I 
108TH CONGRESS 
1ST SESSION H. R. 3093
To amend the Clean Air Act to establish a national uniform multiple air 
pollutant regulatory program for the electric generating sector. 
IN THE HOUSE OF REPRESENTATIVES 
SEPTEMBER 16, 2003
Mr. BASS (for himself, Mr. DAVIS of Florida, Mr. COOPER, and Mr. BRADLEY 
of New Hampshire) introduced the following bill; which was referred to 
the Committee on Energy and Commerce 
A BILL 
To amend the Clean Air Act to establish a national uniform 
multiple air pollutant regulatory program for the electric 
generating sector.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. SHORT TITLE; TABLE OF CONTENTS. 
(a) SHORT TITLE.—This Act may be cited as the 
‘‘Clean Air Planning Act of 2003’’. 
(b) TABLE OF CONTENTS.—The table of contents of 
this Act is as follows:
Sec. 1. Short title; table of contents. 
Sec. 2. Findings and purposes. 
Sec. 3. Integrated air quality planning for the electric generating sector. 
Sec. 4. New source review program.
Sec. 5. Revisions to sulfur dioxide allowance program. 
Sec. 6. Relationship to other law.
SEC. 2. FINDINGS AND PURPOSES. 
(a) FINDINGS.—Congress finds that—
(1) fossil fuel-fired electric generating facilities, 
consisting of facilities fueled by coal, fuel oil, and 
natural gas, produce nearly 2⁄3 of the electricity gen-
erated in the United States; 
(2) fossil fuel-fired electric generating facilities 
produce approximately 2⁄3 of the total sulfur dioxide 
emissions, 1⁄3 of the total nitrogen oxides emissions, 
1⁄3 of the total carbon dioxide emissions, and 1⁄3 of 
the total mercury emissions, in the United States; 
(3)(A) many electric generating facilities have 
been exempt from the emission limitations applicable 
to new units based on the expectation that over time 
the units would be retired or updated with new pol-
lution control equipment; but 
(B) many of the exempted units continue to op-
erate and emit pollutants at relatively high rates; 
(4) pollution from existing electric generating 
facilities can be reduced through adoption of modern 
technologies and practices; 
(5) the electric generating industry is being re-
structured with the objective of providing lower elec-
tricity rates and higher quality service to consumers;
(6) the full benefits of competition will not be 
realized if the environmental impacts of generation 
of electricity are not uniformly internalized; and 
(7) the ability of owners of electric generating 
facilities to effectively plan for the future is impeded 
by the uncertainties surrounding future environ-
mental regulatory requirements that are imposed in-
efficiently on a piecemeal basis. 
(b) PURPOSES.—The purposes of this Act are—
(1) to protect and preserve the environment and 
safeguard public health by ensuring that substantial 
emission reductions are achieved at fossil fuel-fired 
electric generating facilities; 
(2) to significantly reduce the quantities of 
mercury, carbon dioxide, sulfur dioxide, and nitrogen 
oxides that enter the environment as a result of the 
combustion of fossil fuels; 
(3) to encourage the development and use of re-
newable energy; 
(4) to internalize the cost of protecting the val-
ues of public health, air, land, and water quality in 
the context of a competitive market in electricity; 
(5) to ensure fair competition among partici-
pants in the competitive market in electricity that
will result from fully restructuring the electric gener-
ating industry; 
(6) to provide a period of environmental regu-
latory stability for owners and operators of electric 
generating facilities so as to promote improved man-
agement of existing assets and new capital invest-
ments; and 
(7) to achieve emission reductions from electric 
generating facilities in a cost-effective manner. 
SEC. 3. INTEGRATED AIR QUALITY PLANNING FOR THE 
ELECTRIC GENERATING SECTOR. 
The Clean Air Act (42 U.S.C. 7401 et seq.) is amend-
ed by adding at the end the following: 
‘‘TITLE 
VII—INTEGRATED 
AIR 
QUALITY PLANNING FOR THE 
ELECTRIC GENERATING SEC-
TOR
‘‘Sec. 701. Definitions. 
‘‘Sec. 702. National pollutant tonnage limitations. 
‘‘Sec. 703. Nitrogen oxide and mercury allowance trading programs. 
‘‘Sec. 704. Carbon dioxide allowance trading program.
‘‘SEC. 701. DEFINITIONS. 
‘‘In this title: 
‘‘(1) AFFECTED UNIT.—
‘‘(A) MERCURY.—The term ‘affected unit’, 
with respect to mercury, means a coal-fired
electric generating facility (including a cogener-
ating facility) that—
‘‘(i) has a nameplate capacity greater 
than 25 megawatts; and 
‘‘(ii) generates electricity for sale. 
‘‘(B) NITROGEN OXIDES AND CARBON DI-
OXIDE.—The term ‘affected unit’, with respect 
to nitrogen oxides and carbon dioxide, means a 
fossil fuel-fired electric generating facility (in-
cluding a cogenerating facility) that—
‘‘(i) has a nameplate capacity greater 
than 25 megawatts; and 
‘‘(ii) generates electricity for sale. 
‘‘(C) SULFUR
DIOXIDE.—The term ‘af-
fected unit’, with respect to sulfur dioxide, has 
the meaning given the term in section 402. 
‘‘(2) CARBON DIOXIDE ALLOWANCE.—The term 
‘carbon dioxide allowance’ means an authorization 
allocated by the Administrator under this title to 
emit 1 ton of carbon dioxide during or after a speci-
fied calendar year. 
‘‘(3) COVERED UNIT.—The term ‘covered unit’ 
means—
‘‘(A) an affected unit;
‘‘(B) a nuclear generating unit with re-
spect to incremental nuclear generation; and 
‘‘(C) a renewable energy unit. 
‘‘(4) GREENHOUSE GAS.—The term ‘greenhouse 
gas’ means—
‘‘(A) carbon dioxide; 
‘‘(B) methane; 
‘‘(C) nitrous oxide; 
‘‘(D) hydrofluorocarbons; 
‘‘(E) perfluorocarbons; and 
‘‘(F) sulfur hexafluoride. 
‘‘(5) INCREMENTAL NUCLEAR GENERATION.—
The term ‘incremental nuclear generation’ means 
the difference between—
‘‘(A) the quantity of electricity generated 
by a nuclear generating unit in a calendar year; 
and 
‘‘(B) the quantity of electricity generated 
by the nuclear generating unit in calendar year 
1990; 
as determined by the Administrator and measured in 
megawatt hours. 
‘‘(6) MERCURY ALLOWANCE.—The term ‘mer-
cury allowance’ means an authorization allocated by
the Administrator under this title to emit 1 pound 
of mercury during or after a specified calendar year. 
‘‘(7) NEW
RENEWABLE
ENERGY
UNIT.—The 
term ‘new renewable energy unit’ means a renewable 
energy unit that has operated for a period of not 
more than 3 years. 
‘‘(8) NEW UNIT.—The term ‘new unit’ means 
an affected unit that has operated for not more than 
3 years and is not eligible to receive—
‘‘(A) sulfur dioxide allowances under sec-
tion 417(b); 
‘‘(B) nitrogen oxide allowances or mercury 
allowances under section 703(c)(2); or 
‘‘(C) carbon dioxide allowances under sec-
tion 704(c)(2). 
‘‘(9) NITROGEN OXIDE ALLOWANCE.—The term 
‘nitrogen oxide allowance’ means an authorization 
allocated by the Administrator under this title to 
emit 1 ton of nitrogen oxides during or after a speci-
fied calendar year. 
‘‘(10) NUCLEAR GENERATING UNIT.—The term 
‘nuclear generating unit’ means an electric gener-
ating facility that—
‘‘(A) uses nuclear energy to supply elec-
tricity to the electric power grid; and
‘‘(B) commenced operation in calendar 
year 1990 or earlier. 
‘‘(11) RENEWABLE ENERGY.—The term ‘renew-
able energy’ means electricity generated from—
‘‘(A) wind; 
‘‘(B) organic waste (excluding incinerated 
municipal solid waste); 
‘‘(C) biomass (including anaerobic diges-
tion from farm systems and landfill gas recov-
ery); 
‘‘(D) fuel cells; or 
‘‘(E) a hydroelectric, geothermal, solar 
thermal, photovoltaic, or other nonfossil fuel, 
nonnuclear source. 
‘‘(12) RENEWABLE ENERGY UNIT.—The term 
‘renewable energy unit’ means an electric generating 
facility that uses exclusively renewable energy to 
supply electricity to the electric power grid. 
‘‘(13) SEQUESTRATION.—The term ‘sequestra-
tion’ means the action of sequestering carbon by—
‘‘(A) enhancing a natural carbon sink 
(such as through afforestation); or 
‘‘(B)(i) capturing the carbon dioxide emit-
ted from a fossil fuel-based energy system; and
‘‘(ii)(I) storing the carbon in a geologic 
formation or in a deep area of an ocean; or 
‘‘(II) converting the carbon to a benign 
solid material through a biological or chemical 
process. 
‘‘(14) SULFUR
DIOXIDE
ALLOWANCE.—The 
term ‘sulfur dioxide allowance’ has the meaning 
given the term ‘allowance’ in section 402. 
‘‘SEC. 702. NATIONAL POLLUTANT TONNAGE LIMITATIONS. 
‘‘(a) SULFUR DIOXIDE.—The annual tonnage limita-
tion for emissions of sulfur dioxide from affected units in 
the United States shall be equal to—
‘‘(1) for each of calendar years 2009 through 
2012, 4,500,000 tons; 
‘‘(2) for each of calendar years 2013 through 
2015, 3,500,000 tons; and 
‘‘(3) for calendar year 2016 and each calendar 
year thereafter, 2,250,000 tons. 
‘‘(b) NITROGEN OXIDES.—The annual tonnage limi-
tation for emissions of nitrogen oxides from affected units 
in the United States shall be equal to—
‘‘(1) for each of calendar years 2009 through 
2012, 1,870,000 tons; and 
‘‘(2) for calendar year 2013 and each calendar 
year thereafter, 1,700,000 tons.
‘‘(c) MERCURY.—
‘‘(1) IN GENERAL.—The annual tonnage limita-
tion for emissions of mercury from affected units in 
the United States shall be equal to the following: 
‘‘(A) For each of calendar years 2009 
through 2012, 24 tons. 
‘‘(B) For calendar year 2013 and each cal-
endar year thereafter, 10 tons. 
‘‘(2) MAXIMUM EMISSIONS OF MERCURY FROM 
EACH AFFECTED UNIT.—
‘‘(A) CALENDAR
YEARS
2009
THROUGH 
2012.—For each of calendar years 2009 through 
2012, the emissions of mercury from each af-
fected unit shall not exceed either, at the option 
of the operator of the affected unit—
‘‘(i) 50 percent of the total quantity 
of mercury present in the coal delivered to 
the affected unit in the calendar year; or 
‘‘(ii) an annual output-based emission 
rate for mercury that shall be determined 
by the Administrator based on an input-
based rate of 4 pounds per trillion British 
thermal units. 
‘‘(B) CALENDAR YEAR 2013 AND THERE-
AFTER.—For calendar year 2013 and each cal-
endar year thereafter, the emissions of mercury 
from each affected unit shall not exceed—
‘‘(i) 30 percent of the total quantity 
of mercury present in the coal delivered to 
the affected unit in the calendar year; or 
‘‘(ii) an annual output-based emission 
rate for mercury that shall be determined 
by the Administrator. 
‘‘(d) CARBON DIOXIDE.—Subject to section 704(d), 
the annual tonnage limitation for emissions of carbon di-
oxide from covered units in the United States shall be 
equal to—
‘‘(1) for each of calendar years 2009 through 
2012, the quantity of emissions projected to be emit-
ted from affected units in calendar year 2005, as de-
termined by the Energy Information Administration 
of the Department of Energy based on the projec-
tions of the Administration the publication of which 
most closely precedes the date of enactment of this 
title; and 
‘‘(2) for calendar year 2013 and each calendar 
year thereafter, the quantity of emissions emitted 
from affected units in calendar year 2001, as deter-
mined by the Energy Information Administration of 
the Department of Energy.
‘‘(e) REVIEW OF ANNUAL TONNAGE LIMITATIONS.—
‘‘(1) PERIOD OF EFFECTIVENESS.—The annual 
tonnage limitations established under subsections (a) 
through (d) shall remain in effect until the date that 
is 20 years after the date of enactment of this title. 
‘‘(2) DETERMINATION
BY
ADMINISTRATOR.—
Not later than 15 years after the date of enactment 
of this title, the Administrator, after considering im-
pacts on human health, the environment, the econ-
omy, and costs, shall determine whether 1 or more 
of the annual tonnage limitations should be revised. 
‘‘(3) DETERMINATION NOT TO REVISE.—If the 
Administrator determines under paragraph (2) that 
none of the annual tonnage limitations should be re-
vised, the Administrator shall publish in the Federal 
Register a notice of the determination and the rea-
sons for the determination. 
‘‘(4) DETERMINATION TO REVISE.—
‘‘(A) IN GENERAL.—If the Administrator 
determines under paragraph (2) that 1 or more 
of the annual tonnage limitations should be re-
vised, the Administrator shall publish in the 
Federal Register—
‘‘(i) not later than 15 years and 180 
days after the date of enactment of this
title, proposed regulations implementing 
the revisions; and 
‘‘(ii) not later than 16 years and 180 
days after the date of enactment of this 
title, final regulations implementing the re-
visions. 
‘‘(B) EFFECTIVE DATE OF REVISIONS.—
Any revisions to the annual tonnage limitations 
under subparagraph (A) shall take effect on the 
date that is 20 years after the date of enact-
ment of this title. 
‘‘(f) REDUCTION OF EMISSIONS FROM SPECIFIED 
AFFECTED UNITS.—Subject to the requirements of this 
Act concerning national ambient air quality standards es-
tablished under part A of title I, notwithstanding the an-
nual tonnage limitations established under this section, 
the Federal Government or a State government may re-
quire that emissions from a specified affected unit be re-
duced to address a local air quality problem. 
‘‘SEC. 703. NITROGEN OXIDE AND MERCURY ALLOWANCE 
TRADING PROGRAMS. 
‘‘(a) REGULATIONS.—
‘‘(1) PROMULGATION.—
‘‘(A) IN GENERAL.—Not later than Janu-
ary 1, 2005, the Administrator shall promul-
gate regulations to establish for affected units 
in the United States—
‘‘(i) a nitrogen oxide allowance trad-
ing program; and 
‘‘(ii) a mercury allowance trading pro-
gram. 
‘‘(B) REQUIREMENTS.—Regulations pro-
mulgated under subparagraph (A) shall estab-
lish requirements for the allowance trading pro-
grams under this section, including require-
ments concerning—
‘‘(i)(I) 
the 
generation, 
allocation, 
issuance, recording, tracking, transfer, and 
use of nitrogen oxide allowances and mer-
cury allowances; and 
‘‘(II) the public availability of all in-
formation concerning the activities de-
scribed in subclause (I) that is not con-
fidential; 
‘‘(ii) 
compliance 
with 
subsection 
(e)(1); 
‘‘(iii) the monitoring and reporting of 
emissions under paragraphs (2) and (3) of 
subsection (e); and
‘‘(iv) excess emission penalties under 
subsection (e)(4). 
‘‘(2) MIXED FUEL, CO-GENERATION FACILITIES 
AND
COMBINED
HEAT
AND
POWER
FACILITIES.—
The Administrator shall promulgate such regulations 
as are necessary to ensure the equitable issuance of 
allowances to—
‘‘(A) facilities that use more than 1 energy 
source to produce electricity; and 
‘‘(B) facilities that produce electricity in 
addition to another service or product. 
‘‘(3) REPORT TO CONGRESS ON USE OF CAP-
TURED OR RECOVERED MERCURY.—
‘‘(A) IN
GENERAL.—Not later than 18 
months after the date of enactment of this title, 
the Administrator shall submit to Congress a 
report on the public health and environmental 
impacts from mercury that is or may be—
‘‘(i) captured or recovered by air pol-
lution control technology; and 
‘‘(ii) incorporated into products such 
as soil amendments and cement. 
‘‘(B) REQUIRED ELEMENTS.—The report 
shall—
‘‘(i) review—
‘‘(I) technologies, in use as of the 
date of the report, for incorporating 
mercury into products; and 
‘‘(II) potential technologies that 
might further minimize the release of 
mercury; and 
‘‘(ii)(I) address the adequacy of legal 
authorities and regulatory programs in ef-
fect as of the date of the report to protect 
public health and the environment from 
mercury in products described in subpara-
graph (A)(ii); and 
‘‘(II) to the extent necessary, make 
recommendations to improve those authori-
ties and programs. 
‘‘(b) NEW UNIT RESERVES.—
‘‘(1) 
ESTABLISHMENT.—The 
Administrator 
shall establish by regulation a reserve of nitrogen 
oxide allowances and a reserve of mercury allow-
ances to be set aside for use by new units. 
‘‘(2) DETERMINATION OF QUANTITY.—The Ad-
ministrator, in consultation with the Secretary of 
Energy, shall determine, based on projections of 
electricity output for new units—
‘‘(A) not later than June 30, 2005, the 
quantity of nitrogen oxide allowances and mer-
cury allowances required to be held in reserve 
for new units for each of calendar years 2009 
through 2013; and 
‘‘(B) not later than June 30 of each fifth 
calendar year thereafter, the quantity of nitro-
gen oxide allowances and mercury allowances 
required to be held in reserve for new units for 
the following 5-calendar year period. 
‘‘(c) NITROGEN OXIDE AND MERCURY ALLOWANCE 
ALLOCATIONS.—
‘‘(1) TIMING OF ALLOCATIONS.—The Adminis-
trator shall allocate nitrogen oxide allowances and 
mercury allowances to affected units—
‘‘(A) not later than December 31, 2005, 
for calendar year 2009; and 
‘‘(B) not later than December 31 of cal-
endar year 2006 and each calendar year there-
after, for the fourth calendar year that begins 
after that December 31. 
‘‘(2) ALLOCATIONS TO AFFECTED UNITS THAT 
ARE NOT NEW UNITS.—
‘‘(A) QUANTITY OF NITROGEN OXIDE AL-
LOWANCES
ALLOCATED.—The Administrator
shall allocate to each affected unit that is not 
a new unit a quantity of nitrogen oxide allow-
ances that is equal to the product obtained by 
multiplying—
‘‘(i) 1.5 pounds of nitrogen oxides per 
megawatt hour; and 
‘‘(ii) the quotient obtained by divid-
ing—
‘‘(I) the average annual net 
quantity of electricity generated by 
the affected unit during the most re-
cent 3-calendar year period for which 
data are available, measured in mega-
watt hours; by 
‘‘(II) 2,000 pounds of nitrogen 
oxides per ton. 
‘‘(B) QUANTITY
OF
MERCURY
ALLOW-
ANCES
ALLOCATED.—The Administrator shall 
allocate to each affected unit that is not a new 
unit a quantity of mercury allowances that is 
equal to the product obtained by multiplying—
‘‘(i) 0.0000227 pounds of mercury per 
megawatt hour; and 
‘‘(ii) the average annual net quantity 
of electricity generated by the affected unit
during the most recent 3-calendar year pe-
riod for which data are available, measured 
in megawatt hours. 
‘‘(C) ADJUSTMENT OF ALLOCATIONS.—
‘‘(i) IN
GENERAL.—If, for any cal-
endar year, the total quantity of allowances 
allocated under subparagraph (A) or (B) is 
not equal to the applicable quantity deter-
mined under clause (ii), the Administrator 
shall adjust the quantity of allowances allo-
cated to affected units that are not new 
units on a pro-rata basis so that the quan-
tity is equal to the applicable quantity de-
termined under clause (ii). 
‘‘(ii) APPLICABLE
QUANTITY.—The 
applicable quantity referred to in clause (i) 
is the difference between—
‘‘(I) the applicable annual ton-
nage limitation for emissions from af-
fected units specified in subsection (b) 
or (c) of section 702 for the calendar 
year; and 
‘‘(II) the quantity of nitrogen 
oxide allowances or mercury allow-
ances, respectively, placed in the ap-
plicable new unit reserve established 
under subsection (b) for the calendar 
year. 
‘‘(3) ALLOCATION TO NEW UNITS.—
‘‘(A) METHODOLOGY.—The Administrator 
shall promulgate regulations to establish a 
methodology for allocating nitrogen oxide allow-
ances and mercury allowances to new units. 
‘‘(B) QUANTITY OF NITROGEN OXIDE AL-
LOWANCES AND MERCURY ALLOWANCES ALLO-
CATED.—The Administrator shall determine the 
quantity of nitrogen oxide allowances and mer-
cury allowances to be allocated to each new unit 
based on the projected emissions from the new 
unit. 
‘‘(4) ALLOWANCE NOT A PROPERTY RIGHT.—A 
nitrogen oxide allowance or mercury allowance—
‘‘(A) is not a property right; and 
‘‘(B) may be terminated or limited by the 
Administrator. 
‘‘(5) NO JUDICIAL REVIEW.—An allocation of 
nitrogen allowances or mercury allowances by the 
Administrator under this subsection shall not be 
subject to judicial review.
‘‘(d) NITROGEN OXIDE ALLOWANCE AND MERCURY 
ALLOWANCE TRANSFER SYSTEM.—
‘‘(1) USE OF ALLOWANCES.—The regulations 
promulgated under subsection (a)(1)(A) shall—
‘‘(A) prohibit the use (but not the transfer 
in accordance with paragraph (3)) of any nitro-
gen oxide allowance or mercury allowance be-
fore the calendar year for which the allowance 
is allocated; 
‘‘(B) provide that unused nitrogen oxide 
allowances and mercury allowances may be car-
ried forward and added to nitrogen oxide allow-
ances and mercury allowances, respectively, al-
located for subsequent years; and 
‘‘(C) provide that unused nitrogen oxide al-
lowances and mercury allowances may be trans-
ferred by—
‘‘(i) the person to which the allow-
ances are allocated; or 
‘‘(ii) any person to which the allow-
ances are transferred. 
‘‘(2) USE BY PERSONS TO WHICH ALLOWANCES 
ARE TRANSFERRED.—Any person to which nitrogen 
oxide allowances or mercury allowances are trans-
ferred under paragraph (1)(C)—
‘‘(A) may use the nitrogen oxide allow-
ances or mercury allowances in the calendar 
year for which the nitrogen oxide allowances or 
mercury allowances were allocated, or in a sub-
sequent calendar year, to demonstrate compli-
ance with subsection (e)(1); or 
‘‘(B) may transfer the nitrogen oxide al-
lowances or mercury allowances to any other 
person for the purpose of demonstration of that 
compliance. 
‘‘(3) CERTIFICATION OF TRANSFER.—A trans-
fer of a nitrogen oxide allowance or mercury allow-
ance shall not take effect until a written certification 
of the transfer, authorized by a responsible official 
of the person making the transfer, is received and 
recorded by the Administrator. 
‘‘(4) PERMIT
REQUIREMENTS.—An allocation 
or transfer of nitrogen oxide allowances or mercury 
allowances to an affected unit shall, after recording 
by the Administrator, be considered to be part of the 
federally enforceable permit of the affected unit 
under this Act, without a requirement for any fur-
ther review or revision of the permit. 
‘‘(e) COMPLIANCE AND ENFORCEMENT.—
‘‘(1) IN
GENERAL.—For calendar year 2009 
and each calendar year thereafter, the operator of 
each affected unit shall surrender to the Adminis-
trator—
‘‘(A) a quantity of nitrogen oxide allow-
ances that is equal to the total tons of nitrogen 
oxides emitted by the affected unit during the 
calendar year; and 
‘‘(B) a quantity of mercury allowances that 
is equal to the total pounds of mercury emitted 
by the affected unit during the calendar year. 
‘‘(2) MONITORING SYSTEM.—The Administrator 
shall promulgate regulations requiring the accurate 
monitoring of the quantities of nitrogen oxides and 
mercury that are emitted at each affected unit. 
‘‘(3) REPORTING.—
‘‘(A) IN GENERAL.—Not less often than 
quarterly, the owner or operator of an affected 
unit shall submit to the Administrator a report 
on the monitoring of emissions of nitrogen ox-
ides and mercury carried out by the owner or 
operator in accordance with the regulations pro-
mulgated under paragraph (2). 
‘‘(B) AUTHORIZATION.—Each report sub-
mitted under subparagraph (A) shall be author-
ized by a responsible official of the affected 
unit, who shall certify the accuracy of the re-
port. 
‘‘(C) PUBLIC REPORTING.—The Adminis-
trator shall make available to the public, 
through 1 or more published reports and 1 or 
more forms of electronic media, data concerning 
the emissions of nitrogen oxides and mercury 
from each affected unit. 
‘‘(4) EXCESS EMISSIONS.—
‘‘(A) IN GENERAL.—The owner or operator 
of an affected unit that emits nitrogen oxides or 
mercury in excess of the nitrogen oxide allow-
ances or mercury allowances that the owner or 
operator holds for use for the affected unit for 
the calendar year shall—
‘‘(i) pay an excess emissions penalty 
determined under subparagraph (B); and 
‘‘(ii) offset the excess emissions by an 
equal quantity in the following calendar 
year or such other period as the Adminis-
trator shall prescribe. 
‘‘(B) DETERMINATION
OF
EXCESS
EMIS-
SIONS PENALTY.—
‘‘(i) NITROGEN OXIDES.—The excess 
emissions penalty for nitrogen oxides shall 
be equal to the product obtained by multi-
plying—
‘‘(I) the number of tons of nitro-
gen oxides emitted in excess of the 
total quantity of nitrogen oxide allow-
ances held; and 
‘‘(II) $5,000, adjusted (in ac-
cordance with regulations promul-
gated by the Administrator) for 
changes in the Consumer Price Index 
for All-Urban Consumers published by 
the Department of Labor. 
‘‘(ii) MERCURY.—The excess emis-
sions penalty for mercury shall be equal to 
the product obtained by multiplying—
‘‘(I) the number of pounds of 
mercury emitted in excess of the total 
quantity of mercury allowances held; 
and 
‘‘(II) $10,000, adjusted (in ac-
cordance with regulations promul-
gated by the Administrator) for 
changes in the Consumer Price Index
for All-Urban Consumers published by 
the Department of Labor. 
‘‘SEC. 704. CARBON DIOXIDE ALLOWANCE TRADING PRO-
GRAM. 
‘‘(a) REGULATIONS.—
‘‘(1) IN GENERAL.—Not later than January 1, 
2005, the Administrator shall promulgate regula-
tions to establish a carbon dioxide allowance trading 
program for covered units in the United States. 
‘‘(2) REQUIRED ELEMENTS.—Regulations pro-
mulgated under paragraph (1) shall establish re-
quirements for the carbon dioxide allowance trading 
program under this section, including requirements 
concerning—
‘‘(A)(i) the generation, allocation, issuance, 
recording, tracking, transfer, and use of carbon 
dioxide allowances; and 
‘‘(ii) the public availability of all informa-
tion concerning the activities described in clause 
(i) that is not confidential; 
‘‘(B) compliance with subsection (f)(1); 
‘‘(C) the monitoring and reporting of emis-
sions under paragraphs (2) and (3) of sub-
section (f);
‘‘(D) excess emission penalties under sub-
section (f)(4); and 
‘‘(E) standards, guidelines, and procedures 
concerning the generation, certification, and use 
of additional carbon dioxide allowances made 
available under subsection (d). 
‘‘(b) NEW UNIT RESERVE.—
‘‘(1) 
ESTABLISHMENT.—The 
Administrator 
shall establish by regulation a reserve of carbon di-
oxide allowances to be set aside for use by new units 
and new renewable energy units. 
‘‘(2) DETERMINATION OF QUANTITY.—The Ad-
ministrator, in consultation with the Secretary of 
Energy, shall determine, based on projections of 
electricity output for new units and new renewable 
energy units—
‘‘(A) not later than June 30, 2005, the 
quantity of carbon dioxide allowances required 
to be held in reserve for new units and new re-
newable energy units for each of calendar years 
2009 through 2013; and 
‘‘(B) not later than June 30 of each fifth 
calendar year thereafter, the quantity of carbon 
dioxide allowances required to be held in reserve
for new units and renewable energy units for 
the following 5-calendar year period. 
‘‘(c) CARBON DIOXIDE ALLOWANCE ALLOCATION.—
‘‘(1) TIMING OF ALLOCATIONS.—The Adminis-
trator shall allocate carbon dioxide allowances to 
covered units—
‘‘(A) not later than December 31, 2005, 
for calendar year 2009; and 
‘‘(B) not later than December 31 of cal-
endar year 2006 and each calendar year there-
after, for the fourth calendar year that begins 
after that December 31. 
‘‘(2) ALLOCATIONS TO COVERED UNITS THAT 
ARE NOT NEW UNITS.—
‘‘(A) IN
GENERAL.—The Administrator 
shall allocate to each affected unit that is not 
a new unit, to each nuclear generating unit 
with respect to incremental nuclear generation, 
and to each renewable energy unit that is not 
a new renewable energy unit, a quantity of car-
bon dioxide allowances that is equal to the 
product obtained by multiplying—
‘‘(i) the quantity of carbon dioxide al-
lowances available for allocation under sub-
paragraph (B); and
‘‘(ii) the quotient obtained by divid-
ing—
‘‘(I) the average net quantity of 
electricity generated by the unit in a 
calendar year during the most recent 
3-calendar year period for which data 
are available, measured in megawatt 
hours; and 
‘‘(II) the total of the average net 
quantities described in subclause (I) 
with respect to all such units. 
‘‘(B) QUANTITY TO BE ALLOCATED.—For 
each calendar year, the quantity of carbon diox-
ide allowances allocated under subparagraph 
(A) shall be equal to the difference between—
‘‘(i) the annual tonnage limitation for 
emissions of carbon dioxide from affected 
units specified in section 702(d) for the 
calendar year; and 
‘‘(ii) the quantity of carbon dioxide al-
lowances placed in the new unit reserve es-
tablished under subsection (b) for the cal-
endar year. 
‘‘(3) ALLOCATION TO NEW UNITS AND NEW RE-
NEWABLE ENERGY UNITS.—
‘‘(A) METHODOLOGY.—The Administrator 
shall promulgate regulations to establish a 
methodology for allocating carbon dioxide allow-
ances to new units and new renewable energy 
units. 
‘‘(B) QUANTITY OF CARBON DIOXIDE AL-
LOWANCES
ALLOCATED.—The Administrator 
shall determine the quantity of carbon dioxide 
allowances to be allocated to each new unit and 
each new renewable energy unit based on the 
unit’s projected share of the total electric power 
generation attributable to covered units. 
‘‘(d) ISSUANCE AND USE OF ADDITIONAL CARBON 
DIOXIDE ALLOWANCES.—
‘‘(1) IN GENERAL.—
‘‘(A) ALLOWANCES
FOR
PROJECTS
CER-
TIFIED BY INDEPENDENT REVIEW BOARD.—In 
addition to carbon dioxide allowances allocated 
under subsection (c), the Administrator shall 
make carbon dioxide allowances available to 
projects that are certified, in accordance with 
paragraph (3), by the independent review board 
established under paragraph (2) as eligible to 
receive the carbon dioxide allowances.
‘‘(B) 
ALLOWANCES
OBTAINED
UNDER 
OTHER
PROGRAMS.—The regulations promul-
gated under subsection (a)(1) shall—
‘‘(i) allow covered units to comply 
with subsection (f)(1) by purchasing and 
using carbon dioxide allowances that are 
traded under any other United States or 
internationally recognized carbon dioxide 
reduction program that is specified under 
clause (ii); 
‘‘(ii) specify, for the purpose of clause 
(i), programs that meet the goals of this 
section; and 
‘‘(iii) apply such conditions to the use 
of carbon dioxide allowances traded under 
programs specified under clause (ii) as are 
necessary to achieve the goals of this sec-
tion. 
‘‘(2) INDEPENDENT REVIEW BOARD.—
‘‘(A) IN GENERAL.—
‘‘(i) ESTABLISHMENT.—The Adminis-
trator shall establish an independent re-
view board to assist the Administrator in 
certifying projects as eligible for carbon di-
oxide allowances made available under 
paragraph (1)(A). 
‘‘(ii) REVIEW AND APPROVAL.—Each 
certification by the independent review 
board of a project shall be subject to the 
review and approval of the Administrator. 
‘‘(iii) 
REQUIREMENTS.—Subject 
to 
this subsection, requirements relating to 
the creation, composition, duties, respon-
sibilities, and other aspects of the inde-
pendent review board shall be included in 
the regulations promulgated by the Admin-
istrator under subsection (a). 
‘‘(B) MEMBERSHIP.—The independent re-
view board shall be composed of 12 members, 
of whom—
‘‘(i) 10 members shall be appointed by 
the Administrator, of whom—
‘‘(I) 1 member shall represent 
the Environmental Protection Agency 
(who shall serve as chairperson of the 
independent review board); 
‘‘(II) 3 members shall represent 
State governments;
‘‘(III) 3 members shall represent 
the electric generating sector; and 
‘‘(IV) 3 members shall represent 
environmental organizations; 
‘‘(ii) 1 member shall be appointed by 
the Secretary of Energy to represent the 
Department of Energy; and 
‘‘(iii) 1 member shall be appointed by 
the Secretary of Agriculture to represent 
the Department of Agriculture. 
‘‘(C) STAFF
AND
OTHER
RESOURCES.—
The Administrator shall provide such staff and 
other resources to the independent review board 
as the Administrator determines to be nec-
essary. 
‘‘(D) DEVELOPMENT OF GUIDELINES.—
‘‘(i) IN GENERAL.—The independent 
review board shall develop guidelines for 
certifying projects in accordance with para-
graph (3), including—
‘‘(I) criteria that address the va-
lidity of claims that projects result in 
the generation of carbon dioxide al-
lowances;
‘‘(II) guidelines for certifying in-
cremental carbon sequestration in ac-
cordance with clause (ii); and 
‘‘(III) guidelines for certifying 
geological sequestration of carbon di-
oxide in accordance with clause (iii). 
‘‘(ii) GUIDELINES
FOR
CERTIFYING 
INCREMENTAL CARBON SEQUESTRATION.—
The guidelines for certifying incremental 
carbon sequestration in forests, agricul-
tural soil, rangeland, or grassland shall in-
clude development, reporting, monitoring, 
and verification guidelines, to be used in 
quantifying net carbon sequestration from 
land use projects, that are based on—
‘‘(I) measurement of increases in 
carbon storage in excess of the carbon 
storage that would have occurred in 
the absence of such a project; 
‘‘(II) comprehensive carbon ac-
counting that—
‘‘(aa) reflects net increases 
in carbon reservoirs; and 
‘‘(bb) takes into account any 
carbon emissions resulting from
disturbance of carbon reservoirs 
in existence as of the date of 
commencement of the project; 
‘‘(III) adjustments to account 
for—
‘‘(aa) emissions of carbon 
that may result at other locations 
as a result of the impact of the 
project on timber supplies; or 
‘‘(bb) potential displacement 
of carbon emissions to other land 
owned by the entity that carries 
out the project; and 
‘‘(IV) adjustments to reflect the 
expected carbon storage over various 
time periods, taking into account the 
likely duration of the storage of the 
carbon stored in a carbon reservoir. 
‘‘(iii) GUIDELINES
FOR
CERTIFYING 
GEOLOGICAL SEQUESTRATION OF CARBON 
DIOXIDE.—The guidelines for certifying 
geological sequestration of carbon dioxide 
produced by a covered unit shall—
‘‘(I) provide that a project shall 
be certified only to the extent that the
geological sequestration of carbon di-
oxide produced by a covered unit is in 
addition to any carbon dioxide used by 
the covered unit in 2009 for enhanced 
oil recovery; and 
‘‘(II) include requirements for de-
velopment, reporting, monitoring, and 
verification for quantifying net carbon 
sequestration—
‘‘(aa) to ensure the perma-
nence of the sequestration; and 
‘‘(bb) to ensure that the se-
questration will not cause or con-
tribute to significant adverse ef-
fects on the environment. 
‘‘(iv) 
DEADLINES
FOR
DEVELOP-
MENT.—The guidelines under clause (i) 
shall be developed—
‘‘(I) with respect to projects de-
scribed in paragraph (3)(A), not later 
than January 1, 2005; and 
‘‘(II) with respect to projects de-
scribed in paragraph (3)(B), not later 
than January 1, 2006.
‘‘(v) UPDATING
OF
GUIDELINES.—
The independent review board shall peri-
odically update the guidelines as the inde-
pendent review board determines to be ap-
propriate. 
‘‘(E) CERTIFICATION OF PROJECTS.—
‘‘(i) IN GENERAL.—Subject to clause 
(ii), subparagraph (A)(ii), and paragraph 
(3), the independent review board shall 
certify projects as eligible for additional 
carbon dioxide allowances. 
‘‘(ii) LIMITATION.—The independent 
review board shall not certify a project 
under this subsection if the carbon dioxide 
emission reductions achieved by the project 
will be used to satisfy any requirement im-
posed on any foreign country or any indus-
trial sector to reduce the quantity of green-
house gases emitted by the foreign country 
or industrial sector. 
‘‘(3) PROJECTS
ELIGIBLE
FOR
ADDITIONAL 
CARBON DIOXIDE ALLOWANCES.—
‘‘(A) PROJECTS
CARRIED
OUT
IN
CAL-
ENDAR YEARS 1990 THROUGH 2008.—
‘‘(i) IN GENERAL.—The independent 
review board may certify as eligible for 
carbon dioxide allowances a project that—
‘‘(I) is carried out on or after 
January 1, 1990, and before January 
1, 2009; and 
‘‘(II) consists of—
‘‘(aa) a carbon sequestration 
project carried out in the United 
States or a foreign country; 
‘‘(bb) a project reported 
under section 1605(b) of the En-
ergy Policy Act of 1992 (42 
U.S.C. 13385(b)); or 
‘‘(cc) any other project to 
reduce emissions of greenhouse 
gases that is carried out in the 
United States or a foreign coun-
try. 
‘‘(ii) MAXIMUM
QUANTITY
OF
ADDI-
TIONAL CARBON DIOXIDE ALLOWANCES.—
The Administrator may make available to 
projects certified under clause (i) a quan-
tity of allowances that is not greater than 
10 percent of the tonnage limitation for
calendar year 2009 for emissions of carbon 
dioxide from affected units specified in sec-
tion 702(d)(1). 
‘‘(iii) USE OF ALLOWANCES.—Allow-
ances made available under clause (ii) may 
be used to comply with subsection (f)(1) in 
calendar year 2009 or any calendar year 
thereafter. 
‘‘(B) PROJECTS
CARRIED
OUT
IN
CAL-
ENDAR
YEAR
2009
AND
THEREAFTER.—The 
independent review board may certify as eligible 
for carbon dioxide allowances a project that—
‘‘(i) is carried out on or after January 
1, 2009; and 
‘‘(ii) consists of—
‘‘(I) 
a 
carbon 
sequestration 
project carried out in the United 
States or a foreign country; or 
‘‘(II) a project to reduce the 
greenhouse gas emissions (on a car-
bon dioxide equivalency basis deter-
mined by the independent review 
board) of a source of greenhouse 
gases that is not an affected unit.
‘‘(e) CARBON DIOXIDE ALLOWANCE TRANSFER SYS-
TEM.—
‘‘(1) USE OF ALLOWANCES.—The regulations 
promulgated under subsection (a)(1) shall—
‘‘(A) prohibit the use (but not the transfer 
in accordance with paragraph (3)) of any car-
bon dioxide allowance before the calendar year 
for which the carbon dioxide allowance is allo-
cated; 
‘‘(B) provide that unused carbon dioxide 
allowances may be carried forward and added 
to carbon dioxide allowances allocated for sub-
sequent years; 
‘‘(C) provide that unused carbon dioxide 
allowances may be transferred by—
‘‘(i) the person to which the carbon 
dioxide allowances are allocated; or 
‘‘(ii) any person to which the carbon 
dioxide allowances are transferred; and 
‘‘(D) provide that carbon dioxide allow-
ances allocated and transferred under this sec-
tion may be transferred into any other market-
based carbon dioxide emission trading program 
that is—
‘‘(i) approved by the President; and
‘‘(ii) implemented in accordance with 
regulations developed by the Administrator 
or the head of any other Federal agency. 
‘‘(2) USE BY PERSONS TO WHICH CARBON DI-
OXIDE ALLOWANCES ARE TRANSFERRED.—Any per-
son to which carbon dioxide allowances are trans-
ferred under paragraph (1)(C)—
‘‘(A) may use the carbon dioxide allow-
ances in the calendar year for which the carbon 
dioxide allowances were allocated, or in a subse-
quent calendar year, to demonstrate compliance 
with subsection (f)(1); or 
‘‘(B) may transfer the carbon dioxide al-
lowances to any other person for the purpose of 
demonstration of that compliance. 
‘‘(3) CERTIFICATION OF TRANSFER.—A trans-
fer of a carbon dioxide allowance shall not take ef-
fect until a written certification of the transfer, au-
thorized by a responsible official of the person mak-
ing the transfer, is received and recorded by the Ad-
ministrator. 
‘‘(4) PERMIT
REQUIREMENTS.—An allocation 
or transfer of carbon dioxide allowances to a covered 
unit, or for a project carried out on behalf of a cov-
ered unit, under subsection (c) or (d) shall, after re-
cording by the Administrator, be considered to be 
part of the federally enforceable permit of the cov-
ered unit under this Act, without a requirement for 
any further review or revision of the permit. 
‘‘(f) COMPLIANCE AND ENFORCEMENT.—
‘‘(1) IN
GENERAL.—For calendar year 2009 
and each calendar year thereafter—
‘‘(A) the operator of each affected unit and 
each renewable energy unit shall surrender to 
the Administrator a quantity of carbon dioxide 
allowances that is equal to the total tons of car-
bon dioxide emitted by the affected unit or re-
newable energy unit during the calendar year; 
and 
‘‘(B) the operator of each nuclear gener-
ating unit that has incremental nuclear genera-
tion shall surrender to the Administrator a 
quantity of carbon dioxide allowances that is 
equal to the total tons of carbon dioxide emitted 
by the nuclear generating unit during the cal-
endar year from incremental nuclear genera-
tion. 
‘‘(2) MONITORING SYSTEM.—The Administrator 
shall promulgate regulations requiring the accurate
monitoring of the quantity of carbon dioxide that is 
emitted at each covered unit. 
‘‘(3) REPORTING.—
‘‘(A) IN GENERAL.—Not less often than 
quarterly, the owner or operator of a covered 
unit, or a person that carries out a project cer-
tified under subsection (d) on behalf of a cov-
ered unit, shall submit to the Administrator a 
report on the monitoring of carbon dioxide 
emissions carried out at the covered unit in ac-
cordance with the regulations promulgated 
under paragraph (2). 
‘‘(B) AUTHORIZATION.—Each report sub-
mitted under subparagraph (A) shall be author-
ized by a responsible official of the covered unit, 
who shall certify the accuracy of the report. 
‘‘(C) PUBLIC REPORTING.—The Adminis-
trator shall make available to the public, 
through 1 or more published reports and 1 or 
more forms of electronic media, data concerning 
the emissions of carbon dioxide from each cov-
ered unit. 
‘‘(4) EXCESS EMISSIONS.—
‘‘(A) IN GENERAL.—The owner or operator 
of a covered unit that emits carbon dioxide in
excess of the carbon dioxide allowances that the 
owner or operator holds for use for the covered 
unit for the calendar year shall—
‘‘(i) pay an excess emissions penalty 
determined under subparagraph (B); and 
‘‘(ii) offset the excess emissions by an 
equal quantity in the following calendar 
year or such other period as the Adminis-
trator shall prescribe. 
‘‘(B) DETERMINATION
OF
EXCESS
EMIS-
SIONS PENALTY.—The excess emissions penalty 
shall be equal to the product obtained by multi-
plying—
‘‘(i) the number of tons of carbon di-
oxide emitted in excess of the total quan-
tity of carbon dioxide allowances held; and 
‘‘(ii) $100, adjusted (in accordance 
with regulations promulgated by the Ad-
ministrator) for changes in the Consumer 
Price Index for All-Urban Consumers pub-
lished by the Department of Labor. 
‘‘(g) ALLOWANCE NOT A PROPERTY RIGHT.—A car-
bon dioxide allowance—
‘‘(1) is not a property right; and