Tradeable Performance Standard Act
Bill: H.R.1805 | Sponsor: Rep. Casten, Sean (D-IL)
Policy area: Environmental Protection

Summary:
Tradeable Performance Standard Act
This bill establishes the Greenhouse Gas Pollution Reduction Program, which creates (1) targets to eliminate greenhouse gas emissions from cogeneration facilities (e.g., combined power plants), electric facilities, and thermal energy facilities; (2) a system to allow such facilities to achieve the targets through a voluntary emission trading program; and (3) a thermal energy reporting program.
By 2030, such facilities must reduce greenhouse gas emissions to 60% of 2019 levels. By 2040, the facilities must eliminate the emissions.
Facilities that emit more than the targets must purchase emission allowances from those who emit less. The bill provides for the distribution, trading, and tracking of such allowances. The bill establishes civil penalties for facilities that do not meet the targets and do not submit enough allowances.
Finally, the Environmental Protection Agency must establish a thermal energy reporting program. Under the program, thermal energy facilities must provide information about the fuel used to produce thermal energy and the greenhouse gas emissions associated with such production. Further, thermal energy facilities must submit information to demonstrate their compliance with this bill.

To amend the Clean Air Act to establish a tradeable performance 
    standard covering emissions from the electricity generation and 
              industrial sectors, and for other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Tradeable Performance Standard 
Act''.

SEC. 2. TABLE OF CONTENTS.

    The table of contents for this Act is as follows:

Sec. 1. Short title.
Sec. 2. Table of contents.
Sec. 3. Combating the climate crisis.
        ``TITLE VII--GREENHOUSE GAS POLLUTION REDUCTION PROGRAM

          ``Part A--Global Warming Pollution Reduction Targets

        ``Sec. 701. Definitions.
        ``Sec. 702. Reduction targets for covered entities.
``Part B--Designation of Greenhouse Gases and Thermal Energy Reporting 
                                Program

        ``Sec. 711. Greenhouse gases.
        ``Sec. 712. Carbon dioxide equivalent value of greenhouse 
                            gases.
        ``Sec. 713. Thermal energy reporting program.
        ``Sec. 714. EIA and EPA reporting.
                        ``Part C--Program Rules

        ``Sec. 721. Requirements.
        ``Sec. 722. Distribution of emission allowances.
        ``Sec. 723. Trading.
        ``Sec. 724. Voluntary program participation.
        ``Sec. 725. Penalty for noncompliance.
        ``Sec. 726. Emission allowance tracking system.
        ``Sec. 727. Other program rules.
        ``Sec. 728. Oversight.
        ``Sec. 729. Regulations.
        ``Sec. 730. Savings provisions.

SEC. 3. COMBATING THE CLIMATE CRISIS.

    The Clean Air Act (42 U.S.C. et seq.) is amended by adding after 
title VI the following new title:

        ``TITLE VII--GREENHOUSE GAS POLLUTION REDUCTION PROGRAM

          ``PART A--GLOBAL WARMING POLLUTION REDUCTION TARGETS

``SEC. 701. DEFINITIONS.

    ``In this title:
            ``(1) Average carbon intensity for qualified electric 
        facilities.--The term `average carbon intensity for qualified 
        electric facilities' means the number that equals the total 
        amount of greenhouse gas emissions in metric tons of carbon 
        dioxide equivalent emitted from qualified electric facilities 
        in a calendar year as reported under section 714 divided by the 
        total quantity of megawatt hours of electricity produced by 
        qualified electric facilities in such calendar year as reported 
        under section 714.
            ``(2) Average carbon intensity for qualified thermal 
        facilities.--The term `average carbon intensity for qualified 
        thermal facilities' means the number that equals the total 
        amount of greenhouse gas emissions in metric tons of carbon 
        dioxide equivalent emitted from qualified thermal facilities in 
        a calendar year as reported under section 713 divided by the 
        total quantity of useful thermal energy output from qualified 
        thermal facilities in such calendar year as reported under 
        section 713.
            ``(3) Bottoming cycle cogeneration generator.--The term 
        `bottoming cycle cogeneration generator' means any generator 
        that produces electricity from otherwise-wasted heat, pressure, 
        or both, using any of the following technologies:
                    ``(A) An organic Rankine cycle.
                    ``(B) A waste-heat recovery steam generator.
                    ``(C) A back pressure steam turbine.
                    ``(D) A Stirling engine.
            ``(4) Carbon dioxide equivalent.--The term `carbon dioxide 
        equivalent' means the unit of measure, expressed in metric 
        tons, of greenhouse gases, as provided under section 712.
            ``(5) Covered entity.--The term `covered entity' means each 
        of the following:
                    ``(A) A qualified cogeneration facility.
                    ``(B) A qualified electric facility.
                    ``(C) A qualified thermal facility.
            ``(6) Designated representative.--The term `designated 
        representative' means, with respect to a covered entity, a 
        thermal reporting entity, or any other entity receiving or 
        holding emission allowances under this title, an individual 
        authorized, through a certificate of representation submitted 
        to the Administrator by the owners and operators, to represent 
        the owners and operators in all matters pertaining to this 
        title (including the holding, transfer, or disposition of 
        emission allowances), and to make all submissions to the 
        Administrator under this title.
            ``(7) Emission allowance.--The term `emission allowance' 
        means a limited authorization to emit, in an amount of, 1 
        metric ton of carbon dioxide equivalent of a greenhouse gas in 
        accordance with this title.
            ``(8) Fuel-based capacity.--The term `fuel-based capacity' 
        means--
                    ``(A) for generators that produce useful thermal 
                energy output with the combustion of fuel, the peak 
                fuel combustion rate; and
                    ``(B) for generators that produce useful thermal 
                energy output without the combustion of fuel, the peak 
                useful thermal energy output rate divided by 0.7.
            ``(9) Greenhouse gas.--The term `greenhouse gas' means any 
        gas listed in section 711.
            ``(10) Greenhouse gas emission.--The term `greenhouse gas 
        emission' means the release of a greenhouse gas into the 
        ambient air.
            ``(11) Hold.--The term `hold' means, with respect to an 
        emission allowance, to have in the appropriate account created 
        pursuant to the process under section 726(2).
            ``(12) Qualified cogeneration facility.--The term 
        `qualified cogeneration facility' means any generator that 
        simultaneously produces useful thermal energy output and 
        electricity and--
                    ``(A) has a rated capacity of 2 megawatts or 
                greater; or
                    ``(B) is classified as a qualified cogeneration 
                facility pursuant to section 724(c).
            ``(13) Qualified electric facility.--The term `qualified 
        electric facility' means any generator that produces 
        electricity, including a bottoming cycle cogeneration 
        generator--
                    ``(A) with a rated capacity of 2 megawatts or 
                greater; or
                    ``(B) with a rated capacity of less than 2 
                megawatts that is classified as a qualified electric 
                facility pursuant to section 724(a).
            ``(14) Qualified thermal facility.--The term `qualified 
        thermal facility' means any generator that produces thermal 
        energy--
                    ``(A) with a rated fuel-based capacity of at least 
                50,000,000 British thermal units on a higher heating 
                value basis per hour or greater, excluding any 
                generator producing useful thermal energy output that 
                the Administrator determines is used to wholly or 
                partially provide carbon as a chemical ingredient for a 
                process to manufacture goods; or
                    ``(B) with a rated fuel-based capacity of less than 
                50,000,000 British thermal units on a higher heating 
                value basis per hour that is classified as a qualified 
                thermal facility pursuant to section 724(b).
            ``(15) Thermal reporting entity.--The term `thermal 
        reporting entity' means--
                    ``(A) a qualified thermal facility;
                    ``(B) a qualified cogeneration facility;
                    ``(C) any generator that produces useful thermal 
                energy output with a rated fuel-based capacity of at 
                least 30,000,000 British thermal units on a higher 
                heating value basis per hour, but less than 50,000,000 
                British thermal units on a higher heating value basis 
                per hour; or
                    ``(D) any other entity that produces or delivers 
                useful thermal energy output the production or delivery 
                of which results or may result in greenhouse gas 
                emissions if the Administrator determines that 
                reporting under section 713 by such entity will help 
                achieve the targets specified in section 702.
            ``(16) Useful thermal energy output.--The term `useful 
        thermal energy output' means thermal energy as measured in 
        million British thermal units on a higher heating value basis 
        produced by a generator that produces thermal energy net of the 
        energy in inlet combustion air, feedwater, or any other fluids 
        not used as fuels of combustion.

``SEC. 702. REDUCTION TARGETS FOR COVERED ENTITIES.

    ``(a) In General.--The regulations issued under section 729 shall 
establish enforceable targets for the greenhouse gas emissions of 
covered entities, such that--
            ``(1) in 2030, the aggregate quantity of greenhouse gas 
        emissions from covered entities does not exceed 60 percent of 
        the aggregate quantity of greenhouse gas emissions from covered 
        entities in 2019; and
            ``(2) in 2040, the aggregate quantity of greenhouse gas 
        emissions from covered entities does not exceed zero.
    ``(b) Definition.--For purposes of this section, the term 
`greenhouse gas emissions from covered entities in 2019' means 
greenhouse gas emissions to which section 721 would have applied if the 
requirements of this title for the specified year had been in effect 
for 2019.

``PART B--DESIGNATION OF GREENHOUSE GASES AND THERMAL ENERGY REPORTING 
                                PROGRAM

``SEC. 711. GREENHOUSE GASES.

    ``For purposes of this title, the following are greenhouse gases:
            ``(1) Carbon dioxide.
            ``(2) Methane.
            ``(3) Nitrous oxide.
            ``(4) Sulfur hexafluoride.
            ``(5) Any perfluorocarbon.
            ``(6) Nitrogen trifluoride.

``SEC. 712. CARBON DIOXIDE EQUIVALENT VALUE OF GREENHOUSE GASES.

    ``(a) In General.--Any provision of this title that refers to a 
quantity or percentage of a quantity of a greenhouse gas shall be 
treated as a reference to the quantity or percentage of the greenhouse 
gas expressed in carbon dioxide equivalents.
    ``(b) Values.--Except as provided by the Administrator under 
subsection (c), for the purposes of this title, the carbon dioxide 
equivalent value of a greenhouse gas shall be equal to the 100-year 
global warming potential for such greenhouse gas that is provided in 
the Fifth Assessment Report of the Intergovernmental Panel on Climate 
Change.
    ``(c) Use of 20-Year Global Warming Potential.--If the 
Administrator determines that it is more appropriate for a greenhouse 
gas and the 20-year global warming potential for such greenhouse gas 
that is provided in the Fifth Assessment Report of the 
Intergovernmental Panel on Climate Change exceeds the 100-year global 
warming potential for such greenhouse gas that is provided in the Fifth 
Assessment Report of the Intergovernmental Panel on Climate Change, the 
Administrator may publish a determination in the Federal Register that 
such greenhouse gas has a carbon dioxide equivalent value equal to the 
20-year global warming potential for such greenhouse gas that is 
provided in the Fifth Assessment Report of the Intergovernmental Panel 
on Climate Change.

``SEC. 713. THERMAL ENERGY REPORTING PROGRAM.

    ``(a) Regulations.--Not later than 18 months after the date of 
enactment of this title, the Administrator shall issue regulations 
establishing a program, to be known as the Federal thermal energy 
reporting program. Such regulations shall--
            ``(1) require each thermal reporting entity to submit to 
        the Administrator data on--
                    ``(A) the type, quality, and quantity of fuel used 
                for onsite useful thermal energy output production by 
                such thermal reporting entity;
                    ``(B) the quantity of useful thermal energy output 
                produced by such thermal reporting entity as calculated 
                pursuant to subsection (e); and
                    ``(C) the quantity of greenhouse gas emissions 
                associated with such useful thermal energy output 
                production;
            ``(2) require thermal reporting entities to submit to the 
        Administrator data sufficient to ensure compliance with or 
        implementation of the requirements of this title;
            ``(3) ensure the completeness, consistency, transparency, 
        accuracy, precision, and reliability of data gathered under the 
        Federal thermal energy reporting program;
            ``(4) include methods for avoiding double reporting to the 
        maximum extent possible;
            ``(5) require that thermal reporting entities provide the 
        data required in this section in reports submitted 
        electronically to the Administrator, in such form and 
        containing such information as may be required by the 
        Administrator;
            ``(6) include requirements for keeping records supporting 
        or related to, and protocols for auditing, data submitted under 
        the Federal thermal energy reporting program;
            ``(7) establish consistent policies for calculating carbon 
        content and greenhouse gas emissions for any type of fuel for 
        which data is submitted under the Federal thermal energy 
        reporting program;
            ``(8) provide for immediate dissemination, to States and 
        Indian Tribes, of all data reported under the Federal thermal 
        energy reporting program 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 paragraph if--
                    ``(A) nondissemination of the data is vital to the 
                national security of the United States, as determined 
                by the President; or
                    ``(B) the data is confidential business information 
                that cannot be derived from information that is 
                otherwise publicly available and that would cause 
                significant calculable competitive harm if published, 
                except that data that is confidential business 
                information shall be provided to a State or Indian 
                Tribe within whose jurisdiction the thermal reporting 
                entity is located if the Administrator determines that 
                such State or Indian Tribe has in effect protections 
                for confidential business information that are at least 
                as protective as protections applicable to the Federal 
                Government;
            ``(9) provide that the Administrator publish an aggregate 
        summary of all data reported under the Federal thermal energy 
        reporting program publicly on the internet as soon as 
        practicable after electronic audit by the Administrator and any 
        resulting correction of data, including publication of--
                    ``(A) any confidential business data under 
                paragraph (8)(B); and
                    ``(B) at the discretion of the President, data the 
                nondissemination of which was determined to be vital to 
                the national security of the United States under 
                paragraph (8)(A);
            ``(10) prescribe methods by which the Administrator shall, 
        in cases in which satisfactory data are not submitted by a 
        thermal reporting entity under the Federal thermal energy 
        reporting program to the Administrator for any period of time, 
        estimate the data for such thermal reporting entity required 
        under paragraph (1) with--
                    ``(A) in the case of a thermal reporting entity 
                that is a qualified thermal facility or a qualified 
                cogeneration facility, an estimate of the highest 
                greenhouse gas emission levels that may have occurred 
                during the period for which data are missing; or
                    ``(B) in the case of any other thermal reporting 
                entity, a reasonable estimate of the greenhouse gas 
                emission levels that may have occurred during the 
                period for which data are missing;
            ``(11) require the designation of a designated 
        representative for each thermal reporting entity;
            ``(12) require an appropriate certification, by the 
        designated representative for the thermal reporting entity, of 
        accurate and complete accounting of the data required under 
        paragraph (1), as determined by the Administrator; and
            ``(13) include requirements for the submission of other 
        data necessary for accurate and complete accounting of the 
        quantity of useful thermal energy output, and the quantity of 
        greenhouse gas emissions associated with such useful thermal 
        energy output production, as determined by the Administrator, 
        including data for quality assurance of monitoring systems and 
        other measurement devices.
    ``(b) Timing.--
            ``(1) Calendar years 2019 through 2022.--
                    ``(A) In general.--Not later than March 21, 2023, 
                each thermal reporting entity shall submit to the 
                Administrator data required under the Federal thermal 
                energy reporting program with respect to each of 
                calendar years 2019 through 2022.
                    ``(B) Waiver or modification.--The Administrator 
                may waive or modify reporting requirements for calendar 
                years 2019 through 2022 for thermal reporting entities 
                to the extent that the Administrator determines that 
                the thermal reporting entities did not keep data or 
                records necessary to meet such reporting requirements. 
                The Administrator may, in addition to or in lieu of 
                such reporting requirements, collect additional 
                information on energy consumption and production.
            ``(2) Subsequent calendar years.--With respect to calendar 
        year 2023 and each subsequent calendar year, each thermal 
        reporting entity shall submit quarterly data required under the 
        Federal thermal energy reporting program 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 
        Administrator on an earlier timeframe for another program.
    ``(c) Waiver of Reporting Requirements for Specific Entities.--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 under other statutory 
requirements.
    ``(d) Interrelationship With Other Systems.--
            ``(1) In general.--In developing the regulations issued 
        under subsection (a), the Administrator shall take into account 
        the work done by the Energy Information Administration and 
        other mandatory Federal, State, or multistate programs to 
        collect information that is similar to the information to be 
        collected under this section.
            ``(2) Explanation.--Regulations issued under subsection (a) 
        shall include an explanation of any major differences in 
        information collected between the Federal thermal energy 
        reporting program and information available from the Energy 
        Information Administration and other mandatory Federal, State, 
        or multistate programs to collect similar information.
    ``(e) Calculation of Useful Thermal Energy Output.--The 
Administrator and thermal reporting entities shall--
            ``(1) in the case of thermal reporting entities that have 
        revenue-grade send out meters, calculate useful thermal energy 
        output by using the data provided by those meters; and
            ``(2) in the case of thermal reporting entities that do not 
        have such meters, or that have such meters but for which the 
        Administrator determines that the values obtained by 
        calculating useful thermal energy output under paragraph (1) 
        are unreasonable, calculate useful thermal energy output based 
        on the metered fuel use for a given quarter multiplied by the 
        average conversion efficiency of fuel to useful thermal energy 
        output in all other similarly situated facilities using the 
        same fuel.

``SEC. 714. EIA AND EPA REPORTING.

    ``(a) In General.--Beginning with calendar year 2023, by the end of 
each month, the Administrator of the Energy Information Administration 
shall provide to the Administrator of the Environmental Protection 
Agency information on the total amount of electricity produced from 
qualified electric facilities during the previous month.
    ``(b) New Qualified Electric Facilities.--The Administrator of the 
Environmental Protection Agency shall notify the Administrator of the 
Energy Information Administration whenever an electric facility with a 
rated capacity of less than 2 megawatts elects to be classified as a 
qualified electric facility or a qualified cogeneration facility under 
section 724.

                        ``PART C--PROGRAM RULES

``SEC. 721. REQUIREMENTS.

    ``(a) In General.--By 12:01 a.m. on April 1 of a calendar year, a 
covered entity shall surrender to the Administrator one emission 
allowance for each metric ton of carbon dioxide equivalent of a 
greenhouse gas emitted by the covered entity during the preceding 
calendar year.
    ``(b) Acquisition of Emission Allowances.--A covered entity shall 
acquire emission allowances as follows:
            ``(1) By receiving emission allowances as provided in 
        section 722.
            ``(2) By purchase, exchange, or transfer under section 723.
    ``(c) Applicability.--The requirement of this part applies with 
respect to calendar year 2024 and subsequent calendar years.
    ``(d) Period of Use.--An emission allowance may be used by a 
covered entity to comply with subsection (a) only for--
            ``(1) the calendar year in connection with which it is 
        distributed under section 722; or
            ``(2) the following calendar year.
    ``(e) Adjustment of Deadline.--The Administrator may, by rule, 
establish a deadline for compliance with subsection (a) with respect to 
a calendar year that is later than 12:01 a.m. on April 1 of the 
following calendar year, as necessary to ensure the availability of 
greenhouse gas emissions data, but in no event shall the adjusted 
deadline be later than June 1.

``SEC. 722. DISTRIBUTION OF EMISSION ALLOWANCES.

    ``(a) Qualified Electric Facilities.--During a calendar year, the 
Administrator shall distribute, on a continual basis, to a qualified 
electric facility for each megawatt hour of electricity produced by the 
qualified electric facility a number of emission allowances (or 
fractions thereof) equal to the product of one multiplied by the 
greater of--
            ``(1) zero; and
            ``(2) the lesser of--
                    ``(A) the value equal to the product of 0.93 and 
                the preceding calendar year's average carbon intensity 
                for qualified electric facilities;
                    ``(B) the value equal to the difference of--
                            ``(i) the preceding calendar year's average 
                        carbon intensity for qualified electric 
                        facilities; minus
                            ``(ii) the product of 0.06 multiplied by 
                        calendar year 2023's average carbon intensity 
                        for qualified electric facilities; or
                    ``(C) a value set by the Administrator for purposes 
                of this subsection to ensure that the aggregate 
                quantity of greenhouse gas emissions from covered 
                entities does not exceed the targets specified in 
                section 702(a).
    ``(b) Qualified Thermal Facilities.--During a calendar year, the 
Administrator shall distribute, on a continual basis, to a qualified 
thermal facility for each million British thermal units of useful 
thermal energy output produced by the qualified thermal facility a 
number of emission allowances (or fractions thereof) equal to the 
product of one multiplied by the greater of--
            ``(1) zero; and
            ``(2) the lesser of--
                    ``(A) the value equal to the product of 0.93 and 
                the preceding calendar year's average carbon intensity 
                for qualified thermal facilities;
                    ``(B) the value equal to the difference of--
                            ``(i) the preceding calendar year's average 
                        carbon intensity for qualified thermal 
                        facilities; minus
                            ``(ii) the product of 0.06 multiplied by 
                        calendar year 2023's average carbon intensity 
                        for qualified thermal facilities; or
                    ``(C) a value set by the Administrator for purposes 
                of this subsection to ensure that the aggregate 
                quantity of greenhouse gas emissions from covered 
                entities does not exceed the targets specified in 
                section 702(a).
    ``(c) Qualified Cogeneration Facilities.--During a calendar year, 
the Administrator shall distribute, on a continual basis, to a 
qualified cogeneration facility--
            ``(1) for each megawatt hour of electricity produced by the 
        qualified cogeneration facility, a number of emission 
        allowances (or fractions thereof) calculated in accordance with 
        subsection (a); and
            ``(2) for each million British thermal units of useful 
        thermal energy output produced by the qualified cogeneration 
        facility, a number of emission allowances (or fractions 
        thereof) calculated in accordance with subsection (b).
    ``(d) Adjusted Distribution for Entering Into Certain Agreements.--
            ``(1) In general.--If an existing facility or a newly 
        constructed low-emission facility enters into an agreement 
        described in paragraph (2), then over the period of the 
        agreement the Administrator shall distribute emission 
        allowances to such facility in accordance with this subsection 
        in lieu of subsection (a), (b), or (c).
            ``(2) Agreement.--An agreement described in this paragraph 
        is a 10-year or longer bilateral agreement signed after the 
        date of enactment of this title between an existing qualified 
        electric facility, an existing qualified thermal facility, or 
        an existing qualified cogeneration facility, and a newly 
        constructed low-emission facility for the annual purchase of a 
        specified amount of emission allowances.
            ``(3) Definitions.--In this subsection:
                    ``(A) The term `existing' means, with respect to a 
                facility, in operation as of the date of entry into an 
                agreement described in paragraph (2).
                    ``(B) The term `existing facility' means an 
                existing qualified electric facility, an existing 
                qualified thermal facility, or an existing qualified 
                cogeneration facility that is a party to an agreement 
                described in paragraph (2).
                    ``(C) The term `newly constructed' means that the 
                facility involved did not produce electricity or useful 
                thermal energy output prior to the date of entry into 
                an agreement described in paragraph (2).
                    ``(D) The term `newly constructed low-emission 
                facility' means a newly constructed qualified electric 
                facility, a newly constructed qualified thermal 
                facility, or a newly constructed qualified cogeneration 
                facility that would emit a lesser quantity of 
                greenhouse gases per megawatt hour of electricity or 
                per million British thermal units of useful thermal 
                energy output, as applicable, than the Administrator 
                distributes to covered entities under subsection (a), 
                (b), or (c), as applicable, in the first full calendar 
                year during which the newly constructed facility 
                operates and is a party to an agreement described in 
                paragraph (2).
            ``(4) Distribution of allowances to an existing facility.--
                    ``(A) In general.--For calendar years that are 
                covered by an agreement described in paragraph (2), 
                beginning with the first full calendar year during 
                which the newly constructed low-emission facility 
                operates, the Administrator shall distribute, on a 
                continual basis, to the existing facility--
                            ``(i) for megawatt hours of electricity or 
                        million British thermal units of useful thermal 
                        energy output, as applicable, produced by the 
                        existing facility that are covered by the 
                        agreement, a number of emission allowances that 
                        is equal to--
                                    ``(I) such number of megawatt hours 
                                or million British thermal units, as 
                                applicable; multiplied by
                                    ``(II) the average carbon intensity 
                                for qualified electric facilities or 
                                the average carbon intensity for 
                                qualified thermal facilities, as 
                                applicable, for such first full 
                                calendar year; and
                            ``(ii) for megawatt hours of electricity or 
                        million British thermal units of useful thermal 
                        energy output, as applicable, produced by the 
                        existing facility exceeding those that are 
                        covered by the agreement, the number of 
                        emission allowances calculated under subsection 
                        (a), (b), or (c), as applicable.
                    ``(B) Calculation of megawatt hours or million 
                british thermal units covered by agreement.--For 
                purposes of subparagraph (A), the number of megawatt 
                hours of electricity or million British thermal units 
                of useful thermal energy output, as applicable, 
                produced by an existing facility that are covered by 
                the agreement described in paragraph (2) shall be equal 
                to--
                            ``(i) the number of emission allowances 
                        sold to the existing facility pursuant to the 
                        agreement for the first full calendar year 
                        described in subparagraph (A), divided by the 
                        difference of--
                                    ``(I) the number of emission 
                                allowances surrendered by the existing 
                                facility to the Administrator for such 
                                first full calendar year; minus
                                    ``(II) the number of emission 
                                allowances distributed to the existing 
                                facility by the Administrator for such 
                                first full calendar year; multiplied by
                            ``(ii) the total number of megawatt hours 
                        of electricity or million British thermal units 
                        of useful thermal energy output, as applicable, 
                        produced by the existing facility in such first 
                        full calendar year.
            ``(5) Distribution of allowances to a newly constructed 
        low-emission facility.--
                    ``(A) In general.--For calendar years that are 
                covered by an agreement described in paragraph (2), 
                beginning with the first full calendar year during 
                which the newly constructed low-emission facility 
                operates, the Administrator shall distribute, on a 
                continual basis, to the newly constructed low-emission 
                facility--
                            ``(i) for megawatt hours of electricity or 
                        million British thermal units of useful thermal 
                        energy output, as applicable, produced by the 
                        newly constructed low-emission facility that 
                        are covered by the agreement, a number of 
                        emission allowances that is equal to--
                                    ``(I) such number of megawatt hours 
                                or million British thermal units of 
                                useful thermal energy output; 
                                multiplied by
                                    ``(II) the average carbon intensity 
                                for qualified electric facilities or 
                                the average carbon intensity for 
                                qualified thermal facilities, as 
                                applicable, in such first full calendar 
                                year; and
                            ``(ii) for megawatt hours of electricity or 
                        million British thermal units of useful thermal 
                        energy output, as applicable, produced by the 
                        newly constructed low-emission facility 
                        exceeding those that are covered by the 
                        agreement, the number of emission allowances 
                        calculated under subsection (a), (b), or (c), 
                        as applicable.
                    ``(B) Calculation of megawatt hours or million 
                british thermal units covered by agreement.--For 
                purposes of subparagraph (A), the number of megawatt 
                hours of electricity or million British thermal units 
                of useful thermal energy output, as applicable, 
                produced by a newly constructed low-emission facility 
                that are covered by the agreement described in 
                paragraph (2) shall be equal to--
                            ``(i) the number of emission allowances 
                        sold to the existing facility pursuant to the 
                        agreement for the first full calendar year 
                        described in subparagraph (A), divided by the 
                        difference of--
                                    ``(I) the number of emission 
                                allowances surrendered by the newly 
                                constructed low-emission facility to 
                                the Administrator for such first full 
                                calendar year; minus
                                    ``(II) the number of emission 
                                allowances distributed to the newly 
                                constructed low-emission facility by 
                                the Administrator for such first full 
                                calendar year; multiplied by
                            ``(ii) the total number of megawatt hours 
                        of electricity or million British thermal units 
                        of useful thermal energy output, as applicable, 
                        produced by the existing facility in such first 
                        full calendar year.
            ``(6) Conditions.--An existing facility or newly 
        constructed low-emission facility may receive emission 
        allowances under this subsection only if--
                    ``(A) such facility provides the Administrator a 
                copy of--
                            ``(i) the applicable bilateral agreement; 
                        and
                            ``(ii) any amendment to such bilateral 
                        agreement within 30 days of the amendment being 
                        made; and
                    ``(B) the Administrator certifies that allowing the 
                facility to maintain the bilateral agreement is not 
                impacting the ability to achieve the targets specified 
                in section 702(a)--
                            ``(i) upon receiving the applicable 
                        bilateral agreement, and at least once every 5 
                        years thereafter; and
                            ``(ii) upon receiving any amendment 
                        thereto.

``SEC. 723. TRADING.

    ``(a) Permitted Transactions.--Except as otherwise provided in this 
title, the lawful holder of an emission allowance may, without 
restriction, sell, exchange, transfer, hold, or surrender to the 
Administrator, the emission allowance.
    ``(b) Identification Numbers.--The Administrator shall assign to 
each emission allowance a unique identification number.
    ``(c) Legal Status of Emission Allowances.--
            ``(1) In general.--An emission allowance distributed 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 construed to limit or alter 
        the authority of the United States to terminate or limit 
        emission allowances.
            ``(3) Other provisions.--Except as otherwise specified in 
        this Act, nothing in this Act relating to emission allowances 
        distributed 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) Effectiveness of Emission Allowance Transfers.--No transfer 
of an emission allowance 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 
729.

``SEC. 724. VOLUNTARY PROGRAM PARTICIPATION.

    ``(a) Voluntary Program Participation as Qualified Electric 
Facility.--
            ``(1) In general.--A generator that produces electricity 
        with a rated capacity of less than 2 megawatts may, in 
        accordance with this subsection, elect to be classified as a 
        qualified electric facility for purposes of this title.
            ``(2) Qualification.--In order for a generator with a rated 
        capacity of less than 2 megawatts to be classified as a 
        qualified electric facility, the generator shall--
                    ``(A) submit a notification to the Administrator of 
                the intention of the generator to elect to be 
                classified as a qualified electric facility;
                    ``(B) receive approval of such classification from 
                the Administrator; and
                    ``(C) designate a representative as required under 
                section 727(b).
            ``(3) Approval.--Not later than 90 after receipt of a 
        notification under paragraph (2)(A), the Administrator shall 
        notify the applicable generator whether the Administrator 
        approves or disapproves the classification of such generator as 
        a qualified electric facility.
            ``(4) Classification.--If a generator elects to be 
        classified as a qualified electric facility pursuant to this 
        subsection, such classification shall remain in effect unless 
        the facility produces no electricity over the previous calendar 
        year.
    ``(b) Voluntary Program Participation as a Qualified Thermal 
Facility.--
            ``(1) In general.--A generator that produces thermal energy 
        with a rated fuel-based capacity of less than 50,000,000 
        British thermal units on a higher heating value basis per hour 
        may, in accordance with this subsection, elect to be classified 
        as a qualified thermal facility for purposes of this title.
            ``(2) Qualification.--In order for a generator that 
        produces thermal energy with a rated fuel-based capacity of 
        less than 50,000,000 British thermal units on a higher heating 
        value basis per hour to be classified as a qualified thermal 
        facility, the facility shall--
                    ``(A) have a rated fuel-based capacity of no less 
                than 2,000,000 British thermal units on a higher 
                heating value basis per hour;
                    ``(B) submit a notification to the Administrator of 
                the intention of the generator to elect to be 
                classified as a qualified thermal facility;
                    ``(C) receive approval of such classification from 
                the Administrator;
                    ``(D) report annually to the Administrator relevant 
                information collected on type, quality, and quantity of 
                fuel used for onsite useful thermal energy output 
                production, the quantity of useful thermal energy 
                output, and the quantity of associated greenhouse gas 
                emissions under section 713; and
                    ``(E) designate a representative as required under 
                section 727(b).
            ``(3) Classification.--If a generator that produces useful 
        thermal energy output elects to be classified as a qualified 
        thermal facility pursuant to this subsection, such 
        classification shall remain in effect unless the facility--
                    ``(A) falls below a rated fuel-based capacity of 
                2,000,000 British thermal units on a higher heating 
                value basis per hour; or
                    ``(B) produces no useful thermal energy output over 
                the previous calendar year.
    ``(c) Voluntary Program Participation as Qualified Cogeneration 
Facility.--
            ``(1) In general.--A generator that simultaneously produces 
        useful thermal energy output and electricity with a rated 
        capacity of less than 2 megawatts may, in accordance with this 
        subsection, elect to be classified as a qualified cogeneration 
        facility for purposes of this title.
            ``(2) Qualification.--In order for a generator that 
        simultaneously produces useful thermal energy output and 
        electricity with a rated capacity of less than 2 megawatts to 
        be classified as a qualified cogeneration facility, the 
        facility shall--
                    ``(A) submit a notification to the Administrator of 
                the intention of the generator to elect to be 
                classified as a qualified cogeneration facility;
                    ``(B) receive approval of the classification from 
                the Administrator;
                    ``(C) report annually to the Administrator relevant 
                information collected on type, quality, and quantity of 
                fuel used for onsite useful thermal energy output 
                production, the quantity of useful thermal energy 
                output, and the quantity of associated greenhouse gas 
                emissions under section 713; and
                    ``(D) designate a representative as required under 
                section 727(b).
            ``(3) Classification.--If a generator elects to be 
        classified as a qualified cogeneration facility pursuant to 
        this subsection, such classification shall remain in effect 
        unless the facility produces no electricity over the previous 
        calendar year.

``SEC. 725. PENALTY FOR NONCOMPLIANCE.

    ``(a) Civil Penalty.--
            ``(1) In general.--The owner or operator of a covered 
        entity that fails to surrender an emission allowance as 
        required by section 721(a) shall be liable for payment to the 
        Administrator of a penalty in the amount described in paragraph 
        (2).
            ``(2) Amount.--The amount of a penalty under paragraph (1) 
        shall be equal to the product of--
                    ``(A) twice the highest monetary value (as 
                indicated by the emission allowance tracking system 
                established pursuant to section 726 over the previous 
                calendar year) for the sale or transfer of an emission 
                allowance; multiplied by
                    ``(B) the number of emission allowances which the 
                owner or operator of the covered entity failed to 
                surrender as described in paragraph (1).
            ``(3) Timing.--A penalty required under this subsection 
        shall be immediately due and payable to the Administrator, 
        without demand, in accordance with regulations promulgated 
        under section 729.
            ``(4) No effect on liability.--A penalty due and payable by 
        the owners or operators of a covered entity under this 
        subsection shall not diminish the liability of the owners or 
        operators for any fine, penalty, or assessment against the 
        owners or operators for the same violation under any other 
        provision of this Act or any other law.
    ``(b) Replacement Emission Allowances.--The owner or operator of a 
covered entity that fails to surrender one or more emission allowances 
as required by section 721(a) for a calendar year shall surrender a 
quantity of emission allowances that is equal to the quantity the 
covered entity failed to surrender (in addition to the emission 
allowances otherwise required to be surrendered) by the April 1st 
deadline of the second succeeding calendar year.

``SEC. 726. EMISSION ALLOWANCE TRACKING SYSTEM.

    ``The regulations promulgated under section 729 shall provide for--
            ``(1) the establishment of a system to distribute emission 
        allowances to covered entities;
            ``(2) a process to create accounts in which covered 
        entities and any other entities that buy or sell emission 
        allowances may hold emission allowances;
            ``(3) the establishment of an emission allowance tracking 
        system to track--
                    ``(A) the number of emission allowances 
                transferred;
                    ``(B) the price or monetary value for which 
                emission allowances are transferred;
                    ``(C) the date of each such transfer;
                    ``(D) the parties involved in the transfer; and
                    ``(E) any additional information the Administrator 
                determines necessary for each such transfer; and
            ``(4) the publication by the Administrator on the internet 
        of--
                    ``(A) a weekly summary of average prices of 
                emission allowances weighted by transaction size, the 
                total number of emission allowances traded, and any 
                other additional information determined by the 
                Administrator as necessary for the orderly and 
                competitive functioning of any emission allowance 
                market;
                    ``(B) the number of emission allowances distributed 
                by the Administrator under section 722 each month to 
                qualified electric facilities;
                    ``(C) the number of emission allowances distributed 
                by the Administrator under section 722 each month to 
                qualified thermal facilities;
                    ``(D) the number of emission allowances distributed 
                by the Administrator under section 722 each month to 
                qualified cogeneration facilities;
                    ``(E) the number of emission allowances distributed 
                by the Administrator under section 722 during a 
                calendar year that are held by qualified electric 
                facilities at the end of each month;
                    ``(F) the number of emission allowances distributed 
                by the Administrator under section 722 during a 
                calendar year that are held by qualified thermal 
                facilities at the end of each month;
                    ``(G) the number of emission allowances distributed 
                by the Administrator under section 722 during a 
                calendar year that are held by qualified cogeneration 
                facilities at the end of each month;
                    ``(H) the number of emission allowances distributed 
                by the Administrator under section 722 during a 
                calendar year that are held by entities other than 
                covered entities at the end of each month;
                    ``(I) the number of emission allowances surrendered 
                to the Administrator each year by qualified electric 
                facilities;
                    ``(J) the number of emission allowances surrendered 
                to the Administrator each year by qualified thermal 
                facilities; and
                    ``(K) the number of emission allowances surrendered 
                to the Administrator each year by qualified 
                cogeneration facilities.

``SEC. 727. OTHER PROGRAM RULES.

    ``(a) Threshold Review.--For each category of covered entities 
listed in section 701(5), the Administrator--
            ``(1) in 2025, and once every 5 years thereafter, shall 
        review the threshold for electricity or useful thermal energy 
        output production that is used to define covered entities in 
        such category; and
            ``(2) may by rule lower such threshold after consideration 
        of--
                    ``(A) greenhouse gas emissions from covered 
                entities in such category, and from other entities of 
                the same type that produce less electricity or useful 
                thermal energy output (including greenhouse gas 
                emission sources that commence operation after the date 
                of enactment of this title that are not covered 
                entities); and
                    ``(B) whether greater greenhouse gas emission 
                reductions can be cost-effectively achieved by lowering 
                the applicable threshold.
    ``(b) Designated Representatives.--The regulations promulgated 
under section 729 shall require that each covered entity, and each 
entity holding an emission allowance or receiving an emission allowance 
from the Administrator under this title, submit to the Administrator a 
certificate of representation designating a designated representative.
    ``(c) Savings Provision.--Nothing in this title shall be 
construed--
            ``(1) as requiring a change of any kind in any State law 
        regulating electric utility rates and charges, or as affecting 
        any State law regarding such State regulation, or as limiting 
        State regulation (including any prudency review) under such a 
        State law;
            ``(2) as modifying the Federal Power Act or as affecting 
        the authority of the Federal Energy Regulatory Commission under 
        that Act; or
            ``(3) as interfering with or impairing any program for 
        competitive bidding for power supply in a State in which such a 
        program is established.
    ``(d) Position Limits.--
            ``(1) In general.--The regulations promulgated under 
        section 729 shall limit the number of emission allowances that 
        an entity may hold at any time in a calendar year.
            ``(2) Limits.--The Administrator, in consultation with the 
        Commodity Futures Trading Commission, shall set limits under 
        paragraph (1)--
                    ``(A) on the number of emission allowances 
                distributed in a calendar year that an entity may hold 
                in such calendar year;
                    ``(B) on the total number of emission allowances 
                that an entity may hold in a calendar year;
                    ``(C) so that no entity may at any time hold a 
                number of emission allowances that may influence the 
                price of emission allowances; and
                    ``(D) in a manner that will ensure adequate 
                liquidity for buyers and sellers of emission 
                allowances.
    ``(e) Status of Surrendered Emission Allowances.--Once an emission 
allowance is surrendered to the Administrator under this title, the 
emission allowance shall be disqualified from subsequent use under this 
title, including subsequent sale, exchange, or submission.
    ``(f) Orderly and Competitive Market.--The regulations promulgated 
under section 729 shall specify all procedures and requirements 
necessary for the orderly and competitive functioning of any emission 
allowance market.

``SEC. 728. OVERSIGHT.

    ``(a) In General.--Not later than January 1, 2023, and every 2 
years thereafter, the Comptroller General of the United States shall 
submit to Congress a report on--
            ``(1) the results of implementation of this title; and
            ``(2) the progress in meeting the targets specified in 
        section 702(a).
    ``(b) Contents.--Each report under subsection (a) shall include--
            ``(1) a comprehensive evaluation of--
                    ``(A) the efficiency, transparency, and soundness 
                of the distribution of emission allowances under this 
                title, and the Federal thermal energy reporting 
                program;
                    ``(B) the cost-effectiveness of this title in 
                achieving the targets specified in section 702(a); and
                    ``(C) the effectiveness of this title in 
                facilitating the deployment of additional zero-carbon 
                electricity capacity and useful thermal energy output 
                capacity; and
            ``(2) recommendations, if any, for legislative, regulatory, 
        or administrative changes with respect to this title to improve 
        its effectiveness and to reduce or eliminate any identified 
        waste, fraud, or abuse.
    ``(c) Additional Contents.--Each report under subsection (a) shall 
address the effectiveness of this title in--
            ``(1) creating and preserving jobs;
            ``(2) ensuring a manageable transition to a zero-emission 
        economy for working families and workers;
            ``(3) reducing, or enhancing sequestration of, greenhouse 
        gases;
            ``(4) developing clean technologies; and
            ``(5) maintaining a liquid market for emission allowances.

``SEC. 729. REGULATIONS.

    ``Except as otherwise specified in this title, the Administrator 
shall promulgate final regulations to carry out this title not later 
than 24 months after the date of enactment of this title.

``SEC. 730. SAVINGS PROVISIONS.

    ``Nothing in this title shall be interpreted to relieve any person 
from complying with any requirement of another title of this Act.''.
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