472 
(1) IN GENERAL.—For the emission limitation programs under this 
subdivision, the Administrator shall allocate annual allowances for the 
unit, to be held or distributed by the designated representative of the 
owner or operator of each affected unit at an affected source in accord-
ance with this subdivision, in an amount equal to the annual tonnage 
emission limitation calculated under section 233105, 233106, or 
233109 of this title except as otherwise specifically provided elsewhere 
in this subdivision. 
(2) TOTAL ANNUAL EMISSIONS.— 
(A) IN GENERAL.—Except as provided in paragraphs (2) and 
(3) of section 233105(a) and section 233109 of this title, the Ad-
ministrator shall not allocate annual allowances to emit sulfur di-
oxide pursuant to section 233105 of this title in such an amount 
as would result in total annual emissions of sulfur dioxide from 
utility units in excess of 8,900,000 tons, except that the Adminis-
trator shall not take into account unused allowances carried for-
ward by owners and operators of affected units or by other per-
sons holding such allowances, following the year for which they 
were allocated. 
(B) REDUCTION
IN
BASIC
PHASE
II
ALLOWANCE
ALLOCA-
TIONS.—If necessary to meet the restrictions imposed in subpara-
graph (A), the Administrator shall reduce, pro rata, the basic 
Phase II allowance allocations for each unit subject to the require-
ments of section 233105 of this title. 
(3) ANNUAL ALLOCATION.—Subject to section 233115 of this title, 
the Administrator shall allocate allowances for each affected unit at an 
affected source annually, as provided in this subsection and section 
233108 of this title. 
(4) REMOVAL FROM COMMERCIAL OPERATION.—Except as provided 
in section 233109 of this title, the removal of an existing unit from 
commercial operation at any time shall not terminate or otherwise af-
fect the allocation of allowances pursuant to section 233105 of this title 
to which the unit is entitled. 
(5) COST.—Allowances shall be allocated by the Administrator with-
out cost to the recipient, except for allowances sold by the Adminis-
trator pursuant to section 233115 of this title. 
(6) LIST OF ALLOCATIONS.—The Administrator shall publish a pro-
posed list of the basic Phase II allowance allocations, the Phase II 
bonus allowance allocations and, if applicable, allocations pursuant to 
section 233105(a)(3) of this title for each unit subject to the emission 
limitation requirements of section 233105 of this title for the year 
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2000 and the year 2010. After notice and opportunity for public com-
ment, the Administrator shall publish a final list of such allocations, 
subject to section 233105(a)(2) of this title. The Administrator shall 
publish a revised final statement of allowance allocations, subject to 
section 233105(a)(2) of this title. 
(b) ALLOWANCE TRANSFER SYSTEM.— 
(1) IN GENERAL.—Allowances allocated under this subdivision may 
be transferred among designated representatives of the owners or oper-
ators of affected sources under this subdivision and any other person 
that holds allowances, as provided by the allowance system regulations 
promulgated by the Administrator. The regulations shall establish the 
allowance system prescribed under this section, including requirements 
for the allocation, transfer, and use of allowances under this subdivi-
sion. 
(2) USE OF ALLOWANCES.—The regulations shall— 
(A) prohibit the use of any allowance prior to the calendar year 
for which the allowance is allocated; and 
(B) provide, consistent with the purposes of this subdivision, for 
the identification of unused allowances and for unused allowances 
to be carried forward and added to allowances allocated in subse-
quent years, including allowances allocated to units subject to 
Phase I requirements (as described in section 404 of the Clean Air 
Act (42 U.S.C. 7651c) (as in effect before the repeal of that sec-
tion)) that are applied to emission limitations requirements in 
Phase II (as described in section 233105 of this title). 
(3) CERTIFICATION OF TRANSFER.—A transfers of allowances shall 
not be effective until written certification of the transfer, signed by a 
responsible official of each party to the transfer, is received and re-
corded by the Administrator. 
(4) PRE-ALLOCATION TRANSFERS.—The regulations shall permit the 
transfer of an allowance prior to issuance of the allowance. Recorded 
pre-allocation transfers shall be deducted by the Administrator from 
the number of allowances that would otherwise be allocated to the 
transferor, and added to the allowances allocated to the transferee. A 
pre-allocation transfer shall not affect the prohibition contained in this 
subsection against the use of an allowance prior to the year for which 
the allowance is allocated. 
(c) ALLOWANCE TRACKING SYSTEM.— 
(1) IN GENERAL.—The Administrator shall by regulation promulgate 
a system for issuing, recording, and tracking allowances, which shall 
specify all necessary procedures and requirements for an orderly and 
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competitive functioning of the allowance system. All allowance alloca-
tions and transfers shall, on recordation by the Administrator, be 
deemed a part of each unit’s permit requirements pursuant to section 
233108 of this title, without any further permit review and revision. 
(2) ELECTRIC RELIABILITY.— 
(A) IN GENERAL.—To ensure electric reliability— 
(i) the regulations shall not prohibit or affect temporary in-
creases and decreases in emissions from units in a utility sys-
tem, power pool, or utility entering into an allowance pool 
agreement that result from their operations (including emer-
gencies and central dispatch); and 
(ii) such temporary emissions increases and decreases shall 
not require transfer of allowances among units or require rec-
ordation. 
(B) DESIGNATED REPRESENTATIVES.—The owners or operators 
of such units shall act through a designated representative. 
(C) TOTAL
TONNAGE
OF
EMISSIONS.—The total tonnage of 
emissions in any calendar year (calculated at the end thereof) 
from all such units shall not exceed the total allowances for such 
units for the calendar year concerned. 
(d) NEW UTILITY UNITS.—It shall be unlawful for a new utility unit to 
emit an annual tonnage of sulfur dioxide in excess of the number of allow-
ances to emit held for the unit by the unit’s owner or operator. A new utility 
unit shall not be eligible for an allocation of sulfur dioxide allowances under 
subsection (a) unless the new utility unit is subject to paragraph (2) or (3) 
of section 233105(g) of this title. A new utility unit may obtain an allow-
ance from any person in accordance with this subdivision. The owner or op-
erator of any new utility unit in violation of this subsection shall be liable 
for fulfilling the obligations specified in section 233110 of this title. 
(e) NATURE OF ALLOWANCES.— 
(1) LIMITED AUTHORIZATION.—An allowance allocated under this 
subdivision is a limited authorization to emit sulfur dioxide in accord-
ance with this subdivision. 
(2) NOT A PROPERTY RIGHT.—An allowance does not constitute a 
property right. 
(3) NO LIMITATION ON AUTHORITY TO TERMINATE OR LIMIT AU-
THORIZATION.—Nothing in this subdivision or in any other provision 
of law shall be construed to limit the authority of the United States 
to terminate or limit an allowance. 
(4) OTHER PROVISIONS.—Nothing in this section relating to allow-
ances shall be construed as affecting the application of any other provi-
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sion of this division (including provisions relating to applicable 
NAAQSes and State implementation plans) to, or compliance with any 
other such provision by, an affected unit or affected source. 
(5) STATE LAW.—Nothing in this section shall be construed as re-
quiring a change of any kind in any State law regulating electric utility 
rates and charges or affecting any State law regarding such State reg-
ulation or as limiting State regulation (including any prudency review) 
under such a State law. 
(6) FEDERAL POWER ACT.—Nothing in this section shall be con-
strued as modifying the Federal Power Act (16 U.S.C. 791a et seq.) 
or as affecting the authority of the Federal Energy Regulatory Com-
mission under that Act. 
(7) COMPETITIVE BIDDING.—Nothing in this subdivision shall be 
construed to interfere with or impair any program for competitive bid-
ding for power supply in a State in which the program is established. 
(8) PERMITS.—An allowance, once allocated to a person by the Ad-
ministrator, may be received, held, and temporarily or permanently 
transferred in accordance with this subdivision (including the regula-
tions of the Administrator) without regard to whether a permit is in 
effect under subdivision 6 or section 233108 of this title with respect 
to the unit for which the allowance was originally allocated and re-
corded. Each permit under this subdivision and each permit issued 
under subdivision 6 for any affected unit shall provide that the affected 
unit may not emit an annual tonnage of sulfur dioxide in excess of the 
allowances held for that affected unit. 
(f) PROHIBITION.— 
(1) HOLDING, USE, OR TRANSFER OF ALLOWANCE.—It shall be un-
lawful for any person to hold, use, or transfer an allowance allocated 
under this subdivision except in accordance with regulations promul-
gated by the Administrator. 
(2) EMISSIONS.— 
(A) IN GENERAL.—It shall be unlawful for any affected unit to 
emit sulfur dioxide in excess of the number of allowances held for 
that affected unit for that year by the owner or operator of the 
unit. 
(B) OTHER EMISSION LIMITATIONS.—On the allocation of allow-
ances under this subdivision, the prohibition contained in subpara-
graph (A) shall supersede any other emission limitation applicable 
under this subdivision to the units for which the allowances are 
allocated. 
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