the leasehold agreement. Except 
as otherwise provided in this subsection, where all legal 
or equitable title to or interest in a covered entity, or other 
entity, is held by a single person, the certificate shall state 
that all emission allowances received by the entity are 
deemed to be held for that person. 
‘‘(c) PROHIBITION.—It shall be unlawful for any per-
son to operate any stationary source subject to the re-
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quirements of this section except in compliance with the 
terms and requirements of a permit issued by the Admin-
istrator or a State or Indian tribe with an approved permit 
program in accordance with this section. For purposes of 
this subsection, compliance, as provided in section 504(f), 
with a permit issued under title V which complies with 
this title for covered entities shall be deemed compliance 
with this subsection as well as section 502(a). 
‘‘(d) RELIABILITY.—Nothing in this section or title 
V shall be construed as requiring termination of oper-
ations of a stationary source that is a covered entity for 
failure to have an approved permit, or compliance plan, 
that is consistent with the requirements in the second and 
fifth sentences of subsection (a) concerning the holding 
of allowances or offset credits, except that any such cov-
ered entity may be subject to the applicable enforcement 
provision of section 113. 
‘‘(e) REGULATIONS.—Not later than 2 years after the 
date of enactment of this title, the Administrator shall 
promulgate regulations to implement this section. To pro-
vide for permits required under this section, each State 
in which one or more stationary sources that are covered 
entities are located shall submit, in accordance with this 
section and title V, revised permit programs for approval. 
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‘‘SEC. 728. INTERNATIONAL EMISSION ALLOWANCES. 
‘‘(a) QUALIFYING PROGRAMS.—The Administrator, 
in consultation with the Secretary of State, may by rule 
designate an international climate change program as a 
qualifying international program if— 
‘‘(1) the program is run by a national or supra-
national foreign government, and imposes a manda-
tory absolute tonnage limit on greenhouse gas emis-
sions from 1 or more foreign countries, or from 1 or 
more economic sectors in such a country or coun-
tries; and 
‘‘(2) the program is at least as stringent as the 
program established by this title, including provi-
sions to ensure at least comparable monitoring, com-
pliance, enforcement, quality of offsets, and restric-
tions on the use of offsets. 
‘‘(b) DISQUALIFIED ALLOWANCES.—An international 
emission allowance may not be held under section 
722(d)(2) if it is in the nature of an offset instrument 
or allowance awarded based on the achievement of green-
house gas emission reductions or avoidance, or greenhouse 
gas sequestration, that are not subject to the mandatory 
absolute tonnage limits referred to in subsection (a)(1). 
‘‘(c) RETIREMENT.— 
‘‘(1) ENTITY
CERTIFICATION.—The owner or 
operator of an entity that holds an international 
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emission allowance under section 722(d)(2) shall 
certify to the Administrator that such international 
emission allowance has not previously been used to 
comply with any foreign, international, or domestic 
greenhouse gas regulatory program. 
‘‘(2) RETIREMENT.— 
‘‘(A) FOREIGN AND INTERNATIONAL REG-
ULATORY
ENTITIES.—The Administrator, in 
consultation with the Secretary of State, shall 
seek, by whatever means appropriate, including 
agreements and technical cooperation on allow-
ance tracking, to ensure that any relevant for-
eign, international, and domestic regulatory en-
tities— 
‘‘(i) are notified of the use, for pur-
poses of compliance with this title, of any 
international emission allowance; and 
‘‘(ii) provide for the disqualification of 
such international emission allowance for 
any subsequent use under the relevant for-
eign, international, or domestic greenhouse 
gas regulatory program, regardless of 
whether such use is a sale, exchange, or 
submission to satisfy a compliance obliga-
tion. 
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‘‘(B) DISQUALIFICATION
FROM
FURTHER 
USE.—The Administrator shall ensure that, 
once an international emission allowance has 
been disqualified or otherwise used for purposes 
of compliance with this title, such allowance 
shall be disqualified from any further use under 
this title. 
‘‘(d) USE LIMITATIONS.—The Administrator may, by 
rule, apply a limit to the percentage of the combined 
greenhouse gas emissions and attributable greenhouse gas 
emissions of a covered entity with respect to which compli-
ance may be demonstrated by holding international emis-
sion allowances under section 722(d)(2), consistent with 
the purposes of the Safe Climate Act. 
‘‘PART D—OFFSETS 
‘‘SEC. 731. OFFSETS INTEGRITY ADVISORY BOARD. 
‘‘(a) ESTABLISHMENT.—Not later than 30 days after 
the date of enactment of this title, the Administrator shall 
establish an independent Offsets Integrity Advisory 
Board. The Advisory Board shall make recommendations 
to the Administrator for use in promulgating and revising 
regulations under this part and part E, and for ensuring 
the overall environmental integrity of the programs estab-
lished pursuant to those regulations. 
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‘‘(b) MEMBERSHIP.—The Advisory Board shall be 
comprised of at least nine members. Each member shall 
be qualified by education, training, and experience to 
evaluate scientific and technical information on matters 
referred to the Board under this section. The Adminis-
trator shall appoint Advisory Board members, including 
a chair and vice-chair of the Advisory Board. Terms shall 
be 3 years in length, except for initial terms, which may 
be up to 5 years in length to allow staggering. Members 
may be reappointed only once for an additional 3-year 
term, and such second term may follow directly after a 
first term. 
‘‘(c) ACTIVITIES.—The Advisory Board established 
pursuant to subsection (a) shall— 
‘‘(1) provide recommendations, not later than 
90 days after the Advisory Board’s establishment 
and periodically thereafter, to the Administrator re-
garding offset project types that should be consid-
ered for eligibility under section 733, taking into 
consideration relevant scientific and other issues, in-
cluding— 
‘‘(A) the availability of a representative 
data set for use in developing the activity base-
line; 
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‘‘(B) the potential for accurate quantifica-
tion of greenhouse gas reduction, avoidance, or 
sequestration for an offset project type; 
‘‘(C) the potential level of scientific and 
measurement uncertainty associated with an 
offset project type; and 
‘‘(D) any beneficial or adverse environ-
mental, public health, welfare, social, economic, 
or energy effects associated with an offset 
project type; 
‘‘(2) make available to the Administrator its ad-
vice and comments on offset methodologies that 
should be considered under regulations promulgated 
with respect to section 734, including methodologies 
to address the issues of additionality, activity base-
lines, quantification methods, leakage, uncertainty, 
permanence, and environmental integrity; 
‘‘(3) make available to the Administrator, and 
other relevant Federal agencies, its advice and com-
ments regarding scientific, technical, and methodo-
logical issues specific to the issuance of international 
offset credits under section 743; 
‘‘(4) make available to the Administrator, and 
other relevant Federal agencies, its advice and com-
ments regarding scientific, technical, and methodo-
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logical issues associated with the implementation of 
part E; 
‘‘(5) make available to the Administrator its ad-
vice and comments on areas in which further knowl-
edge is required to appraise the adequacy of exist-
ing, revised, or proposed methodologies for use 
under this part and part E, and describe the re-
search efforts necessary to provide the required in-
formation; and 
‘‘(6) make available to the Administrator its ad-
vice and comments on other ways to improve or 
safeguard the environmental integrity of programs 
established under this part and part E. 
‘‘(d) SCIENTIFIC REVIEW OF OFFSET AND DEFOR-
ESTATION REDUCTION PROGRAMS.—Not later than Janu-
ary 1, 2017, and at 5-year intervals thereafter, the Advi-
sory Board shall submit to the Administrator and make 
available to the public an analysis of relevant scientific and 
technical information related to this part and part E. The 
Advisory Board shall review approved and potential meth-
odologies, scientific studies, offset project monitoring, off-
set project verification reports, and audits related to this 
part and part E, and evaluate the net emissions effects 
of implemented offset projects. The Advisory Board shall 
recommend changes to offset methodologies, protocols, or 
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project types, or to the overall offset program under this 
part, to ensure that offset credits issued by the Adminis-
trator do not compromise the integrity of the annual emis-
sion reductions established under section 703, and to 
avoid or minimize adverse effects to human health or the 
environment. 
‘‘SEC. 732. ESTABLISHMENT OF OFFSETS PROGRAM. 
‘‘(a) REGULATIONS.—Not later than 2 years after 
the date of enactment of this title, the Administrator, in 
consultation with appropriate Federal agencies and taking 
into consideration the recommendations of the Advisory 
Board, shall promulgate regulations establishing a pro-
gram for the issuance of offset credits in accordance with 
the requirements of this part. The Administrator shall pe-
riodically revise these regulations as necessary to meet the 
requirements of this part. 
‘‘(b) REQUIREMENTS.—The regulations described in 
subsection (a) shall— 
‘‘(1) authorize the issuance of offset credits 
with respect to qualifying offset projects that result 
in reductions or avoidance of greenhouse gas emis-
sions, or sequestration of greenhouse gases; 
‘‘(2) ensure that such offset credits represent 
verifiable and additional greenhouse gas emission re-
ductions or avoidance, or increases in sequestration; 
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‘‘(3) ensure that offset credits issued for se-
questration offset projects are only issued for green-
house gas reductions that are permanent; 
‘‘(4) provide for the implementation of the re-
quirements of this part; and 
‘‘(5) include as reductions in greenhouse gases 
reductions achieved through the destruction of meth-
ane and its conversion to carbon dioxide, and reduc-
tions 
achieved 
through 
destruction 
of 
chlorofluorocarbons or other ozone depleting sub-
stances, if permitted by the Administrator under 
section 619(b)(9) and subject to the conditions spec-
ified in section 619(b)(9), based on the carbon diox-
ide equivalent value of the substance destroyed. 
‘‘(c) COORDINATION TO MINIMIZE NEGATIVE EF-
FECTS.—In promulgating and implementing regulations 
under this part, the Administrator shall act (including by 
rejecting projects, if necessary) to avoid or minimize, to 
the maximum extent practicable, adverse effects on human 
health or the environment resulting from the implementa-
tion of offset projects under this part. 
‘‘(d) OFFSET REGISTRY.—The Administrator shall 
establish within the allowance tracking system established 
under section 724(d) an Offset Registry for qualifying off-
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set projects and offset credits issued with respect thereto 
under this part. 
‘‘(e) LEGAL STATUS OF OFFSET CREDIT.—An offset 
credit does not constitute a property right. 
‘‘(f) FEES.—The Administrator shall assess fees pay-
able by offset project developers in an amount necessary 
to cover the administrative costs to the Environmental 
Protection Agency of carrying out the activities under this 
part. Amounts collected for such fees shall be available 
to the Administrator for carrying out the activities under 
this part to the extent provided in advance in appropria-
tions Acts. 
‘‘SEC. 733. ELIGIBLE PROJECT TYPES. 
‘‘(a) LIST OF ELIGIBLE PROJECT TYPES.— 
‘‘(1) IN GENERAL.—As part of the regulations 
promulgated under section 732(a), the Adminis-
trator shall establish, and may periodically revise, a 
list of types of projects eligible to generate offset 
credits, including international offset credits, under 
this part. 
‘‘(2) ADVISORY BOARD RECOMMENDATIONS.— 
In determining the eligibility of project types, the 
Administrator shall take into consideration the rec-
ommendations of the Advisory Board. If a list estab-
lished under this section differs from the rec-
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ommendations of the Advisory Board, the regula-
tions promulgated under section 732(a) shall include 
a justification for the discrepancy. 
‘‘(3) INITIAL DETERMINATION.—The Adminis-
trator shall establish the initial eligibility list under 
paragraph (1) not later than 1 year after the date 
of enactment of this title. The Administrator shall 
add additional project types to the list not later than 
2 years after the date of enactment of this title. In 
determining the initial list, the Administrator shall 
give priority to consideration of offset project types 
that are recommended by the Advisory Board and 
for which there are well developed methodologies 
that the Administrator determines would meet the 
criteria of section 734, with such modifications as 
the Administrator deems appropriate. In establishing 
methodologies pursuant to section 734, the Adminis-
trator shall give priority to methodologies for offset 
project types included on the initial eligibility list. 
‘‘(b) MODIFICATION OF LIST.—The Administrator— 
‘‘(1) may at any time, by rule, add a project 
type to the list established under subsection (a) if 
the Administrator, in consultation with appropriate 
Federal agencies and taking into consideration the 
recommendations of the Advisory Board, determines 
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that the project type can generate additional reduc-
tions or avoidance of greenhouse gas emissions, or 
sequestration of greenhouse gases, subject to the re-
quirements of this part; 
‘‘(2) may at any time, by rule, determine that 
a project type on the list does not meet the require-
ments of this part, and remove the project type from 
the list established under subsection (a), in consulta-
tion with appropriate Federal agencies and taking 
into consideration any recommendations of the Advi-
sory Board; and 
‘‘(3) shall consider adding to or removing from 
the list established under subsection (a), at a min-
imum, project types proposed to the Adminis-
trator— 
‘‘(A) by petition pursuant to subsection 
(c); or 
‘‘(B) by the Advisory Board. 
‘‘(c) PETITION PROCESS.—Any person may petition 
the Administrator to modify the list established under sub-
section (a) by adding or removing a project type pursuant 
to subsection (b). Any such petition shall include a show-
ing by the petitioner that there is adequate data to estab-
lish that the project type does or does not meet the re-
quirements of this part. Not later than 12 months after 
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receipt of such a petition, the Administrator shall either 
grant or deny the petition and publish a written expla-
nation of the reasons for the Administrator’s decision. The 
Administrator may not deny a petition under this sub-
section on the basis of inadequate Environmental Protec-
tion Agency resources or time for review. 
‘‘SEC. 734. REQUIREMENTS FOR OFFSET PROJECTS. 
‘‘(a) METHODOLOGIES.—As part of the regulations 
promulgated under section 732(a), the Administrator shall 
establish, for each type of offset project listed as eligible 
under section 733, the following: 
‘‘(1) ADDITIONALITY.—A standardized method-
ology for determining the additionality of greenhouse 
gas emission reductions or avoidance, or greenhouse 
gas sequestration, achieved by an offset project of 
that type. Such methodology shall ensure, at a min-
imum, that any greenhouse gas emission reduction 
or avoidance, or any greenhouse gas sequestration, is 
considered additional only to the extent that it re-
sults from activities that— 
‘‘(A) are not required by or undertaken to 
comply with any law, including any regulation 
or consent order; 
‘‘(B) were not commenced prior to Janu-
ary 1, 2009, except in the case of— 
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‘‘(i) offset project activities that com-
menced after January 1, 2001, and were 
registered as of the date of enactment of 
this title under an offset program with re-
spect to which the Administrator has made 
an affirmative determination under section 
740(a)(2); or 
‘‘(ii) activities that are readily revers-
ible, with respect to which the Adminis-
trator may set an alternative earlier date 
under this subparagraph that is not earlier 
than January 1, 2001, where the Adminis-
trator determines that setting such an al-
ternative date may produce an environ-
mental benefit by removing an incentive to 
cease and then reinitiate activities that 
began prior to January 1, 2009; and 
‘‘(C) exceed the activity baseline estab-
lished under paragraph (2). 
‘‘(2) ACTIVITY
BASELINES.—A standardized 
methodology for establishing activity baselines for 
offset projects of that type. The Administrator shall 
set activity baselines to reflect a conservative esti-
mate of business-as-usual performance or practices 
for the relevant type of activity such that the base-
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line provides an adequate margin of safety to ensure 
the environmental integrity of offsets calculated in 
reference to such baseline. 
‘‘(3) QUANTIFICATION METHODS.—A standard-
ized methodology for determining the extent to 
which greenhouse gas emission reductions or avoid-
ance, or greenhouse gas sequestration, achieved by 
an offset project of that type exceed a relevant activ-
ity baseline, including protocols for monitoring and 
accounting for uncertainty. 
‘‘(4) LEAKAGE.—A standardized methodology 
for accounting for and mitigating potential leakage, 
if any, from an offset project of that type, taking 
uncertainty into account. 
‘‘(b) ACCOUNTING FOR REVERSALS.— 
‘‘(1) IN GENERAL.—For each type of sequestra-
tion project listed under section 733, the Adminis-
trator shall establish requirements to account for 
and address reversals, including— 
‘‘(A) a requirement to report any reversal 
with respect to an offset project for which offset 
credits have been issued under this part; 
‘‘(B) provisions to require emission allow-
ances to be held in amounts to fully compensate 
for greenhouse gas emissions attributable to re-
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versals, and to assign responsibility for holding 
such emission allowances; and 
‘‘(C) any other provisions the Adminis-
trator determines necessary to account for and 
address reversals. 
‘‘(2) MECHANISMS.—The Administrator shall 
prescribe mechanisms to ensure that any sequestra-
tion with respect to which an offset credit is issued 
under this part results in a permanent net increase 
in sequestration, and that full account is taken of 
any actual or potential reversal of such sequestra-
tion, with an adequate margin of safety. The Admin-
istrator shall prescribe at least one of the following 
mechanisms to meet the requirements of this para-
graph: 
‘‘(A) An offsets reserve, pursuant to para-
graph (3). 
‘‘(B) Insurance that provides for purchase 
and provision to the Administrator for retire-
ment of an amount of offset credits or emission 
allowances equal in number to the tons of car-
bon dioxide equivalents of greenhouse gas emis-
sions released due to reversal. 
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‘‘(C) Another mechanism that the Admin-
istrator determines satisfies the requirements of 
this part. 
‘‘(3) OFFSETS RESERVE.— 
‘‘(A) IN GENERAL.—An offsets reserve re-
ferred to in paragraph (2)(A) is a program 
under which, before issuance of offset credits 
under this part, the Administrator shall sub-
tract and reserve from the quantity to be issued 
a quantity of offset credits based on the risk of 
reversal. The Administrator shall— 
‘‘(i) hold these reserved offset credits 
in the offsets reserve; and 
‘‘(ii) register the holding of the re-
served offset credits in the Offset Registry 
established under section 732(d). 
‘‘(B) PROJECT REVERSAL.— 
‘‘(i) IN GENERAL.—If a reversal has 
occurred with respect to an offset project 
for which offset credits are reserved under 
this paragraph, the Administrator shall re-
tire offset credits or emission allowances 
from the offsets reserve to fully account 
for the tons of carbon dioxide equivalent 
that are no longer sequestered. 
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‘‘(ii) INTENTIONAL
REVERSALS.—If 
the Administrator determines that a rever-
sal was intentional, the offset project devel-
oper for the relevant offset project shall 
place into the offsets reserve a quantity of 
offset credits, or combination of offset 
credits and emission allowances, equal in 
number to the number of reserve offset 
credits that were canceled due to the rever-
sal pursuant to clause (i). 
‘‘(iii) UNINTENTIONAL REVERSALS.— 
If the Administrator determines that a re-
versal was unintentional, the offset project 
developer for the relevant offset project 
shall place into the offsets reserve a quan-
tity of offset credits, or combination of off-
set credits and emission allowances, equal 
in number to half the number of offset 
credits that were reserved for that offset 
project, or half the number of reserve off-
set credits that were canceled due to the 
reversal pursuant to clause (i), whichever 
is less. 
‘‘(C) USE
OF
RESERVED
OFFSET
CRED-
ITS.—Offset credits placed into the offsets re-
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serve under this paragraph may not be used to 
comply with section 722. 
‘‘(c) CREDITING PERIODS.— 
‘‘(1) IN
GENERAL.—For each offset project 
type, the Administrator shall specify a crediting pe-
riod, and establish provisions for petitions for new 
crediting periods, in accordance with this subsection. 
‘‘(2) DURATION.—The crediting period shall be 
no less than 5 and no greater than 10 years for any 
project type other than those involving sequestra-
tion. 
‘‘(3) ELIGIBILITY.—An offset project shall be 
eligible to generate offset credits under this part 
only during the project’s crediting period. During 
such crediting period, the project shall remain eligi-
ble to generate offset credits, subject to the meth-
odologies and project type eligibility list that applied 
as of the date of project approval under section 735, 
except as provided in paragraph (4) of this sub-
section. 
‘‘(4) PETITION FOR NEW CREDITING PERIOD.— 
An offset project developer may petition for a new 
crediting period to commence after termination of a 
crediting period, subject to the methodologies and 
project type eligibility list in effect at the time when 
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such petition is submitted. A petition may not be 
submitted under this paragraph more than 18 
months before the end of the pending crediting pe-
riod. The Administrator may limit the number of 
new crediting periods available for projects of par-
ticular project types. 
‘‘(d) ENVIRONMENTAL INTEGRITY.—In establishing 
the requirements under this section, the Administrator 
shall apply conservative assumptions or methods to maxi-
mize the certainty that the environmental integrity of the 
cap established under section 703 is not compromised. 
‘‘(e) PRE-EXISTING METHODOLOGIES.—In promul-
gating requirements under this section, the Administrator 
shall give due consideration to methodologies for offset 
projects existing as of the date of enactment of this title. 
‘‘(f) ADDED PROJECT TYPES.—The Administrator 
shall establish methodologies described in subsection (a), 
and, as applicable, requirements and mechanisms for re-
versals as described in subsection (b), for any project type 
that is added to the list pursuant to section 733. 
‘‘SEC. 735. APPROVAL OF OFFSET PROJECTS. 
‘‘(a) APPROVAL PETITION.—An offset project devel-
oper shall submit an offset project approval petition pro-
viding such information as the Administrator requires to 
determine whether the offset project is eligible for issuance 
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of offset credits under rules promulgated pursuant to this 
part. 
‘‘(b) TIMING.—An approval petition shall be sub-
mitted to the Administrator under subsection (a) no later 
than the time at which an offset project’s first verification 
report is submitted under section 736. 
‘‘(c) APPROVAL PETITION REQUIREMENTS.—As part 
of the regulations promulgated under section 732, the Ad-
ministrator shall include provisions for, and shall specify, 
the required components of an offset project approval peti-
tion required under subsection (a), which shall include— 
‘‘(1) designation of an offset project developer; 
and 
‘‘(2) any other information that the Adminis-
trator considers to be necessary to achieve the pur-
poses of this part. 
‘‘(d) APPROVAL AND NOTIFICATION.—Not later than 
90 days after receiving a complete approval petition under 
subsection (a), the Administrator shall make the approval 
petition publicly available, approve or deny the petition in 
writing and if the petition is denied, provide the reasons 
for denial, and make the Administrator’s written decision 
publicly available. After an offset project is approved, the 
offset project developer shall not be required to resubmit 
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an approval petition during the offset project’s crediting 
period, except as provided in section 734(c)(4). 
‘‘(e) APPEAL.—The Administrator shall establish 
procedures for appeal and review of determinations made 
under subsection (d). 
‘‘(f) VOLUNTARY PREAPPROVAL REVIEW.—The Ad-
ministrator may establish a voluntary preapproval review 
procedure, to allow an offset project developer to request 
the Administrator to conduct a preliminary eligibility re-
view for an offset project. Findings of such reviews shall 
not be binding upon the Administrator. The voluntary 
preapproval review procedure— 
‘‘(1) shall require the offset project developer to 
submit such basic project information as the Admin-
istrator requires to provide a meaningful review; and 
‘‘(2) shall require a response from the Adminis-
trator not later than 6 weeks after receiving a re-
quest for review under this subsection. 
‘‘SEC. 736. VERIFICATION OF OFFSET PROJECTS. 
‘‘(a) IN GENERAL.—As part of the regulations pro-
mulgated under section 732(a), the Administrator shall es-
tablish requirements, including protocols, for verification 
of the quantity of greenhouse gas emission reductions or 
avoidance, or sequestration of greenhouse gases, resulting 
from an offset project. The regulations shall require that 
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an offset project developer shall submit a report, prepared 
by a third-party verifier accredited under subsection (d), 
providing such information as the Administrator requires 
to determine the quantity of greenhouse gas emission re-
ductions or avoidance, or sequestration of greenhouse 
gases, resulting from the offset project. 
‘‘(b) SCHEDULE.—The Administrator shall prescribe 
a schedule for the submission of verification reports under 
subsection (a). 
‘‘(c) VERIFICATION REPORT REQUIREMENTS.—The 
Administrator shall specify the required components of a 
verification report required under subsection (a), which 
shall include— 
‘‘(1) the name and contact information for a 
designated representative for the offset project devel-
oper; 
‘‘(2) the quantity of greenhouse gases reduced, 
avoided, or sequestered; 
‘‘(3) the methodologies applicable to the project 
pursuant to section 734; 
‘‘(4) a certification that the project meets the 
applicable requirements; 
‘‘(5) a certification establishing that the conflict 
of interest requirements in the regulations promul-
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gated under subsection (d)(1) have been complied 
with; and 
‘‘(6) any other information that the Adminis-
trator considers to be necessary to achieve the pur-
poses of this part. 
‘‘(d) VERIFIER ACCREDITATION.— 
‘‘(1) IN GENERAL.—As part of the regulations 
promulgated under section 732(a), the Adminis-
trator shall establish a process and requirements for 
periodic accreditation of third-party verifiers to en-
sure that such verifiers are professionally qualified 
and have no conflicts of interest. 
‘‘(2) STANDARDS.— 
‘‘(A) AMERICAN NATIONAL STANDARDS IN-
STITUTE ACCREDITATION.—The Administrator 
may accredit, or accept for purposes of accredi-
tation under this subsection, verifiers accredited 
under the American National Standards Insti-
tute (ANSI) accreditation program in accord-
ance with ISO 14065. The Administrator shall 
accredit, or accept for accreditation, verifiers 
under this subparagraph only if the Adminis-
trator finds that the American National Stand-
ards Institute accreditation program provides 
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sufficient assurance that the requirements of 
this part will be met. 
‘‘(B) EPA ACCREDITATION.—As part of 
the regulations promulgated under section 
732(a), the Administrator may establish accred-
itation standards for verifiers under this sub-
section, and may establish related training and 
testing programs and requirements. 
‘‘(3) PUBLIC
ACCESSIBILITY.—Each verifier 
meeting the requirements for accreditation in ac-
cordance with this subsection shall be listed in a 
publicly accessible database, which shall be main-
tained and updated by the Administrator. 
‘‘SEC. 737. ISSUANCE OF OFFSET CREDITS. 
‘‘(a) DETERMINATION
AND
NOTIFICATION.—Not 
later than 90 days after receiving a complete verification 
report under section 736, the Administrator shall— 
‘‘(1) make the report publicly available; 
‘‘(2) make a determination of the quantity of 
greenhouse gas emissions that have been reduced or 
avoided, or greenhouse gases that have been seques-
tered, by the offset project; and 
‘‘(3) notify the offset project developer in writ-
ing of such determination and make such determina-
tion publicly available. 
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‘‘(b) ISSUANCE OF OFFSET CREDITS.—The Adminis-
trator shall issue one offset credit to an offset project de-
veloper for each ton of carbon dioxide equivalent that the 
Administrator has determined has been reduced, avoided, 
or sequestered during the period covered by a verification 
report submitted in accordance with section 736, only if— 
‘‘(1) the Administrator has approved the offset 
project pursuant to section 735; and 
‘‘(2) the relevant emissions reduction, avoid-
ance, or sequestration has— 
‘‘(A) already occurred, during the offset 
project’s crediting period; and 
‘‘(B) occurred after January 1, 2009. 
‘‘(c) APPEAL.—The Administrator shall establish 
procedures for appeal and review of determinations made 
under subsection (a). 
‘‘(d) TIMING.—Offset credits meeting the criteria es-
tablished in subsection (b) shall be issued not later than 
2 weeks following the verification determination made by 
the Administrator under subsection (a). 
‘‘(e) REGISTRATION.—The Administrator shall as-
sign a unique serial number to and register each offset 
credit to be issued in the Offset Registry established under 
section 732(d). 
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‘‘SEC. 738. AUDITS. 
‘‘(a) IN GENERAL.—The Administrator shall, on an 
ongoing basis, conduct random audits of offset projects, 
offset credits, and practices of third-party verifiers. In 
each year, the Administrator shall conduct audits, at min-
imum, for a representative sample of project types and 
geographic areas. 
‘‘(b) DELEGATION.—The Administrator may delegate 
to a State or tribal government the responsibility for con-
ducting audits under this section if the Administrator 
finds that the program proposed by the State or tribal 
government provides assurances equivalent to those pro-
vided by the auditing program of the Administrator, and 
that the integrity of the offset program under this part 
will be maintained. Nothing in this subsection shall pre-
vent the Administrator from conducting any audit the Ad-
ministrator considers necessary and appropriate. 
‘‘SEC. 739. PROGRAM REVIEW AND REVISION. 
‘‘At least once every 5 years, the Administrator shall 
review and, based on new or updated information and tak-
ing into consideration the recommendations of the Advi-
sory Board, update and revise— 
‘‘(1) the list of eligible project types established 
under section 733; 
‘‘(2) the methodologies established, including 
specific activity baselines, under section 734(a); 
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‘‘(3) the reversal requirements and mechanisms 
established or prescribed under section 734(b); 
‘‘(4) measures to improve the accountability of 
the offsets program; and 
‘‘(5) any other requirements established under 
this part to ensure the environmental integrity and 
effective operation of this part. 
‘‘SEC. 740. EARLY OFFSET SUPPLY. 
‘‘(a) PROJECTS REGISTERED UNDER OTHER GOV-
ERNMENT-RECOGNIZED PROGRAMS.—Except as provided 
in subsection (b) or (c), the Administrator shall issue one 
offset credit for each ton of carbon dioxide equivalent 
emissions reduced, avoided, or sequestered— 
‘‘(1) under an offset project that was started 
after January 1, 2001; 
‘‘(2) for which a credit was issued under any 
regulatory or voluntary greenhouse gas emission off-
set program that the Administrator determines— 
‘‘(A) was established under State or tribal 
law or regulation prior to January 1, 2009, or 
has been approved by the Administrator pursu-
ant to subsection (e); 
‘‘(B) has developed offset project type 
standards, 
methodologies, 
and 
protocols 
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through a public consultation process or a peer 
review process; 
‘‘(C) has made available to the public 
standards, methodologies, and protocols that re-
quire that credited emission reductions, avoid-
ance, or sequestration are permanent, addi-
tional, verifiable, and enforceable; 
‘‘(D) requires that all emission reductions, 
avoidance, or sequestration be verified by a 
State or tribal regulatory agency or an accred-
ited third-party independent verification body; 
‘‘(E) requires that all credits issued are 
registered in a publicly accessible registry, with 
individual serial numbers assigned for each ton 
of carbon dioxide equivalent emission reduc-
tions, avoidance, or sequestration; and 
‘‘(F) ensures that no credits are issued for 
an activity if the entity administering the pro-
gram, or a program administrator or represent-
ative, has funded, solicited, or served as a fund 
administrator for the development of the activ-
ity; and 
‘‘(3) for which the credit described in para-
graph (2) is transferred to the Administrator. 
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‘‘(b) INELIGIBLE CREDITS.—Subsection (a) shall not 
apply to offset credits that have expired or have been re-
tired, canceled, or used for compliance under a program 
established under State or tribal law or regulation. 
‘‘(c) 
LIMITATION.—Notwithstanding 
subsection 
(a)(1), offset credits shall be issued under this section— 
‘‘(1) only for reductions or avoidance of green-
house gas emissions, sequestration of greenhouse 
gases, or destruction of chlorofluorocarbons (subject 
to the conditions specified in section 619(b)(9) and 
based on the carbon dioxide equivalent value of the 
substance destroyed), that occur after January 1, 
2009; and 
‘‘(2) only until the date that is 3 years after the 
date of enactment of this title, or the date that regu-
lations promulgated under section 732(a) take ef-
fect, whichever occurs sooner. 
‘‘(d) RETIREMENT OF CREDITS.—The Administrator 
shall seek to ensure that offset credits described in sub-
section (a)(2) are retired for purposes of use under a pro-
gram described in subsection (b). 
‘‘(e) OTHER PROGRAMS.—(1) Offset programs that 
either— 
‘‘(A) were not established under State or tribal 
law or regulation; or 
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‘‘(B) were not established prior to January 1, 
2009, 
but that otherwise meet all of the criteria of subsection 
(a)(2) may apply to the Administrator to be approved 
under this subsection as an eligible program for early off-
set credits under this section. 
‘‘(2) The Administrator shall approve any such pro-
gram that the Administrator determines has criteria and 
methodologies of at least equal stringency to the criteria 
and methodologies of the programs established under 
State or tribal law or regulation that the Administrator 
determines meet the criteria of subsection (a)(2). The Ad-
ministrator may approve types of offsets under any such 
program that are subject to criteria and methodologies of 
at least equal stringency to the criteria and methodologies 
for such types of offsets applied under the programs estab-
lished under State or tribal law or regulation that the Ad-
ministrator determines meet the criteria of subsection 
(a)(2). The Administrator shall make a determination on 
any application received under this section by no later 
than 180 days from the date of receipt of the application. 
‘‘SEC. 741. ENVIRONMENTAL CONSIDERATIONS. 
‘‘If the Administrator lists forestry or other relevant 
land management-related offset projects as eligible offset 
project types under section 733, the Administrator, in con-
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sultation with appropriate Federal agencies, shall promul-
gate regulations for the selection and use of species in 
such offset projects— 
‘‘(1) to ensure that native species are given pri-
mary consideration in such projects; 
‘‘(2) to enhance biological diversity in such 
projects; 
‘‘(3) to prohibit the use of federally designated 
or State-designated noxious weeds; 
‘‘(4) to prohibit the use of a species listed by 
a regional or State invasive plant authority within 
the applicable region or State; and 
‘‘(5) in the case of forestry offset projects, in 
accordance with widely accepted, environmentally 
sustainable forestry practices. 
‘‘SEC. 742. TRADING. 
‘‘Section 724 shall apply to the trading of offset cred-
its. 
‘‘SEC. 743. INTERNATIONAL OFFSET CREDITS. 
‘‘(a) IN GENERAL.—The Administrator, in consulta-
tion with the Secretary of State and the Administrator 
of the United States Agency for International Develop-
ment, may issue, in accordance with this section, inter-
national offset credits based on activities that reduce or 
avoid greenhouse gas emissions, or increase sequestration 
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of greenhouse gases, in a developing country. Such credits 
may be issued for projects eligible under section 733 or 
as provided in subsection (c), (d), or (e) of this section. 
‘‘(b) ISSUANCE.— 
‘‘(1) REGULATIONS.—Not later than 2 years 
after the date of enactment of this title, the Admin-
istrator, in consultation with the Secretary of State, 
the Administrator of the United States Agency for 
International Development, and any other appro-
priate Federal agency, and taking into consideration 
the recommendations of the Advisory Board, shall 
promulgate regulations for implementing this sec-
tion. Except as otherwise provided in this section, 
the issuance of international offset credits under this 
section shall be subject to the requirements of this 
part. 
‘‘(2) 
REQUIREMENTS
FOR
INTERNATIONAL 
OFFSET
CREDITS.—The Administrator may issue 
international offset credits only if— 
‘‘(A) the United States is a party to a bi-
lateral or multilateral agreement or arrange-
ment that includes the country in which the 
project or measure achieving the relevant green-
house gas emission reduction or avoidance, or 
greenhouse gas sequestration, has occurred; 
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‘‘(B) such country is a developing country; 
and 
‘‘(C) such agreement or arrangement— 
‘‘(i) ensures that the requirements of 
this part apply to the issuance of inter-
national offset credits under this section; 
and 
‘‘(ii) provides for the appropriate dis-
tribution of international offset credits 
issued. 
‘‘(c) SECTOR-BASED CREDITS.— 
‘‘(1) IN GENERAL.—In order to minimize the 
potential for leakage and to encourage countries to 
take nationally appropriate mitigation actions to re-
duce or avoid greenhouse gas emissions, or sequester 
greenhouse gases, the Administrator, in consultation 
with the Secretary of State and the Administrator of 
the United States Agency for International Develop-
ment, shall— 
‘‘(A) identify sectors of specific countries 
with respect to which the issuance of inter-
national offset credits on a sectoral basis is ap-
propriate; and 
‘‘(B) issue international offset credits for 
such sectors only on a sectoral basis. 
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‘‘(2) IDENTIFICATION OF SECTORS.— 
‘‘(A) GENERAL
RULE.—For purposes of 
paragraph (1)(A), a sectoral basis shall be ap-
propriate for activities— 
‘‘(i) in countries that have compara-
tively high greenhouse gas emissions, or 
comparatively greater levels of economic 
development; and 
‘‘(ii) that, if located in the United 
States, would be within a sector subject to 
the compliance obligation under section 
722. 
‘‘(B) FACTORS.—In determining the sec-
tors and countries for which international offset 
credits should be awarded only on a sectoral 
basis, the Administrator, in consultation with 
the Secretary of State and the Administrator of 
the United States Agency for International De-
velopment, shall consider the following factors: 
‘‘(i) The country’s gross domestic 
product. 
‘‘(ii) The country’s total greenhouse 
gas emissions. 
‘‘(iii) Whether the comparable sector 
of the United States economy is covered by 
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the compliance obligation under section 
722. 
‘‘(iv) The heterogeneity or homo-
geneity of sources within the relevant sec-
tor. 
‘‘(v) Whether the relevant sector pro-
vides products or services that are sold in 
internationally competitive markets. 
‘‘(vi) The risk of leakage if inter-
national offset credits were issued on a 
project-level basis, instead of on a sectoral 
basis, for activities within the relevant sec-
tor. 
‘‘(vii) The capability of accurately 
measuring, 
monitoring, 
reporting, 
and 
verifying the performance of sources across 
the relevant sector. 
‘‘(viii) Such other factors as the Ad-
ministrator, in consultation with the Sec-
retary of State and the Administrator of 
the United States Agency for International 
Development, determines are appropriate 
to— 
‘‘(I) ensure the integrity of the 
United States greenhouse gas emis-
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sions cap established under section 
703; and 
‘‘(II) encourage countries to take 
nationally appropriate mitigation ac-
tions to reduce or avoid greenhouse 
gas emissions, or sequester green-
house gases. 
‘‘(3) SECTORAL BASIS.— 
‘‘(A) DEFINITION.—In this subsection, the 
term ‘sectoral basis’ means the issuance of 
international offset credits only for the quantity 
of sector-wide reductions or avoidance of green-
house gas emissions, or sector-wide increases in 
sequestration of greenhouse gases, achieved 
across the relevant sector of the economy rel-
ative to a domestically enforceable baseline level 
of absolute emissions established in an agree-
ment or arrangement described in subsection 
(b)(2)(A) for the sector. 
‘‘(B) BASELINE.—The baseline for a sec-
tor shall be established on an absolute basis 
and at levels of greenhouse gas emissions con-
sistent with the thresholds identified in section 
705(e)(2) and lower than would occur under a 
business-as-usual scenario taking into account 
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relevant domestic or international policies or in-
centives to reduce greenhouse gas emissions, 
among other factors, and additionality and per-
formance shall be determined on the basis of 
such baseline. 
‘‘(d) CREDITS
ISSUED
BY
AN
INTERNATIONAL 
BODY.— 
‘‘(1) IN GENERAL.—The Administrator, in con-
sultation with the Secretary of State, may issue 
international offset credits in exchange for instru-
ments in the nature of offset credits that are issued 
by an international body established pursuant to the 
United Nations Framework Convention on Climate 
Change, to a protocol to such Convention, or to a 
treaty that succeeds such Convention. The Adminis-
trator may issue international offset credits under 
this subsection only if, in addition to the require-
ments of subsection (b), the Administrator has de-
termined that the international body that issued the 
instruments has implemented substantive and proce-
dural requirements for the relevant project type that 
provide equal or greater assurance of the integrity of 
such instruments as is provided by the requirements 
of this part. Starting January 1, 2016, the Adminis-
trator shall issue no offset credit pursuant to this 
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subsection if the activity generating the greenhouse 
gas emissions reductions or avoidance, or greenhouse 
gas sequestration, occurs in a country and sector 
identified by the Administrator under subsection (c). 
‘‘(2) RETIREMENT.—The Administrator, in 
consultation with the Secretary of State, shall seek, 
by whatever means appropriate, including agree-
ments, arrangements, or technical cooperation with 
the international issuing body described in para-
graph (1), to ensure that such body— 
‘‘(A) is notified of the Administrator’s 
issuance, under this subsection, of an inter-
national offset credit in exchange for an instru-
ment issued by such international body; and 
‘‘(B) provides, to the extent feasible, for 
the disqualification of the instrument issued by 
such international body for subsequent use 
under any relevant foreign or international 
greenhouse gas regulatory program, regardless 
of whether such use is a sale, exchange, or sub-
mission to satisfy a compliance obligation. 
‘‘(e) OFFSETS FROM REDUCED DEFORESTATION.— 
‘‘(1) REQUIREMENTS.—The Administrator, in 
accordance with the regulations promulgated under 
subsection (b)(1) and an agreement or arrangement 
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described in subsection (b)(2)(A), shall issue inter-
national offset credits for greenhouse gas emission 
reductions achieved through activities to reduce de-
forestation only if, in addition to the requirements of 
subsection (b)— 
‘‘(A) the activity occurs in— 
‘‘(i) a country listed by the Adminis-
trator pursuant to paragraph (2); 
‘‘(ii) a state or province listed by the 
Administrator pursuant to paragraph (5); 
or 
‘‘(iii) a country listed by the Adminis-
trator pursuant to paragraph (6); 
‘‘(B) except as provided in paragraph (5) 
or (6), the quantity of the international offset 
credits is determined by comparing the national 
emissions from deforestation relative to a na-
tional deforestation baseline for that country es-
tablished, in accordance with an agreement or 
arrangement described in subsection (b)(2)(A), 
pursuant to paragraph (4); 
‘‘(C) the reduction in emissions from de-
forestation has occurred before the issuance of 
the international offset credit and, taking into 
consideration relevant international standards, 
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has been demonstrated using ground-based in-
ventories, remote sensing technology, and other 
methodologies to ensure that all relevant carbon 
stocks are accounted; 
‘‘(D) the Administrator has made appro-
priate adjustments, such as discounting for any 
additional uncertainty, to account for cir-
cumstances specific to the country, including its 
technical capacity described in paragraph 
(2)(A); 
‘‘(E) the activity is designed, carried out, 
and managed— 
‘‘(i) in accordance with widely accept-
ed, 
environmentally 
sustainable 
forest 
management practices; 
‘‘(ii) to promote or restore native for-
est species and ecosystems where prac-
ticable, and to avoid the introduction of 
invasive nonnative species; 
‘‘(iii) in a manner that gives due re-
gard to the rights and interests of local 
communities, indigenous peoples, forest-de-
pendent communities, and vulnerable social 
groups; 
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‘‘(iv) with consultations with, and full 
participation of, local communities, indige-
nous peoples, and forest-dependent com-
munities, in affected areas, as partners 
and primary stakeholders, prior to and 
during the design, planning, implementa-
tion, and monitoring and evaluation of ac-
tivities; and 
‘‘(v) with equitable sharing of profits 
and benefits derived from offset credits 
with local communities, indigenous peoples, 
and forest-dependent communities; and 
‘‘(F) the reduction otherwise satisfies and 
is consistent with any relevant requirements es-
tablished by an agreement reached under the 
auspices of the United Nations Framework 
Convention on Climate Change. 
‘‘(2) ELIGIBLE
COUNTRIES.—The Adminis-
trator, in consultation with the Secretary of State 
and the Administrator of the United States Agency 
for International Development, and in accordance 
with an agreement or arrangement described in sub-
section (b)(2)(A), shall establish, and periodically re-
view and update, a list of the developing countries 
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that have the capacity to participate in deforestation 
reduction activities at a national level, including— 
‘‘(A) the technical capacity to monitor, 
measure, report, and verify forest carbon fluxes 
for all significant sources of greenhouse gas 
emissions from deforestation with an acceptable 
level of uncertainty, as determined taking into 
account relevant internationally accepted meth-
odologies, such as those established by the 
Intergovernmental Panel on Climate Change; 
‘‘(B) the institutional capacity to reduce 
emissions from deforestation, including strong 
forest governance and mechanisms to equitably 
distribute deforestation resources for local ac-
tions; and 
‘‘(C) a land use or forest sector strategic 
plan that— 
‘‘(i) assesses national and local drivers 
of deforestation and forest degradation and 
identifies reforms to national policies need-
ed to address them; 
‘‘(ii) estimates the country’s emissions 
from deforestation and forest degradation; 
‘‘(iii) identifies improvements in data 
collection, monitoring, and institutional ca-
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pacity necessary to implement a national 
deforestation reduction program; and 
‘‘(iv) establishes a timeline for imple-
menting the program and transitioning to 
low-emissions development with respect to 
emissions from forest and land use activi-
ties. 
‘‘(3) PROTECTION
OF
INTERESTS.—With re-
spect to an agreement or arrangement described in 
subsection (b)(2)(A) that addresses international off-
set credits under this subsection, the Administrator, 
in consultation with the Secretary of State and the 
Administrator of the United States Agency for 
International Development, shall seek to ensure the 
establishment and enforcement by such country of 
legal regimes, processes, standards, and safeguards 
that— 
‘‘(A) give due regard to the rights and in-
terests of local communities, indigenous peoples, 
forest-dependent communities, and vulnerable 
social groups; 
‘‘(B) promote consultations with, and full 
participation of, forest-dependent communities 
and indigenous peoples in affected areas, as 
partners and primary stakeholders, prior to and 
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during the design, planning, implementation, 
and monitoring and evaluation of activities; and 
‘‘(C) encourage equitable sharing of profits 
and benefits derived from international offset 
credits with local communities, indigenous peo-
ples, and forest-dependent communities. 
‘‘(4) NATIONAL DEFORESTATION BASELINE.—A 
national deforestation baseline established under this 
subsection shall— 
‘‘(A) be national in scope; 
‘‘(B) be consistent with nationally appro-
priate mitigation commitments or actions with 
respect to deforestation, taking into consider-
ation the average annual historical deforestation 
rates of the country during a period of at least 
5 years, the applicable drivers of deforestation, 
and other factors to ensure additionality; 
‘‘(C) establish a trajectory that would re-
sult in zero net deforestation by not later than 
20 years after the national deforestation base-
line has been established; 
‘‘(D) be adjusted over time to take account 
of changing national circumstances; 
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‘‘(E) be designed to account for all signifi-
cant sources of greenhouse gas emissions from 
deforestation in the country; and 
‘‘(F) be consistent with the national defor-
estation baseline, if any, established for such 
country under section 754(d)(1) and (2). 
‘‘(5) STATE-LEVEL
OR
PROVINCE-LEVEL
AC-
TIVITIES.— 
‘‘(A) ELIGIBLE STATES OR PROVINCES.— 
The Administrator, in consultation with the 
Secretary of State and the Administrator of the 
United States Agency for International Devel-
opment, shall establish within 2 years after the 
date of enactment of this title, and periodically 
review and update, a list of states or provinces 
in developing countries where— 
‘‘(i) the developing country is not in-
cluded on the list of countries established 
pursuant to paragraph (6)(A); 
‘‘(ii) the state or province by itself is 
a major emitter of greenhouse gases from 
tropical deforestation on a scale commen-
surate to the emissions of other countries; 
and 
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‘‘(iii) the state or province meets the 
eligibility criteria in paragraphs (2) and 
(3) for the geographic area under its juris-
diction. 
‘‘(B) ACTIVITIES.—The Administrator may 
issue international offset credits for greenhouse 
gas emission reductions achieved through activi-
ties to reduce deforestation at a state or provin-
cial level that meet the requirements of this sec-
tion. Such credits shall be determined by com-
paring the emissions from deforestation within 
that state or province relative to the state or 
province deforestation baseline for that state or 
province established, in accordance with an 
agreement or arrangement described in sub-
section (b)(2)(A), pursuant to subparagraph 
(C) of this paragraph. 
‘‘(C) STATE
OR
PROVINCE
DEFOREST-
ATION BASELINE.—A state or province deforest-
ation baseline shall— 
‘‘(i) be consistent with any existing 
nationally appropriate mitigation commit-
ments or actions for the country in which 
the activity is occurring, taking into con-
sideration the average annual historical de-
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forestation rates of the state or province 
during a period of at least 5 years, rel-
evant drivers of deforestation, and other 
factors to ensure additionality; 
‘‘(ii) establish a trajectory that would 
result in zero net deforestation by not later 
than 20 years after the state or province 
deforestation baseline has been established; 
and 
‘‘(iii) be designed to account for all 
significant sources of greenhouse gas emis-
sions from deforestation in the state or 
province and adjusted to fully account for 
emissions leakage outside the state or 
province. 
‘‘(D) PHASE
OUT.—Beginning 5 years 
after the first calendar year for which a covered 
entity must demonstrate compliance with sec-
tion 722(a), the Administrator shall issue no 
further international offset credits for eligible 
state-level or province-level activities to reduce 
deforestation pursuant to this paragraph. 
‘‘(6) PROJECTS
AND
PROGRAMS
TO
REDUCE 
DEFORESTATION.— 
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‘‘(A) ELIGIBLE COUNTRIES.—The Admin-
istrator, in consultation with the Secretary of 
State and the Administrator of the United 
States Agency for International Development, 
shall establish within 2 years after the date of 
enactment of this title, and periodically review 
and update, a list of developing countries each 
of which— 
‘‘(i) the Administrator determines, 
based on recent, credible, and reliable 
emissions data, accounts for less than 1 
percent of global greenhouse gas emissions 
and less than 3 percent of global forest- 
sector and land use change greenhouse gas 
emissions; and 
‘‘(ii) has, or in the determination of 
the Administrator is making a good faith 
effort to develop, a land use or forest sec-
tor strategic plan that meets the criteria 
described in paragraph (2)(C). 
‘‘(B) ACTIVITIES.—The Administrator may 
issue international offset credits for greenhouse 
gas emission reductions achieved through 
project or program level activities to reduce de-
forestation in countries listed under subpara-
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graph (A) that meet the requirements of this 
section. The quantity of international offset 
credits shall be determined by comparing the 
project-level or program-level emissions from 
deforestation to a deforestation baseline for 
such project or program established pursuant to 
subparagraph (C). 
‘‘(C) PROJECT-LEVEL OR PROGRAM-LEVEL 
BASELINE.—A project-level or program-level de-
forestation baseline shall— 
‘‘(i) be consistent with any existing 
nationally appropriate mitigation commit-
ments or actions for the country in which 
the project or program is occurring, taking 
into consideration the average annual his-
torical deforestation rates relevant to the 
specific project or program during a period 
of at least 5 years, applicable drivers of de-
forestation, and other factors to ensure 
additionality; 
‘‘(ii) be designed to account for all 
significant sources of greenhouse gas emis-
sions from deforestation in the project or 
program boundary; and 
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‘‘(iii) be adjusted to fully account for 
emissions leakage outside the project or 
program boundary. 
‘‘(D) PHASE OUT.—(i) Beginning 5 years 
after the first calendar year for which a covered 
entity must demonstrate compliance with sec-
tion 722(a), the Administrator shall issue no 
further international offset credits for project- 
level or program-level activities pursuant to this 
paragraph, except as provided in clause (ii). 
‘‘(ii) The Administrator may extend the 
phase out deadline for the issuance of inter-
national offset credits under this paragraph by 
up to 8 years with respect to eligible activities 
taking place in a least developed country, which 
for purposes of this paragraph is defined as a 
foreign country that the United Nations has 
identified as among the least developed of devel-
oping countries at the time that the Adminis-
trator determines to provide an extension, if the 
Administrator, in consultation with the Sec-
retary of State and the Administrator of the 
United States Agency for International Devel-
opment, determines the country— 
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‘‘(I) lacks sufficient capacity to adopt 
and implement effective programs to 
achieve reductions in deforestation meas-
ured against national baselines; 
‘‘(II) is receiving support under part 
E to develop such capacity; and 
‘‘(III) has developed and is working to 
implement a credible national strategy or 
plan to reduce deforestation. 
‘‘(7) DEFORESTATION.—In implementing this 
subsection, the Administrator, taking into consider-
ation the recommendations of the Advisory Board, 
may include forest degradation, or soil carbon losses 
associated with forested wetlands or peatlands, with-
in the meaning of deforestation. 
‘‘(8) CONSULTATION.—In implementing this 
subsection, the Administrator shall consult with the 
Secretary of Agriculture on relevant matters within 
such Secretary’s area of expertise. 
‘‘(f) MODIFICATION OF REQUIREMENTS.—In promul-
gating regulations under subsection (b)(1) with respect to 
the issuance of international offset credits under sub-
section (c), (d), or (e), the Administrator, in consultation 
with the Secretary of State and the Administrator of the 
United States Agency for International Development, may 
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modify or omit a requirement of this part (excluding the 
requirements of this section) if the Administrator deter-
mines that the application of that requirement to such 
subsection is not feasible. In modifying or omitting such 
a requirement on the basis of infeasibility, the Adminis-
trator, in consultation with the Secretary of State and the 
Administrator of the United States Agency for Inter-
national Development, shall ensure, with an adequate 
margin of safety, the integrity of international offset cred-
its issued under this section and of the greenhouse gas 
emissions cap established pursuant to section 703. 
‘‘(g) AVOIDING DOUBLE COUNTING.—The Adminis-
trator, in consultation with the Secretary of State, shall 
seek, by whatever means appropriate, including agree-
ments, arrangements, or technical cooperation, to ensure 
that activities on the basis of which international offset 
credits are issued under this section are not used for com-
pliance with an obligation to reduce or avoid greenhouse 
gas emissions, or increase greenhouse gas sequestration, 
under a foreign or international regulatory system. In ad-
dition, no international offset credits shall be issued for 
emission reductions from activities with respect to which 
emission allowances were allocated under section 781 for 
distribution under part E. 
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‘‘(h) LIMITATION.—The Administrator shall not issue 
international offset credits generated by projects based on 
the destruction of hydrofluorocarbons. 
‘‘PART E—SUPPLEMENTAL EMISSIONS 
REDUCTIONS FROM REDUCED DEFORESTATION 
‘‘SEC. 751. DEFINITIONS. 
‘‘In this part: 
‘‘(1) LEAKAGE PREVENTION ACTIVITIES.—The 
term ‘leakage prevention activities’ means activities 
in developing countries that are directed at pre-
serving existing forest carbon stocks, including for-
ested wetlands and peatlands, that might, absent 
such activities, be lost through leakage. 
‘‘(2) NATIONAL
DEFORESTATION
REDUCTION 
ACTIVITIES.—The term ‘national deforestation re-
duction activities’ means activities in developing 
countries that reduce a quantity of greenhouse gas 
emissions from deforestation that is calculated by 
measuring actual emissions against a national defor-
estation baseline established pursuant to section 
754(d)(1) and (2). 
‘‘(3) SUBNATIONAL
DEFORESTATION
REDUC-
TION ACTIVITIES.—The term ‘subnational deforest-
ation reduction activities’ means activities in devel-
oping countries that reduce a quantity of greenhouse 
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gas emissions from deforestation that are calculated 
by measuring actual emissions using an appropriate 
baseline established by the Administrator that is less 
than national in scope. 
‘‘(4) 
SUPPLEMENTAL
EMISSIONS
REDUC-
TIONS.—The term ‘supplemental emissions reduc-
tions’ means greenhouse gas emissions reductions 
achieved from reduced or avoided deforestation 
under this part. 
‘‘(5) USAID.—The term ‘USAID’ means the 
United States Agency for International Develop-
ment. 
‘‘SEC. 752. FINDINGS. 
‘‘Congress finds that— 
‘‘(1) as part of a global effort to mitigate cli-
mate change, it is in the national interest of the 
United States to assist developing countries to re-
duce and ultimately halt emissions from deforest-
ation; 
‘‘(2) deforestation is one of the largest sources 
of greenhouse gas emissions in developing countries, 
amounting to roughly 20 percent of overall emissions 
globally; 
‘‘(3) recent scientific analysis shows that it will 
be substantially more difficult to limit the increase 
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in global temperatures to less than 2 degrees centi-
grade above preindustrial levels without reducing 
and ultimately halting net emissions from deforest-
ation; 
‘‘(4) reducing emissions from deforestation is 
highly cost-effective, compared to many other 
sources of emissions reductions; 
‘‘(5) in addition to contributing significantly to 
worldwide efforts to address global warming, assist-
ance under this part will generate significant envi-
ronmental and social cobenefits, including protection 
of biodiversity, ecosystem services, and forest-related 
livelihoods; and 
‘‘(6) under the Bali Action Plan, developed 
country parties to the United Nations Framework 
Convention on Climate Change, including the United 
States, committed to ‘enhanced action on the provi-
sion of financial resources and investment to support 
action on mitigation and adaptation and technology 
cooperation,’ including, inter alia, consideration of 
‘improved access to adequate, predictable, and sus-
tainable financial resources and financial and tech-
nical support, and the provision of new and addi-
tional resources, including official and concessional 
funding for developing country parties’ . 
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‘‘SEC. 
753. 
SUPPLEMENTAL 
EMISSIONS 
REDUCTIONS 
THROUGH REDUCED DEFORESTATION. 
‘‘(a) REGULATIONS.—Not later than 2 years after 
the date of enactment of this title, the Administrator, in 
consultation with the Administrator of USAID and any 
other appropriate agencies, shall promulgate regulations 
establishing a program to use emission allowances set 
aside for this purpose under section 781 to reduce green-
house gas emissions from deforestation in developing 
countries in accordance with the requirements of this part. 
‘‘(b) OBJECTIVES.—The objectives of the program es-
tablished under this section shall be to— 
‘‘(1) achieve supplemental emissions reductions 
of at least 720,000,000 tons of carbon dioxide equiv-
alent in 2020, a cumulative amount of at least 
6,000,000,000 tons of carbon dioxide equivalent by 
December 31, 2025, and additional supplemental 
emissions reductions in subsequent years; 
‘‘(2) build capacity to reduce deforestation in 
developing countries experiencing deforestation, in-
cluding preparing developing countries to participate 
in international markets for international offset 
credits for reduced emissions from deforestation; and 
‘‘(3) preserve existing forest carbon stocks in 
countries where such forest carbon may be vulner-
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able to international leakage, particularly in devel-
oping countries with largely intact native forests. 
‘‘SEC. 754. REQUIREMENTS FOR INTERNATIONAL DEFOR-
ESTATION REDUCTION PROGRAM. 
‘‘(a) ELIGIBLE
COUNTRIES.—The Administrator 
may support activities under this part only with respect 
to a developing country that— 
‘‘(1) the Administrator, in consultation with the 
Administrator of USAID, determines is experiencing 
deforestation or forest degradation or has standing 
forest carbon stocks that may be at risk of deforest-
ation or degradation; and 
‘‘(2) has entered into a bilateral or multilateral 
agreement or arrangement with the United States 
establishing the conditions of its participation in the 
program established under this part, which shall in-
clude an agreement to meet the standards estab-
lished under subsection (d) for the activities to 
which those standards apply. 
‘‘(b) ACTIVITIES.— 
‘‘(1) AUTHORIZED ACTIVITIES.—Subject to the 
requirements of this part, the Administrator, in con-
sultation with the Administrator of USAID, may 
support activities to achieve the objectives identified 
in section 753(b), including— 
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‘‘(A) national deforestation reduction ac-
tivities; 
‘‘(B) subnational deforestation reduction 
activities, including pilot activities that reduce 
greenhouse gas emissions but are subject to sig-
nificant uncertainty; 
‘‘(C) activities to measure, monitor, and 
verify deforestation, avoided deforestation, and 
deforestation rates; 
‘‘(D) leakage prevention activities; 
‘‘(E) development of measurement, moni-
toring, and verification capacities to enable a 
country to quantify supplemental emissions re-
ductions and to generate for sale offset credits 
from reduced or avoided deforestation; 
‘‘(F) development of governance structures 
to reduce deforestation and illegal logging; 
‘‘(G) enforcement of requirements for re-
duced deforestation or forest conservation; 
‘‘(H) efforts to combat illegal logging and 
increase enforcement cooperation; 
‘‘(I) providing incentives for policy reforms 
to achieve the objectives identified in section 
753(b); and 
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‘‘(J) monitoring and evaluation of the re-
sults of the activities conducted under this sec-
tion. 
‘‘(2) ACTIVITIES SELECTED BY USAID.— 
‘‘(A) The Administrator of USAID, in con-
sultation with the Administrator, may select for 
support and implementation pursuant to sub-
section (c) any of the activities described in 
paragraph (1), consistent with this part and the 
regulations promulgated under subsection (d), 
and subject to the requirement to achieve the 
objectives listed in section 753(b)(1). 
‘‘(B) With respect to the activities listed in 
subparagraphs (D) through (J) of paragraph 
(1), the Administrator of USAID, in consulta-
tion with the Administrator, shall have primary 
but not exclusive responsibility for selecting the 
activities to be supported and implemented. 
‘‘(3) INTERAGENCY COORDINATION.—The Ad-
ministrator and the Administrator of USAID shall 
jointly develop and biennially update a strategic plan 
for meeting the objectives listed in section 753(b) 
and shall execute a memorandum of understanding 
delineating the agencies’ respective roles in imple-
menting this part. 
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‘‘(c) MECHANISMS.— 
‘‘(1) IN
GENERAL.—The Administrator may 
support activities to achieve the objectives identified 
in section 753(b) by— 
‘‘(A) developing and implementing pro-
grams and projects that achieve such objectives; 
and 
‘‘(B) distributing emission allowances to a 
country that is eligible under subsection (a), to 
a private or public group (including inter-
national organizations), or to an international 
fund established by an international agreement 
to which the United States is a party, to carry 
out activities to achieve such objectives. 
‘‘(2) USAID ACTIVITIES.—With respect to ac-
tivities selected and implemented by the Adminis-
trator of USAID pursuant to subsection (b)(2), the 
Administrator shall distribute emission allowances as 
provided in paragraph (1) of this subsection based 
upon the direction of the Administrator of USAID, 
subject to the availability of allowances for such ac-
tivities. 
‘‘(3) 
IMPLEMENTATION
THROUGH
INTER-
NATIONAL
ORGANIZATIONS.—If support is distrib-
uted through an international organization, the 
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agency responsible for selecting activities in accord-
ance with subsection (b)(1) or (2), in consultation 
with the Secretary of State, shall ensure the estab-
lishment and implementation of adequate mecha-
nisms to apply and enforce the eligibility require-
ments and other requirements of this section. 
‘‘(4) ROLE OF THE SECRETARY OF STATE.— 
The Administrator may not distribute emission al-
lowances under this part to the government of an-
other country or to an international organization or 
international fund unless the Secretary of State has 
concurred with such distribution. 
‘‘(d) STANDARDS.—The Administrator, in consulta-
tion with the Administrator of USAID, shall promulgate 
regulations establishing standards to ensure that supple-
mental emissions reductions achieved through supported 
activities are additional, measurable, verifiable, perma-
nent, and monitored, and account for leakage and uncer-
tainty. In addition, such standards shall— 
‘‘(1) require the establishment of a national de-
forestation baseline for each country with national 
deforestation reduction activities that is used to ac-
count for reductions achieved from such activities; 
‘‘(2) provide that a national deforestation base-
line established under paragraph (1) shall— 
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‘‘(A) be national in scope; 
‘‘(B) be consistent with nationally appro-
priate mitigation commitments or actions with 
respect to deforestation, taking into consider-
ation the average annual historical deforestation 
rates of the country during a period of at least 
5 years, the applicable drivers of deforestation, 
and other factors to ensure additionality; 
‘‘(C) establish a trajectory that would re-
sult in zero net deforestation by not later than 
20 years from the date the baseline is estab-
lished; 
‘‘(D) be adjusted over time to take account 
of changing national circumstances; 
‘‘(E) be designed to account for all signifi-
cant sources of greenhouse gas emissions from 
deforestation in the country; and 
‘‘(F) be consistent with the national defor-
estation baseline, if any, established for such 
country under section 743(e)(4); 
‘‘(3) with respect to support provided pursuant 
to subsection (b)(1)(A) or (B), require supplemental 
emissions reductions to be achieved and verified 
prior to compensation through the distribution of 
emission allowances under this part; 
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‘‘(4) with respect to accounting for subnational 
deforestation reduction activities that lack the stand-
ardized or precise measurement and monitoring 
techniques needed for a full accounting of changes 
in emissions or baselines, or are subject to other 
sources of uncertainty, apply a conservative discount 
factor to reflect the uncertainty regarding the levels 
of reductions achieved; 
‘‘(5) ensure that activities under this part shall 
be designed, carried out, and managed— 
‘‘(A) in accordance with widely accepted, 
environmentally sustainable forest management 
practices; 
‘‘(B) to promote or restore native forest 
species and ecosystems where practicable, and 
to avoid the introduction of invasive nonnative 
species; 
‘‘(C) in a manner that gives due regard to 
the rights and interests of local communities, 
indigenous peoples, forest-dependent commu-
nities, and vulnerable social groups; 
‘‘(D) with consultations with, and full par-
ticipation of, local communities, indigenous peo-
ples, and forest-dependent communities in af-
fected areas, as partners and primary stake-
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holders, prior to and during the design, plan-
ning, implementation, and monitoring and eval-
uation of activities; and 
‘‘(E) with equitable sharing of profits and 
benefits derived from the activities with local 
communities, indigenous peoples, and forest-de-
pendent communities; and 
‘‘(6) with respect to support for all activities 
under this part, seek to ensure the establishment 
and enforcement, by the country in which the activi-
ties occur, of legal regimes, standards, processes, 
and safeguards that— 
‘‘(A) give due regard to the rights and in-
terests of local communities, indigenous peoples, 
forest-dependent communities, and vulnerable 
social groups; 
‘‘(B) promote consultations with local com-
munities and indigenous peoples and forest-de-
pendent communities in affected areas, as part-
ners and primary stakeholders, prior to and 
during the design, planning, implementation, 
monitoring, and evaluation of activities under 
this part; and 
‘‘(C) encourage equitable sharing of profits 
and benefits from incentives for emissions re-
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ductions or leakage prevention with local com-
munities, indigenous peoples, and forest-de-
pendent communities. 
‘‘(e) SCOPE.—(1) The Administrator shall include 
within the scope of activities under this part reduced emis-
sions from forest degradation. 
‘‘(2) The Administrator, in consultation with the Ad-
ministrator of USAID, may decide, taking into account 
any advice from the Advisory Board, to expand, where ap-
propriate, the scope of activities under this part to include 
reduced soil carbon-derived emissions associated with de-
forestation and degradation of forested wetlands and 
peatlands. 
‘‘(f) ACCOUNTING.—The Administrator shall estab-
lish a publicly accessible registry of the supplemental emis-
sions reductions achieved through support provided under 
this part each year, after appropriately discounting for un-
certainty and other relevant factors as required by the 
standards established under subsection (d). 
‘‘(g) TRANSITION TO NATIONAL REDUCTIONS.—Be-
ginning 5 years after the date that a country entered into 
the agreement or arrangement required under subsection 
(a)(2), the Administrator shall provide no further com-
pensation through emission allowances to that country 
under this part for any subnational deforestation reduc-
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tion activities, except that the Administrator may extend 
this period by an additional 5 years if the Administrator, 
in consultation with the Administrator of USAID, deter-
mines that— 
‘‘(1) the country is making substantial progress 
towards adopting and implementing a program to 
achieve reductions in deforestation measured against 
a national baseline; 
‘‘(2) the greenhouse gas emissions reductions 
achieved are not resulting in significant leakage; and 
‘‘(3) the greenhouse gas emissions reductions 
achieved are being appropriately discounted to ac-
count for any leakage that is occurring. 
The limitation under this subsection shall not apply to 
support for activities to further the objectives listed in sec-
tion 753(b)(2) or (3). 
‘‘(h) COORDINATION WITH U.S. FOREIGN ASSIST-
ANCE.—Subject to the direction of the President, the Ad-
ministrator and the Administrator of USAID shall, to the 
extent practicable and consistent with the objectives of 
this program, seek to align activities under this section 
with broader development, poverty alleviation, or natural 
resource management objectives and initiatives in the re-
cipient country. 
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‘‘(i) SUPPORT AS SUPPLEMENT.—The provision of 
support for activities under this part shall be used to sup-
plement, and not to supplant, any other Federal, State, 
or local support available to carry out such qualifying ac-
tivities under this part. 
‘‘(j) NOT ELIGIBLE FOR OFFSET CREDIT.—Activities 
that receive support under this part shall not be issued 
offset credits for the greenhouse gas emissions reductions 
or avoidance, or greenhouse gas sequestration, produced 
by such activities. 
‘‘SEC. 755. REPORTS AND REVIEWS. 
‘‘(a) REPORTS.—Not later than January 1, 2014, 
and annually thereafter, the Administrator and the Ad-
ministrator of USAID shall submit to the Committee on 
Energy and Commerce and the Committee on Foreign Af-
fairs of the House of Representatives, and the Committee 
on Environment and Public Works and the Committee on 
Foreign Relations of the Senate, and make available to 
the public, a report on the support provided under this 
part during the prior fiscal year. The report shall in-
clude— 
‘‘(1) a statement of the quantity of supple-
mental emissions reductions for which compensation 
in the form of emission allowances was provided 
under this part during the prior fiscal year, as reg-
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istered by the Administrator under section 754(f); 
and 
‘‘(2) a description of the national and sub-
national deforestation reduction activities, capacity- 
building activities, and leakage prevention activities 
supported under this part, including a statement of 
the quantity of emission allowances distributed to 
each recipient for each activity during the prior fis-
cal year, and a description of what was accomplished 
through each of the activities. 
‘‘(b) REVIEWS.—Not later than 4 years after the date 
of enactment of this title and every 5 years thereafter, 
the Administrator and the Administrator of USAID, tak-
ing into consideration any evaluation by or recommenda-
tions from the Advisory Board established under section 
731, shall conduct a review of the activities undertaken 
pursuant to this part and make any appropriate changes 
in the program established under this part, consistent with 
the requirements of this part, based on the findings of the 
review. The review shall include the effects of the activities 
on— 
‘‘(1) total documented carbon stocks of each 
country that directly or indirectly received support 
under this part compared with such country’s na-
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tional deforestation baseline established under sec-
tion 754(d)(1) and (2); 
‘‘(2) the number of countries with the capacity 
to generate for sale instruments in the nature of off-
set credits from forest-related activities, and the 
amount of such activities; 
‘‘(3) forest governance in each country that di-
rectly or indirectly received support under this part; 
‘‘(4) indigenous peoples and forest-dependent 
communities residing in areas affected by such ac-
tivities; 
‘‘(5) biodiversity and ecosystem services within 
forested areas associated with the activities; 
‘‘(6) subnational and international leakage; and 
‘‘(7) any program or mechanism established 
under the United Nations Framework Convention on 
Climate Change related to greenhouse gas emissions 
from deforestation. 
‘‘SEC. 756. LEGAL EFFECT OF PART. 
‘‘(1) IN GENERAL.—Nothing in this part super-
sedes, limits, or otherwise affects any restriction im-
posed by Federal law (including regulations) on any 
interaction between an entity located in the United 
States and an entity located in a foreign country. 
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‘‘(2) ROLE OF THE SECRETARY OF STATE.— 
Nothing in this part shall be construed as affecting 
the role of the Secretary of State or the responsibil-
ities of the Secretary under section 622(c) of the 
Foreign Assistance Act of 1961.’’. 
SEC. 312. DEFINITIONS. 
Title VII of the Clean Air Act, as added by section 
311 of this Act, is amended by inserting before part A 
the following new section: 
‘‘SEC. 700. DEFINITIONS. 
‘‘In this title: 
‘‘(1) 
ADDITIONAL.—The 
term 
‘additional’, 
when used with respect to reductions or avoidance of 
greenhouse gas emissions, or to sequestration of 
greenhouse gases, means reductions, avoidance, or 
sequestration that result in a lower level of net 
greenhouse gas emissions or atmospheric concentra-
tions than would occur in the absence of an offset 
project. 
‘‘(2) ADDITIONALITY.—The term ‘additionality’ 
means the extent to which reductions or avoidance 
of greenhouse gas emissions, or sequestration of 
greenhouse gases, are additional. 
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‘‘(3) ADVISORY
BOARD.—The term ‘Advisory 
Board’ means the Offsets Integrity Advisory Board 
established under section 731. 
‘‘(4) AFFILIATED.—The term ‘affiliated’— 
‘‘(A) when used in relation to an entity 
means owned or controlled by, or under com-
mon ownership or control with, another entity, 
as determined by the Administrator; and 
‘‘(B) when used in relation to a natural 
gas local distribution company, means owned or 
controlled by, or under common ownership or 
control with, another natural gas local distribu-
tion company, as determined by the Adminis-
trator. 
‘‘(5) 
ALLOWANCE.—The 
term 
‘allowance’ 
means a limited authorization to emit, or have at-
tributable greenhouse gas emissions in an amount 
of, 1 ton of carbon dioxide equivalent of a green-
house gas in accordance with this title. Such term 
includes an emission allowance, a compensatory al-
lowance, and an international emission allowance, 
but does not include an international reserve allow-
ance established under section 766. 
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‘‘(6) ATTRIBUTABLE GREENHOUSE GAS EMIS-
SIONS.—The term ‘attributable greenhouse gas emis-
sions’, for a given calendar year, means— 
‘‘(A) for a covered entity that is a fuel pro-
ducer or importer described in paragraph 
(13)(B), greenhouse gases that would be emit-
ted from the combustion of any petroleum- 
based or coal-based liquid fuel, petroleum coke, 
or natural gas liquid, produced or imported by 
that covered entity during that calendar year 
for sale or distribution in interstate commerce, 
assuming no capture and sequestration of any 
greenhouse gas emissions; 
‘‘(B) for a covered entity that is an indus-
trial gas producer or importer described in 
paragraph (13)(C), the tons of carbon dioxide 
equivalent of any gas described in clauses (i) 
through (vi) of paragraph (13)(C)— 
‘‘(i) produced or imported by such 
covered entity during that calendar year 
for sale or distribution in interstate com-
merce; or 
‘‘(ii) released as fugitive emissions in 
the production of fluorinated gas; and 
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‘‘(C) for a natural gas local distribution 
company described in paragraph (13)(J), green-
house gases that would be emitted from the 
combustion of the natural gas, and any other 
gas meeting the specifications for commingling 
with natural gas for purposes of delivery, that 
such entity delivered during that calendar year 
to customers that are not covered entities, as-
suming no capture and sequestration of that 
greenhouse gas. 
‘‘(7) 
BIOLOGICAL
SEQUESTRATION; 
BIO-
LOGICALLY
SEQUESTERED.—The terms ‘biological 
sequestration’ and ‘biologically sequestered’ mean 
the removal of greenhouse gases from the atmos-
phere by terrestrial biological means, such as by 
growing plants, and the storage of those greenhouse 
gases in plants or soils. 
‘‘(8) CAPPED
EMISSIONS.—The term ‘capped 
emissions’ means greenhouse gas emissions to which 
section 722 applies, including emissions from the 
combustion of natural gas, petroleum-based or coal- 
based liquid fuel, petroleum coke, or natural gas liq-
uid to which section 722(b)(2) or (8) applies. 
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‘‘(9) CAPPED
SOURCE.—The term ‘capped 
source’ means a source that directly emits capped 
emissions. 
‘‘(10) CARBON
DIOXIDE
EQUIVALENT.—The 
term ‘carbon dioxide equivalent’ means the unit of 
measure, expressed in metric tons, of greenhouse 
gases as provided under section 711 or 712. 
‘‘(11) CARBON
STOCK.—The term ‘carbon 
stock’ means the quantity of carbon contained in a 
biological reservoir or system which has the capacity 
to accumulate or release carbon. 
‘‘(12) COMPENSATORY ALLOWANCE.—The term 
‘compensatory allowance’ means an allowance issued 
under section 721(f). 
‘‘(13) COVERED
ENTITY.—The term ‘covered 
entity’ means each of the following: 
‘‘(A) Any electricity source. 
‘‘(B) Any stationary source that produces, 
and any entity that (or any group of two or 
more affiliated entities that, in the aggregate) 
imports, for sale or distribution in interstate 
commerce in 2008 or any subsequent year, pe-
troleum-based or coal-based liquid fuel, petro-
leum coke, or natural gas liquid, the combus-
tion of which would emit 25,000 or more tons 
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of carbon dioxide equivalent, as determined by 
the Administrator. 
‘‘(C) Any stationary source that produces, 
and any entity that (or any group of two or 
more affiliated entities that, in the aggregate) 
imports, for sale or distribution in interstate 
commerce, in bulk, or in products designated by 
the Administrator, in 2008 or any subsequent 
year 25,000 or more tons of carbon dioxide 
equivalent of— 
‘‘(i) fossil fuel-based carbon dioxide; 
‘‘(ii) nitrous oxide; 
‘‘(iii) perfluorocarbons; 
‘‘(iv) sulfur hexafluoride; 
‘‘(v) any other fluorinated gas, except 
for nitrogen trifluoride, that is a green-
house gas, as designated by the Adminis-
trator under section 711; or 
‘‘(vi) any combination of greenhouse 
gases described in clauses (i) through (v). 
‘‘(D) Any stationary source that has emit-
ted 25,000 or more tons of carbon dioxide 
equivalent of nitrogen trifluoride in 2008 or any 
subsequent year. 
‘‘(E) Any geologic sequestration site. 
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‘‘(F) Any stationary source in the following 
industrial sectors: 
‘‘(i) Adipic acid production. 
‘‘(ii) Primary aluminum production. 
‘‘(iii) Ammonia manufacturing. 
‘‘(iv) Cement production, excluding 
grinding-only operations. 
‘‘(v) Hydrochlorofluorocarbon produc-
tion. 
‘‘(vi) Lime manufacturing. 
‘‘(vii) Nitric acid production. 
‘‘(viii) Petroleum refining. 
‘‘(ix) Phosphoric acid production. 
‘‘(x) Silicon carbide production. 
‘‘(xi) Soda ash production. 
‘‘(xii) Titanium dioxide production. 
‘‘(xiii) Coal-based liquid or gaseous 
fuel production. 
‘‘(G) Any stationary source in the chemical 
or petrochemical sector that, in 2008 or any 
subsequent year— 
‘‘(i) produces acrylonitrile, carbon 
black, ethylene, ethylene dichloride, ethyl-
ene oxide, or methanol; or 
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‘‘(ii) produces a chemical or petro-
chemical product if producing that product 
results in annual combustion plus process 
emissions of 25,000 or more tons of carbon 
dioxide equivalent. 
‘‘(H) Any stationary source that— 
‘‘(i) is in one of the following indus-
trial sectors: ethanol production; ferroalloy 
production; fluorinated gas production; 
food processing; glass production; hydrogen 
production; iron and steel production; lead 
production; pulp and paper manufacturing; 
and zinc production; and 
‘‘(ii) has emitted 25,000 or more tons 
of carbon dioxide equivalent in 2008 or 
any subsequent year. 
‘‘(I) Any fossil fuel-fired combustion device 
(such as a boiler) or grouping of such devices 
that— 
‘‘(i) is all or part of an industrial 
source not specified in subparagraph (D), 
(F), (G), or (H); and 
‘‘(ii) has emitted 25,000 or more tons 
of carbon dioxide equivalent in 2008 or 
any subsequent year. 
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‘‘(J) Any natural gas local distribution 
company that (or any group of 2 or more affili-
ated natural gas local distribution companies 
that, in the aggregate), in 2008 or any subse-
quent year, delivers 460,000,000 cubic feet or 
more of natural gas, and any other gas meeting 
the specifications for commingling with natural 
gas for purposes of delivery, to customers that 
are not covered entities. 
‘‘(14) CREDITING PERIOD.—The term ‘crediting 
period’ means the period with respect to which an 
offset project is eligible to earn offset credits under 
part D, as determined under section 734(c). 
‘‘(15) DESIGNATED
REPRESENTATIVE.—The 
term ‘designated representative’ means, with respect 
to a covered entity, a reporting entity (as defined in 
section 713), an offset project developer, or any 
other entity receiving or holding allowances, offset 
credits, or term offset credits under this title, an in-
dividual authorized, through a certificate of rep-
resentation submitted to the Administrator by the 
owners and operators or similar entity official, to 
represent the owners and operators or similar entity 
official in all matters pertaining to this title (includ-
ing the holding, transfer, or disposition of allowances 
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‘‘(B) For vintage years 2022 through 2050, 1.0 per-
cent of the emission allowances established for each year 
under section 721(a). 
All amounts deposited into the fund shall be available to 
the Secretary of Labor until expended to carry out part 
2 of subtitle B of title IV of the American Clean Energy 
and Security Act of 2009. Of the amounts deposited, not 
more than $10,000,000 shall be available to the Secretary 
of Labor for Federal administration costs of such part 2 
each fiscal year. 
‘‘(2) The Administrator shall auction, pursuant to 
section 791, 0.75 percent of the emission allowances estab-
lished for each of vintage years 2012 and 2013 under sec-
tion 721(a), and shall deposit the proceeds in the Energy 
Efficiency and Renewable Energy Worker Training Fund 
established by section 422 of the American Clean Energy 
and Security Act of 2009. 
‘‘(l) DOMESTIC ADAPTATION.—The Administrator 
shall allocate emission allowances for domestic adaptation 
as follows: 
‘‘(1) To be distributed in accordance with sec-
tion 453 of the American Clean Energy and Security 
Act of 2009 in the following amounts: 
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‘‘(A) For vintage years 2012 through 
2021, 0.9 percent of the emission allowances es-
tablished for each year under section 721(a). 
‘‘(B) For vintage years 2022 through 
2026, 1.9 percent of the emission allowances es-
tablished for each year under section 721(a). 
‘‘(C) For vintage years 2027 through 
2050, 3.9 percent of the emission allowances es-
tablished for each year under section 721(a). 
‘‘(2) For vintage year 2012 and thereafter, the 
Administrator shall auction, pursuant to section 
791, 0.1 percent of the emission allowances estab-
lished for each year under section 721(a), and shall 
deposit the proceeds in the Climate Change Health 
Protection and Promotion Fund established by sec-
tion 467 of the American Clean Energy and Security 
Act of 2009. 
‘‘(m) WILDLIFE AND NATURAL RESOURCE ADAPTA-
TION.—The Administrator shall allocate emission allow-
ances for wildlife and natural resource adaptation as fol-
lows: 
‘‘(1) To be distributed to State agencies in ac-
cordance with section 480(a) of the American Clean 
Energy and Security Act of 2009 in the following 
amounts: 
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‘‘(A) For vintage years 2012 through 
2021, 0.385 percent of the emission allowances 
established for each year under section 721(a). 
‘‘(B) For vintage years 2022 through 
2026, 0.77 percent of the emission allowances 
established for each year under section 721(a). 
‘‘(C) For vintage years 2027 through 
2050, 1.54 percent of the emission allowances 
established for each year under section 721(a). 
‘‘(2) To be auctioned pursuant to section 791, 
with the proceeds to be deposited in the Natural Re-
sources Climate Change Adaptation Fund estab-
lished pursuant to section 480(b), in the following 
amounts: 
‘‘(A) For vintage years 2012 through 
2021, 0.615 percent of the emission allowances 
established for each year under section 721(a). 
‘‘(B) For vintage years 2022 through 
2026, 1.23 percent of the emission allowances 
established for each year under section 721(a). 
‘‘(C) For vintage years 2027 through 
2050, 2.46 percent of the emission allowances 
established for each year under section 721(a). 
‘‘(n) INTERNATIONAL ADAPTATION.—The Adminis-
trator shall allocate emission allowances for international 
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adaptation to be distributed in accordance with part 2 of 
subtitle E of title IV of the American Clean Energy and 
Security Act of 2009 in the following amounts: 
‘‘(1) For vintage years 2012 through 2021, 1.0 
percent of the emission allowances established for 
each year under section 721(a). 
‘‘(2) For vintage years 2022 through 2026, 2.0 
percent of the emission allowances established for 
each year under section 721(a). 
‘‘(3) For vintage years 2027 through 2050, 4.0 
percent of the emission allowances established for 
each year under section 721(a). 
‘‘(o) INTERNATIONAL CLEAN TECHNOLOGY DEPLOY-
MENT.—The Administrator shall allocate emission allow-
ances for international clean technology deployment for 
distribution in accordance with subtitle D of title IV of 
the American Clean Energy and Security Act of 2009 in 
the following amounts: 
‘‘(1) For vintage years 2012 through 2021, 1.0 
percent of the emission allowances established for 
each year under section 721(a). 
‘‘(2) For vintage years 2022 through 2026, 2.0 
percent of the emission allowances established for 
each year under section 721(a). 
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‘‘(3) For vintage years 2027 through 2050, 4.0 
percent of the emission allowances established for 
each year under section 721(a). 
‘‘(p) RELEASE OF FUTURE ALLOWANCES.—The Ad-
ministrator shall make future year allowances available by 
auctioning allowances, pursuant to section 791, in the fol-
lowing amounts: 
‘‘(1) In each of calendar years 2014 through 
2019, a string of 0.70 billion allowances with vintage 
years 12 to 17 years after the year of the auction, 
with an equal number of allowances from each vin-
tage year in the string. 
‘‘(2) In each of calendar years 2020 through 
2025, a string of 0.50 billion allowances with vintage 
years 12 to 17 years after the year of the auction, 
with an equal number of allowances from each vin-
tage year in the string. 
‘‘(3) In each of calendar years 2026 through 
2030, a string of 0.3 billion allowances with vintage 
years 12 to 17 years after the year of the auction, 
with an equal number of allowances from each vin-
tage year in the string. 
‘‘(q) DEFICIT REDUCTION.— 
‘‘(1) For each of vintage years 2012 through 
2025, any allowances not allocated for distribution 
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tjames on DSKG8SOYB1PROD with BILLS