II 118th CONGRESS 2d Session S. 5495 IN THE SENATE OF THE UNITED STATES December 11, 2024 Mr. Van Hollen introduced the following bill; which was read twice and referred to the Committee on Finance A BILL To cap the emissions of greenhouse gases through a requirement to purchase carbon permits, to distribute the proceeds of such purchases to eligible individuals, and for other purposes.

1. Short title This Act may be cited as the Healthy Climate and Family Security Act of 2024 . 2. Findings The Congress finds the following: (1) Carbon dioxide and other greenhouse gas emissions continue to rise. (2) The warming of our planet has led to more frequent, dangerous and expensive extreme weather events, including heat waves, storms, fires, droughts, floods and tornadoes. (3) A 2018 report by the Intergovernmental Panel on Climate Change (IPCC) recommends that serious efforts be made to limit global warming to 1.5 °C, which would require that CO 2 emissions fall by 45 percent below 2010 levels by 2030, reaching net zero by the middle of this century. (4) The atmosphere is a common resource that belongs equally to all. (5) Stabilizing the climate can and must be done in a way that supports vibrant economic growth and a thriving middle class. (6) Stabilizing the climate can and must be done in a way that supports environmental justice by reducing pollution affecting communities that have suffered disproportionately from hazards arising from the extraction and combustion of fossil fuels and supports community right-to-know reporting on emissions from fossil fuel combustion. (7) Legislation to address climate change and accelerate the transition to a clean energy economy must be fair, transparent and built to last. 3. Auction of carbon permits and distribution of Healthy Climate Dividends (a) In general The Internal Revenue Code of 1986 is amended by adding at the end the following new subtitle: L Auction of Carbon Permits and Distribution of Healthy Climate Dividends Chapter 101. Cap and Dividend Program Rules. Chapter 102. Healthy Climate Dividends. Chapter 103. Border Adjustments. 101 Cap and Dividend Program Rules Sec. 9901. Definitions. Sec. 9902. Carbon permits. Sec. 9903. Auctions. Sec. 9904. Compliance obligation. Sec. 9905. Penalty for noncompliance. Sec. 9906. Transfers. Sec. 9907. Banking and borrowing. Sec. 9908. Environmental justice. 9901. Definitions For purposes of this subtitle: (1) Administrator The term Administrator means the Administrator of the Environmental Protection Agency. (2) Carbon permit The term carbon permit means a carbon permit established by the Secretary under section 9902(a). (3) Covered entity The term covered entity means— (A) in the case of crude oil— (i) any producer of crude oil operating in the United States, and (ii) any importer of crude oil, petroleum, or any petroleum product into the United States, (B) in the case of coal— (i) any coal mine operating in the United States, and (ii) any importer of coal into the United States, and (C) in the case of natural gas— (i) any entity required to submit a report to the Energy Information Agency on Form 176 by reason of delivering natural gas to an end user, and (ii) any natural gas processor not described in clause (i) with respect to sales of natural gas in the United States. (4) Covered fuel The term covered fuel means crude oil, natural gas, coal, or any other product derived therefrom for use as a combustible fuel offered for sale in United States markets. (5) Crude oil The term crude oil includes crude oil condensates, natural gasoline, shale oil, any bitumen or bituminous mixture, any oil derived from a bitumen or bituminous mixture, and any oil derived from kerogen-bearing sources. (6) Fair market value The term fair market value means the average auction price for carbon permits during the 4 quarters immediately preceding a failure to surrender, when required under section 9904, the required number of carbon permits under such section. (7) State The term State means the several States, the District of Columbia, the Commonwealth of Puerto Rico, the United States Virgin Islands, Guam, American Samoa, the Commonwealth of the Northern Mariana Islands, and any other commonwealth, territory, or possession of the United States. (8) Vintage year The term vintage year means the calendar year for which a carbon permit is established under section 9902. (9) Co-pollutant The term co-pollutant means— (A) any criteria pollutant for which there are national ambient air quality standards under section 109 of the Clean Air Act ( 42 U.S.C. 7409 ), and (B) any precursor to such a criteria pollutant which is released in fossil fuel combustion. (10) Frontline communities The term frontline communities means locations in which minority populations and low-income populations in the United States and its territories and possessions, the District of Columbia, the Commonwealth of Puerto Rico, and the Commonwealth of the Mariana Islands are exposed to disproportionately high and adverse human health or environmental effects of air pollution. 9902. Carbon permits (a) In general The Secretary, in consultation with the Administrator, shall establish a separate quantity of carbon permits for calendar year 2025 and each calendar year thereafter, as set forth under subsection (b). (b) Emissions reduction schedule (1) In general The quantity of carbon permits established by the Secretary, in consultation with the Administrator, under subsection (a) for any calendar year before 2050 that is between the nearest target years specified in paragraph (2) preceding and succeeding such calendar year shall be the quantity of such permits that represents an equal, pro rata reduction from the preceding year to the succeeding year. (2) Targets (A) Initial target The quantity of carbon permits established for 2025 shall be equal to 15 percent less than the number of metric tons of carbon dioxide emitted in the United States in 2015. (B) Decadal targets The quantity of carbon permits established for— (i) 2027 shall be equal to 35 percent less than the number of metric tons of carbon dioxide emitted in the United States in 2015, (ii) 2030 shall be equal to 50 percent less than the number of metric tons of carbon dioxide emitted in the United States in 2015, (iii) 2038 shall be equal to 60 percent less than the number of metric tons of carbon dioxide emitted in the United States in 2015, (iv) 2044 shall be equal to 80 percent less than the number of metric tons of carbon dioxide emitted in the United States in 2015, and (v) 2050 shall be equal to 90 percent less than the number of metric tons of carbon dioxide emitted in the United States in 2015. (3) Reports (A) Calendar year 2050 In 2050 the Secretary, after consultation with the Administrator, shall submit a report to Congress making recommendations concerning the program established under this subtitle for years after 2050, including the quantity of carbon permits to be established and any reductions that may be necessary to ensure a net zero carbon economy and a healthy climate. (B) Averting catastrophic climatic impact Not later than 4 years after the date of the enactment of this section, and every 4 years thereafter, the Secretary shall report to Congress on any recommended revisions to the decadal targets under paragraph (2) and the basis for those recommendations if the Secretary, after consultation with the Administrator, determines the emissions reductions targets under this subsection should be further tightened in order to— (i) reach a net-zero carbon economy by 2050, or (ii) avert catastrophic climate impacts. (c) Identification numbers The Secretary shall assign to each carbon permit established under subsection (a) a unique identification number that includes the vintage year for that carbon permit. (d) Legal status of carbon permits (1) In general A carbon permit does not constitute a property right. (2) Termination or limitation Nothing in this subtitle or any other provision of law shall be construed to limit or alter the authority of the United States, including the Secretary acting pursuant to statutory authority, to terminate or limit a carbon permit. (3) Other provisions unaffected Nothing in this subtitle relating to carbon permits issued under this section shall affect the application of any other provision of law to a covered entity (including the Clean Air Act), or the responsibility for a covered entity to comply with any such provision of law. Regional and State greenhouse gas initiatives are not preempted by this subtitle. (e) Regulations Not later than December 31, 2025, the Secretary shall promulgate regulations to carry out the provisions of this subtitle. 9903. Auctions (a) Periodic auctions The Secretary shall conduct periodic public auctions of carbon permits established under section 9902(a). The Secretary shall conduct at least 1 such auction in each calendar quarter of each year for which carbon permits are established, and shall distribute the available permits for each such year pro rata among the quarters of such year. (b) Auction rules The Secretary shall— (1) limit auction participation only to covered entities, (2) establish a limit on the amount of carbon permits that can be purchased by a single entity at each auction and an aggregate limit on the total amount of permits that can be held by a single entity at any one time that— (A) reflects anticipated sector and participant demand, (B) prevents speculation, manipulation, or hoarding of permits, and (C) does not interfere with normal market competition, and (3) set a minimum permit price at the initial auction of $40 per ton of carbon dioxide that will be released when the covered fuel is burned, increase this minimum price by $10 in each successive year and adjust for inflation, and have the authority to set higher minimum permit prices. (c) Unsold permits Any carbon permit unsold at the auction at which it is offered shall expire. 9904. Compliance obligation (a) In general Not later than April 1, 2025, and April 1 of each year thereafter, each covered entity shall surrender to the Secretary a quantity of carbon permits at least as great as the number of metric tons of carbon dioxide that the Secretary, in consultation with the Administrator, determines would be emitted by the combustion of covered fuels with respect to which the covered entity made the first sale in United States markets during the previous calendar year. (b) Use treated as sale For purposes of subsection (a), consumption for an emitting use by the covered entity of covered fuels produced by the covered entity shall be treated as a first sale. 9905. Penalty for noncompliance (a) In general Any covered entity that fails for any year to surrender, by the deadline described in section 9904, one or more of the carbon permits due pursuant to such section shall be required to surrender permits in order to meet this past due obligation and shall be liable for payment to the Secretary of a penalty in the amount described in subsection (b). (b) Amount The amount of a penalty required to be paid under subsection (a) shall be equal to the product obtained by multiplying— (1) the number of carbon permits that the covered entity failed to surrender by the deadline, by (2) 3 times the fair market value of carbon permits issued for emissions occurring in the calendar year for which the carbon permits were due. (c) Timing A penalty required under this section shall be immediately due and payable to the Secretary, without demand, in accordance with regulations promulgated by the Secretary, which shall be issued not later than 1 year after the date of enactment of this subtitle. (d) No effect on liability A penalty due and payable by the covered entity under this section shall not diminish the liability of the covered entity for any fine, penalty, or assessment against the covered entity for the same violation under any other provision of law. (e) Penalty not deductible No deduction shall be allowed under subtitle A for a penalty paid under this section. 9906. Tracking The regulations promulgated under section 9902(e) shall include a system for issuing, recording, holding, and tracking carbon permits that shall specify all necessary procedures and requirements for an orderly and competitive functioning of the carbon permit system. Such regulations shall provide for appropriate publication of the information in the system on the internet. 9907. Banking (a) Banking A carbon permit may be used to meet the compliance obligation requirements of section 9904 for emissions only in the permit’s vintage year, the year prior, or the year following. At least 80 percent of permits used by an entity to meet its compliance obligation for a year must be of that year’s vintage. The Secretary shall have the authority to establish stricter requirements for the percentage of the compliance obligation for a year that must be met with permits of that year’s vintage, and to establish penalties for failure to comply. (b) Expiration A carbon permit shall expire when— (1) it is surrendered to the Secretary under section 9904, (2) it has been held by a covered entity and has not been surrendered to the Secretary under section 9904 within 18 months after the end of its vintage year, or (3) the Secretary determines by regulation that expiration is necessary to ensure the authenticity and integrity of carbon permits or the carbon permit tracking system. 9908. Environmental justice (a) In general This chapter shall be implemented to the extent practicable to ensure that reductions in carbon emissions are accompanied by commensurate reductions in emissions of co-pollutants from fossil fuel combustion that impact frontline communities. (b) Report on Air Quality Methods Development Not later than 1 year after the date of enactment of this section, the Administrator shall submit to Congress a report detailing efforts to increase air quality monitoring deployment and technical assistance at the Federal, State, local, and tribal level. (c) Air quality monitoring in frontline communities The Administrator (or the Administrator's delegate) is authorized to provide for trends monitoring of ambient air quality in frontline communities and monitoring of co-pollutant emissions from sources located in or near such communities that impact their pollution burden. Not later than 3 years after the date of the enactment of this section, any information from such monitors shall be recorded and reported at the level of monitor and pollutant, and made available to the public to support effective community participation in the making of environmental policies. (d) Environmental justice guarantee In cases where co-pollutant emissions impacting frontline communities have not declined at a rate equal to the carbon dioxide emissions targets established in section 9902(b)(2), the Administrator is authorized to implement or promulgate additional regulatory measures to ensure such reductions. (e) Environmental justice review Not later than 4 years after the date of enactment of this section, and annually thereafter, the Administrator shall implement an annual review to determine frontline communities, evaluate the effects of the enactment of this chapter on environmental justice, and recommend further corrective measures if needed. (f) Appropriations Out of any money in the Treasury not otherwise appropriated, there shall be appropriated such sums as are necessary to carry out the purposes of this section, to remain available until expended. 102 Healthy Climate Dividends Sec. 9911. Healthy Climate Trust Fund. Sec. 9912. Healthy Climate Dividend Payments. Sec. 9913. Transparency. 9911. Healthy Climate Trust Fund (a) Establishment There is established in the Treasury of the United States a trust fund to be known as the Healthy Climate Trust Fund , consisting of such amounts as may be appropriated to such trust fund as provided for in this section. (b) Transfers (1) Proceed amounts There are appropriated to the Healthy Climate Trust Fund amounts equivalent to funds received as proceeds under section 9903. (2) Penalty amounts There are appropriated to the Healthy Climate Trust Fund amounts equivalent to funds received as penalties under section 9905. (c) Expenditures (1) Administrative expenses Out of any amounts in the Treasury not otherwise appropriated, there shall be appropriated such sums as are necessary to pay the administrative expenses necessary to carry out this chapter. (2) Healthy Climate Dividend Payments Amounts in the Healthy Climate Trust Fund not used under paragraph (1) for any month shall be available for making Healthy Climate Dividend Payments under section 9912. 9912. Healthy Climate Dividend Payments (a) In general For purposes of this section: (1) Healthy Climate Dividend Payment The term Healthy Climate Dividend Payment means the individual pro rata share, as determined by the Secretary, of amounts available for any quarter in the Healthy Climate Trust Fund under section 9911(c)(2). The amounts so available for any quarter shall be equal to the proceeds from auctions conducted under section 9903 in the preceding calendar quarter. (2) Eligible individual (A) In general The term eligible individual means, with respect to any quarter, any individual with a valid social security number (other than a nonresident alien individual) who is lawfully present in the United States for such quarter, as determined and verified by the Secretary in consultation with any other Federal entity the Secretary determines appropriate. (B) Opt out An individual may elect not to be treated as an eligible individual. (b) Payment of Healthy Climate Dividend From amounts made available under section 9911(c)(2), the Secretary shall make a Healthy Climate Dividend Payment not later than the end of the calendar quarter following the calendar quarter in which such amounts are appropriated to the Healthy Climate Trust Fund under section 9911 to each eligible individual for that quarter. Such payments shall be made by electronic means to the maximum extent practicable. (c) Exclusion from gross income Gross income shall not include any Healthy Climate Dividend paid under this section. (d) Regulations The Secretary shall prescribe such regulations and other guidance as may be necessary or appropriate to carry out this section. 9913. Transparency (a) Report to Congress Not later than June 30, 2026, and at least annually thereafter, the Secretary shall transmit to Congress a report accounting for the disposition of amounts in the Healthy Climate Trust Fund in the previous calendar year. (b) Healthy Climate Trust Fund Website Not later than 90 days after the date of the enactment of this subtitle, the Secretary shall establish and maintain a website to provide the public with information on the disposition of any amounts in the Healthy Climate Trust Fund. 103 Border Adjustments Sec. 9921. Carbon equivalency fee. Sec. 9922. Definitions. Sec. 9923. Sense of Congress. 9921. Carbon equivalency fee (a) Imports The Secretary shall impose carbon equivalency fees to be collected by the Commissioner responsible for U.S. Customs and Border Control on imports of carbon-intensive goods. The amount of the carbon equivalency fee shall be equal to the cost that domestic producers of a comparable carbon-intensive good incur as a result of— (1) prices paid in the acquisition of carbon permits by covered entities under this subtitle, and (2) carbon equivalency fees paid by importers of carbon-intensive goods used in the production of the comparable carbon-intensive good. (b) Payments to Exporters The Secretary shall pay without interest to entities exporting from the United States carbon-intensive goods produced in the United States. The amount of the payment shall be equal to the cost that domestic producers of the carbon-intensive good incur as a result of— (1) prices paid in the acquisition of carbon permits by covered entities under this subtitle, and (2) carbon equivalency fees paid by importers of carbon-intensive goods used in the production of the comparable carbon-intensive good. (c) Expiration This section shall cease to have effect at such time as and to the extent that— (1) an international agreement requiring countries that emit greenhouse gases and produce carbon-intensive goods for export markets to adopt equivalent measures comes into effect, or (2) the country of export has implemented equivalent measures, as determined by the Secretary, in consultation with the Secretary of State. 9922. Definitions In this chapter: (1) Carbon-intensive good The term carbon-intensive good means a good that, as identified by the Secretary, in consultation with the Administrator, by rule— (A) is a primary product, or (B) is a manufactured item in which one or more primary products are inputs and the cost of production of which in the United States is significantly increased by reason of the requirements under this subtitle. (2) Primary product The term primary product means— (A) iron, steel, steel mill products (including pipe and tube), aluminum, cement, glass (including flat, container, and specialty glass and fiberglass), pulp, paper, chemicals, or industrial ceramics, and (B) any other manufactured product that the Secretary, in consultation with the Administrator, determines— (i) is sold for purposes of further manufacture, and (ii) generates, in the course of the manufacture of the product, direct and indirect greenhouse gas emissions that are comparable (on an emissions-per-dollar of output basis) to emissions generated in the manufacture or production of a primary product identified in subparagraph (A). (3) Equivalent measure The term ‘equivalent measure’ means a tax, or other regulatory requirement that imposes a cost, on manufacturers of carbon-intensive goods located outside the United States, by reason of greenhouse gas emissions in the production of such goods by such manufacturers, approximately equal to the cost imposed by this subtitle on manufacturers of comparable carbon-intensive goods located in the United States. 9923. Sense of Congress It is the sense of Congress that the United States should work proactively under the United Nations Framework Convention on Climate Change and in other appropriate fora, to establish binding agreements committing all major greenhouse gas emitting countries and countries with globally competitive producers of carbon-intensive goods to contribute equitably to the reduction of global greenhouse gas emissions on a schedule and order of magnitude necessary to stabilize the climate. . (b) Clerical amendment The table of subtitles for the Internal Revenue Code of 1986 is amended by adding at the end the following new item: Subtitle L. Auction of Carbon Permits and Distribution of Healthy Climate Dividends. . 4. Non-auction greenhouse gases (a) Definitions In this section: (1) The term Administrator means the Administrator of the Environmental Protection Agency. (2) The term non-auction greenhouse gas refers to the gases included on the list in effect under subsection (b). (b) List of non-Auction greenhouse gases (1) Initial list Not later than 2 years after the date of the enactment of this Act, the Administrator, by rule, shall finalize and publish a list that— (A) consists of the anthropogenically emitted gases that are determined by the Administrator to contribute to global warming; and (B) excludes gases to the extent they are— (i) carbon dioxide emitted by the combustion of a covered fuel (as such term is defined in section 9901 of the Internal Revenue Code of 1986, as added by section 3(a) of this Act); or (ii) directly attributable to the production of animals for food or food products. (2) Updates The Administrator shall periodically review and, as appropriate, update the list under paragraph (1). (c) Regulations (1) In general Under the authorities vested in the Administrator by the Clean Air Act ( 42 U.S.C. 7401 et seq. ) and any other applicable law (other than this section), the Administrator shall promulgate regulations addressing the contribution of non-auction greenhouse gases to global warming. (2) International competitiveness In promulgating regulations under this subsection, the Administrator shall take into consideration the effect of such regulations on the international competitiveness of businesses and industries of the United States. (d) Schedule (1) In general The regulations under subsection (c) shall ensure that— (A) not later than 4 years after the date of enactment of this Act, requirements take effect to regulate sources which, collectively, emit not less than 25 percent of non-auction greenhouse gases emitted in the United States; (B) not later than 6 years after the date of enactment of this Act, requirements take effect to regulate sources which, collectively, emit not less than 50 percent of non-auction greenhouse gases emitted in the United States; (C) not later than 8 years after the date of enactment of this Act, requirements take effect to regulate sources which, collectively, emit not less than 75 percent of non-auction greenhouse gases emitted in the United States; and (D) not later than 10 years after the date of enactment of this Act, requirements take effect to regulate sources which, collectively, emit 100 percent of non-auction greenhouse gases emitted in the United States. (2) Baseline The percentages specified in paragraph (1) shall be applied relative to the aggregate quantity of non-auction greenhouse gases emitted in the United States during the calendar year in which the initial list under subsection (b)(1) is required to be finalized by such subsection. (e) Priorities In determining priorities for regulating the emissions of non-auction greenhouse gases under subsection (c), the Administrator shall consider— (1) the degree to which the gases involved contribute to global warming; and (2) the speed with which a given reduction would contribute to stabilizing the climate. (f) Citizen suits The provisions of section 304 of the Clean Air Act ( 42 U.S.C. 7604 ) shall apply with respect to a violation of a requirement under this section, or the failure of the Administrator to perform a non-discretionary act or duty under this section, to the same extent and in the same manner as such provisions apply with respect to a violation described in subsection (a) of such section 304 or a failure to perform a non-discretionary act or duty described in such subsection. (g) Report to Congress Not later than 2 years after the date of the enactment of this Act, the Administrator shall submit a report to the Congress identifying any additions or modifications to statutory provisions which are needed for the Administrator to effectively address the contribution of non-auction greenhouse gases to global warming. 5. Disclosure of information (a) Limited disclosure of identity Subsection (l) of section 6103 of the Internal Revenue Code of 1986 is amended by adding at the end the following new paragraph: (23) Limited disclosure of identity information relating to Healthy Climate Dividend Payments (A) Department of the Treasury Information regarding taxpayer identity with respect to individuals shall, without written request, be open to inspection by or disclosure to officers and employees of the Department of the Treasury whose official duties require such inspection or disclosure for purposes of section 9912. (B) Commissioner of Social Security The Commissioner of Social Security shall, on written request, disclose to officers and employees of the Department of the Treasury information regarding taxpayer identity which has been disclosed to the Social Security Administration as provided by paragraph (1) or (5). (C) Restriction on disclosure Information disclosed under this paragraph shall be disclosed only for purposes of, and to the extent necessary in, carrying out section 9912. . (b) Conforming amendments Section 6103(p)(3)(A) of the Internal Revenue Code of 1986 is amended by striking or (18) and inserting (18), or (23) . 6. Preservation of remedies (a) In general Nothing in this Act preempts, displaces, or restricts any State or Federal common law or statutory rights that create a remedy for civil relief, including those for civil damages, or that create a penalty for criminal conduct. (b) Claims related to fossil fuels and climate change Notwithstanding any other provision of law, nothing in this Act, the Clean Air Act ( 42 U.S.C. 7401 et seq. ), or Federal common law preempts, displaces, or restricts any right or remedy of any person, State, city, county, or local or Tribal government under State or local statute, ordinance, or common law related to any allegation of— (1) deception concerning the effects of fossil fuels on climate change; (2) damage or injury resulting from the role of fossil fuels in contributing to climate change; or (3) the failure to avoid any damage or injury related to— (A) climate change, including claims for nuisance, trespass, design defect, negligence, failure to warn, or deceptive or unfair practices; and (B) claims for injunctive, declaratory, monetary, or other relief. 7. Effective date The amendments made by this Act shall take effect on the date of the enactment of this Act.