(b) DETERMINATION OF TRANSPORTATION SECTOR 
AMOUNT.—For the transportation sector, the Adminis-
trator shall determine the amount of greenhouse gases, 
measured in units of carbon dioxide equivalents, that will 
be emitted when petroleum products are used for trans-
portation. 
(c) EXCEPTION
FOR CERTAIN DEPOSITED EMIS-
SIONS.—Notwithstanding subsection (a), a covered entity 
is not required to submit a tradeable allowance for any 
amount of greenhouse gas that would otherwise have been 
emitted from a facility under the ownership or control of 
that entity if— 
(1) the emission is deposited in a geological 
storage facility approved by the Administrator de-
scribed in section 204(a)(2)(G); and 
(2) the entity agrees to submit tradeable allow-
ances for any portion of the deposited emission that 
is subsequently emitted from that facility. 
(d) 
DETERMINATION
OF
HYDROFLUROCARBON, 
PERFLUOROCARBON, 
AND
SULFUR
HEXAFLUORIDE 
AMOUNT.—The 
Administrator 
shall 
determine 
the 
amounts of hydrofluorocarbons, perfluorocarbons, or sul-
fur hexafluoride, measured in units of carbon dioxide 
equivalents, that will be deemed to be emitted for purposes 
of this Act.
SEC. 302. COMPLIANCE. 
(a) IN GENERAL.— 
(1) SOURCE
OF
TRADEABLE
ALLOWANCES 
USED.—A covered entity may use a tradeable allow-
ance to meet the requirements of this section with-
out regard to whether the tradeable allowance was 
allocated to it under subtitle B or acquired from an-
other entity or the Climate Change Credit Corpora-
tion established under section 351. 
(2) VERIFICATION
BY
ADMINISTRATOR.—At 
various times during each year, the Administrator 
shall determine whether each covered entity has met 
the requirements of this section. In making that de-
termination, the Administrator shall— 
(A) take into account the tradeable allow-
ances submitted by the covered entity to the 
Administrator; and 
(B) retire the serial number assigned to 
each such tradeable allowance. 
(b) ALTERNATIVE MEANS OF COMPLIANCE.—For the 
years after 2010, a covered entity may satisfy up to 15 
percent of its total allowance submission requirement 
under this section by— 
(1) submitting tradeable allowances from an-
other nation’s market in greenhouse gas emissions 
if—
(A) the Secretary determines that the 
other nation’s system for trading in greenhouse 
gas emissions is complete, accurate, and trans-
parent and reviews that determination at least 
once every 5 years; 
(B) the other nation has adopted enforce-
able limits on its greenhouse gas emissions 
which the tradeable allowances were issued to 
implement; and 
(C) the covered entity certifies that the 
tradeable allowance has been retired unused in 
the other nation’s market; 
(2) submitting a registered net increase in se-
questration, as registered in the database, adjusted, 
if necessary, to comply with the accounting stand-
ards and methods established under section 371; 
(3) submitting a greenhouse gas emissions re-
duction (other than a registered net increase in se-
questration) that was registered in the database by 
a person that is not a covered entity; or 
(4) submitting credits obtained from the Ad-
ministrator under section 303. 
(c) DEDICATED PROGRAM FOR SEQUESTRATION IN 
AGRICULTURAL SOILS.—If a covered entity chooses to 
satisfy 15 percent of its total allowance submission re-
quirements under the provisions of subsection (b), it shall 
satisfy up to 1.5 percent of its total allowance submission 
requirement by submitting registered net increases in se-
questration in agricultural soils, as registered in the data-
base, adjusted, if necessary, to comply with the accounting 
standards and methods established under section 371. 
SEC. 303. BORROWING AGAINST FUTURE REDUCTIONS. 
(a) IN GENERAL.—The Administrator shall establish 
a program under which a covered entity may— 
(1) receive a credit in the current calendar year 
for anticipated reductions in emissions in a future 
calendar year; and 
(2) use the credit in lieu of a tradeable allow-
ance to meet the requirements of this Act for the 
current calendar year, subject to the limitation im-
posed by section 302(b). 
(b) DETERMINATION OF TRADEABLE ALLOWANCE 
CREDITS.—The Administrator may make credits available 
under subsection (a) only for anticipated reductions in 
emissions that— 
(1) are attributable to the realization of capital 
investments in equipment, the construction, recon-
struction, or acquisition of facilities, or the deploy-
ment of new technologies—
(A) for which the covered entity has exe-
cuted a binding contract and secured, or ap-
plied for, all necessary permits and operating or 
implementation authority; 
(B) that will not become operational within 
the current calendar year; and 
(C) that will become operational and begin 
to reduce emissions from the covered entity 
within 5 years after the year in which the credit 
is used; and 
(2) will be realized within 5 years after the year 
in which the credit is used. 
(c) CARRYING COST.—If a covered entity uses a cred-
it under this section to meet the requirements of this Act 
for a calendar year (referred to as the use year), the 
tradeable allowance requirement for the year from which 
the credit was taken (referred to as the source year) shall 
be increased by an amount equal to— 
(1) 10 percent for each credit borrowed from 
the source year; multiplied by 
(2) the number of years beginning after the use 
year and before the source year. 
(d) MAXIMUM BORROWING PERIOD.—A credit from 
a year beginning more than 5 years after the current year
may not be used to meet the requirements of this Act for 
the current year. 
(e) FAILURE TO ACHIEVE REDUCTIONS GENERATING 
CREDIT.—If a covered entity that uses a credit under this 
section fails to achieve the anticipated reduction for which 
the credit was granted for the year from which the credit 
was taken, then— 
(1) the covered entity’s requirements under this 
Act for that year shall be increased by the amount 
of the credit, plus the amount determined under 
subsection (c); 
(2) any tradeable allowances submitted by the 
covered entity for that year shall be counted first 
against the increase in those requirements; and 
(3) the covered entity may not use credits 
under this section to meet the increased require-
ments. 
SEC. 304. OTHER USES OF TRADEABLE ALLOWANCES. 
(a) IN GENERAL.—Tradeable allowances may be sold, 
exchanged, purchased, retired, or used as provided in this 
section. 
(b) INTERSECTOR TRADING.—Covered entities may 
purchase or otherwise acquire tradeable allowances from 
other covered sectors to satisfy the requirements of section 
301.
(c) CLIMATE CHANGE CREDIT ORGANIZATION.—The 
Climate Change Credit Corporation established under sec-
tion 351 may sell tradeable allowances allocated to it 
under section 332(a)(2) to any covered entity or to any 
investor, broker, or dealer in such tradeable allowances. 
The Climate Change Credit Corporation shall use all pro-
ceeds from such sales in accordance with the provisions 
of section 352. 
(d) BANKING OF TRADEABLE ALLOWANCES.—Not-
withstanding the requirements of section 301, a covered 
entity that has more than a sufficient amount of tradeable 
allowances to satisfy the requirements of section 301, may 
refrain from submitting a tradeable allowance to satisfy 
the requirements in order to sell, exchange, or use the 
tradeable allowance in the future. 
SEC. 305. EXEMPTION OF SOURCE CATEGORIES. 
(a) IN GENERAL.—The Administrator may grant an 
exemption from the requirements of this Act to a source 
category if the Administrator determines, after public no-
tice and comment, that it is not feasible to measure or 
estimate emissions from that source category, until such 
time as measurement or estimation becomes feasible. 
(b) REDUCTION OF LIMITATIONS.—If the Adminis-
trator exempts a source category under subsection (a), the 
Administrator shall also reduce the total tradeable allow-
ances under section 331(a)(1) by the amount of green-
house gas emissions that the exempted source category 
emitted in calendar year 2000, as identified in the 2000 
Inventory. 
(c) LIMITATION ON EXEMPTION.—The Administrator 
may not grant an exemption under subsection (a) to car-
bon dioxide produced from fossil fuel. 
Subtitle B—Establishment and 
Allocation of Tradeable Allowances 
SEC. 331. ESTABLISHMENT OF TRADEABLE ALLOWANCES. 
(a) IN GENERAL.—The Administrator shall promul-
gate regulations to establish tradeable allowances, denomi-
nated in units of carbon dioxide equivalents, for calendar 
years beginning after 2009, equal to— 
(1) 5896 million metric tons, measured in units 
of carbon dioxide equivalents, reduced by 
(2) the amount of emissions of greenhouse 
gases in calendar year 2000 from non-covered enti-
ties. 
(b) SERIAL NUMBERS.—The Administrator shall as-
sign a unique serial number to each tradeable allowance 
established under subsection (a), and shall take such ac-
tion as may be necessary to prevent counterfeiting of 
tradeable allowances.
(c) NATURE
OF
TRADEABLE
ALLOWANCES.—A 
tradeable allowance is not a property right, and nothing 
in this title or any other provision of law limits the author-
ity of the United States to terminate or limit a tradeable 
allowance. 
(d) NON-COVERED ENTITY.—In this section: 
(1) IN GENERAL.—The term ‘‘non-covered enti-
ty’’ means an entity that— 
(A) owns or controls a source of green-
house gas emissions in the electric power, in-
dustrial, or commercial sector of the United 
States economy (as defined in the Inventory), 
refines or imports petroleum products for use in 
transportation, 
or 
produces 
or 
imports 
hydrofluorocarbons, perfluorocarbons, or sulfur 
hexafluoride; and 
(B) is not a covered entity. 
(2) EXCEPTION.—Notwithstanding paragraph 
(1), an entity that is a covered entity for any cal-
endar year beginning after 2009 shall not be consid-
ered to be a non-covered entity for purposes of sub-
section (a) only because it emitted, or its products 
would have emitted, 10,000 metric tons or less of 
greenhouse gas, measured in units of carbon dioxide 
equivalents, in the year 2000.
SEC. 332. DETERMINATION OF TRADEABLE ALLOWANCE 
ALLOCATIONS. 
(a) IN GENERAL.—The Secretary shall determine— 
(1) the amount of tradeable allowances to be al-
located to each covered sector of that sector’s allot-
ments; and 
(2) the amount of tradeable allowances to be al-
located to the Climate Change Credit Corporation 
established under section 351. 
(b) ALLOCATION FACTORS.—In making the deter-
mination required by subsection (a), the Secretary shall 
consider— 
(1) the distributive effect of the allocations on 
household income and net worth of individuals; 
(2) the impact of the allocations on corporate 
income, taxes, and asset value; 
(3) the impact of the allocations on income lev-
els of consumers and on their energy consumption; 
(4) the effects of the allocations in terms of eco-
nomic efficiency; 
(5) the ability of covered entities to pass 
through compliance costs to their customers; 
(6) the degree to which the amount of alloca-
tions to the covered sectors should decrease over 
time; and
(7) the need to maintain the international com-
petitiveness of United States manufacturing and 
avoid the additional loss of United States manufac-
turing jobs. 
(c) ALLOCATION RECOMMENDATIONS
AND IMPLE-
MENTATION.—Before allocating or providing tradeable al-
lowances under subsection (a) and within 24 months after 
the date of enactment of this Act, the Secretary shall sub-
mit the determinations under subsection (a) to the Senate 
Committee on Commerce, Science, and Transportation, 
the Senate Committee on Environment and Public Works, 
the House of Representatives Committee on Science, and 
the House of Representatives Committee on Energy and 
Commerce. The Secretary’s determinations under sub-
section (a)(1), including the allocations and provision of 
tradeable allowances pursuant to that determination, are 
deemed to be a major rule (as defined in section 804(2) 
of title 5, United States Code), and subject to the provi-
sions of chapter 8 of that title. 
SEC. 333. ALLOCATION OF TRADEABLE ALLOWANCES. 
(a) IN GENERAL.—Beginning with calendar year 
2010 and after taking into account any initial allocations 
under section 334, the Administrator shall— 
(1) allocate to each covered sector that sector’s 
allotments determined by the Administrator under
section 332 (adjusted for any such initial allocations 
and the allocation to the Climate Change Credit 
Corporation established under section 351); and 
(2) allocate to the Climate Change Credit Cor-
poration established under section 351 the tradeable 
allowances allocable to that Corporation. 
(b) INTRASECTORIAL ALLOTMENTS.—The Adminis-
trator shall, by regulation, establish a process for the allo-
cation of tradeable allowances under this section, without 
cost to covered entities, that will— 
(1) encourage investments that increase the ef-
ficiency of the processes that produce greenhouse 
gas emissions; 
(2) minimize the costs to the Government of al-
locating the tradeable allowances; 
(3) not penalize a covered entity for emissions 
reductions made before 2010 and registered with the 
database; and 
(4) provide sufficient allocation for new en-
trants into the sector. 
(c) POINT SOURCE ALLOCATION.—The Adminis-
trator shall allocate the tradeable allowances for the elec-
tricity generation, industrial, and commercial sectors to 
the entities owning or controlling the point sources of 
greenhouse gas emissions within that sector.
(d) HYDROFLUOROCARBONS, PERFLUOROCARBONS, 
AND SULFUR HEXAFLUORIDE.—The Administrator shall 
allocate the tradeable allowances for producers or import-
ers of hydrofluorocarbons, perfluorocarbons, or sulfur 
hexafluoride to such producers or importers. 
(e) SPECIAL RULE FOR ALLOCATION WITHIN THE 
TRANSPORTATION SECTOR.—The Administrator shall al-
locate the tradeable allowances for the transportation sec-
tor to petroleum refiners or importers that produce or im-
port petroleum products that will be used as fuel for trans-
portation. 
(f) ALLOCATIONS TO RURAL ELECTRIC COOPERA-
TIVES.— 
(1) IN
GENERAL.—The Administrator shall 
make the allocations described in paragraph (2) each 
year at no cost. The allocations shall be offset from 
the allowances allocated to the Climate Change 
Credit Corporation. 
(2) RURAL
ELECTRIC
COOPERATIVES.—For 
each electric generating unit that is owned or oper-
ated by a rural electric cooperative, the Adminis-
trator shall allocate allowances in an amount equal 
to the greenhouse gas emissions of each such unit in 
2000, plus an amount equal to the average emis-
sions growth expected for all such units.
SEC. 334. ENSURING TARGET ADEQUACY. 
(a) IN GENERAL.—Beginning 2 years after the date 
of enactment of this Act, the Under Secretary of Com-
merce for Oceans and Atmosphere shall review the allow-
ances established by section 331 no less frequently than 
biennially— 
(1) to re-evaluate the levels established by that 
section, after taking into account the best available 
science and the most currently available data, and 
(2) to re-evaluate the environmental and public 
health impacts of specific concentration levels of 
greenhouse gases, 
to determine whether the allowances established by sub-
section (a) continue to be consistent with the objective of 
the United Nations’ Framework Convention on Climate 
Change of stabilizing levels of greenhouse gas emissions 
at a level that will prevent dangerous anthropogenic inter-
ference with the climate system. 
(b) REVIEW OF 2010 LEVELS.—The Under Secretary 
shall specifically review in 2008 the level established under 
section 331(a)(1), and transmit a report on his reviews, 
together with any recommendations, including legislative 
recommendations, for modification of the levels, to the 
Senate Committee on Commerce, Science, and Transpor-
tation, the Senate Committee on Environment and Public 
Works, the House of Representatives Committee on
Science, and the House of Representatives Committee on 
Energy and Commerce. 
SEC. 335. INITIAL ALLOCATIONS FOR EARLY PARTICIPA-
TION AND ACCELERATED PARTICIPATION. 
Before making any allocations under section 333, the 
Administrator shall allocate— 
(1) to any covered entity an amount of 
tradeable allowances equivalent to the amount of 
greenhouse gas emissions reductions registered by 
that covered entity in the national greenhouse gas 
database if— 
(A) the covered entity has requested to use 
the registered reduction in the year of alloca-
tion; 
(B) the reduction was registered prior to 
2010; and 
(C) the Administrator retires the unique 
serial number assigned to the reduction under 
section 201(c)(3); and 
(2) to any covered entity that has entered into 
an accelerated participation agreement under section 
336, such tradeable allowances as the Administrator 
has determined to be appropriate under that section.
SEC. 336. BONUS FOR ACCELERATED PARTICIPATION. 
(a) IN GENERAL.—If a covered entity executes an 
agreement with the Administrator under which it agrees 
to reduce its level of greenhouse gas emissions to a level 
no greater than the level of its greenhouse gas emissions 
for calendar year 1990 by the year 2010, then, for the 
6-year period beginning with calendar year 2010, the Ad-
ministrator shall— 
(1) provide additional tradeable allowances to 
that entity when allocating allowances under section 
334 in order to recognize the additional emissions 
reductions that will be required of the covered entity; 
(2) allow that entity to satisfy 20 percent of its 
requirements under section 301 by— 
(A) submitting tradeable allowances from 
another nation’s market in greenhouse gas 
emissions under the conditions described in sec-
tion 302(b)(1); 
(B) submitting a registered net increase in 
sequestration, as registered in the National 
Greenhouse Gas Database established under 
section 201, and as adjusted by the appropriate 
sequestration discount rate established under 
section 371; or 
(C) submitting a greenhouse gas emission 
reduction (other than a registered net increase
in sequestration) that was registered in the Na-
tional Greenhouse Gas Database by a person 
that is not a covered entity. 
(b) TERMINATION.—An entity that executes an 
agreement described in subsection (a) may terminate the 
agreement at any time. 
(c) FAILURE TO MEET COMMITMENT.—If an entity 
that executes an agreement described in subsection (a) 
fails to achieve the level of emissions to which it committed 
by calendar year 2010— 
(1) its requirements under section 301 shall be 
increased by the amount of any tradeable allowances 
provided to it under subsection (a)(1); and 
(2) any tradeable allowances submitted there-
after shall be counted first against the increase in 
those requirements. 
Subtitle C—Climate Change Credit 
Corporation 
SEC. 351. ESTABLISHMENT. 
(a) IN GENERAL.—The Climate Change Credit Cor-
poration is established as a nonprofit corporation without 
stock. The Corporation shall not be considered to be an 
agency or establishment of the United States Government. 
(b) APPLICABLE LAWS.—The Corporation shall be 
subject to the provisions of this title and, to the extent
consistent with this title, to the District of Columbia Busi-
ness Corporation Act. 
(c) BOARD OF DIRECTORS.—The Corporation shall 
have a board of directors of 5 individuals who are citizens 
of the United States, of whom 1 shall be elected annually 
by the board to serve as chairman. No more than 3 mem-
bers of the board serving at any time may be affiliated 
with the same political party. The members of the board 
shall be appointed by the President of the United States, 
by and with the advice and consent of the Senate and shall 
serve for terms of 5 years. 
SEC. 352. PURPOSES AND FUNCTIONS. 
(a) TRADING.—The Corporation— 
(1) shall receive and manage tradeable allow-
ances allocated to it under section 333(a)(2); and 
(2) shall buy and sell tradeable allowances, 
whether allocated to it under that section or ob-
tained by purchase, trade, or donation from other 
entities; but 
(3) may not retire tradeable allowances unused. 
(b) USE OF TRADEABLE ALLOWANCES AND PRO-
CEEDS.— 
(1) IN GENERAL.—The Corporation shall use 
the tradeable allowances, and proceeds derived from 
its trading activities in tradeable allowances, to re-
duce costs borne by consumers as a result of the 
greenhouse gas reduction requirements of this Act. 
The reductions— 
(A) may be obtained by buy-down, subsidy, 
negotiation of discounts, consumer rebates, or 
otherwise; 
(B) shall be, as nearly as possible, equi-
tably distributed across all regions of the 
United States; and 
(C) may include arrangements for pref-
erential treatment to consumers who can least 
afford any such increased costs. 
(2) TRANSITION ASSISTANCE TO DISLOCATED 
WORKERS
AND
COMMUNITIES.—The Corporation 
shall allocate a percentage of the proceeds derived 
from its trading activities in tradeable allowances to 
provide transition assistance to dislocated workers 
and communities. Transition assistance may take 
the form of— 
(A) grants to employers, employer associa-
tions, and representatives of employees— 
(i) to provide training, adjustment as-
sistance, and employment services to dis-
located workers; and
(ii) to make income-maintenance and 
needs-related payments to dislocated work-
ers; and 
(B) grants to State and local governments 
to assist communities in attracting new employ-
ers or providing essential local government serv-
ices. 
(3) PHASE-OUT OF TRANSITION ASSISTANCE.— 
The percentage allocated by the Corporation under 
paragraph (2)— 
(A) shall be 20 percent for 2010; 
(B) shall be reduced by 2 percentage 
points each year thereafter; and 
(C) may not be reduced below zero. 
(4) TECHNOLOGY DEPLOYMENT PROGRAMS.— 
The Corporation shall establish and carry out a pro-
gram, through direct grants, revolving loan pro-
grams, or other financial measures, to provide sup-
port for the deployment of technology to assist in 
compliance with this Act by distributing the pro-
ceeds from no less than 10 percent of the total al-
lowances allocated to it. The support shall include 
the following: 
(A) COAL GASIFICATION COMBINED-CYCLE 
AND
GEOLOGICAL
CARBON
STORAGE
PRO-
GRAM.—The Corporation shall establish and 
carry out a program, through direct grants, to 
provide incentives for the repowering of existing 
facilities or construction of new facilities pro-
ducing electricity or other products from coal 
gasification combined-cycle plants that capture 
and geologically store at least 90 percent of the 
carbon dioxide produced at the facility in ac-
cordance with requirements established by the 
Administrator to ensure the permanence of the 
storage and that such storage will not cause or 
contribute to significant adverse effects on pub-
lic health or the environment. The Corporation 
shall ensure that no less than 20 percent of the 
funding under this program is distributed to 
rural electric cooperatives. 
(B) AGRICULTURAL PROGRAMS.—The Cor-
poration shall establish and carry out a pro-
gram, through direct grants, revolving loan pro-
grams, or other financial measures, to provide 
incentives for greenhouse gas emissions reduc-
tions or net increases in greenhouse gas seques-
tration on agricultural lands. The program shall 
include incentives for—