public notice and comment, that it is not feasible to meas-
ure 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 124(a)(1), (2), (3), or (4), as applica-
ble, by the amount of greenhouse 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. 
SEC. 124. 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, as follows: 
(1) For the first 8 calendar years beginning 
after 2011, the number of tradeable allowances shall 
be equal to the number of metric tons of greenhouse 
gases emitted in 2006, measured in units of carbon 
dioxide equivalents, reduced by the amount of emis-
sions of greenhouse gases in calendar year 2012 
from noncovered entities, as calculated by the Ad-
ministrator. 
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(2) For the first 10 calendar years beginning 
after 2019, the number of tradeable allowances shall 
be equal to 85 percent of the number of metric tons 
of greenhouse gases emitted in 2006, measured in 
units of carbon dioxide equivalents, reduced by the 
amount of emissions of greenhouse gases in calendar 
year 2020 from noncovered entities, as calculated by 
the Administrator. 
(3) For the first 10 calendar years beginning 
after 2029, the number of tradeable allowances shall 
be equal to 63 percent of the number of metric tons 
of greenhouse gases emitted in 2006, measured in 
units of carbon dioxide equivalents, reduced by the 
amount of emissions of greenhouse gases in calendar 
year 2030 from noncovered entities, as calculated by 
the Administrator. 
(4) For calendar years beginning after 2049, 
the number of tradeable allowances shall be equal to 
25 percent of the number of metric tons of green-
house gases emitted in 2006, measured in units of 
carbon dioxide equivalents, reduced by the amount 
of emissions of greenhouse gases in each such cal-
endar year from noncovered entities, as calculated 
by the Administrator. 
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(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) NONCOVERED ENTITY.—For purposes of this 
section only, the term ‘‘noncovered entity’’ means an enti-
ty that— 
(1) owns or controls a source of greenhouse gas 
emissions in the electric power, industrial, or com-
mercial sector of the United States economy (as de-
fined in the Inventory), refines or imports refined 
petroleum products for use in transportation, or pro-
duces 
or 
imports 
hydrofluorocarbons, 
perfluorocarbons, or sulfur hexafluoride; and 
(2) is not a covered entity. 
SEC. 125. INTERNATIONAL RESERVE ALLOWANCE PRO-
GRAM. 
(a) PURPOSES.—The purposes of this section are— 
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(1) to ensure that greenhouse gas emissions oc-
curring outside the United States do not undermine 
the objectives of the United States to reduce green-
house gas emissions and to stabilize greenhouse gas 
concentrations in the atmosphere at a level that 
would prevent dangerous anthropogenic interference 
with the climate system; 
(2) to ensure that manufactured products pro-
duced in the United States remain competitive, in 
international and domestic markets, with comparable 
products produced in foreign nations that do not 
have restrictions on greenhouse gas emissions com-
parable to those described in section 124; and 
(3) to encourage effective international action 
to achieve the purposes stated in paragraphs (1) and 
(2) through procedures negotiated between the 
United States and other countries or through meas-
ures taken by the United States that comply with 
applicable international agreements. 
(b) INTERNATIONAL NEGOTIATIONS.— 
(1) FINDING.—Congress finds that the pur-
poses described in subsection (a) can be most effec-
tively addressed and achieved through procedures 
negotiated between the United States and other 
countries. 
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(2) NEGOTIATING OBJECTIVE.—To the extent 
that the procedures described in paragraph (1) in-
volve measures affecting international trade in goods 
or services, the climate change negotiating objective 
of the United States shall be to conclude agreements 
on the reduction of greenhouse gas emissions that 
will help to achieve the purposes described in sub-
section (a). 
(c) INTERNATIONAL EQUITY PROGRAM.— 
(1) ESTABLISHMENT.—The President may es-
tablish a program to require importers to pay the 
value of greenhouse gases (based on the market 
price of tradeable allowances issued under this Act) 
emitted during the production of goods or services 
imported into the United States from any foreign 
nation other than those described in paragraph (2). 
(2) NATIONS NOT SUBJECT TO PROGRAM.—The 
foreign nations referred to in paragraph (1) are 
those that— 
(A) are a party to an agreement with the 
United States that achieves the purposes of this 
section; or 
(B) impose restrictions on greenhouse gas 
emissions that are comparable to such restric-
tions imposed in the United States. 
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(3) NEGOTIATIONS.—The President shall not 
impose the requirements of a program established 
under paragraph (1) on imports from any foreign 
nation unless negotiations to achieve an agreement 
described in paragraph (2)(A) have been attempted 
by the United States with that foreign nation. 
(d) CONSISTENCY WITH INTERNATIONAL AGREE-
MENTS.—A program established under subsection (c) shall 
be designed to ensure that the United States complies with 
all applicable international agreements. 
SEC. 126. PENALTIES. 
Any covered entity that fails to meet the require-
ments of this subtitle for a year shall be liable for a civil 
penalty, payable to the Administrator, equal to thrice the 
market value (determined as of the last day of the year 
at issue) of the tradeable allowances that would be nec-
essary for that covered entity to meet those requirements 
on the date that the tradeable allowances were due. 
Subtitle C—Controlling 
Compliance Costs 
PART 1—USE OF ALLOWANCES 
SEC. 141. TRADING. 
(a) IN GENERAL.—Tradeable allowances may be sold, 
exchanged, purchased, retired, or used as provided in this 
Act. 
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(b) INTERSECTOR TRADING.—Covered entities may 
purchase or otherwise acquire tradeable allowances from 
other covered sectors to satisfy the requirements of this 
title, in addition to those from within their own sector. 
SEC. 142. BANKING. 
Tradeable allowances not used to satisfy the require-
ments of this title in a year may be used to satisfy the 
requirements in a later year. 
SEC. 143. 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 title for the 
current calendar year, subject to the limitation im-
posed by subsection (b). 
(b) DETERMINATION OF TRADEABLE ALLOWANCE 
CREDITS.— 
(1) IN GENERAL.—Except as provided in para-
graph (2), the Administrator may make credits 
available under subsection (a) only for anticipated 
reductions in emissions that— 
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(A) are attributable to the realization of 
capital investments in equipment, the construc-
tion, reconstruction, or acquisition of facilities, 
or the deployment of new technologies— 
(i) for which the covered entity has 
executed a binding contract and secured, 
or applied for, all necessary permits and 
operating or implementation authority; 
(ii) that will not become operational 
within the current calendar year; and 
(iii) 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 
(B) will be realized within 5 years after the 
year in which the credit is used. 
(2) BOARD.—The Administrator shall make 
credits available under subsection (a) as instructed 
by the Board under section 153(a)(1) or (2)(A). 
(c) CARRYING COST.—If a covered entity uses a cred-
it under this section to meet the requirements of this title 
for a calendar year (in this subsection referred to as the 
use year), the tradeable allowance requirement for the 
year from which the credit was taken (in this subsection 
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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 after the use year that 
the source year occurs. 
(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 title 
for the current year. 
(e) FAILURE TO ACHIEVE REDUCTIONS GENER-
ATING CREDIT.—If a covered entity that uses a credit 
under this section fails to achieve the anticipated reduc-
tion 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. 
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SEC. 144. DOMESTIC OFFSETS. 
(a) ALTERNATIVE MEANS OF COMPLIANCE.—A cov-
ered entity may satisfy up to 15 percent of its total allow-
ance submission requirement under section 121 by any 
combination of the following: 
(1) Submitting tradeable allowances from an-
other nation’s market in greenhouse gas emissions 
if— 
(A) the Administrator 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 described in subsection (c). An in-
crease in sequestration submitted under this para-
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graph need not have been registered by the covered 
entity submitting it. 
(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. 
(4) Submitting credits obtained by the submit-
ting covered entity from the Administrator under 
section 143 or section 145. 
(b) DEDICATED PROGRAM FOR SEQUESTRATION IN 
AGRICULTURAL SOILS.—If a covered entity satisfies a full 
15 percent of its total allowance submission requirements 
pursuant to subsection (a), it shall satisfy up to 1.5 per-
cent of its total allowance submission requirement by sub-
mitting registered net increases in sequestration in agri-
cultural soils, as registered in the database, adjusted, if 
necessary, to comply with the accounting standards and 
methods described in subsection (c). 
(c) SEQUESTRATION ACCOUNTING.— 
(1) SEQUESTRATION
ACCOUNTING.—If a cov-
ered entity uses a registered net increase in seques-
tration to satisfy the requirements of section 121 for 
any year, that covered entity shall submit informa-
tion to the Administrator every 5 years thereafter 
sufficient to allow the Administrator to determine, 
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using the methods and standards created under sec-
tion 104, whether that net increase in sequestration 
still exists. The covered entity shall offset any loss 
of sequestration by submitting additional tradeable 
allowances of equivalent amount in the calender year 
following that determination. 
(2) REGULATIONS
REQUIRED.—The Adminis-
trator, in coordination with the Secretary of Agri-
culture, the Secretary of Energy, and the Secretary, 
shall issue regulations establishing the sequestration 
accounting rules for all classes of sequestration 
projects. 
(3) CRITERIA FOR REGULATIONS.—In issuing 
regulations under this subsection, the Administrator 
shall use the following criteria: 
(A) If the range of possible amounts of net 
increase in sequestration for a particular class 
of sequestration project is not more than 10 
percent of the median of that range, the 
amount of sequestration credited shall be equal 
to the median value of that range. 
(B) If the range of possible amounts of net 
increase in sequestration for a particular class 
of sequestration project is more than 10 percent 
of the median of that range, the amount of se-
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questration awarded shall be equal to the fifth 
percentile of that range. 
(C) The regulations shall include proce-
dures for accounting for potential leakage from 
sequestration projects and for ensuring that 
any registered increase in sequestration is in 
addition that which would have occurred if this 
Act had not been enacted. 
(4) UPDATES.—The Administrator shall update 
the sequestration accounting rules for every class of 
sequestration project at least once every 5 years. 
SEC. 145. INTERNATIONAL CREDITS PLAN. 
(a) ESTABLISHMENT.—The Administrator shall es-
tablish a program the purposes of which are— 
(1) to assist developing countries in achieving 
sustainable development and in contributing to the 
objective of reducing the greenhouse gas emissions; 
and 
(2) to assist covered entities in achieving com-
pliance with the requirements of section 121. 
(b) PROGRAM COMPONENTS.— 
(1) IN GENERAL.—The program shall provide 
for the earning of tradable allowances by covered en-
tities from project activities in developing countries 
resulting in certified emission reductions. The Ad-
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ministrator shall ensure tradability of emission re-
ductions earned under this program with reductions 
earned under other similar international programs. 
(2) APPROVAL
CRITERIA
AND
REVIEW
PROC-
ESS.—By no later than 2011, the Administrator 
shall— 
(A) develop criteria for the approval of 
projects submitted for review; and 
(B) establish a review process for sub-
mitted projects that includes a procedure for 
providing the results of the review, together 
with an explanation of the reasons for approv-
ing or denying approval of a submitted project, 
to the entity that submitted the project. 
(3) FEES.—The Administrator may charge an 
application fee for the review of project proposals to 
cover the administrative costs of the program. 
(4) CERTIFICATION OF RESULTS REQUIRED.— 
The Administrator shall require entities partici-
pating in this program to obtain independent third- 
party verification that— 
(A) participation by all parties involved in 
the project is voluntary; and 
(B) the project produces— 
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(i) real, measurable, and long-term 
benefits related to the mitigation of climate 
change; and 
(ii) reductions in emissions that are 
additional to any that would occur in the 
absence of the certified project activity. 
(c) USE OF ALLOWANCES.—Subject to the limitation 
in section 144(a), tradable allowances earned under the 
program may be used to meet the requirements of section 
121. 
(d) STUDY.—Within 3 years after the date of enact-
ment of this Act, the Administrator, in coordination with 
the Secretary, shall conduct a study of the impacts of the 
compliance cost reduction measures of this section and 
section 144 on achieving the purposes of this Act. The 
Administrator shall submit the results of the study to the 
Congress along with any recommendations the Adminis-
trator considers appropriate. 
SEC. 146. OUTREACH INITIATIVE ON REVENUE ENHANCE-
MENT FOR AGRICULTURAL PRODUCERS. 
(a) ESTABLISHMENT.—The Secretary of Agriculture, 
acting through the Chief of the Natural Resources Con-
servation Service, the Chief of the Forest Service, the Ad-
ministrator of the Cooperative State Research, Education, 
and Extension Service, and land-grant colleges and univer-
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sities, in consultation with the Administrator and the 
heads of other appropriate departments and agencies, 
shall establish an outreach initiative to provide informa-
tion to agricultural producers, agricultural organizations, 
foresters, and other landowners about opportunities under 
sections 144 and 145 to earn new revenue. 
(b) COMPONENTS.—The initiative under this sec-
tion— 
(1) shall be designed to ensure that, to the 
maximum extent practicable, agricultural organiza-
tions and individual agricultural producers, for-
esters, and other landowners receive detailed prac-
tical information about— 
(A) opportunities to earn new revenue 
under sections 144 and 145; 
(B) measurement protocols, monitoring, 
verifying, inventorying, registering, insuring, 
and marketing offsets under this title; 
(C) emerging domestic and international 
markets for energy crops, allowances, and off-
sets; and 
(D) local, regional, and national databases 
and aggregation networks to facilitate achieve-
ment, measurement, registration, and sales of 
offsets; 
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(2) shall provide— 
(A) outreach materials, including the hand-
book published under subsection (c), to inter-
ested parties; 
(B) workshops; and 
(C) technical assistance; and 
(3) may include the creation and development 
of regional marketing centers or coordination with 
existing centers (including centers within the Nat-
ural Resources Conservation Service or the Coopera-
tive State Research, Education, and Extension Serv-
ice or at land-grant colleges and universities). 
(c) HANDBOOK.— 
(1) IN GENERAL.—Not later than 2 years after 
the date of enactment of this Act, the Secretary of 
Agriculture, in consultation with the Administrator 
and after an opportunity for public input, shall pub-
lish a handbook for use by agricultural producers, 
agricultural cooperatives, foresters, other land-
owners, offset buyers, and other stakeholders that 
provides easy-to-use guidance on achieving, report-
ing, registering, and marketing offsets. 
(2) DISTRIBUTION.—The Secretary of Agri-
culture shall ensure, to the maximum extent prac-
ticable, that the handbook is distributed widely 
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