In June 2009, the House passed H.R. 2454 , the American Clean Energy and Security Act of 2009. In November 2009, Chairwoman Boxer of the Senate Committee on Environment and Public Works completed markup of S. 1733 , the Clean Energy Jobs and American Power Act, by approving a "Manager's Amendment" as a substitute, and ordered S. 1733 reported. Both the House-passed ( H.R. 2454 ) and the Senate-reported ( S. 1733 ) bills would establish a cap-and-trade system to regulate greenhouse gas (GHG) emissions, as well as to address energy efficiency, renewable energy, and other energy topics. Among other provisions, both bills would require major reductions in GHG emissions from entities comprising roughly 85% of current U.S. GHG emissions. Covered sectors would include electricity production, natural gas distribution, petroleum refining, and industrial sectors. These and related bills and issues are currently being debated in Congress. For more detailed information, see CRS Report R40896, Climate Change: Comparison of the Cap-and-Trade Provisions in H.R. 2454 and S. 1733 . The climate provisions in the House-passed and the Senate-reported bills would not require GHG emission reductions in the agriculture and forestry sectors. However, if enacted, provisions in these bills could potentially raise farm input costs for fossil fuels, fertilizers, energy, and other production inputs. These higher costs could potentially be alleviated by possible farm revenue increases should farmers participate in carbon offset and renewable energy provisions that are part of these bills. This report provides a background on the energy and climate debate and pending legislation as it pertains to the U.S. agriculture and forestry sectors. It provides a brief overview of how the agricultural and forestry sectors could be affected by the proposed cap-and-trade programs in climate titles of these bills. Also included in the proposed cap-and-trade programs are provisions that address which industries are to be considered sources of GHG emissions thus requiring emission reductions; which industries are to be considered as eligible sources of carbon allowances; and what types of domestic and international carbon storage and emission reduction activities might become eligible under a carbon offset credit program. This report also describes some of the carbon energy and biomass provisions pertaining to the domestic agricultural and forestry sectors in the energy titles of these bills. Finally, the report describes other related initiatives involving the U.S. agricultural sectors, including updates on related activities being addressed by the U.S. Environmental Protection Agency (EPA). During the 110 th Congress, several GHG bills were debated that would have explicitly allowed for the use of carbon offsets, including agricultural activities and other land-based practices, under a cap-and-trade framework. This builds on the concept, also expressed in the 110 th Congress by the House Energy and Commerce Committee, that emissions reductions and carbon sequestration by the agricultural sector may provide an appropriate source of credits or offsets within a cap-and-trade program. However, in the 110 th Congress, some proposed bills did not allow for offsets, but would have set aside a percentage of allowances for various purposes, including biological sequestration. Participating farmers and landowners who receive these allowances for sequestration and/or emission reduction activities could sell them to facilities that could become covered by a cap-and-trade program. For example, one 110th Congress bill, S. 3036 (Boxer; formerly S. 2191 (Leiberman/Warner)), contained several agriculture- and forestry-based provisions. The cap-and-trade framework outlined in S. 3036 established a tradeable allowance system that included a combination of auctions and free allocation of tradeable allowances. As part of this overall framework, S. 3036 included three design mechanisms that could provide financial incentives to encourage land-based agricultural and forestry activities: carbon offsets, set-aside allowances, and auction proceeds. S. 3036 provided for a range of agriculture and forestry offset projects, including agricultural and rangeland sequestration and management practices, land use change and forestry activities, manure management and disposal, and other terrestrial offset practices. S. 3036 also would have directly allocated 5% of the overall emissions allowances to domestic agriculture and forestry entities, and allocated a set percentage of available auction proceeds to carry out a cellulosic biomass ethanol technology deployment program. Both the distribution of allowances to support agricultural and forestry activities and an offset program could provide opportunities to some farmers and landowners by allowing them to directly participate in and potentially gain a significant part of this emerging carbon market. The offset and allowance provisions could allow farmers and landowners to participate in this market by granting them the use of allowances and credits for sequestration and/or emission reduction activities. These allowances and credits could be sold to regulated facilities (e.g., power plants) covered by a cap-and-trade program to meet their emission reduction obligations. Proceeds from the sale of these allowances, credits, and auctions could be used to further promote and support activities in these sectors that reduce, avoid, or sequester emissions. For more information on the agriculture and forestry provisions in S. 3036 , see CRS Report RS22834, Agriculture and Forestry Provisions in Climate Change Bills in the 110th Congress . Also during Senate floor debate of S. 3036 in the 110 th Congress, Senator Stabenow introduced an amendment to the bill that sought to replace the offset provisions in S. 3036 with an even more expansive version of the agriculture and forestry offset program provisions. This amendment was not adopted, but the general provisions of this proposed amendment continue to be promoted by the farm community as a desired option for establishing an offset program as part of a cap-and-trade program. In May 2008, these and other issues and concerns were raised at a 110 th Congress Senate subcommittee hearing on the role of agriculture and forestry activities under a cap-and-trade program. Congress has continued to consider legislation in the 111 th Congress to impose or permit some form of market-based controls on GHG emissions. However, with respect to the agriculture and forestry sectors, this legislation differs from that debated in the 110 th Congress. Although the climate provisions in both the House-passed ( H.R. 2454 ) and the Senate-reported ( S. 1733 ) bills do not specifically include agricultural operations among its "covered entities" under a mandatory emissions cap, the extent to which the agricultural and forestry sectors are granted tradeable allowances and opportunities under a carbon offset program is more limited compared to some legislation debated in the 110 th Congress. For more general background information about these two bills, see CRS Report R40896, Climate Change: Comparison of the Cap-and-Trade Provisions in H.R. 2454 and S. 1733 . Prior to House passage of H.R. 2454 , the extent to which the agricultural and forestry sectors could be allowed to participate in an offset and allowance program was actively debated in Congress. In fact, the version of H.R. 2454 that passed the House was substantially different than the version that was reported by the House Committee on Energy and Commerce. Although H.R. 2454 set the aggregate number of submitted offsets at two billion tons annually, it initially did not identify whether agriculture and forestry activities would be eligible as offsets and did not include a separate title covering domestic agriculture and forestry carbon offsets. Instead eligible domestic offset types would be determined through the EPA rulemaking process. This caused concern among stakeholders in the agricultural community who wanted the U.S. Department of Agriculture (USDA) to be the lead agency administering the offset program for domestic agricultural and forestry offsets. In addition, many in the agricultural community were concerned that the committee-reported bill did not include an explicit list of offset practices. Just prior to the floor debate, following negotiations between the Chairmen of the House Energy and Commerce Committee and the House Agriculture Committee, the so-called "Peterson Amendment" was added to H.R. 2454 . The Energy Committee's June 26, 2009 "Manager's Amendment" included a new Title V to H.R. 2454 —"Agriculture and Forestry Related Offsets." Among other provisions, the Peterson Amendment allowed for certain agricultural and forestry activities to become eligible to participate in a carbon offset program, established that this program would be implemented by USDA (rather than EPA), addressed concerns in the agricultural community about existing and evolving renewable energy and certain biomass requirements, and also recognized certain early actions that have already been taken by farmers and landowners to reduce emissions and sequester carbon. The inclusion of provisions that allow for agricultural and forestry offsets as part of a cap-and-trade scheme is generally supported by a broad farm industry coalition. Initially this coalition consists of agricultural groups representing federally-supported crops (such as grains and cotton), livestock and dairy, the American Farm Bureau Federation, the National Farmers Union, the American Farmland Trust, and other agriculture support and utility companies. Former Senators and Majority Leaders Bob Dole and Tom Daschle have also advocated on behalf of the Bipartisan Policy Center that farmers be fully integrated into any cap-and-trade program. Most groups, including many within the environmental community, generally support the inclusion of carbon offset projects within a cap-and-trade scheme since this is likely to help contain overall costs of a carbon reduction program. More recently, however, several farm groups are tending to oppose any climate legislation because of concerns that it will raise production and input costs to farmers. In March 2009, the House Agriculture Committee issued a climate change questionnaire, which was distributed to more than 400 organizations, to solicit input on proposals to reduce GHG emissions.