602 
covered entity reported to the registry established 
under section 713 for 2011 and that would be sub-
ject to section 722(a) if occurring in later calendar 
years. 
‘‘(3) 
NEW
ENTRANTS.—The 
Administrator 
shall, by regulation, establish a separate purchase 
limit applicable to entities that expect to become a 
covered entity in the year of the auction, permitting 
them to purchase emission allowances at the stra-
tegic reserve auctions in their first calendar year of 
operation in an amount of at least 20 percent of 
their expected combined greenhouse gas emissions 
and attributable greenhouse gas emissions for that 
year. 
‘‘(f) DELEGATION OR CONTRACT.—Pursuant to regu-
lations under this section, the Administrator may, by dele-
gation or contract, provide for the conduct of strategic re-
serve auctions under the Administrator’s supervision by 
other departments or agencies of the Federal Government 
or by nongovernmental agencies, groups, or organizations. 
‘‘(g) USE OF AUCTION PROCEEDS.— 
‘‘(1) DEPOSIT IN STRATEGIC RESERVE FUND.— 
The proceeds from strategic reserve auctions shall be 
placed in the Strategic Reserve Fund established 
under section 793(1), and shall be available without 
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further appropriation or fiscal year limitation for the 
purposes described in this subsection. 
‘‘(2) INTERNATIONAL OFFSET CREDITS FOR RE-
DUCED DEFORESTATION.—The Administrator shall 
use the proceeds from each strategic reserve auction 
to purchase international offset credits issued for re-
duced deforestation activities pursuant to section 
743(e). The Administrator shall retire those inter-
national offset credits and establish a number of 
emission allowances equal to 80 percent of the num-
ber of international offset credits so retired. Emis-
sion allowances established under this paragraph 
shall be in addition to those established under sec-
tion 721(a). 
‘‘(3) EMISSION
ALLOWANCES.—The Adminis-
trator shall deposit emission allowances established 
under paragraph (2) in the strategic reserve, except 
that, with respect to any such emission allowances in 
excess of the amount necessary to fill the strategic 
reserve to its original size, the Administrator shall— 
‘‘(A) except as provided in subparagraph 
(B), assign a vintage year to the emission al-
lowance, which shall be no earlier than the year 
in which the allowance is established under 
paragraph (2), and shall treat such allowances 
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as ones that are not designated for distribution 
or auction for purposes of section 782(q) and 
(r); and 
‘‘(B) to the extent any such allowances 
cannot be assigned a vintage year because of 
the limitation in paragraph (4), retire the allow-
ances. 
‘‘(4) LIMITATION.—In no case may the Admin-
istrator assign under paragraph (3)(A) more emis-
sion allowances to a vintage year than the number 
of emission allowances from that vintage year that 
were placed in the strategic reserve account under 
subsection (b)(1). 
‘‘(h) AVAILABILITY
OF
INTERNATIONAL
OFFSET 
CREDITS FOR AUCTION.— 
‘‘(1) IN
GENERAL.—The regulations promul-
gated under section 721(h) shall allow any entity 
holding international offset credits from reduced de-
forestation issued under section 743(e) to request 
that the Administrator include such offset credits in 
an upcoming strategic reserve auction. The regula-
tions shall provide that— 
‘‘(A) such international offset credits will 
be used to fill bid orders only after the supply 
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of strategic reserve allowances available for sale 
at that auction has been depleted; 
‘‘(B) international offset credits may be 
sold at a strategic reserve auction under this 
subsection only if the Administrator determines 
that it is highly likely that covered entities will, 
to cover emissions occurring in the year the 
auction is held, use offset credits to dem-
onstrate compliance under section 722 for emis-
sions equal to or greater than 80 percent of 2 
billion tons of carbon dioxide equivalent; 
‘‘(C) upon sale of such international offset 
credits, the Administrator shall retire those 
international offset credits, and establish and 
provide to the purchasers a number of emission 
allowances equal to 80 percent of the number of 
international offset credits so retired, which al-
lowances shall be in addition to those estab-
lished under section 721(a); and 
‘‘(D) for international offset credits sold 
pursuant to this subsection, the proceeds for 
the entity that offered the international offset 
credits for sale shall be the lesser of— 
‘‘(i) the average daily closing price for 
international offset credits sold on reg-
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istered exchanges (or if such price is un-
available, the average price as determined 
by the Administrator) during the six 
months prior to the strategic reserve auc-
tion at which they were auctioned, with the 
remaining funds collected upon the sale of 
the international offset credits deposited in 
the Treasury; and 
‘‘(ii) the amount received for the 
international offset credits at the auction. 
‘‘(2) PROCEEDS.—For international offset cred-
its sold pursuant to this subsection, notwithstanding 
section 3302 of title 31, United States Code, or any 
other provision of law, within 90 days of receipt, the 
United States shall transfer the proceeds from the 
auction, as defined in paragraph (1)(D), to the enti-
ty that offered the international offset credits for 
sale. No funds transferred from a purchaser to a 
seller of international offset credits under this para-
graph shall be held by any officer or employee of the 
United States or treated for any purpose as public 
monies. 
‘‘(3) PRICING.—When the Administrator acts 
under this subsection as the agent of an entity in 
possession of international offset credits, the Admin-
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istrator is not obligated to obtain the highest price 
possible for the international offset credits, and in-
stead shall auction such international offset credits 
in the same manner and pursuant to the same rules 
(except as modified in paragraph (1)) as set forth 
for auctioning strategic reserve allowances. Entities 
requesting that such international offset credits be 
offered for sale at a strategic reserve auction may 
not set a minimum reserve price for their inter-
national offset credits that is different than the min-
imum strategic reserve auction price set pursuant to 
subsection (c). 
‘‘(i) INITIAL REGULATIONS.—Not later than 24 
months after the date of enactment of this title, the Ad-
ministrator shall promulgate regulations, in consultation 
with other appropriate agencies, governing the auction of 
allowances under this section. Such regulations shall in-
clude the following requirements: 
‘‘(1) FREQUENCY; FIRST
AUCTION.—Auctions 
shall be held four times per year at regular intervals, 
with the first auction to be held no later than March 
31, 2012. 
‘‘(2) AUCTION FORMAT.—Auctions shall follow 
a single-round, sealed-bid, uniform price format. 
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‘‘(3) PARTICIPATION; FINANCIAL ASSURANCE.— 
Auctions shall be open to any covered entity eligible 
to purchase emission allowances at the auction 
under subsection (a)(2), except that the Adminis-
trator may establish financial assurance require-
ments to ensure that auction participants can and 
will perform on their bids. 
‘‘(4) DISCLOSURE
OF
BENEFICIAL
OWNER-
SHIP.—Each bidder in an auction shall be required 
to disclose the person or entity sponsoring or bene-
fitting from the bidder’s participation in the auction 
if such person or entity is, in whole or in part, other 
than the bidder. 
‘‘(5) PURCHASE LIMITS.—No person may, di-
rectly or in concert with another participant, pur-
chase more than 20 percent of the allowances of-
fered for sale at any quarterly auction. 
‘‘(6) PUBLICATION
OF
INFORMATION.—After 
the auction, the Administrator shall, in a timely 
fashion, publish the identities of winning bidders, 
the quantity of allowances obtained by each winning 
bidder, and the auction clearing price. 
‘‘(7) OTHER
REQUIREMENTS.—The Adminis-
trator may include in the regulations such other re-
quirements or provisions as the Administrator, in 
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consultation with other agencies as appropriate, con-
siders appropriate to promote effective, efficient, 
transparent, and fair administration of auctions 
under this section. 
‘‘(j) REVISION
OF REGULATIONS.—The Adminis-
trator may, at any time, in consultation with other agen-
cies as appropriate, revise the initial regulations promul-
gated under subsection (i). Such revised regulations need 
not meet the requirements identified in subsection (i) if 
the Administrator determines that an alternative auction 
design would be more effective, taking into account factors 
including costs of administration, transparency, fairness, 
and risks of collusion or manipulation. In determining 
whether and how to revise the initial regulations under 
this subsection, the Administrator shall not consider maxi-
mization of revenues to the Federal Government. 
‘‘SEC. 727. PERMITS. 
‘‘(a) PERMIT PROGRAM.—For stationary sources 
subject to title V of this Act that are covered entities, the 
provisions of this title shall be implemented by permits 
issued to such covered entities (and enforced) in accord-
ance with the provisions of title V, as modified by this 
title. Any such permit issued by the Administrator, or by 
a State or Indian tribe with an approved permit program, 
shall require the owner or operator of a covered entity to 
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hold allowances or offset credits at least equal to the total 
annual amount of carbon dioxide equivalents for its com-
bined emissions and attributable greenhouse gas emissions 
to which section 722 applies. No such permit shall be 
issued that is inconsistent with the requirements of this 
title, and title V as applicable. Nothing in this section re-
garding compliance plans or in title V shall be construed 
as affecting allowances or offset credits. Submission of a 
statement by the owner or operator, or the designated rep-
resentative of the owners and operators, of a covered enti-
ty that the owners and operators will hold allowances or 
offset credits for the entity’s combined emissions and at-
tributable greenhouse gas emissions to which section 722 
applies shall be deemed to meet the proposed and ap-
proved planning requirements of title V. Recordation by 
the Administrator of transfers of allowances and offset 
credits shall amend automatically all applicable proposed 
or approved permit applications, compliance plans, and 
permits. 
‘‘(b) MULTIPLE OWNERS.—No permit shall be issued 
under this section and no allowances or offset credits shall 
be disbursed under this title to a covered entity or any 
other person until the designated representative of the 
owners or operators has filed a certificate of representa-
tion with regard to matters under this title, including the 
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holding and distribution of emission allowances and the 
proceeds of transactions involving emission allowances. 
Where there are multiple holders of a legal or equitable 
title to, or a leasehold interest in, such a covered entity 
or other entity or where a utility or industrial customer 
purchases power under a long-term power purchase con-
tract from an independent power production facility that 
is a covered entity, the certificate shall state— 
‘‘(1) that emission allowances and the proceeds 
of transactions involving emission allowances will be 
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 
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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-
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-
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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. 
‘‘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. 
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‘‘(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 
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— 
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‘‘(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. 
‘‘(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. 
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‘‘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. 
‘‘(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 
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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; 
‘‘(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; 
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‘‘(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-
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 five-year intervals thereafter, the Ad-
visory Board shall submit to the Administrator and make 
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