I 
111TH CONGRESS 
1ST SESSION H. R. 1666 
To amend the Internal Revenue Code of 1986 to establish an auction and 
revenue collection mechanism for a carbon market that ensures price 
stability with environmental integrity. 
IN THE HOUSE OF REPRESENTATIVES 
MARCH 23, 2009 
Mr. DOGGETT (for himself, Mr. COOPER, Mr. SHULER, Mr. THOMPSON of 
California, Mr. BLUMENAUER, Mr. STARK, Mr. LEWIS of Georgia, Ms. 
BERKLEY, Ms. LINDA T. SA´NCHEZ of California, Mr. YARMUTH, Mr. 
BRADY of Pennsylvania, Mr. COHEN, Mr. FATTAH, Mr. JOHNSON of 
Georgia, Mr. ROTHMAN of New Jersey, Mr. SIRES, Mr. NADLER of New 
York, Mr. FARR, Mr. CUMMINGS, Ms. CLARKE, Mr. ACKERMAN, and Ms. 
EDDIE BERNICE JOHNSON of Texas) introduced the following bill; which 
was referred to the Committee on Ways and Means, and in addition to 
the Committee on Energy and Commerce, for a period to be subsequently 
determined by the Speaker, in each case for consideration of such provi-
sions as fall within the jurisdiction of the committee concerned 
A BILL 
To amend the Internal Revenue Code of 1986 to establish 
an auction and revenue collection mechanism for a car-
bon market that ensures price stability with environ-
mental integrity. 
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
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SECTION 1. SHORT TITLE. 
This Act may be cited as the ‘‘Safe Markets Develop-
ment Act of 2009’’. 
SEC. 2. FINDINGS. 
The Congress finds— 
(1) a market-based, national emissions cap and 
trade program for greenhouse gases shall help meet 
national mitigation goals with a high degree of cer-
tainty while creating a new market for emissions al-
lowances; 
(2) ensuring a smooth startup of the program 
is critical for meeting short- and long-term emissions 
goals and maintaining public and political support 
for the program; 
(3) the economy-wide scale of the new allowance 
market and participation in the market of many reg-
ulated entities with little or no experience with cap 
and trade programs call for a careful startup phase 
for the program; 
(4) stable and predictable prices for allowances 
shall support development of cost-effective mitigation 
technologies and ease the transition for businesses 
and consumers making long-term investment deci-
sions; 
(5) recent experiences in the oil, housing, elec-
tricity and financial markets suggest that many 
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markets are subject to boom and bust cycles and can 
be vulnerable to market manipulation or speculative 
excesses and that lessons from these experiences 
should guide the design of the new cap and trade 
program; and 
(6) the risks of speculative excess and market 
manipulation are highest in the initial period of a 
cap and trade program while the regulatory systems 
to monitor allowance markets are under development 
and regulated sources are less experienced in market 
participation. 
SEC. 3. PURPOSES. 
The purposes of this Act are to— 
(1) establish an auction mechanism for the col-
lection of revenue that ensures a smooth price path 
while achieving the emissions reductions necessary to 
stop climate change; and 
(2) direct the revenue raised from the auction 
to a trust fund to be used for important public pur-
poses. 
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SEC. 4. ISSUING, AUCTIONING, AND ADMINISTERING EMIS-
SIONS ALLOWANCES AND COLLECTION OF 
REVENUE. 
(a) IN GENERAL.—The Internal Revenue Code of 
1986 is amended by adding at the end the following new 
subtitle: 
‘‘Subtitle L—Auction Based Carbon 
Market 
‘‘CHAPTER 101—EMISSION ALLOWANCES 
‘‘ ‘‘Subchapter A. Allowance auctions and compliance obligations. 
‘‘ ‘‘Subchapter B. Climate Oversight and Coordination Board. 
‘‘ ‘‘Subchapter C. Auction Revenue Trust Fund. 
‘‘ ‘‘Subchapter D. Assurance of cumulation emissions. 
‘‘ ‘‘Subchapter E. Definitions. 
‘‘Subchapter A—Allowance Auctions and 
Compliance Obligations 
‘‘Sec. 9901. Allowance auctions. 
‘‘Sec. 9902. Allowance transfer system. 
‘‘Sec. 9903. Compliance obligation. 
‘‘Sec. 9904. Excess Emissions Penalty. 
‘‘Sec. 9905. Allowance banking. 
‘‘SEC. 9901. ALLOWANCE AUCTIONS. 
‘‘(a) AUCTIONS.—The Secretary shall conduct auc-
tions of allowances in accordance with procedures estab-
lished by the Board established under subchapter B to 
meet the target allowance price for the year determined 
by the Board. The auction schedule is as follows: 
‘‘(1) Four auctions shall be undertaken during 
each trading year. 
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‘‘(2) The first auction of each trading year shall 
occur between April and June and at least three 
weeks after the Board announces a target price for 
the trading year. 
‘‘(3) The fourth auction for each trading year 
shall be in the last month (March) of the trading 
year. 
‘‘(b) AUCTION REVENUE.—All revenue from the auc-
tions under this section shall be deposited in the Auction 
Revenue Trust Fund established under subchapter C. 
Amounts deposited in such trust fund may be used, sub-
ject to annual appropriation, only for the purposes speci-
fied in other provisions of law. 
‘‘SEC. 9902. ALLOWANCE TRANSFER SYSTEM. 
‘‘(a) ESTABLISHMENT.—The Secretary shall estab-
lish a system for issuing, recording, and tracking emission 
allowances, and shall maintain a registry of allowances for 
each recorded holder of allowances. 
‘‘(b) RECORDING
REQUIREMENT.—The Secretary 
shall establish, by rule, a mechanism for the recording of 
emission allowances. 
‘‘(c) HOLDERS NOT RESTRICTED.—The privilege of 
purchasing, holding, and transferring emission allowances 
shall not be restricted to the owners and operators of cov-
ered facilities. 
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‘‘SEC. 9903. COMPLIANCE OBLIGATION. 
‘‘(a) SUBMISSION OF ALLOWANCES.—Not later than 
90 days after the end of a calendar year, the owner or 
operator of a covered facility shall submit to the Secretary 
an emission allowance for each carbon dioxide equivalent 
attributable to such facility as calculated by the Adminis-
trator under the Emissions Registry. 
‘‘(b) RETIREMENT OF ALLOWANCES.—Upon receipt 
of an emission allowance under subsection (a), the Sec-
retary shall retire the allowance, and shall reduce that cov-
ered entity’s registry account by a corresponding amount. 
The Secretary may also retire other allowances as speci-
fied in section 9905. 
‘‘SEC. 9904. EXCESS EMISSIONS PENALTY. 
‘‘(a) IMPOSITION OF PENALTY.—The owner or oper-
ator of any covered facility that fails for any year to sub-
mit to the Secretary, by the deadline described in section 
9903(a), 1 or more of the emission allowances due pursu-
ant to that section shall be liable for the payment to the 
Secretary of an excess emissions penalty on the date of 
such failure. 
‘‘(b) AMOUNT.—The amount of an excess emissions 
penalty required to be paid under paragraph (1) shall be 
an amount equal to the product obtained by multiplying— 
‘‘(1) the number of excess emission allowances 
that the owner or operator failed to submit; and 
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‘‘(2) the greater of— 
‘‘(A) $200; or 
‘‘(B) 3 times the mean market value (as 
determined by the Secretary) of an emission al-
lowance during the calendar year for which the 
emission allowance were due. 
‘‘(c) DEFICIENCY PROCEDURES NOT TO APPLY.— 
Subchapter B of chapter 63 (relating to deficiency proce-
dure for income, estate, gift, and certain excise taxes) shall 
not apply in respect of the assessment or collection of any 
penalty imposed by subsection (a). 
‘‘(d) COORDINATION WITH OTHER PENALTIES.— 
The penalty imposed by this section shall be in addition 
to any other penalty imposed under any other provision 
of law. 
‘‘SEC. 9905. ALLOWANCE BANKING. 
‘‘In Phase I of the program, the Secretary shall allow 
a covered entity to retain, after the retirement of allow-
ances equal to its emissions in the previous calendar year, 
a sum of allowances equal to 5 percent of its emissions 
in the previous calendar year. The Secretary shall retire 
from a covered entity’s account any remaining allowances 
in excess of 5 percent of the entity’s emissions during the 
previous calendar year. The Secretary shall also retire all 
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allowances in the registry accounts of non-covered entities 
at the end of each trading year in Phase I of the program. 
‘‘Subchapter B—Climate Oversight and 
Coordination Board 
‘‘Sec. 9911. Establishment of a Climate Program Oversight and Coordination 
Board. 
‘‘Sec. 9912. Initial expectations for annual emissions. 
‘‘SEC. 9911. ESTABLISHMENT OF A CLIMATE PROGRAM 
OVERSIGHT AND COORDINATION BOARD. 
‘‘(a) ESTABLISHMENT.—There is established a Cli-
mate Program Oversight and Coordination Board (here-
after in this Act referred to as the ‘Board’). 
‘‘(b) PURPOSES.—The purposes of the Board are 
to— 
‘‘(1) coordinate and review the work of the Sec-
retary, the Administrator, and other agencies in im-
plementing this Act; 
‘‘(2) make forecasts and to set targets for green 
house gas allowance prices; 
‘‘(3) review the functioning of carbon markets, 
including allowance auctions, secondary markets in 
allowances and associated financial instruments (in-
cluding futures, forwards, options, swaps, and other 
derivative contracts); 
‘‘(4) review the regulation and oversight of car-
bon markets; and 
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‘‘(5) provide reports and testimony to Congress 
in April or May of each year beginning in 2012. 
‘‘(c) MEMBERSHIP.—(1) The Board shall include 6 
members who shall be appointed by the President by and 
with the advice and consent of the Senate. In appointing 
members of the Board, the President shall select individ-
uals with recognized expertise in relevant areas, including 
climate science and economics, and energy and financial 
markets. Such persons shall have no other employment. 
At least one member shall be a scientist with expertise 
in climate change and the effects of climate change on the 
environment. In addition, Board shall include the fol-
lowing three voting, ex-officio members: The Secretaries 
of the Treasury and Energy and the Administrator of the 
Environmental Protection Agency. 
‘‘(2) The ex-officio members of the Board shall serve 
without additional compensation and may not serve as 
Chairman or Vice Chairman. The ex-officio members of 
the Board may, from time to time, designate other officers 
or employees of their respective organizations to carry out 
their duties on the Board. 
‘‘(d) COMPENSATION.— 
‘‘(1) IN GENERAL.—A member of the Board 
shall be compensated at the annual rate of basic pay 
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prescribed for level II of the Executive Schedule 
under section 5313 of title 5, United States Code. 
‘‘(2) CHAIRPERSON.—The Chairperson of the 
Board shall be compensated at the annual rate of 
basic pay prescribed for level I of the Executive 
Schedule under section 5312 of title 5, United 
States Code. 
‘‘(e) TERMS; VACANCIES.— 
‘‘(1) TERMS.—The term of a member of the 
Board shall be 10 years, except that the members 
first appointed to the Board shall be appointed for 
terms in a manner that ensures that the term of not 
more than 1 member shall expire during any 2-year 
period, and no member serves a term of more than 
10 years. 
‘‘(2) OATH OF OFFICE.—A member shall take 
the oath of office of the Board by not later than 15 
days after the date on which the member is ap-
pointed. 
‘‘(3) REMOVAL.—A member may be removed 
from the Board on determination of the President 
for cause. The President shall submit to Congress a 
notification of any determination by the President to 
remove a member of the Board for cause. 
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‘‘(4) VACANCIES.—A member of the Board the 
term of whom has expired or otherwise been termi-
nated shall continue to serve until the date on which 
a replacement is appointed under subparagraph 
(A)(ii), if the President determines that service to be 
appropriate. A vacancy on the Board shall not affect 
the powers of the Board and shall be filled in the 
same manner as the original appointment was made. 
‘‘(5) CHAIRPERSON AND VICE-CHAIRPERSON.— 
From among members of the Board, the President 
shall appoint 1 member to serve as Chairperson of 
the Board for a term of 4 years and member to 
serve as Vice-Chairperson of the Board for a term 
of 4 years. 
‘‘(6) EX-OFFICIO
MEMBERS
NOT
COVERED.— 
The provisions of this subsection apply only to 
Board members who are not ex-officio members. 
‘‘(f) PROHIBITIONS.— 
‘‘(1) CONFLICTS OF INTEREST.—The President 
shall not appoint to the Board an individual em-
ployed by, or holding any official relationship (in-
cluding any shareholder) with, any entity engaged in 
the generation, transmission, distribution, or sale of 
energy, an individual who has any pecuniary interest 
in the generation, transmission, distribution, or sale 
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of energy, or an individual who has a pecuniary in-
terest in the implementation of this Act. 
‘‘(2) NO OTHER EMPLOYMENT.—A member of 
the Board (other than an ex-officio member) shall 
not hold any other employment during the term of 
service of the member. 
‘‘(g) RESOURCES.—The Board may obtain the serv-
ices of such experts and consultants as are necessary to 
carry out the provisions of this Act. The administrative 
costs of the Board shall be paid out of the revenue from 
auctions of greenhouse gas allowances. 
‘‘(h) POWERS AND DUTIES OF THE BOARD.— 
‘‘(1) FORECAST
EMISSIONS
AND
ALLOWANCE 
PRICES.—Before April 30, 2012, and before April 
30 of each successive year through 2019, the Board 
shall publish a forecast of gradually rising allowance 
prices for the trading years through 2020 that the 
Board expects shall be associated with a gradual re-
duction in emissions of greenhouse gases of covered 
entities until reaching the level of 4,911 million tons 
in 2020. In deciding upon a forecast of allowance 
prices the Board shall— 
‘‘(A) review forecasts made by the Sec-
retary of Energy (acting through the Energy 
Information Agency) and the Administrator of 
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the Environmental Protection Agency, as well 
as those of private sector forecasters; and 
‘‘(B) in the years 2013 through 2019, re-
view and update its allowance price forecast as 
part of the assessment under paragraph (4) of 
this subsection. 
‘‘(2) SELECT ANNUAL PRICE TARGETS.—Before 
April 30, 2012, and before April 30 of each succes-
sive year through 2019, the Board shall select a tar-
get allowance price for the trading year that begins 
on April 1 of that calendar year, as follows: 
‘‘(A) In 2012, the target price shall be set 
at the price the Board determines will achieve 
the annual emission expectation for the year as 
set forth in section 9912. 
‘‘(B) In 2013 through 2019, the target 
price shall be the same as its forecast price for 
that year, which may have been revised accord-
ing to paragraph (4). 
‘‘(3) AUCTION PROCEDURES.—The Board shall 
establish procedures for auctions of allowances that 
would achieve the target price on average over all 
trading of allowances during the year, including the 
sales of allowances in auctions as well as in sec-
ondary market trading. To achieve the target price, 
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the total number of emission allowances issued in 
auctions in any particular year may be more or less 
than the expected emissions for that year as set 
forth in section 9912. 
‘‘(4) CONDUCT AN ANNUAL ASSESSMENT.—On 
or before April 30 of each year beginning in 2013, 
in consultation with the Secretary, the Secretary of 
Energy, and the Administrator, the Board shall pre-
pare an assessment of the program. In Phase I of 
the program, the assessment shall include each of 
the following: 
‘‘(A) Actual emissions of covered enti-
ties in the previous calendar year. 
‘‘(B) The progress in achieving the 
environmental goals of the program. 
‘‘(C) The effectiveness of the moni-
toring of emissions, the registration of al-
lowances, and the enforcement of compli-
ance requirements for covered entities. 
‘‘(D) An analysis of the behavior of 
greenhouse gases markets. 
‘‘(E) The effectiveness of the price 
target. 
‘‘(F) The reasons for the difference 
between actual emissions and the expected 
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levels given in section 9912. In considering 
the difference between actual and expected 
emissions, the Board shall estimate— 
‘‘(i) the amount of the difference 
that was attributable to influences 
that pertain only to the given calendar 
year, including but not limited to un-
usual weather or other transitory 
changes in economic activity and en-
ergy use; and 
‘‘(ii) the amount of the difference 
attributable to influences that shall 
likely persist for multiple calendar 
years and the likely duration of each 
such influence. 
‘‘(G) A revision in its forecast of al-
lowance prices through 2020 in response to 
the persistent influences identified in 
clause (ii) of subparagraph (F), but not in 
response to the transitory influences identi-
fied in clause (i) of subparagraph (F). 
‘‘(5) MAKE ANNUAL REPORTS TO CONGRESS.— 
The Chairman of the Board shall present the assess-
ment in a written report and in testimony before 
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each house of Congress in April or May of each 
year. 
‘‘(6) CONDUCT A PROGRAM REVIEW IN 2017.— 
The Board shall present a report containing a thor-
ough review of the program to the Congress by Oc-
tober 1, 2017, and include in this report its rec-
ommendations for any adjustments in the design 
features for Phase II of the program. 
‘‘(i) REVIEW BY GOVERNMENT ACCOUNTABILITY OF-
FICE.—Not later than January 1, 2015, and every three 
years thereafter, the Comptroller General of the United 
States shall conduct a review of the efficacy of the Board 
in fulfilling the purposes and duties of the Board under 
this Act. 
‘‘SEC. 9912. INITIAL EXPECTATIONS FOR ANNUAL EMIS-
SIONS. 
‘‘The initial expectation of the greenhouse gas emis-
sions of covered facilities in the cap and trade program 
are the amounts for each of the calendar years 2012 
through 2050 set forth in the following table: 
‘‘Calendar Year 
Initial Expectation of Emissions 
(millions of tons of greenhouse gases) 
2012 
6,153 
2013 
5,998 
2014 
5,843 
2015 
5,687 
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