540 
; and 
‘‘(2) the carbon dioxide equivalent value for pur-
poses of this Act for any greenhouse gas not listed in 
the table under paragraph (1) shall be the 100-year 
Global Warming Potentials provided in the Intergov-
ernmental Panel on Climate Change Fourth Assess-
ment Report. 
‘‘(c) PERIODIC REVIEW.— 
‘‘(1) Not later than February 1, 2017, and (ex-
cept as provided in paragraph (3)) not less than 
every 5 years thereafter, the Administrator shall— 
‘‘(A) review and, if appropriate, revise the 
carbon dioxide equivalent values established 
under this section or section 711(b)(2), based on 
a determination of the number of metric tons of 
carbon dioxide that makes the same contribution 
to global warming over 100 years as 1 metric 
ton of each greenhouse gas; and 
‘‘(B) publish in the Federal Register the re-
sults of that review and any revisions. 
‘‘(2) A revised determination published in the 
Federal Register under paragraph (1)(B) shall take 
effect for greenhouse gas emissions starting on Janu-
ary 1 of the first calendar year starting at least 9 
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months after the date on which the revised determina-
tion was published. 
‘‘(3) The Administrator may decrease the fre-
quency of review and revision under paragraph (1) if 
the Administrator determines that such decrease is 
appropriate in order to synchronize such review and 
revision with any similar review process carried out 
pursuant to the United Nations Framework Conven-
tion on Climate Change, done at New York on May 
9, 1992, or to an agreement negotiated under that 
convention, except that in no event shall the Adminis-
trator carry out such review and revision any less fre-
quently than every 10 years. 
‘‘(d) METHODOLOGY.—In setting carbon dioxide equiv-
alent values, for purposes of this section or section 711, the 
Administrator shall take into account publications by the 
Intergovernmental Panel on Climate Change or a successor 
organization under the auspices of the United Nations En-
vironmental Programme and the World Meteorological Or-
ganization. 
‘‘SEC. 713. GREENHOUSE GAS REGISTRY. 
‘‘(a) DEFINITIONS.—For purposes of this section: 
‘‘(1) CLIMATE
REGISTRY.—The term ‘Climate 
Registry’ means the greenhouse gas emissions registry 
jointly established and managed by more than 40 
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States and Indian tribes in 2007 to collect high-qual-
ity greenhouse gas emission data from facilities, cor-
porations, and other organizations to support various 
greenhouse gas emission reporting and reduction poli-
cies for the member States and Indian tribes. 
‘‘(2) REPORTING ENTITY.—The term ‘reporting 
entity’ means— 
‘‘(A) a covered entity; 
‘‘(B) an entity that— 
‘‘(i) would be a covered entity if it had 
emitted, produced, imported, manufactured, 
or delivered in 2008 or any subsequent year 
more than the applicable threshold level in 
the definition of covered entity in para-
graph (13) of section 700; and 
‘‘(ii) has emitted, produced, imported, 
manufactured, or delivered in 2008 or any 
subsequent year more than the applicable 
threshold level in the definition of covered 
entity in paragraph (13) of section 700, 
provided that the figure of 25,000 tons of 
carbon dioxide equivalent is read instead as 
10,000 tons of carbon dioxide equivalent 
and the figure of 460,000,000 cubic feet is 
read instead as 184,000,000 cubic feet; 
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‘‘(C) any other entity that emits a green-
house gas, or produces, imports, manufactures, 
or delivers material whose use results or may re-
sult in greenhouse gas emissions if the Adminis-
trator determines that reporting under this sec-
tion by such entity will help achieve the purposes 
of this title or title VIII; 
‘‘(D) any vehicle fleet with emissions of 
more than 25,000 tons of carbon dioxide equiva-
lent on an annual basis, if the Administrator de-
termines that the inclusion of such fleet will help 
achieve the purposes of this title or title VIII; or 
‘‘(E) any entity that delivers electricity to 
an energy-intensive facility in an industrial sec-
tor that meets the energy or greenhouse gas in-
tensity criteria in section 764(b)(2)(A)(i). 
‘‘(b) REGULATIONS.— 
‘‘(1) IN
GENERAL.—Not later than 6 months 
after the date of enactment of this title, the Adminis-
trator shall issue regulations establishing a Federal 
greenhouse gas registry. Such regulations shall— 
‘‘(A) require reporting entities to submit to 
the Administrator data on— 
‘‘(i) greenhouse gas emissions in the 
United States; 
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‘‘(ii) the production and manufacture 
in the United States, importation into the 
United States, and, at the discretion of the 
Administrator, exportation from the United 
States, of fuels and industrial gases the uses 
of which result or may result in greenhouse 
gas emissions; 
‘‘(iii) deliveries in the United States of 
natural gas, and any other gas meeting the 
specifications for commingling with natural 
gas for purposes of delivery, the combustion 
of which result or may result in greenhouse 
gas emissions; and 
‘‘(iv) the capture and sequestration of 
greenhouse gases; 
‘‘(B) require covered entities and, where ap-
propriate, other reporting entities to submit to 
the Administrator data sufficient to ensure com-
pliance with or implementation of the require-
ments of this title; 
‘‘(C) require reporting of electricity deliv-
ered to industrial sources in energy-intensive in-
dustries; 
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‘‘(D) ensure the completeness, consistency, 
transparency, accuracy, precision, and reli-
ability of such data; 
‘‘(E) take into account the best practices 
from the most recent Federal, State, tribal, and 
international protocols for the measurement, ac-
counting, reporting, and verification of green-
house gas emissions, including protocols from the 
Climate Registry and other mandatory State or 
multistate authorized programs; 
‘‘(F) take into account the latest scientific 
research; 
‘‘(G) require that, for covered entities with 
respect to greenhouse gases to which section 722 
applies, and, to the extent determined to be ap-
propriate by the Administrator, for covered enti-
ties with respect to other greenhouse gases and 
for other reporting entities, submitted data are 
based on— 
‘‘(i) continuous monitoring systems for 
fuel flow or emissions, such as continuous 
emission monitoring systems; 
‘‘(ii) alternative systems that are dem-
onstrated as providing data with the same 
precision, 
reliability, 
accessibility, 
and 
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subparagraph (G) is appropriate for reporting 
entities other than covered entities or for green-
house gases to which section 722 does not apply, 
consider the cost of using such systems and meth-
odologies, and of using other systems and meth-
odologies that are available and suitable, for 
quantifying the emissions involved in light of the 
purposes of this title, including the goal of col-
lecting consistent entity-wide data; 
‘‘(I) include methods for minimizing double 
reporting and avoiding irreconcilable double re-
porting of greenhouse gas emissions; 
‘‘(J) establish measurement protocols for 
carbon capture and sequestration systems, taking 
into consideration the regulations promulgated 
under section 813; 
‘‘(K) require that reporting entities provide 
the data required under this paragraph in re-
ports submitted electronically to the Adminis-
trator, in such form and containing such infor-
mation as may be required by the Adminis-
trator; 
‘‘(L) include requirements for keeping 
records supporting or related to, and protocols 
for auditing, submitted data; 
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‘‘(M) establish consistent policies for calcu-
lating carbon content and greenhouse gas emis-
sions for each type of fossil fuel with respect to 
which reporting is required; 
‘‘(N) subsequent to implementation of poli-
cies developed under subparagraph (M), provide 
for immediate dissemination, to States, Indian 
tribes, and on the Internet, of all data reported 
under this section as soon as practicable after 
electronic audit by the Administrator and any 
resulting correction of data, except that data 
shall not be disseminated under this subpara-
graph if— 
‘‘(i) its nondissemination is vital to 
the national security of the United States, 
as determined by the President; or 
‘‘(ii) it is confidential business infor-
mation that cannot be derived from infor-
mation that is otherwise publicly available 
and that would cause significant calculable 
competitive 
harm 
if 
published, 
except 
that— 
‘‘(I) data relating to greenhouse 
gas emissions, including any upstream 
or verification data from reporting en-
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549 
tities, shall not be considered to be con-
fidential business information; and 
‘‘(II) data that is confidential 
business information shall be provided 
to a State or Indian tribe within 
whose jurisdiction the reporting entity 
is located, if the Administrator deter-
mines that such State or Indian tribe 
has in effect protections for confiden-
tial business information that are 
equivalent to protections applicable to 
the Federal Government; 
‘‘(O) prescribe methods by which the Ad-
ministrator shall, in cases in which satisfactory 
data are not submitted to the Administrator for 
any period of time, estimate emission, produc-
tion, importation, manufacture, or delivery lev-
els— 
‘‘(i) for covered entities with respect to 
greenhouse gas emissions, production, im-
portation, manufacture, or delivery regu-
lated under this title to ensure that emis-
sions, production, importation, manufac-
ture, or deliveries are not underreported, 
and to create a strong incentive for meeting 
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data monitoring and reporting require-
ments— 
‘‘(I) with a conservative estimate 
of the highest emission, production, im-
portation, manufacture, or delivery 
levels that may have occurred during 
the period for which data are missing; 
or 
‘‘(II) to the extent the Adminis-
trator considers appropriate, with an 
estimate of such levels assuming the 
unit is emitting, producing, importing, 
manufacturing, or delivering at a 
maximum potential level during the 
period, in order to ensure that such 
levels are not underreported and to cre-
ate a strong incentive for meeting data 
monitoring and reporting require-
ments; and 
‘‘(ii) for covered entities with respect to 
greenhouse gas emissions to which section 
722 does not apply and for other reporting 
entities, with a reasonable estimate of the 
emission, production, importation, manu-
facture, or delivery levels that may have oc-
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curred during the period for which data are 
missing; 
‘‘(P) require the designation of a designated 
representative for each reporting entity; 
‘‘(Q) require an appropriate certification, 
by the designated representative for the reporting 
entity, of accurate and complete accounting of 
greenhouse gas emissions, as determined by the 
Administrator; and 
‘‘(R) include requirements for other data 
necessary for accurate and complete accounting 
of greenhouse gas emissions, as determined by the 
Administrator, including data for quality assur-
ance of monitoring systems, monitors and other 
measurement devices, and other data needed to 
verify reported emissions, production, importa-
tion, manufacture, or delivery. 
‘‘(2) TIMING.— 
‘‘(A) CALENDAR
YEARS
2007
THROUGH 
2010.—For a base period of calendar years 2007 
through 2010, each reporting entity shall submit 
annual data required under this section to the 
Administrator not later than March 31, 2011. 
The Administrator may waive or modify report-
ing requirements for calendar years 2007 
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through 2010 for categories of reporting entities 
to the extent that the Administrator determines 
that the reporting entities did not keep data or 
records necessary to meet reporting requirements. 
The Administrator may, in addition to or in 
lieu of such requirements, collect information on 
energy consumption and production. 
‘‘(B) SUBSEQUENT CALENDAR YEARS.—For 
calendar year 2011 and each subsequent cal-
endar year, each reporting entity shall submit 
quarterly data required under this section to the 
Administrator not later than 60 days after the 
end of the applicable quarter, except when the 
data is already being reported to the Adminis-
trator on an earlier timeframe for another pro-
gram. 
‘‘(3) WAIVER OF REPORTING REQUIREMENTS.— 
The Administrator may waive reporting requirements 
under this section for specific entities to the extent 
that the Administrator determines that sufficient and 
equally or more reliable verified and timely data are 
available to the Administrator and the public on the 
Internet under other mandatory statutory require-
ments. 
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553 
‘‘(4) ALTERNATIVE THRESHOLD.—The Adminis-
trator may, by rule, establish applicability thresholds 
for reporting under this section using alternative 
metrics and levels, provided that such metrics and 
levels are easier to administer and cover the same size 
and type of sources as the threshold defined in this 
section. 
‘‘(c) INTERRELATIONSHIP WITH OTHER SYSTEMS.— 
In developing the regulations issued under subsection (b), 
the Administrator shall take into account the work done by 
the Climate Registry and other mandatory State or 
multistate programs. Such regulations shall include an ex-
planation of any major differences in approach between the 
system established under the regulations and such registries 
and programs. 
‘‘PART C—PROGRAM RULES 
‘‘SEC. 721. EMISSION ALLOWANCES. 
‘‘(a) IN GENERAL.—The Administrator shall establish 
a separate quantity of emission allowances for each cal-
endar year starting in 2012, in the amounts prescribed 
under subsection (e). 
‘‘(b) IDENTIFICATION NUMBERS.—The Administrator 
shall assign to each emission allowance established under 
subsection (a) a unique identification number that includes 
the vintage year for that emission allowance. 
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‘‘(c) LEGAL STATUS OF EMISSION ALLOWANCES.— 
‘‘(1) IN GENERAL.—An allowance established by 
the Administrator under this title does not constitute 
a property right. 
‘‘(2) TERMINATION OR LIMITATION.—Nothing in 
this Act or any other provision of law shall be con-
strued to limit or alter the authority of the United 
States, including the Administrator acting pursuant 
to statutory authority, to terminate or limit allow-
ances or offset credits. 
‘‘(3) OTHER PROVISIONS UNAFFECTED.—Except 
as otherwise specified in this Act, nothing in this Act 
relating to allowances or offset credits established or 
issued under this title shall affect the application of 
any other provision of law to a covered entity, or the 
responsibility for a covered entity to comply with any 
such provision of law. 
‘‘(d) SAVINGS PROVISION.—Nothing in this part shall 
be construed as requiring a change of any kind in any State 
law regulating electric utility rates and charges, or as af-
fecting any State law regarding such State regulation, or 
as limiting State regulation (including any prudency re-
view) under such a State law. Nothing in this part shall 
be construed as modifying the Federal Power Act or as af-
fecting the authority of the Federal Energy Regulatory 
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Commission under that Act. Nothing in this part shall be 
construed to interfere with or impair any program for com-
petitive bidding for power supply in a State in which such 
program is established. 
‘‘(e) ALLOWANCES FOR EACH CALENDAR YEAR.— 
‘‘(1) IN GENERAL.—Except as provided in para-
graph (2), the number of emission allowances estab-
lished by the Administrator under subsection (a) for 
each calendar year shall be as provided in the fol-
lowing table: 
‘‘Calendar year 
Emission allowances (in mil-
lions) 
2012 
4,627 
2013 
4,544 
2014 
5,099 
2015 
5,003 
2016 
5,482 
2017 
5,375 
2018 
5,269 
2019 
5,162 
2020 
5,056 
2021 
4,903 
2022 
4,751 
2023 
4,599 
2024 
4,446 
2025 
4,294 
2026 
4,142 
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‘‘Calendar year 
Emission allowances (in mil-
lions) 
2027 
3,990 
2028 
3,837 
2029 
3,685 
2030 
3,533 
2031 
3,408 
2032 
3,283 
2033 
3,158 
2034 
3,033 
2035 
2,908 
2036 
2,784 
2037 
2,659 
2038 
2,534 
2039 
2,409 
2040 
2,284 
2041 
2,159 
2042 
2,034 
2043 
1,910 
2044 
1,785 
2045 
1,660 
2046 
1,535 
2047 
1,410 
2048 
1,285 
2049 
1,160 
2050 and each year thereafter 
1,035 
‘‘(2) REVISION.— 
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‘‘(A) IN
GENERAL.—The Administrator 
may adjust, in accordance with subparagraph 
(B), the number of emission allowances estab-
lished pursuant to paragraph (1) if, after notice 
and an opportunity for public comment, the Ad-
ministrator determines that— 
‘‘(i) United States greenhouse gas 
emissions in 2005 were other than 7,206 
million metric tons carbon dioxide equiva-
lent; 
‘‘(ii) if the requirements of this title for 
2012 had been in effect in 2005, section 722 
would have required emission allowances to 
be held for other than 66.2 percent of 
United States greenhouse gas emissions in 
2005; 
‘‘(iii) if the requirements of this title 
for 2014 had been in effect in 2005, section 
722 would have required emission allow-
ances to be held for other than 75.7 percent 
of United States greenhouse gas emissions 
in 2005; or 
‘‘(iv) if the requirements of this title 
for 2016 had been in effect in 2005, section 
722 would have required emission allow-
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ances to be held for other than 84.5 percent 
United States greenhouse gas emissions in 
2005. 
‘‘(B) ADJUSTMENT FORMULA.— 
‘‘(i) IN
GENERAL.—If the Adminis-
trator adjusts under this paragraph the 
number of emission allowances established 
pursuant to paragraph (1), the number of 
emission allowances the Administrator es-
tablishes for any given calendar year shall 
equal the product of— 
‘‘(I) United States greenhouse gas 
emissions in 2005, expressed in tons of 
carbon dioxide equivalent; 
‘‘(II) the percent of United States 
greenhouse gas emissions in 2005, ex-
pressed in tons of carbon dioxide equiv-
alent, that would have been subject to 
section 722 if the requirements of this 
title for the given calendar year had 
been in effect in 2005; and 
‘‘(III) the percentage set forth for 
that calendar year in section 703(a), 
or determined under clause (ii) of this 
subparagraph. 
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‘‘(1) IN GENERAL.—The regulations promulgated 
under subsection (h) shall provide for the establish-
ment and distribution of compensatory allowances 
for— 
‘‘(A) the destruction, in 2012 or later, of 
fluorinated gases that are greenhouse gases if— 
‘‘(i) allowances or offset credits were 
retired for their production or importation; 
and 
‘‘(ii) such gases are not required to be 
destroyed under any other provision of law; 
‘‘(B) the nonemissive use, in 2012 or later, 
of petroleum-based or coal-based liquid or gas-
eous fuel, petroleum coke, natural gas liquid, or 
natural gas as a feedstock, if allowances or offset 
credits were retired for the greenhouse gases that 
would have been emitted from their combustion; 
and 
‘‘(C) the conversionary use, in 2012 or 
later, of fluorinated gases in a manufacturing 
process, including semiconductor research or 
manufacturing, if allowances or offset credits 
were retired for the production or importation of 
such gas. 
‘‘(2) ESTABLISHMENT AND DISTRIBUTION.— 
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‘‘(A) IN GENERAL.—Not later than 90 days 
after the end of each calendar year, the Adminis-
trator shall establish and distribute to the entity 
taking the actions described in subparagraph 
(A), (B), or (C) of paragraph (1) a quantity of 
compensatory allowances equivalent to the num-
ber of tons of carbon dioxide equivalent of avoid-
ed emissions achieved through such actions. In 
establishing the quantity of compensatory allow-
ances, the Administrator shall take into account 
the carbon dioxide equivalent value of any green-
house gas resulting from such action. 
‘‘(B) SOURCE OF ALLOWANCES.—Compen-
satory allowances established under this sub-
section shall not be emission allowances estab-
lished under subsection (a). 
‘‘(C) IDENTIFICATION NUMBERS.—The Ad-
ministrator shall assign to each compensatory 
allowance established under subparagraph (A) a 
unique identification number. 
‘‘(3) DEFINITIONS.—For purposes of this sub-
section— 
‘‘(A) the term ‘destruction’ means the con-
version of a greenhouse gas by thermal, chemical, 
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562 
or other means to another gas or set of gases 
with little or no carbon dioxide equivalent value; 
‘‘(B) the term ‘nonemissive use’ means the 
use of fossil fuel as a feedstock in an industrial 
or manufacturing process to the extent that 
greenhouse gases are not emitted from such proc-
ess, and to the extent that the products of such 
process are not intended for use as, or to be con-
tained in, a fuel; and 
‘‘(C) the term ‘conversionary use’ means the 
conversion during research or manufacturing of 
a fluorinated gas into another greenhouse gas or 
set of gases with a lower carbon dioxide equiva-
lent value. 
‘‘(4) FEEDSTOCK EMISSIONS STUDY.— 
‘‘(A) The Administrator may conduct a 
study to determine the extent to which petro-
leum-based or coal-based liquid or gaseous fuel, 
petroleum coke, natural gas liquid, or natural 
gas are used as feedstocks in manufacturing 
processes to produce products and the greenhouse 
gas emissions resulting from such uses. 
‘‘(B) If as a result of such a study, the Ad-
ministrator determines that the use of such prod-
ucts by noncovered sources results in substantial 
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emissions of greenhouse gases or their precursors 
and that such emissions have not been ade-
quately addressed under other requirements of 
this Act, the Administrator may, after notice 
and comment rulemaking, promulgate a regula-
tion reducing compensatory allowances commen-
surately if doing so will not result in leakage. 
‘‘(g) FLUORINATED GASES ASSESSMENT.—No later 
than March 31, 2014, the Administrator shall conduct an 
assessment of the regulation of non-HFC fluorinated gases 
under this title to determine whether the most appropriate 
point of regulation is at the gas manufacturer or importer 
level, or at the source of emissions downstream. If the Ad-
ministrator determines, based on consideration of environ-
mental effectiveness, cost effectiveness, administrative feasi-
bility, extent of coverage of emissions, and competitiveness 
considerations, that emissions of non-HFC fluorinated gases 
can best be regulated by designating downstream emission 
sources as covered entities with compliance obligations 
under section 722, the Administrator shall, after notice and 
comment rulemaking, change the definition of covered enti-
ty with respect to fluorinated gases (other than HFCs) ac-
cordingly and establish such requirements as are necessary 
to ensure compliance for such entities with the requirements 
of this title. 
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‘‘(h) REGULATIONS.—Not later than 24 months after 
the date of enactment of this title, the Administrator shall 
promulgate regulations to carry out the provisions of this 
title. 
‘‘SEC. 722. PROHIBITION OF EXCESS EMISSIONS. 
‘‘(a) PROHIBITION.—Except as provided in subsection 
(c), effective January 1, 2012, each covered entity is prohib-
ited from emitting greenhouse gases, and having attrib-
utable greenhouse gas emissions, in combination, in excess 
of its allowable emissions level. A covered entity’s allowable 
emissions level for each calendar year is the number of emis-
sion allowances (or credits or other allowances as provided 
in subsection (d)) it holds as of 12:01 a.m. on April 1 (or 
a later date established by the Administrator under sub-
section (j)) of the following calendar year. 
‘‘(b) METHODS OF DEMONSTRATING COMPLIANCE.— 
Except as otherwise provided in this section, the owner or 
operator of a covered entity shall not be considered to be 
in compliance with the prohibition in subsection (a) unless, 
as of 12:01 a.m. on April 1 (or a later date established by 
the Administrator under subsection (j)) of each calendar 
year starting in 2013, the owner or operator holds a quan-
tity of emission allowances (or credits or other allowances 
as provided in subsection (d)) at least as great as the quan-
tity calculated as follows: 
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‘‘(1) ELECTRICITY SOURCES.—For a covered en-
tity described in section 700(13)(A), 1 emission allow-
ance for each ton of carbon dioxide equivalent of 
greenhouse gas that such covered entity emitted in the 
previous calendar year, excluding emissions resulting 
from the combustion of— 
‘‘(A) petroleum-based or coal-based liquid 
fuel; 
‘‘(B) natural gas liquid; 
‘‘(C) renewable biomass or gas derived from 
renewable biomass; or 
‘‘(D) petroleum coke or gas derived from pe-
troleum coke. 
‘‘(2) FUEL PRODUCERS AND IMPORTERS.—For a 
covered entity described in section 700(13)(B), 1 
emission allowance for each ton of carbon dioxide 
equivalent of greenhouse gas that would be emitted 
from the combustion of any petroleum-based or coal- 
based liquid fuel, petroleum coke, or natural gas liq-
uid, produced or imported by such covered entity dur-
ing the previous calendar year for sale or distribution 
in interstate commerce, assuming no capture and se-
questration of any greenhouse gas emissions. 
‘‘(3) INDUSTRIAL GAS PRODUCERS AND IMPORT-
ERS.—For a covered entity described in section 
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700(13)(J), 1 emission allowance for each ton of car-
bon dioxide equivalent of greenhouse gas that would 
be emitted from the combustion of the natural gas, 
and any other gas meeting the specifications for com-
mingling with natural gas for purposes of delivery, 
that such entity delivered during the previous cal-
endar year to customers that are not covered entities, 
assuming no capture and sequestration of that green-
house gas. 
‘‘(9) ALGAE-BASED FUELS.—Where carbon diox-
ide (or another greenhouse gas) is used as an input 
in the production of algae-based fuels, the Adminis-
trator shall ensure that allowances are required to be 
held either for the carbon dioxide used to grow the 
algae or for the carbon dioxide emitted from combus-
tion of the fuel produced from such algae, but not for 
both. 
‘‘(10) FUGITIVE EMISSIONS.—The greenhouse gas 
emissions to which paragraphs (1), (4), (6), and (7) 
apply shall not include fugitive emissions of green-
house gas, except to the extent the Administrator de-
termines that data on the carbon dioxide equivalent 
value of greenhouse gas in the fugitive emissions can 
be provided with sufficient precision, reliability, ac-
cessibility, and timeliness to ensure the integrity of 
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emission allowances, the allowance tracking system, 
and the cap on emissions. 
‘‘(11) EXPORT EXEMPTION.—This section shall 
not apply to any petroleum-based or coal-based liquid 
fuel, petroleum coke, natural gas liquid, fossil fuel- 
based carbon dioxide, nitrous oxide, or fluorinated gas 
that is exported for sale or use. 
‘‘(12) NATURAL GAS LIQUIDS.—Notwithstanding 
subsection (a), if the owner or operator of a covered 
entity described in section 700(13)(B) that produces 
natural gas liquids does not take ownership of the liq-
uids, and is not responsible for the distribution or use 
of the liquids in commerce, the owner of the liquids 
shall be responsible for compliance with this section, 
section 723, and other relevant sections of this title 
with respect to such liquids. In the regulations pro-
mulgated under section 721, the Administrator shall 
include such provisions with respect to such liquids as 
the Administrator determines are appropriate to de-
termine and ensure compliance, and to penalize non-
compliance. In such a case, the owner of the covered 
entity shall provide to the Administrator, in a man-
ner to be determined by the Administrator, informa-
tion regarding the quantity and ownership of liquids 
produced at the covered entity. 
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‘‘(13) 
APPLICATION
OF
MULTIPLE
PARA-
GRAPHS.—For a covered entity to which more than 1 
of paragraphs (1) through (8) apply, all applicable 
paragraphs shall apply, except that not more than 1 
emission allowance shall be required for the same 
emission. 
‘‘(c) PHASE-IN OF PROHIBITION.— 
‘‘(1) INDUSTRIAL
STATIONARY
SOURCES.—The 
prohibition under subsection (a) shall first apply to 
a covered entity described in section 700(13)(D), (F), 
(G), (H), or (I), with respect to emissions occurring 
during calendar year 2014. 
‘‘(2) NATURAL GAS LOCAL DISTRIBUTION COMPA-
NIES.—The prohibition under subsection (a) shall 
first apply to a covered entity described in section 
700(13)(J) with respect to deliveries occurring during 
calendar year 2016. 
‘‘(d) ADDITIONAL METHODS.—In addition to using the 
method of compliance described in subsection (b), a covered 
entity may do the following: 
‘‘(1) OFFSET CREDITS.— 
‘‘(A) IN GENERAL.—Covered entities collec-
tively may, in accordance with this paragraph, 
use offset credits to demonstrate compliance for 
up to a maximum of 2 billion tons of greenhouse 
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gas emissions annually. The ability to dem-
onstrate compliance with offset credits shall be 
divided pro rata among covered entities by al-
lowing each covered entity to satisfy a percentage 
of the number of allowances required to be held 
under subsection (b) to demonstrate compliance 
by holding 1 domestic offset credit or 1.25 inter-
national offset credits in lieu of an emission al-
lowance, except as provided in subparagraph 
(D). 
‘‘(B) APPLICABLE PERCENTAGE.—The per-
centage referred to in subparagraph (A) for a 
given calendar year shall be determined by di-
viding 2 billion by the sum of 2 billion plus the 
number of emission allowances established under 
section 721(a) for the previous year, and multi-
plying that number by 100. Not more than one 
half of the applicable percentage under this 
paragraph may be used by holding domestic off-
set credits, and not more than one half of the ap-
plicable percentage under this paragraph may be 
used by holding international offset credits, ex-
cept as provided in subparagraph (C). 
‘‘(C) MODIFIED PERCENTAGES.—If the Ad-
ministrator determines that domestic offset cred-
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its available for use in demonstrating compli-
ance in any calendar year at domestic offset 
prices generally equal to or less than allowance 
prices, are likely to offset less than 0.9 billion 
tons of greenhouse gas emissions (measured in 
tons of carbon dioxide equivalents), the Adminis-
trator shall increase the percent of emissions that 
can be offset through the use of international off-
set credits (and decrease the percent of emissions 
that can be allowed through the use of domestic 
offset credits by the same amount) to reflect the 
amount that 1.0 billion exceeds the number of 
domestic offset credits the Administrator deter-
mines is available for that year, up to a max-
imum of 0.5 billion tons of greenhouse gas emis-
sions. 
‘‘(D) INTERNATIONAL
OFFSET
CREDITS.— 
Notwithstanding subparagraph (A), to dem-
onstrate compliance prior to calendar year 2018, 
a covered entity may use 1 international offset 
credit in lieu of an emission allowance up to the 
amount permitted under this paragraph. 
‘‘(E) PRESIDENT’S RECOMMENDATION.—The 
President may make a recommendation to Con-
gress as to whether the number 2 billion specified 
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in subparagraphs (A) and (B) should be in-
creased or decreased. 
‘‘(2) INTERNATIONAL EMISSION ALLOWANCES.— 
To demonstrate compliance, a covered entity may 
hold an international emission allowance in lieu of 
an emission allowance, except as modified under sec-
tion 728(d). 
‘‘(3) COMPENSATORY
ALLOWANCES.—To dem-
onstrate compliance, a covered entity may hold a 
compensatory allowance obtained under section 721(f) 
in lieu of an emission allowance. 
‘‘(e) RETIREMENT OF ALLOWANCES AND CREDITS.— 
As soon as practicable after a deadline established for cov-
ered entities to demonstrate compliance with this title, the 
Administrator shall retire the quantity of allowances or 
credits required to be held under this title. 
‘‘(f) ALTERNATIVE METRICS.—For categories of cov-
ered entities described in subparagraph (B), (C), (D), (G), 
(H), or (I) of section 700(13), the Administrator may, by 
rule, establish an applicability threshold for inclusion 
under those subparagraphs using an alternative metric and 
level, provided that such metric and level are easier to ad-
minister and cover the same size and type of sources as 
the threshold defined in such subparagraphs. 
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‘‘(g) THRESHOLD REVIEW.—For each category of cov-
ered entities described in subparagraph (B), (C), (D), (G), 
(H), or (I) of section 700(13), the Administrator shall, in 
2020 and once every 8 years thereafter, review the carbon 
dioxide equivalent emission thresholds that are used to de-
fine covered entities. After consideration of— 
‘‘(1) emissions from covered entities in each such 
category, and from other entities of the same type that 
emit less than the threshold amount for the category 
(including emission sources that commence operation 
after the date of enactment of this title that are not 
covered entities); and 
‘‘(2) whether greater greenhouse gas emission re-
ductions can be cost-effectively achieved by lowering 
the applicable threshold, 
the Administrator may by rule lower such threshold to not 
less than 10,000 tons of carbon dioxide equivalent emis-
sions. In determining the cost effectiveness of potential re-
ductions from lowering the threshold for covered entities, the 
Administrator shall consider alternative regulatory green-
house gas programs, including setting standards under 
other titles of this Act. 
‘‘(h) DESIGNATED REPRESENTATIVES.—The regula-
tions promulgated under section 721(h) shall require that 
each covered entity, and each entity holding allowances or 
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credits or receiving allowances or credits from the Adminis-
trator under this title, select a designated representative. 
‘‘(i) EDUCATION AND OUTREACH.— 
‘‘(1) IN GENERAL.—The Administrator shall es-
tablish and carry out a program of education and 
outreach to assist covered entities, especially entities 
having little experience with environmental regu-
latory requirements similar or comparable to those 
under this title, in preparing to meet the compliance 
obligations of this title. Such program shall include 
education with respect to using markets to effectively 
achieve such compliance. 
‘‘(2) FAILURE
TO
RECEIVE
INFORMATION.—A 
failure to receive information or assistance under this 
subsection may not be used as a defense against an 
allegation of any violation of this title. 
‘‘(j) ADJUSTMENT OF DEADLINE.—The Administrator 
may, by rule, establish a deadline for demonstrating com-
pliance, for a calendar year, later than the date provided 
in subsection (a), as necessary to ensure the availability 
of emissions data, but in no event shall the deadline be later 
than June 1. 
‘‘(k) NOTICE REQUIREMENT FOR COVERED ENTITIES 
RECEIVING NATURAL GAS FROM NATURAL GAS LOCAL 
DISTRIBUTION COMPANIES.—The owner or operator of a 
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covered entity that takes delivery of natural gas from a nat-
ural gas local distribution company shall, not later than 
September 1 of each calendar year, notify such natural gas 
local distribution company in writing that such entity will 
qualify as a covered entity under this title for that calendar 
year. 
‘‘(l) COMPLIANCE OBLIGATION.—For purposes of this 
title, the year of a compliance obligation is the year in 
which compliance is determined, not the year in which the 
greenhouse gas emissions occur or the covered entity has at-
tributable greenhouse gas emissions. 
‘‘SEC. 723. PENALTY FOR NONCOMPLIANCE. 
‘‘(a) ENFORCEMENT.—A violation of any prohibition 
of, requirement of, or regulation promulgated pursuant to 
this title shall be a violation of this Act. It shall be a viola-
tion of this Act for a covered entity to emit greenhouse gases, 
and have attributable greenhouse gas emissions, in com-
bination, in excess of its allowable emissions level as pro-
vided in section 722(a). Each ton of carbon dioxide equiva-
lent for which a covered entity fails to demonstrate compli-
ance under section 722(b) shall be a separate violation. 
‘‘(b) EXCESS EMISSIONS PENALTY.— 
‘‘(1) IN GENERAL.—The owner or operator of 
any covered entity that fails for any year to comply, 
on the deadline described in section 722(a) or (j), 
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shall be liable for payment to the Administrator of an 
excess emissions penalty in the amount described in 
paragraph (2). 
‘‘(2) AMOUNT.—The amount of an excess emis-
sions penalty required to be paid under paragraph 
(1) shall be equal to the product obtained by multi-
plying— 
‘‘(A) the tons of carbon dioxide equivalent of 
greenhouse gas emissions or attributable green-
house gas emissions for which the owner or oper-
ator of a covered entity failed to comply under 
section 722(b) on the deadline; by 
‘‘(B) twice the fair market value of emission 
allowances established for emissions occurring in 
the calendar year for which the emission allow-
ances were due. 
‘‘(3) TIMING.—An excess emissions penalty re-
quired under this subsection shall be immediately due 
and payable to the Administrator, without demand, 
in accordance with regulations promulgated by the 
Administrator, which shall be issued not later than 2 
years after the date of enactment of this title. 
‘‘(4) NO EFFECT ON LIABILITY.—An excess emis-
sions penalty due and payable by the owners or oper-
ators of a covered entity under this subsection shall 
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not diminish the liability of the owners or operators 
for any fine, penalty, or assessment against the own-
ers or operators for the same violation under any 
other provision of this Act or any other law. 
‘‘(c) EXCESS EMISSIONS ALLOWANCES.—The owner or 
operator of a covered entity that fails for any year to com-
ply on the deadline described in section 722(a) or (j) shall 
be liable to offset the covered entity’s excess combination of 
greenhouse gases emitted and attributable greenhouse gas 
emissions by an equal quantity of emission allowances dur-
ing the following calendar year, or such longer period as 
the Administrator may prescribe. During the year in which 
the covered entity failed to comply, or any year thereafter, 
the Administrator may deduct the emission allowances re-
quired under this subsection to offset the covered entity’s 
excess actual or attributable emissions. 
‘‘SEC. 724. TRADING. 
‘‘(a) PERMITTED TRANSACTIONS.—Except as other-
wise provided in this title, the lawful holder of an emission 
allowance, compensatory allowance, or offset credit may, 
without restriction, sell, exchange, transfer, hold for compli-
ance in accordance with section 722, or request that the Ad-
ministrator retire the emission allowance, compensatory al-
lowance, or offset credit. 
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‘‘(b) NO RESTRICTION ON TRANSACTIONS.—The privi-
lege of purchasing, holding, selling, exchanging, transfer-
ring, and requesting retirement of emission allowances, 
compensatory allowances, or offset credits shall not be re-
stricted to the owners and operators of covered entities, ex-
cept as otherwise provided in this title. 
‘‘(c) EFFECTIVENESS OF ALLOWANCE TRANSFERS.— 
No transfer of an allowance or offset credit shall be effective 
for purposes of this title until a certification of the transfer, 
signed by the designated representative of the transferor, is 
received and recorded by the Administrator in accordance 
with regulations promulgated under section 721(h). 
‘‘(d) ALLOWANCE TRACKING SYSTEM.—The regula-
tions promulgated under section 721(h) shall include a sys-
tem for issuing, recording, holding, and tracking allowances 
and offset credits that shall specify all necessary procedures 
and requirements for an orderly and competitive func-
tioning of the allowance and offset credit markets. Such reg-
ulations shall provide for appropriate publication of the in-
formation in the system on the Internet. 
‘‘SEC. 725. BANKING AND BORROWING. 
‘‘(a) BANKING.—An emission allowance may be used 
to comply with section 722 or section 723 for emissions 
in— 
‘‘(1) the vintage year for the allowance; or 
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ance to comply with section 722 shall not expire un-
less— 
‘‘(A) the allowance is retired by the Admin-
istrator as required by this title; or 
‘‘(B) the ability to use such allowance to 
meet such compliance obligation requirements is 
determined to expire or to have expired by a spe-
cific date by the Administrator in accordance 
with regulations promulgated under paragraph 
(1). 
‘‘(c) BORROWING FUTURE VINTAGE YEAR ALLOW-
ANCES.— 
‘‘(1) BORROWING WITHOUT INTEREST.—In addi-
tion to the uses described in subsection (a), an emis-
sion allowance may be used to comply with section 
722(a) or section 723 for emissions, production, im-
portation, manufacture, or deliveries in the calendar 
year immediately preceding the vintage year for the 
allowance. 
‘‘(2) BORROWING WITH INTEREST.— 
‘‘(A) IN GENERAL.—A covered entity may 
demonstrate compliance under subsection (b) in 
a specific calendar year for up to 15 percent of 
its emissions by holding emission allowances 
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with a vintage year 1 to 5 years later than that 
calendar year. 
‘‘(B) LIMITATIONS.—An emission allowance 
borrowed pursuant to this paragraph shall be an 
emission allowance that is established by the Ad-
ministrator for a specific future calendar year 
under section 721(a) and that is held by the bor-
rower. 
‘‘(C) PREPAYMENT OF INTEREST.—For each 
emission allowance that an owner or operator of 
a covered entity borrows pursuant to this para-
graph, such owner or operator shall, at the time 
it borrows the allowance, hold for retirement by 
the Administrator a quantity of emission allow-
ances that is equal to the product obtained by 
multiplying— 
‘‘(i) 0.08; by 
‘‘(ii) the number of years between the 
calendar year in which the allowance is 
being used to satisfy a compliance obliga-
tion and the vintage year of the allowance. 
‘‘SEC. 726. STRATEGIC RESERVE. 
‘‘(a) STRATEGIC RESERVE AUCTIONS.— 
‘‘(1) IN GENERAL.—Once each quarter of each 
calendar year for which allowances are established 
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under section 721(a), the Administrator shall auction 
strategic reserve allowances. 
‘‘(2) RESTRICTION TO COVERED ENTITIES.—In 
each auction conducted under paragraph (1), only 
covered entities that the Administrator expects will be 
required to comply with section 722 in the following 
calendar year shall be eligible to make purchases. 
‘‘(b) POOL OF EMISSION ALLOWANCES FOR STRATEGIC 
RESERVE AUCTIONS.— 
‘‘(1) FILLING
THE
STRATEGIC
RESERVE
INI-
TIALLY.— 
‘‘(A) IN
GENERAL.—The Administrator 
shall, not later than 2 years after the date of en-
actment of this title, establish a strategic reserve 
account, and shall place in that account an 
amount of emission allowances established under 
section 721(a) for each calendar year from 2012 
through 2050 in the amounts specified in sub-
paragraph (B) of this paragraph. 
‘‘(B) AMOUNT.—The amount referred to in 
subparagraph (A) shall be— 
‘‘(i) for each of calendar years 2012 
through 2019, 1 percent of the quantity of 
emission allowances established for that 
year pursuant to section 721(e)(1); 
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‘‘(ii) for each of calendar years 2020 
through 2029, 2 percent of the quantity of 
emission allowances established for that 
year pursuant to section 721(e)(1); and 
‘‘(iii) for each of calendar years 2030 
through 2050, 3 percent of the quantity of 
emission allowances established for that 
year pursuant to section 721(e)(1). 
‘‘(C) EFFECT ON OTHER PROVISIONS.—Any 
provision in this title (except for subparagraph 
(B) of this paragraph) that refers to a quantity 
or percentage of the emission allowances estab-
lished for a calendar year under section 721(a) 
shall be considered to refer to the amount of 
emission allowances as determined pursuant to 
section 721(e), less any emission allowances es-
tablished for that year that are placed in the 
strategic reserve account under this paragraph. 
‘‘(2) SUPPLEMENTING
THE
STRATEGIC
RE-
SERVE.—The Administrator shall also— 
‘‘(A) at the end of each calendar year, 
transfer to the strategic reserve account each 
emission allowance that was offered for sale but 
not sold at any auction conducted under section 
791; and 
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‘‘(B) transfer emission allowances estab-
lished under subsection (g) from auction pro-
ceeds, and deposit them into the strategic reserve, 
to the extent necessary to maintain the reserve at 
its original size. 
‘‘(c) 
MINIMUM
STRATEGIC
RESERVE
AUCTION 
PRICE.— 
‘‘(1) IN GENERAL.—At each strategic reserve auc-
tion, the Administrator shall offer emission allow-
ances for sale beginning at a minimum price per 
emission allowance, which shall be known as the 
‘minimum strategic reserve auction price’. 
‘‘(2) INITIAL MINIMUM STRATEGIC RESERVE AUC-
TION PRICES.—The minimum strategic reserve auc-
tion price shall be $28 (in constant 2009 dollars) for 
the strategic reserve auctions held in 2012. For the 
strategic reserve auctions held in 2013 and 2014, the 
minimum strategic reserve auction price shall be the 
strategic reserve auction price for the previous year 
increased by 5 percent plus the rate of inflation (as 
measured by the Consumer Price Index for All Urban 
Consumers). 
‘‘(3) MINIMUM
STRATEGIC
RESERVE
AUCTION 
PRICE IN SUBSEQUENT YEARS.—For each strategic re-
serve auction held in 2015 and each year thereafter, 
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the minimum strategic reserve auction price shall be 
60 percent above a rolling 36-month average of the 
daily closing price for that year’s emission allowance 
vintage as reported on registered carbon trading fa-
cilities, calculated using constant dollars. 
‘‘(d) QUANTITY OF EMISSION ALLOWANCES RELEASED 
FROM THE STRATEGIC RESERVE.— 
‘‘(1) INITIAL
LIMITS.—For each of calendar 
years 2012 through 2016, the annual limit on the 
number of emission allowances from the strategic re-
serve account that may be auctioned is an amount 
equal to 5 percent of the emission allowances estab-
lished for that calendar year under section 721(a). 
This limit does not apply to international offset cred-
its sold on consignment pursuant to subsection (h). 
‘‘(2) LIMITS IN SUBSEQUENT YEARS.—For cal-
endar year 2017 and each year thereafter, the annual 
limit on the number of emission allowances from the 
strategic reserve account that may be auctioned is an 
amount equal to 10 percent of the emission allowances 
established for that calendar year under section 
721(a). This limit does not apply to international off-
set credits sold on consignment pursuant to subsection 
(h). 
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