109th CONGRESS
2d Session
H. R. 5049
To establish a market-based system to regulate greenhouse gas emissions
and to promote advanced energy research and technology development and deployment,
and for other purposes.
IN THE HOUSE OF REPRESENTATIVES
March 29, 2006
Mr. UDALL of New Mexico (for himself and Mr. PETRI) introduced the following
bill; which was referred to the Committee on Energy and Commerce, and in
addition to the Committees on Science, International Relations, and Education
and the Workforce, for a period to be subsequently determined by the Speaker,
in each case for consideration of such provisions as fall within the jurisdiction
of the committee concerned
A BILL
To establish a market-based system to regulate greenhouse gas emissions
and to promote advanced energy research and technology development and deployment,
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 `Keep America Competitive Global Warming Policy
Act of 2006'.
SEC. 2. DEFINITIONS.
For purposes of this Act:
(1) ADMINISTRATOR- The term `Administrator' means the Administrator of
the Environmental Protection Agency.
(2) ALLOWANCE- The term `allowance' means a tradeable allowance issued
by the Administrator pursuant to section 3(b), 5(a), or 7(b).
(3) CARBON EQUIVALENT- With respect to each greenhouse gas, the term `carbon
equivalent' means the amount of the greenhouse gas that traps the same
amount of heat as one metric ton of carbon, as determined by the Administrator.
(4) COVERED FOSSIL FUEL- The term `covered fossil fuel' means coal, crude
oil, natural gas, natural gas liquids, refined petroleum products, and
any other fossil fuel that the Administrator determines appropriate.
(5) DEVELOPING COUNTRIES- The term `developing countries' means the countries
that are not listed in Annex I of the United Nations Framework Convention
on Climate Change.
(6) GREENHOUSE GAS- The term `greenhouse gas' means carbon dioxide, hydrofluorocarbons,
methane, nitrous oxide, perfluorocarbons, and sulfur hexafluoride.
(7) NATURAL GAS- The term `natural gas' does not include natural gas liquids.
(8) SEQUESTRATION- The term `sequestration' means the capture, recapture,
long-term separation, isolation, or removal of greenhouse gases from the
atmosphere, including through reforestation, forest preservation, and
geological storage.
SEC. 3. ESTABLISHMENT OF SYSTEM OF ALLOWANCES.
(a) Regulations- The Administrator shall issue regulations not later than
the second January 1 after the date of enactment of this Act to establish
a system for--
(1) issuing, recording, and tracking allowances;
(2) appropriately measuring for purposes of section 6 the relative amounts
of carbon that will be emitted or produced by given amounts of covered
fossil fuels; and
(3) appropriately measuring given amounts of greenhouse gases in units
of carbon equivalents.
(b) Issuance of Allowances- On the third January 1 after the date of enactment
of this Act, and annually thereafter, the Administrator shall issue a number
of allowances equal to the number of allowances that the Administrator estimates
will be required to be transferred to the Administrator pursuant to section
6 during the calendar year beginning with that January 1. The Administrator
shall base such estimate on the number of allowances that would have been
transferred pursuant to section 6 had such transfers been required during
each of the 3 full calendar years immediately preceding that January 1.
The Administrator shall publish in the Federal Register the number of allowances
to be issued pursuant to this subsection not later than July 1 of the calendar
year immediately preceding that January 1.
(c) Sale or Exchange of Allowances- Any person holding an allowance issued,
sold, or exchanged under this Act may sell or exchange such allowance to
any other person. The sale or exchange of such allowance shall be recorded
in accordance with regulations issued by the Administrator. An allowance
issued pursuant to subsection (b), section 5(a), or section 7(b) shall not
be sold, exchanged, or used to meet the requirements of section 6 after
the expiration of the 2-year period beginning on the date that the allowance
is issued. The Administrator shall maintain a registry of all allowances
issued, sold, or exchanged under this Act.
(d) Serial Numbers- The Administrator shall assign a unique serial number
to each allowance issued pursuant to subsection (b), section 5(a), and section
7(b), and shall take such action as may be necessary to prevent the counterfeiting
of allowances. The Administrator shall retire the serial number assigned
to an allowance pursuant to this subsection on the date that the allowance
is used to meet the requirements of section 6.
SEC. 4. ALLOCATION OF ALLOWANCES.
(a) Secretary of Energy- In each year that allowances are issued by the
Administrator pursuant to section 3(b), the Administrator shall allocate
25 percent of such allowances to the Secretary of Energy, for use in carrying
out section 8.
(b) Secretary of State- In each year that allowances are issued by the Administrator
pursuant to section 3(b), the Administrator shall allocate 10 percent of
such allowances to the Secretary of State. After consultation with such
agencies as the Secretary of State determines, the Secretary of State shall
use the allowances to--
(1) invest in low-emission and emission-free policies, technologies, and
projects in developing countries; and
(2) assist developing countries in adopting the emission reducing policies
and programs described in section 5(b).
(1) IN GENERAL- In each year that allowances are issued by the Administrator
pursuant to section 3(b), the Administrator shall retain 35 percent of
such allowances for distribution under this subsection.
(2) RULEMAKING- The Administrator shall establish, by rule, a procedure
to distribute allowances without charge to the industry sectors listed
in paragraph (3) in a sufficient amount to offset, but no more than offset,
any expected loss of profits by that industry sector as a whole, directly
attributable to the enactment of this Act. Within each of the industry
sectors listed in paragraph (3), the allowances shall be distributed without
charge to companies within the respective industry sector based on their
relative historic share of greenhouse gas emissions, as determined by
the Administrator.
(3) INDUSTRY- Consistent with paragraph (2), the Administrator shall distribute
without charge not more than 5 percent of the allowances issued by the
Administrator pursuant to section 3(b) each calendar year to each of--
(A) the fossil fuel-fired electric generating industry;
(B) the petroleum and natural gas industry;
(C) the coal industry; and
(D) energy-intensive industries, as determined by the Administrator,
and industries that are required to transfer allowances to the Administrator
under section 6(b) or (c).
(4) TRANSITION ASSISTANCE-
(A) IN GENERAL- The Administrator, in consultation with the Secretary
of Labor, shall distribute the percentage of allowances described in
subparagraph (B) each calendar year to the States. Each State shall
receive allowances under this paragraph according to the proportion
of individuals who have lost jobs in that State in the previous year
as a result of the enactment of this Act as compared to all the individuals
who have lost jobs in all States the previous year as a result of the
enactment of this Act. Each State shall use the allowances to make--
(i) grants to individuals who have lost their jobs as a result of
the enactment of this Act for the purpose of--
(I) providing training, adjustment assistance, and employment services
to such individuals; and
(II) making income-maintenance and needs-related payments to such
individuals; and
(ii) grants to local governments that represent communities that demonstrate
economic losses that are directly attributable to the enactment of
this Act for the purpose of assisting the communities in attracting
new employers or providing essential local government services.
(B) PERCENTAGE OF ALLOWANCES USED FOR TRANSITION ASSISTANCE- With respect
to allowances issued in the third full calendar year beginning after
the date of enactment of this Act, the percentage referred to in subparagraph
(A) shall be 15 percent of the allowances issued by the Administrator
pursuant to section 3(b) for that year. The percentage shall be reduced
by 1.5 percentage points each calendar year thereafter.
(5) LOW-INCOME HOME ENERGY ASSISTANCE- The Administrator shall distribute
5 percent of the allowances issued by the Administrator pursuant to section
3(b) each calendar year to the States. Each State shall receive allowances
under this paragraph equal to its share of the total of all individuals
receiving home energy assistance pursuant to the Low-Income Home Energy
Assistance Act of 1981 (42 U.S.C. 8621 et seq.) in the previous year.
Each State shall use the allowances to provide home energy assistance
to such individuals.
(d) Secretary of the Treasury- In each year that allowances are issued by
the Administrator pursuant to section 3(b), the Administrator shall allocate
25 percent of such allowances to the Secretary of the Treasury, plus the
percentage not distributed under subparagraph (B) of subsection (c)(4) pursuant
to the percentage reduction described in the last sentence of that subparagraph.
The Secretary of the Treasury shall deposit the cash proceeds from selling
the allowances pursuant to section 3(c) in the Treasury. Allowances that
have been allocated or retained under subsection (a), (b), or (c) but have
not been distributed pursuant to such subsections at the end of the calendar
year in which they were issued by the Administrator shall be transferred,
without charge, to the Secretary of the Treasury for sale pursuant to section
3(c).
SEC. 5. SAFETY VALVE ALLOWANCES.
(a) Safety Valve Price- Beginning on the third January 1 after the date
of enactment of this Act, the Secretary of the Treasury shall offer for
sale an unlimited number of allowances at the safety valve price. The allowances
sold under this subsection shall be in addition to the allowances issued
pursuant to section 3(b). In the third full calendar year beginning after
the date of enactment of this Act, the safety valve price shall be $25 per
allowance. On January 1 of each calendar year thereafter, the Secretary
of the Treasury shall adjust the safety valve price by the percentage increase
in the Consumer Price Index for All Urban Consumers (United States city
average) during the 1-year period ending 2 months before the date of the
adjustment plus one percent.
(b) Policy Comparability Certification- Beginning in the sixth full calendar
year beginning after the date of enactment of this Act and in subsequent
years thereafter, the Secretary of State shall evaluate whether the 5 developing
countries with the most greenhouse gas emissions, as determined by the Secretary
of State in consultation with the Administrator, have adopted and are enforcing
policies and programs to reduce greenhouse gas emissions that are comparable
to the policies and programs established pursuant to this Act. Based on
the evaluation completed during the previous calendar year, the Secretary
of State shall provide certification to the President on the seventh January
1 after the date of enactment of this Act and annually thereafter if the
Secretary finds that the 5 developing countries with the most greenhouse
gas emissions have adopted and are enforcing comparable policies and programs.
Not later than 30 days after the Secretary of State provides such certification,
the President shall transmit to Congress an acceptance or rejection of the
Secretary of State's certification along with a report documenting substantial
evidence that supports the President's decision. If the Secretary of State
provides certification pursuant to this subsection and the President accepts
such certification, the Secretary of the Treasury shall adjust the safety
valve price, in addition to the percentage increase due to the Consumer
Price Index under subsection (a), by 2 percent, not later than 30 days after
the President accepts such certification. The Secretary of the Treasury
shall not increase the safety valve price under this subsection during any
calendar year in which the Secretary of State has not provided certification
pursuant to this subsection or the President has not accepted such certification.
SEC. 6. ALLOWANCES REQUIRED.
(1) IMPORTED PETROLEUM FUEL PRODUCTS- Except as provided in paragraph
(6) and consistent with regulations issued by the Administrator pursuant
to section 3(a), a person shall not import into the United States any
refined petroleum product without transferring to the Administrator a
number of allowances equal to the number of metric tons of carbon that
will be emitted or produced from the amount of refined petroleum product
that is imported into the United States by such person.
(i) PROHIBITION- Except as provided in paragraph (6) and consistent
with regulations issued by the Administrator pursuant to section 3(a),
an owner or operator of a natural gas pipeline shall not accept for
transportation in such pipeline any natural gas without transferring
to the Administrator a number of allowances equal to the number of
metric tons of carbon that will be emitted or produced from the amount
of natural gas accepted for transportation by the owner or operator.
(ii) EXCEPTION- With respect to an amount of natural gas for which
an owner or operator of a natural gas pipeline or a natural gas processing
plant has transferred allowances to the Administrator pursuant to
this paragraph before a subsequent owner or operator of a natural
gas pipeline accepts the natural gas for transportation, the subsequent
owner or operator shall not be required to transfer additional allowances
to the Administrator.
(i) PROHIBITION- Except as provided in paragraph (6) and consistent
with regulations issued by the Administrator pursuant to section 3(a),
an owner or operator of a natural gas processing plant shall not sell
or dispose of natural gas or natural gas liquids without transferring
to the Administrator a number of allowances equal to the number of
metric tons of carbon that will be emitted or produced from the amount
of natural gas or natural gas liquids sold or disposed of by the owner
or operator.
(ii) EXCEPTIONS- With respect to an amount of natural gas or natural
gas liquids for which an owner or operator of a natural gas processing
plant has transferred allowances to the Administrator pursuant to
clause (i) before a subsequent owner or operator of a natural gas
processing plant sells or disposes of the natural gas or natural gas
liquids, the subsequent owner or operator shall not be required to
transfer additional allowances to the Administrator. With respect
to an amount of natural gas for which an owner or operator of a natural
gas pipeline has transferred allowances to the Administrator pursuant
to subparagraph (A)(i) before an owner of a natural gas processing
plant sells or disposes of the natural gas (including in liquid form),
the owner or operator of the natural gas processing plant shall not
be required to transfer additional allowances to the Administrator
pursuant to this subparagraph.
(A) PROHIBITION- Except as provided in paragraph (6) and consistent
with regulations issued by the Administrator pursuant to section 3(a),
an owner or operator of a refinery shall not receive crude oil without
transferring to the Administrator a number of allowances equal to the
number of metric tons of carbon that will be emitted or produced from
the amount of crude oil that is received by the owner or operator.
(B) EXCEPTION- With respect to an amount of crude oil for which an owner
or operator of a refinery has transferred allowances to the Administrator
pursuant to subparagraph (A) before a subsequent owner or operator of
a refinery receives the crude oil, the subsequent owner or operator
shall not be required to transfer additional allowances to the Administrator.
(i) PROHIBITION- Except as provided in paragraph (6) and consistent
with regulations issued by the Administrator pursuant to section 3(a),
an owner or operator of a coal preparation plant shall not sell or
dispose of coal prepared at such plant without transferring to the
Administrator a number of allowances equal to the number of metric
tons of carbon that will be emitted or produced from the amount of
coal sold or disposed of by the owner or operator.
(ii) EXCEPTION- With respect to an amount of coal for which a person
has transferred allowances to the Administrator pursuant to this paragraph
before a subsequent owner or operator of a coal preparation plant
sells or disposes of the coal, the subsequent owner or operator shall
not be required to transfer additional allowances to the Administrator.
(i) PROHIBITION- Except as provided in paragraph (6) and consistent
with regulations issued by the Administrator pursuant to section 3(a),
an owner or operator of a coal mine shall not sell or dispose of coal
without transferring to the Administrator a number of allowances equal
to the number of metric tons of carbon that will be emitted or produced
from the amount of coal sold or disposed of by the owner or operator.
(ii) EXCEPTIONS- With respect to coal that is being sold to an owner
or operator of a coal preparation plant who is subject to the allowance
requirement described in subparagraph (A)(i), the owner or operator
of a coal mine shall not be required to transfer allowances to the
Administrator. With respect to an amount of coal for which an owner
or operator of a coal mine has transferred allowances to the Administrator
pursuant to this paragraph before a subsequent owner or operator of
the coal mine sells or disposes of the coal, the subsequent owner
or operator shall not be required to transfer additional allowances
to the Administrator.
(C) IMPORTED COAL- Except as provided in paragraph (6) and consistent
with regulations issued by the Administrator pursuant to section 3(a),
a person shall not import into the United States any coal without transferring
to the Administrator a number of allowances equal to the number of metric
tons of carbon that will be emitted or produced from the amount of coal
that is imported into the United States by such person.
(A) PROHIBITION- Except as provided in paragraph (6) and consistent
with regulations issued by the Administrator pursuant to section 3(a),
a person shall not sell or dispose of a covered fossil fuel that is
not referred to in paragraph (1), (2), (3), or (4) without transferring
to the Administrator a number of allowances equal to the number of metric
tons of carbon that will be emitted or produced from the amount of covered
fossil fuel sold or disposed of by such person.
(B) EXCEPTION- With respect to an amount of covered fossil fuel for
which a person has transferred allowances to the Administrator pursuant
to subparagraph (A) before a subsequent person sells or disposes of
the covered fossil fuel, the subsequent person shall not be required
to transfer additional allowances to the Administrator.
(6) EXPORT AND NONFUEL USE- Pursuant to regulations issued by the Administrator,
a person who--
(A) exports an amount of covered fossil fuel; or
(B) sells, disposes of, or otherwise handles an amount of covered fossil
fuel for a nonfuel purpose that does not result in the emission of more
than a trace amount of a greenhouse gas,
shall not be required to transfer allowances to the Administrator pursuant
to this subsection with respect to that amount of covered fossil fuel.
(1) PROHIBITION- Pursuant to regulations issued by the Administrator,
a person shall not sell or dispose of an amount of greenhouse gas other
than carbon dioxide in a manner that may result in the release of such
greenhouse gas in the atmosphere without transferring to the Administrator
a number of allowances equal to the amount of greenhouse gas sold or disposed
of by such person, measured in units of carbon equivalents.
(2) EXCEPTION- With respect to an amount of greenhouse gas for which a
person has transferred allowances to the Administrator pursuant to paragraph
(1) before a subsequent person sells or disposes of the greenhouse gas,
the subsequent person shall not be required to transfer additional allowances
to the Administrator.
(c) Agricultural, Industrial, and Manufacturing Processes-
(1) PROHIBITION- A person shall not sell or dispose of any product processed
through an agricultural, industrial, or manufacturing process that emits
a greenhouse gas without transferring to the Administrator a number of
allowances equal to the amount of greenhouse gas emitted in the processing
of the amount of such product sold or disposed of by such person, measured
in units of carbon equivalents.
(2) EXCEPTIONS- With respect to an amount of greenhouse gas emitted in
the agricultural, industrial, or manufacturing processing of a product
for which a person has transferred allowances to the Administrator pursuant
to paragraph (1) or subsection (b)(1) before a subsequent person sells
or disposes of the product processed through the agricultural, industrial,
or manufacturing process, the subsequent person shall not be required
to transfer additional allowances to the Administrator. With respect to
an amount of greenhouse gas emitted for which a person has transferred
allowances to the Administrator pursuant to subsection (a) before a subsequent
person sells or disposes of a product processed through the agricultural,
industrial, or manufacturing process that emitted such amount of greenhouse
gas, the subsequent person shall not be required to transfer additional
allowances to the Administrator.
(1) IN GENERAL- If the Administrator determines, after public notice and
comment, that it is not feasible to measure or estimate the number of
allowances that a person is required to transfer to the Administrator
pursuant to subsection (b) or (c), the Administrator may grant an exemption
only with respect to the greenhouse gas or product processed through an
agricultural, industrial, or manufacturing process that emits greenhouse
gases for which it is not feasible to measure or estimate the number of
allowances required. The Administrator shall revoke such exemption at
any time if the Administrator determines that it is feasible to measure
or estimate the number of allowances required.
(2) METHANE FROM ANIMALS- The Administrator shall grant an exemption under
this subsection for the sale or disposal of methane from animals until
such time that the Administrator determines, after notice and opportunity
to be heard, that it is feasible to measure or estimate the number of
allowances that a person is required to transfer to the Administrator
pursuant to subsection (b) with respect to the amount of methane from
animals sold or disposed of by such person.
(3) REDUCTION IN NUMBER OF ALLOWANCES- In accordance with regulations
issued by the Administrator, the Administrator shall reduce the total
number of allowances issued pursuant to section 3(b) by an amount that
is proportional to the number of exemptions granted under paragraphs (1)
and (2) of this subsection. If the Administrator revokes an exemption
granted under paragraph (1) or (2), the Administrator shall readjust the
total number of allowances issued pursuant to section 3(b) for the calendar
year following the year that the exemption is revoked.
(4) REDUCTION OF GREENHOUSE GAS EMISSIONS- If the Administrator grants
an exemption under paragraph (1) to a person otherwise required to transfer
allowances to the Administrator pursuant to subsection (c), the Administrator
shall encourage the reduction of greenhouse gas emissions from the agricultural,
industrial, or manufacturing process for which the exemption was granted
on a best practices basis until the exemption is revoked.
(e) Penalties- A person who does not transfer the required number of allowances
to the Administrator pursuant to this Act shall be liable to the Administrator
a civil penalty. The civil penalty assessed by the Administrator shall be
equal to three times the market value of the number of allowances that the
person failed to transfer to the Administrator for each day the person has
so failed to transfer.
(f) Pass Through of Costs- Any Federal, State, or local authority with ratemaking
regulatory authority over any entity required to submit an allowance under
this Act, or any entity that the cost of that allowance is passed on to,
shall allow such entity to recover the full market value of such allowances
for ratemaking purposes.
(g) Effective Date- This section shall take effect on the third January
1 after the date of enactment of this Act.
SEC. 7. SEQUESTRATION.
(a) Sequestration Projects- The Administrator, in coordination with the
Secretary of Agriculture and the Secretary of Energy, shall review proposals
for domestic sequestration projects and provide approval, for purposes of
subsection (b), to projects that--
(1) will result in greenhouse gas emission reductions that would not occur
in the absence of the project; and
(2) provide for the sequestration of greenhouse gases in a manner that
can be accurately and periodically measured, monitored, and reported in
a cost-effective manner.
(b) Allowances- The Administrator shall issue to the person responsible
for submitting a proposal that is approved by the Administrator under subsection
(a) a number of allowances equal to the amount of greenhouse gas, measured
in units of carbon equivalents, that the person has sequestered. The allowances
issued pursuant to this subsection shall be in addition to the allowances
issued by the Administrator pursuant to section 3(b).
SEC. 8. ADVANCED RESEARCH PROJECTS AGENCY-ENERGY.
(1) IN GENERAL- The Secretary of Energy shall establish in the Department
of Energy the Advanced Research Projects Agency-Energy (referred to in
this section as `ARPA-E'), to be headed by a Director who shall be appointed
by, and report to, the Secretary.
(2) QUALIFICATIONS- The Director shall be an individual with--
(A) an advanced education degree in energy technology; and
(B) substantial commercial research and technology development and deployment
experience.
(b) Mission- The mission of ARPA-E is to implement a radically innovative
advanced basic and applied energy research and technology development and
deployment program in order to increase national security, improve homeland
security, reduce greenhouse gas emissions, improve our balance of payments,
and develop alternative energy sources and improve the efficiency of existing
energy sources, by sponsoring a diverse portfolio of cutting-edge, high-risk,
high-payoff research and development and deployment projects.
(c) Personnel- In hiring personnel for ARPA-E, the Secretary shall have
the hiring and management authorities described in section 1101 of the Strom
Thurmond National Defense Authorization Act for Fiscal Year 1999 (Public
Law 105-261; 5 U.S.C. 3104 note).
(d) Transactions Other Than Contracts and Grants- To carry out projects
under this section, the Director shall have the authority to enter into
transactions provided under section 646(g) of the Department of Energy Organization
Act (42 U.S.C. 7256(g)).
(e) Prizes for Advanced Technology Achievements-
(1) IN GENERAL- The Director may carry out a program to award cash prizes
in recognition of outstanding achievements to advance the mission described
in subsection (b).
(2) COMPETITION REQUIREMENTS- In carrying out this subsection, the Director
shall--
(A) use a competitive process for the selection of recipients of cash
prizes; and
(B) conduct widely-advertised solicitation of submissions.
(3) MAXIMUM AMOUNT FOR ALL CASH PRIZES- The total amount of all cash prizes
awarded for a fiscal year under this subsection may not exceed $50,000,000.
(4) MAXIMUM AMOUNT OF INDIVIDUAL CASH PRIZES- The amount of an individual
cash prize awarded under this subsection may not exceed $10,000,000 unless
the amount of the award is approved by the Secretary of Energy.
(f) Annual Reports- As soon as practicable after the end of each fiscal
year, the Director shall submit to the Committee on Energy and Natural Resources
of the Senate and the Committee on Energy and Commerce and the Committee
on Science of the House of Representatives a report on the progress, challenges,
future milestones, and strategic plan of ARPA-E, including--
(1) a description of, and rationale for, any changes in the strategic
plan;
(2) the adequacy of human and financial resources necessary to achieve
the mission described in subsection (b); and
(3) in the case of cash prizes awarded under subsection (e), a description
of--
(A) the applications of the research, technology, or prototypes for
which prizes were awarded;
(B) the total amount of the prizes that were awarded;
(C) the methods used for solicitation and evaluation of submissions
and an assessment of the effectiveness of those methods; and
(D) recommendations to improve the prize program.
END
