Greenhouse Gas Reduction: Cap-and-Trade Bills in the 110th Congress

Greenhouse Gas Reduction:
th
Cap-and-Trade Bills in the 110 Congress
Updated June 27, 2008
Larry Parker, Brent D. Yacobucci, and Jonathan L. Ramseur
Resources, Science, and Industry Division



Greenhouse Gas Reduction:
Cap-and-Trade Bills in the 110th Congress
Summary
Multiple proposals to advance programs that reduce greenhouse gases have been
introduced in the 110th Congress. S. 2191 was reported May 20, 2008, from the
Senate Committee on Environment and Public Works. An amended version of
S.2191, S. 3036, was considered by the Senate in June 2008, but a vote to invoke
cloture failed. In general, these proposals would create market-based greenhouse gas
reduction programs along the lines of the trading provisions of the current acid rain
reduction program established by the 1990 Clean Air Act Amendments. This report
presents a side-by-side comparison of the major provisions of those bills and includes
a glossary of common terms (Appendix C).
Although the purpose of these bills is to reduce greenhouse gases (GHGs), the
specifics of each differ greatly. Five bills (S. 280, S. 309, S. 485, H.R. 620, and H.R.
1590) cap greenhouse gas emissions from covered entities at 1990 levels in the year
2020. S. 317 places its first emissions cap at 2001 levels in 2015; S. 1766 targets
reductions at 2006 levels in 2020; S. 2191 as reported would cap GHGs at about 19%
below 2005 levels in 2020; H.R. 4226 would limit 2020 emissions to 85% of their

2006 levels; H.R. 6186 would reduce emissions to 20% below 2005 levels by 2020,


and H.R. 6316 would reduce emission to 20% below 1990 levels by 2020. Ten bills
(S. 280, S. 317, S. 485, S. 2191, S. 3036, H.R. 620, H.R. 1590, H.R. 4226, H.R.
6186, and H.R. 6316) would establish cap-and-trade systems to implement their
emission caps. In contrast, S. 1766 provides for two compliance systems — a cap-
and-trade program and an alternative safety valve payment — and allows the covered
entities to choose one or employ a combination of both. Finally, S. 309 provides
discretionary authority to the Environmental Protection Agency (EPA) to establish
a cap-and-trade program to implement its emission cap.
The differences continue with respect to entities covered under the programs.
Three bills (S. 309, S. 485, H.R. 1590) provide discretionary authority to EPA to
determine covered entities by applying cost-effective criteria to reduction options.
In contrast, S. 317’s emission cap is imposed solely on the electric generating sector.
The other bills (S. 280, S. 1766, S. 2191, S. 3036, H.R. 620, H.R. 4226, H.R. 6186,
and H.R. 6316) cover most economic sectors but not all (e.g., they exclude the
agricultural sector). Thus, the overall reductions achieved by the bills depend partly
on the breadth of entities covered.
Beyond the basics of these bills, each contains other important provisions. For
example, S. 280 creates a new innovation infrastructure, while several — S. 1766,
S. 2191, S. 3036, H.R. 4226, H.R. 6186, and H.R. 6316 — encourage foreign
countries to undertake comparable control actions and specify potential consequences
for inaction. Other provisions include mandatory greenhouse gas standards for
vehicles (S. 309, S. 485, H.R. 1590), and a renewable portfolio standard for the
electric generating sector (S. 309, S. 485, H.R. 1590). This comparison should be
considered a guide to the basic provisions contained in each bill. It is not a substitute
for careful examination of each bill’s language and provisions.



Contents
In troduction ......................................................1
Proposed Legislation in 110th Congress.................................2
Legislative Action in the 110th Congress................................5
Appendix A. Comparison of Key Provisions of Senate Greenhouse Gas
Reduction Bills................................................7
Appendix B. Comparison of Key Provisions of House Greenhouse Gas
Reduction Bills...............................................16
Appendix C. Common Terms.......................................24



Greenhouse Gas Reduction:
th
Cap-and-Trade Bills in the 110 Congress
Introduction
Climate change is generally viewed as a global issue, but proposed responses
generally require action at the national level. In 1992, the United States ratified the
United Nations Framework Convention on Climate Change (UNFCCC), which called
on industrialized countries to take the lead in reducing the six primary greenhouse1
gases to 1990 levels by the year 2000. For more than a decade, a variety of
voluntary and regulatory actions have been proposed or undertaken in the United
States, including monitoring of power plant carbon dioxide emissions, improved
appliance efficiency, and incentives for developing renewable energy sources.
However, carbon dioxide emissions have continued to increase.
In 2001, President George W. Bush rejected the Kyoto Protocol, which called
for legally binding commitments by developed countries to reduce their greenhouse2
gas emissions. He also rejected the concept of mandatory emissions reductions.
Since then, the Administration has focused U.S. climate change policy on voluntary
initiatives to reduce the growth in greenhouse gas emissions. In contrast, in 2005, the
Senate passed a Sense of the Senate resolution on climate change declaring that
Congress should enact legislation establishing a mandatory, market-based program
to slow, stop, and reverse the growth of greenhouse gases at a rate and in a manner
that “will not significantly harm the United States economy” and “will encourage
comparable action” by other nations.3
A number of congressional proposals to advance programs designed to reduceth
greenhouse gases have been introduced in the 110 Congress. These have generally
followed one of three tracks. The first is to improve the monitoring of greenhouse
gas emissions to provide a basis for research and development and for any potential
future reduction scheme. The second is to enact a market-oriented greenhouse gas
reduction program along the lines of the trading provisions of the current acid rain
reduction program established by the 1990 Clean Air Act Amendments. The third


1 Under the United Nations Framework Convention on Climate Change (UNFCCC), those
gases are carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), hydrofluorocarbons
(HFCs), perfluorocarbons (PFCs), and sulfur hexafluoride (SF6). Some greenhouse gases
are controlled under the Montreal Protocol on Substances that Deplete the Ozone Layer, and
are not covered under UNFCCC.
2 For further information, see CRS Report RL30692, Global Climate Change: The Kyoto
Protocol, by Susan R. Fletcher.
3 S.Amdt. 866, passed by voice vote after a motion to table failed 43-54, June 22, 2005.

is to enact energy and related programs that would have the added effect of reducing
greenhouse gases4; an example would be a requirement that electricity producers
generate a portion of their electricity from renewable resources (a renewable portfolio
standard). This report focuses on the second category of bills. (For a review of
additional climate change related bills, see CRS Report RL34067, Climate Change
Legislation in the 110th Congress, by Jonathan L. Ramseur and Brent D. Yacobucci.)
Proposed Legislation in 110th Congress
In the 110th Congress, Members have introduced 12 bills that include provisions
to impose or permit some form of market-based controls on emissions of greenhouse
gases. General descriptions of those bills follow, beginning with S. 2191, which was
reported, with amendments, on May 20, 2008, by the Senate Committee on
Environment and Public Works.5 The major provisions of the seven Senate bills are
compared in Appendix A. The major provisions of the five House bills are
compared in Appendix B.
S. 2191, as introduced October 18, 2007, by Senators Lieberman and Warner,
would cap greenhouse gas emissions from the electric generation, industrial, and
transportation sectors (for facilities that emit more than 10,000 metric tons of carbon
dioxide equivalent — mtCO2e). As introduced, the cap is estimated by the sponsors
to reduce emissions to 15% below 2005 levels in 2020, declining steadily to 63%
below 2005 levels in 2050. The program would be implemented through an
expansive allowance trading program to maximize opportunities for cost-effective
reductions. Credits obtained from increases in carbon sequestration and acquisition
of allowances from foreign sources could be used to comply with 30% of allowance
requirements. The bill would also establish a Carbon Market Efficiency Board to
observe the allowance market and implement cost-relief measures if necessary. (For
recent action on S. 2191 and for modifications to the provisions, see the next
section.)
S. 3036, introduced by Senator Boxer on May 20, 2008, is identical to the
reported version of S. 2191, except that S. 3036 contains a budget amendment aimed
at making the bill revenue-neutral. This would entail devoting a percentage of auction
revenues — increasing from 6.1% in 2012 to 15.99% in 2031 and thereafter — to6
offset budget deficits that are projected to occur due to the cap-and-trade program.
This bill was considered by the Senate the week of June 2, 2008.


4 For discussions of relevant energy legislation, see CRS Report RL34294, Energy
Independence and Security Act of 2007: A Summary of Major Provisions, by Fred Sissine,
and CRS Report RL33831, Energy Efficiency and Renewable Energy Legislation in theth

110 Congress, by Fred Sissine, et al.


5 The bill was ordered reported December 5, 2007, by an 11-8 vote.
6 See CBO, S. 2191, America’s Climate Security Act, with an Amendment (April 10, 2008),
at [http://www.cbo.gov/ftpdocs/91xx/doc9120/s2191.pdf].

S. 280, introduced January 12, 2007, by Senator Lieberman, would cap
emissions of the six greenhouse gases specified in the United Nations Framework
Convention on Climate Change at reduced levels from the electric generation,
transportation, industrial, and commercial sectors — sectors that account for about
85% of U.S. greenhouse gas emissions. The reductions would be implemented in
four phases, with an emissions cap in 2012 based on the affected facilities’ 2004
emissions (for an entity that has a single unit that emits more than 10,000 metric tons
of carbon dioxide equivalent); the cap steadily declines until it is equal to one-third
of the facilities’ 2004 levels. The program would be implemented through an
expansive allowance trading program to maximize opportunities for cost-effective
reductions, and credits obtained from increases in carbon sequestration, reductions
from non-covered sources, and acquisition of allowances from foreign sources could
be used to comply with 30% of reduction requirements. The bill also contains an
extensive new infrastructure to encourage innovation and new technologies.
S. 309, introduced January 16, 2007, by Senator Sanders, would cap greenhouse
gas emissions on an economy-wide basis beginning in 2010. Beginning in 2020, the
country’s emissions would be capped at their 1990 levels, and then proceed to
decline steadily until they were reduced to 20% of their 1990 levels in the year 2050.
EPA has the discretion to employ a market-based allowance trading program or any
combination of cost-effective emission reduction strategies. The bill also includes
new mandatory greenhouse gas emission standards for vehicles and new powerplants,
along with a new energy efficiency performance standard. The bill would establish
a renewable portfolio standard (RPS) and a new low-carbon generation requirement
and trading program.
S. 317, introduced January 17, 2007, by Senator Feinstein, would cap
greenhouse gas emissions from electric generators over 25 megawatts. Beginning in
2011, affected generators would be capped at their 2006 levels, declining to 2001
levels by 2015. After that, the emission cap would decline 1% annually until 2020,
when the rate of decline would increase to 1.5%. The allowance trading program
includes an allocation scheme that provides for an increasing percentage of all
allowances to be auctioned, with 100% auctioning in 2036 and thereafter. The cap-
and-trade program allows some of an entity’s reduction requirement to be meet with
credits obtained from foreign sources and a variety of other activities specified in the
bill.
S. 485, introduced February 1, 2007, by Senator Kerry, would cap greenhouse
gas emissions on an economy-wide basis beginning in 2010. Beginning in 2020, the
country’s emissions would be capped at their 1990 levels. After 2020, emissions
economy-wide would be reduced 2.5% annually from their previous year’s level until
2031, when that percentage would increase to 3.5% through 2050. The allowance
trading system includes an allocation scheme that requires an unspecified percentage
of allowances to be auctioned. The bill also includes new mandatory greenhouse gas
emission standards for vehicles, along with a new energy efficiency performance
standard. The bill would establish a renewable portfolio standard (RPS), increase
biofuel mandates under the Renewable Fuels Standard, and mandate new
infrastructure for biofuels. Finally, the bill expands and extends existing tax
incentives for alternative fuels and advanced technology vehicles, and establishes a
manufacturer tax credit for advanced technology vehicle investment.



S. 1766, introduced July 11, 2007, by Senator Bingaman, would set emissions
targets on most of the country’s greenhouse gas emissions. Greenhouse gas emitting
activities such as methane emissions from landfills, coal mines, animal waste, and
municipal wastewater projects, along with nitrous oxide emissions from agricultural
soil management, wastewater treatment, and manure management, are not included
under the targets, although credits for use by covered entities are available or may be
generated by verified GHG reductions in these areas. Beginning in 2012, covered
entities would have emissions targets set at their 2006 levels in 2020. The emissions
targets would decline steadily until 2030 when the emission target would be set at the
entities’ 1990 levels. Compliance can be secured either through an allowance trading
program or by paying a safety valve price (called a Technology Accelerator Payment
or TAP). Under the trading program, allowances are allocated according to various
categories, including covered entities; eligible facilities, such as coal mines and
carbon-intensive industries; states; and sequestration activities. Initially, 24% of all
allowances are auctioned, a percentage that increases over time. The TAP is set at
$12 a metric ton of carbon dioxide equivalent; it increases 5% annually above the
rate of inflation. The bill also requires countries that do not take comparable action
to control emissions to submit special allowances (or their foreign equivalent) to
accompany exports to the United States of any covered greenhouse intensive goods
and primary products.
H.R. 620, introduced February 7, 2007, by Representative Olver, is a
substantially modified version of S. 280. Using the same basic structure as S. 280,
the emission caps under H.R. 620 are more stringent. Reductions from affected
sectors (electric generation, transportation, industrial, and commercial) would be set
at 2004 levels in 2012 and then steadily decline until the cap is equal to about one-
fourth of facilities’ 2004 levels. Although H.R. 620 permits affected entities to
comply with the reduction requirements with credits from foreign sources,
sequestration, and reductions from non-covered entities, these credits are limited to

15% of the source’s reduction requirement.


H.R. 1590, introduced March 20, 2007, by Representative Waxman, is similar
to S. 485. H.R. 1590 would cap greenhouse gas emissions on an economy-wide basis
beginning in 2010. Beginning in 2020, the country’s emissions would be capped at
their 1990 levels. After 2020, emissions economy-wide would be reduced by roughly
5% annually from their previous year’s level through 2050, when emissions levels
would be capped at 80% below 1990 levels. The allowance trading system includes
an allocation scheme that requires an unspecified percentage of allowances to be
auctioned. The bill also includes new mandatory greenhouse gas emission standards
for vehicles, along with a new energy efficiency performance standard. The bill
would also establish a renewable portfolio standard.
H.R. 4226, introduced November 15, 2007, by Representative Gilchrest, is a
modified version of H.R. 620. Using the same basic structure as H.R. 620, emission
limitations are based on percentages of 2006 emission levels. Reductions from
affected sectors (electric generation, transportation, industrial, and commercial)
would be set at 2006 levels in 2012 and then steadily decline until the cap is equal
to about one-fourth of facilities’ 2006 levels in 2050. The bill provides that the
President may establish a program to require importers to pay the value of GHGs
emitted during the production of goods or services imported into the United States



from countries that have no comparable emission restrictions to those of the United
States. The program’s requirement may not be imposed on countries until
negotiations to achieve agreement on such restrictions have been attempted. In
addition, the bill also establishes a Carbon Market Efficiency Board to observe the
allowance market and implement cost-relief measures if necessary.
H.R. 6186, introduced June 4, 2008, by Representative Markey, would cap
emissions from covered sources at 930 million mtCO2e in 2050. Of the long-term
reduction targets in the cap-and-trade bills, this is among the most stringent. H.R.
6186 would auction 94% of its emission allowances in 2012, increasing to 100% by
FY2020. Almost 60% of the auction revenues would be distributed (via tax credits
and rebates) to low- and middle-income households. The bill would direct EPA to
develop emission performance standards for non-covered entities, which may include
coal mines, landfills, wastewater treatment operations, and animal feeding
operations. In addition, new (as defined in the bill) coal-fired power plants would be
required to capture and geologically sequester not less than 85% of their CO2
emissions within a specified time frame.
H.R. 6316, introduced June 19, 2008, by Representative Doggett, would cap
emissions from covered sources at 348 million mtCO2e in 2050. Of the long-term
reduction targets in the cap-and-trade bills, this is the most stringent. In addition, the
bill would direct EPA to develop regulations that prevent growth in emissions from
non-covered entities. H.R. 6316 would auction 85% of its emission allowances in
2012, increasing to 100% by FY2020. Approximately 54% of the auction revenues
would be distributed for consumer assistance: of this allotment, 66% would fund a
healthcare coverage program (established by subsequent legislation); the remainder
would provide rebates and tax relief to low- and moderate-income households.
Domestic offsets and international allowances could combine to contribute up to 25%
of covered source’s allowance requirements. Similar to other bills, a Carbon Market
Efficiency Board would observe the allowance market and implement cost-relief
measures if necessary. The bill would also require countries that do not take
comparable action to control emissions to submit special allowances (or their foreign
equivalent) to accompany exports to the United States of any covered primary
product.
Legislative Action in the 110th Congress
On May 20, 2008, the Senate Committee on Environment and Public Works’
Subcommittee on Private Sector and Consumer Solutions to Global Warming and
Wildlife Protection reported out a revised version of S. 2191. As reported from
subcommittee, S. 2191 is estimated to reduce greenhouse gas emissions 19% below
2005 levels by 2020 (up from 15% as introduced) and 63% below 2005 levels by
2050. The increase in the estimated reductions in 2020 is the result of amended text
that includes greenhouse gases from all natural gas uses under the overall emissions
cap. Other amendments approved included modifications to eligibility requirements
for the advanced technology vehicles manufacturing incentive program and the
advanced coal generation technology demonstration program. Modifications were
also made to the proposed allocation of allowances to help tribal communities



respond to climate change and to encourage international forest carbon activities,
along with 1% of allowances reserved for rural cooperatives and a corresponding
reduction in allowances allocated to the rest of the electric power industry. The
revised bill also added two new recipients of auction revenues: a Bureau of Land
Management Emergency Firefighting Fund ($300 million) and a Forest Service
Emergency Firefighting Fund ($800 million).
On December 5, 2007, the full committee ordered reported out a revised version
of S. 2191 by an 11 to 8 vote. The bill was reported by the committee on May 20,
2008 (S.Rept. 110-337). The revised bill expands the greenhouse gas reduction
program coverage by replacing the previous definition of covered facility based on
the electric power, transportation, and industrial sectors with a comprehensive
upstream definition for oil refineries, natural gas processing plants, and a downstream
definition for coal consumers. Among the amendments agreed to by the full
committee were a new low carbon fuel standard (LCFS) that would require the
carbon intensity of transportation fuel to be frozen in 2011 and then reduced by 5%
in 2015 and 10% in 2020. Other amendments agreed to would increase incentives
for states to modify their utility regulatory structures to encourage energy efficiency,
and would broaden the ability of states to use their allowance allocations to mitigate
adverse economic impacts resulting from the bill’s implementation. As ordered
reported, S. 2191’s emissions cap is estimated by its sponsors to require a 71%
reduction from 2005 levels by 2050 from covered entities (estimated by the sponsors
to account for 87% of total U.S. greenhouse gas emissions). Overall, the sponsors
estimate that S. 2191 would reduce total U.S. greenhouse gas emissions by up to 66%
from 2005 levels by 2050.
In April 2008, a proposed amendment to S. 2191 was submitted by the
committee to the Congressional Budget Office (CBO) to be included in the scoring
of the bill. The amendment would provide for some of the auctioned revenues to be
put aside for deficit reduction purposes.
Senator Boxer introduced S. 3036 on May 20, 2008. This proposal combined
the reported version of S. 2191 with the revenue-neutral amendment. The Senate
considered S. 3036 the week of June 2, 2008. On June 6, 2008, a motion to invoke
cloture failed on a roll call vote of 48 to 36, and bill supporters withdrew the bill
from consideration.



CRS-7
Appendix A. Comparison of Key Provisions of Senate Greenhouse Gas Reduction Bills
TopicS. 280 (Lieberman)S. 309 (Sanders)S. 317 (Feinstein)S. 485 (Kerry)S. 1766 (Bingaman)S. 3036 (Boxer) / S. 2191as amended (Lieberman)
issionAbsolute cap on totalAbsolute cap on totalAbsolute cap on totalAbsolute cap on totalEmissions targets for allAbsolute cap on total
ion/emissions from allemissions economy-emissions from coveredemissions economy-covered entities.emissions from all
itationcovered entities in thewide.electric generators.wide.Affected entitiescovered entities. Affected
meelectric power,estimated to cover aboutentities estimated to cover
transportation, industry,85%-90% of all U.S.about 80%-87% of all
and commercial sectors.GHG emissions.U.S. GHG emissions.
sponsibleEnvironmentalEPA.EPA.EPA.To be determined by theEPA.
cyProtection AgencyPresident.
(EP A).
useCarbon dioxide,Same six gases as S.Same six gases as S.Same six gases as S.Same six gases as S.Same six gases as S. 280.
es definedmethane, nitrous oxide280.280.280.280.
(N2O),
iki/CRS-RL33846hydrofluorocarbons
g/w(HFCs) ,
s.orperfluorocarbons
leak(PFCs), and sulfur
hexafluoride (SF6).
://wikiBeginning in 2012,Beginning in 2010,Beginning in 2011,Beginning in 2010,In 2012, the emissionsIn 2012, emissions from
httpissionsemissions from coveredemissions economy-emissions from affectedemissions economy-target for coveredcovered entities are
itsentities are capped atwide to be reduced 2%electric generatorswide to be reduced byentities is set at 6.652capped at 5.775 billion
6.13 billion metric tons,annually.capped at 2006 levels.appropriate measures tobillion metric tons. metric tons. Cap is
minus 2012 emissionscap emissions at 1990Target is reducedreduced annually
from non-coveredBeginning in 2020,Beginning in 2015,levels by 2020.annually thereafter untilthereafter until 2050.
entities. emission cap onemissions from affected2030.
economy-wide basis setelectric generatorsBeginning in 2021,Emission cap for covered
Beginning in 2020,at 1990 level, withcapped at their 2001emissions economy-Emission target forsources in 2020 is 4.924
emission cap declines todeclining emission capslevels, declining 1%wide to be reduced 2.5%covered sources in 2020billion metric tons.
5.239 billion metricof 26.7% below 1990annually from previousannually from previousis 6.188 billion metric
tons, minus 2020levels in 2030 andyear’s level from 2016years level.tons.Emission cap for covered
emissions from non-53.3% in 2040. to 2020.sources in 2030 is 3.860
covered entities.Beginning in 2031Emission target forbillion metric tons.
Beginning in 2050,Beginning in 2020,through 2050, emissionscovered sources in 2030
Beginning in 2030,emission cap set at 80%emission cap declineseconomy-wide to beis 4.819 billion metricEmission cap for covered
emission cap declines tobelow 1990 levels.1.5% annually fromreduced 3.5% annuallytons.sources in 2040 is 2.796
4.1 billion metric tons,previous years level.from previous year’sbillion metric tons.


minus 2030 emissionslevel. If the President

CRS-8
TopicS. 280 (Lieberman)S. 309 (Sanders)S. 317 (Feinstein)S. 485 (Kerry)S. 1766 (Bingaman)S. 3036 (Boxer) / S. 2191as amended (Lieberman)
from non-covereddetermines thatEmission cap for covered
entities.scientific, technological,sources in 2050 is 1.732
and internationalbillion metric tons.
Beginning in 2050,considerations suggest
emission cap furtherfurther reductions are
declines to 2.096 billionwarranted, his
metric tons, minusrecommendations are to
annual emissions frombe considered by
non-covered entities. Congress under
expedited procedures.
In metric tons of carbonEPA promulgates ruleAny fossil fuel-firedEPA promulgates ruleRegulated fuelAssuming no capture of
dioxide equivalentswithin two years ofelectric generatingwithin two years ofdistributors includeGHGs, any producer or
(CO2e): any electricenactment that appliesfacility that has aenactment that appliespetroleum refineries,importer of petroleum- or
power, industrial, orthe most cost-effectivecapacity of greater thanthe most cost-effectivenatural gas processingcoal-based liquid or
commercial entity thatreduction options on25 megawatts andreduction options on theplants, and imports ofgaseous fuel that emits
iki/CRS-RL33846emits over 10,000 CO2esources or sectors togenerates electricity forlargest emitting sourcespetroleum products,GHGs, or any facility that
g/wannually from anyachieve reduction goals.sale, includingor sectors to achievecoke, or natural gas. produces or imports more
s.orsingle facility owned bycogeneration andreduction goals.Regulated coal facilitiesthan 10,000 CO2e of GHG
leakthe entity; any refiner orgovernment-ownedare entities thatchemicals annually; any
importer of petroleumfacilities.consume more thanfacility that uses more
://wikiproducts for5,000 tons of coal athan 5,000 tons of coal
httptransportation use that,when combusted, willyear. Regulated nonfuelentities are importers ofannually; any natural gasprocessing plant or
emit over 10,000 metricHFCs, PFC, SF6, N2O,importer (including
tons annually; and anyor products containingLNG); or, any facility that
importer or producer ofsuch compounds, andemits more than 10,000
HFCs, PFCs, or SF6 that,adipic acid and nitricCO2e of HFCs annually as
when used, will emitacid plants, aluminuma byproduct of
over 10,000 CO2e.smelters, and facilitieshydrochlorofluorocarbon
that emit HFCs as aproduction.
byproduct of HCFC
productio n.
neralA tradeable allowanceTradeable allowanceTradeable allowanceA tradeable allowanceTwo complianceA tradeable allowance
cating andsystem is established:system permitted. Insystem is established. system is established. systems are provided.system is established. Off
plementingEPA shall determineimplementing reductionAllocations to existingThe President submits toCovered entities maythe top, a share of
ategyallocations based onprogram, EPA shallsources based onCongress an allocationchoose which one to useallowances are auctioned
several economic,select the most cost-historic electricityplan within one year ofor employ afor deficit reduction
equity, and sector-effective emissionoutput, and includesenactment that includescombination of both. increasing from 6.1% in
specific criteria,reduction strategies.allowance allocationsa combination of2012 to 15.99% in 2031



CRS-9
TopicS. 280 (Lieberman)S. 309 (Sanders)S. 317 (Feinstein)S. 485 (Kerry)S. 1766 (Bingaman)S. 3036 (Boxer) / S. 2191as amended (Lieberman)
including economicEPA shall allocate tofor incremental nuclearauctions and freeFirst, a tradeableand thereafter. Then the
efficiency, competitivevarious sectors andcapacity and renewableallocation ofallowance system isremainder allowances
effects, and impact oninterests any allowancesenergy, along withallowances. To theestablished. In 2012,are distributed in 2012
consumers. Allowancesthat are not allocated tosequestration and earlymaximum extent53% of allowances(adjusted in future years)
are to be allocatedaffected entities,action provisions.practicable, theallocated to covered andas follows: 38% of
upstream to refiners andincluding households,allocation and revenueseligible industrialallowances to covered
importers ofdislocated workers,From 2011 on, anreceived shouldentities; 23% allocatedelectric utilities, industrial
transportation fuel,energy efficiency andincreasing percentage ofmaximize publicto States and forfacilities, and coops,
along with producers ofrenewable energyall allowances are to bebenefits, promotesequestration and earlydeclining steadily to 0 in
HFCs, PFCs, and SF6,activities, sequestrationauctioned, with 100% ofeconomic growth, assist reduction activities;2031; 10.5% to states for
and downstream toactivities, and ecosystemallowances auctioned inhouseholds and24% are auctioned toconservation, extra
electric generation,protection activities.2036 and thereafter. dislocated workers,fund low incomereductions, and other
industrial, andencourage energyassistance, carbonactivities; 7.5% for
commercial entities.efficiency, renewablecapture and storage, andvarious sequestration
energy, andadaptation activities.activities; 11% allocated
iki/CRS-RL33846Allocations to coveredentities are provided atsequestration activities,and assist states inThe percentageauctioned increasesfor electricity and naturalgas consumer assistance;
g/wno cost.addressing the impact ofsteadily, reaching 53%5% for early reductions;
s.orclimate change.by 2030.0.5% for tribal
leakCongress has one yeargovernments; 1% for
://wikito enact an alternative tothe plan; otherwise,Second, a TechnologyAccelerator Paymentmethane reductionprojects and 21.5% (plus
httpEPA shall implement it.(i.e., safety valve) mayan early auction of 5%)
be paid in lieu ofauctioned to fund
submitting one or moretechnology deployment,
allowances.carbon capture and
storage, low income and
rural assistance, and
adaptation activities, as
well as program
management. The
percentage auctioned for
CCCC activities increases
steadily, reaching 69.5%
by 2031 and thereafter.
EPA shall determine theEPA may choose toFrom 2011 on, anThe President shallBeginning in 2012, 24%Beginning in 2012, 6.1%
uction ofnumber of allowancesprovide for trustees toincreasing percentage ofdetermine the number ofof available allowancesof total allowances are
wancesallocated to the Climatesell allowances for theall allowances are to beallowances to beare auctioned to fundauctioned for deficit
Change Creditbenefit of entitiesauctioned, with 100% ofauctioned. Thelow income assistance, reduction. Further, 21.5%



CRS-10
TopicS. 280 (Lieberman)S. 309 (Sanders)S. 317 (Feinstein)S. 485 (Kerry)S. 1766 (Bingaman)S. 3036 (Boxer) / S. 2191as amended (Lieberman)
Corporation (CCCC)eligible to receiveallowances auctioned inproceeds of the auctiontechnology, andofremainder
(established by the bill).assistance under the2036 and thereafter. to be deposited with theadaptation activities.allowances” (plus 5%
proposal (see above).Climate ReinvestmentThe percentagefrom an early auction of
EPA shall allocate to theRevenues from theFund created by theauctioned increases2012 remainder
CCCC allowancesauction are to beDepartment of thesteadily, reaching 53%allowances) are auctioned
before 2012 to auctiondeposited in the ClimateTreasury. (Seeby 2030; after that itto fund the activities of
to raise revenue forAction Trust FundRevenue recyclingincreases 1 percentagethe CCCC. This
technology deploymentcreated by thebelow.) point annually throughpercentage increases
and dissemination. Department of the2043.steadily to 69.5% by 2031
Treasury.and thereafter.
The CCCC may buy andRevenues from the
sell allowances, and useauction are to beRevenues from the
the proceeds to reducedeposited in one ofauction are to be
costs borne bythree funds created bydeposited in one of ten
consumers and otherthe Department of thefunds created in the
iki/CRS-RL33846purposes. (SeeRevenue recyclingTreasury: the EnergyTechnologyDepartment of theTreasury: Deficit
g/wbelow.)Deployment Fund, theReduction Fund,
s.orClimate AdaptationTechnology Deployment,
leakFund, and the EnergyEnergy Independence
://wikiAssistance Fund.Acceleration Fund,Energy Assistance Fund,
httpClimate Change Worker
Training Fund,
Adaptation Fund, and the
Climate Change and
National Security Fund, as
well as a fund for program
management and two
Emergency Firefighting
Fund s.
st-limitingNo explicit provision.No explicit provision. No explicit provision. No explicit provision.A TechnologyA Carbon Market
veAccelerator PaymentEfficiency Board is
However, if theHowever, limited(TAP) (i.e., safetyestablished to observe the
President determines aborrowing against futurevalve) may be paid inallowance market and
national securityreductions is permittedlieu of submitting oneimplement cost-relief
emergency exists, theif EPA determinesor more allowances. Formeasures if necessary.
President mayallowance prices have2012, the TAP price isMeasures include
temporarily adjust,reached and sustained aset at $12 per metricpermitting increased



CRS-11
TopicS. 280 (Lieberman)S. 309 (Sanders)S. 317 (Feinstein)S. 485 (Kerry)S. 1766 (Bingaman)S. 3036 (Boxer) / S. 2191as amended (Lieberman)
suspend, or waive anylevel that is or will causeton, rising 5% aboveallowance borrowing
regulation promulgatedsignificant harm to theinflation annuallyfrom future allocations;
under this programU.S. economy. Also,thereafter.increased offsets and
(subject to judicialEPA may increase toforeign allowance use;
review). 50% the share ofIf the Presidentexpanded payback period
international credits thatdetermines the TAPfor such allowances;
can be used in suchshould be increased orlower interest charged for
cases.eliminated to achieveborrowed allowances; and
the act’s purposes, hisexpanded total borrowed
recommendations are toallowances. Increased
be considered byborrowing limited to 5%
Congress underof emission cap and
expedited procedures.repayment schedule can
not be longer than 15
years.
iki/CRS-RL33846If the President
g/wdetermines a national
s.orsecurity emergency exists,
leakthe President may
://wikitemporarily adjust,suspend, or waive any
httpregulation promulgated
under this program
(subject to judicial
review).
alty for Excess emissionExisting enforcement$100 per excess tonExcess emissionExcess emissionsExcess emission penalties
n-penalties are equal toprovisions of Sectionindexed to inflation pluspenalties are equal topenalties are equal toper ton are equal to the
pliancethree times the market113 of the Clean Air Acta 1.3 to 1 offset fromtwice the market pricethree times the TAPhigher of $200 or three
price for allowances onare extended tofuture allowances. Iffor allowances as ofprice for that calendartimes the mean market
the last day of the yearprogram.the market price for anDecember 31 of the yearyear. In addition, civilprice for allowances
at issue.allowance exceeds $60,at issue, plus a 1 to 1penalties are $25,000 aduring the year the
the penalty is $200 peroffset from next year’sday for violatingallowance was due, plus a
excess ton, adjusted forallowance allocation.provisions of the act.1-to-1 offset from a future
inflation.year allocation.
etUp to 30% of requiredMarket trading systemsUp to 25% (50% forMarket trading systemsIf the PresidentUp to 15% of allowance
ent andreductions may beincorporated intonew affected units) ofincorporated intodetermines thatrequirement may be
erachieved through creditsRenewable Portfoliorequired reductions mayRenewable Portfolioemission credits issuedachieved through credits
ibilityobtained through pre-Standard, new energybe achieved with creditsStandard and newunder foreign programsobtained through



CRS-12
TopicS. 280 (Lieberman)S. 309 (Sanders)S. 317 (Feinstein)S. 485 (Kerry)S. 1766 (Bingaman)S. 3036 (Boxer) / S. 2191as amended (Lieberman)
mscertified internationalefficiency performanceobtained through EPA-energy efficiencyor foreign offsetagricultural sequestration,
emissions tradingstandard, and new low-approved foreignperformance standard.projects are comparableland use change, forestry,
programs, approvedcarbon generationgovernment programsto U.S. ones, he maymanure management, and
reduction projects inrequirement.developed under UnitedNo limit on use ofpromulgate rulesother specified activities.
developing countries,Nations Frameworkdomestic biologicalallowing such credits orPercentage may be
domestic carbonNo limit on use ofConvention on Climatesequestration to meetoffsets to be used toincreased by the Carbon
sequestration, anddomestic biologicalChange (UNFCCC)reductions requirements.meet the act’s emissionMarket Efficiency Board
reductions from non-sequestration to meetprotocols. targets.
covered entities.reductions requirements.Up to 15% of allowance
EPA may increase toNo more than 10% of anrequirement may be
50% the share ofentitys emissions targetachieved through
international credits, ifcan be met throughallowances obtained
EPA determinesforeign offset projectthrough certified foreign
allowance prices havecredits.allowance markets.
reached and sustained aPercentage may be
iki/CRS-RL33846level that is causing orwill cause significantEstablishes program toprovide credits obtainedincreased by the CarbonMarket Efficiency Board.
g/wharm to the U.S.through verified
s.oreconomy. reductions from non-
leakcovered activities. No
://wikilimit on their use tomeet reduction targets.
httpkingBanking of allowancesNo specific prohibitionBanking of allowancesBanking of allowancesBanking of allowancesBanking of allowances is
is permitted; allowanceson banking.is permitted; allowancesis permitted; allowancesis permitted; allowancespermitted; allowances
may be saved for use inmay be saved for use inmay be saved for use inmay be saved for use inmay be saved for use in
future years.future years.future years.future years.future years.
rrowingBorrowing againstNo specific provision.Limited borrowingNo specific provision.No specific provision.The Carbon Market
future reductions isagainst future reductionsEfficiency Board may
permitted.is permitted if EPApermit borrowing against
determines allowancefuture reductions in
prices have reached andcertain cases.
sustained a level that is
causing or will cause
significant harm to the
U.S. economy.
rlyEntities with registeredReductions previouslyEntities with reductionsRecognizing andOne percent ofFive percent of
ionemission reductionsachieved under stateachieved from 2000rewarding earlyallowances availableremainder allowances
andachieved before 2012programs that are atthrough 2010 shallreductions is a statedfrom 2012 through 2020established for 2012
creditsmay receive allowancesleast as stringent as areceive credits undergoal of the program.are allocated to early(declining steadily to 0 in



CRS-13
TopicS. 280 (Lieberman)S. 309 (Sanders)S. 317 (Feinstein)S. 485 (Kerry)S. 1766 (Bingaman)S. 3036 (Boxer) / S. 2191as amended (Lieberman)
for them, includingfederal trading programspecific criteria,reductions reported2017) are allocated to
reductions achievedmay be recognized byincluding EPA rules thatunder the 1992 Energyearly reductions reported
under more stringentthe federal program.ensure reductions arePolicy Acts 1605(b)under the 1992 Energy
mandatory statereal, additional,program, EPAsPolicy Acts 1605(b)
programs.Entities that demonstrateverifiable, enforceable,Climate Leadersprogram, EPAs Climate
reductions achievedand permanent, and thatProgram, or a State-Leaders Program, a State-
For the time periodearly (but not beforethey were reportedadministered oradministered or voluntary
2012-2017, entities that1992) that are asunder either 1605(b) ofprivately administeredprogram.
have entered into anverifiable as reductionsthe 1992 Energy Policyregistry.
agreement with EPA tounder a federal tradingAct, or according to aFour percent of remainder
reduce emissions toprogram may bestate or regionalGeologic sequestrationallowances established for
1990 levels by 2012 arerecognized by theregistry. Quantity ofprojects built from 20082012 through 2035
entitled to additionalfederal program. credits given is limitedthrough 2030 receiveavailable on a steadily
allowances to coverto 10% of the 2011bonus allowances fordeclining basis from 2012
their additionalallowance allocation. the first 10 years ofthrough 2039 for geologic
iki/CRS-RL33846reductions and areallowed to achieve 40%operation.sequestration projects forelectric generating plants
g/wof their reductionbuilt from 2008 through
s.orrequirement (as opposed2035. The bonus
leakto 30%; see above)allowances are limited to
://wikithrough internationalemissions trading andthe first 10 years ofoperation.
httpprojects, sequestration,
or reductions by non-
covered entities.
enueRevenues generated byAllowances may beRevenues generatedRevenues generated byA new EnergyOff the top, a growing
allowance auctions andallocated by EPA tofrom the auction are toallowance auctions andTechnologyshare of allowances are
trading proceeds arehouseholds, dislocatedbe deposited in thepenalties are received byDeployment Fund isauctioned for deficit
received by a newworkers, energyClimate Action Trusta new Climatefunded by TAPsreduction.
Climate Change Creditefficiency andFund created by Reinvestment Fundreceived and some
Corporation (CCCC).renewable energyDepartment of thecreated by Departmentauction proceeds.Revenues received by
Activities to be fundedactivities, sequestrationTreasury. Activities toof the Treasury. Activities to be fundedremainder allowance”
include mechanisms toactivities, and ecosystembe funded include anActivities to be fundedinclude zero- or low-auctions are to be received
reduce consumer costsprotection activities. Innovative Low- andinclude mechanisms tocarbon energy,by the Climate Change
and to assist dislocatedZero-emitting Carbonreward early reductions,advanced coal andCredit Corporation
workers, low-incomeTechnologies Program,maximize publicsequestration, cellulosic(CCCC). Activities to be
persons, and affecteda Clean Coalbenefits, promotebiomass, and advancedfunded include
communities, along withTechnologies Program,economic growth, assist technology vehicles.technology deployment
programs to encourageand an Energyhouseholds andactivities (including zero-



CRS-14
TopicS. 280 (Lieberman)S. 309 (Sanders)S. 317 (Feinstein)S. 485 (Kerry)S. 1766 (Bingaman)S. 3036 (Boxer) / S. 2191as amended (Lieberman)
deployment of newEfficiency Technologydislocated workers,A new Climateor low-carbon energy,
technology and wildlifeProgram, along withencourage energyAdaptation Fund isadvanced coal and
restoration. Allocationsresearch andefficiency, renewablefunded by some auctionsequestration, cellulosic
to the CCCC are to bedevelopment. energy, andproceeds. Activities tobiomass, and advanced
determined by EPAsequestration activities,be funded includetechnology vehicles);
based on the fundingAdaptation andand assist states incoastal, arctic, and fishassistance activities
needs of the advancedmitigation activities toaddressing the impact ofand wildlife impact(including low income,
technologiesbe funded includeclimate change. mitigation. weatherization, and rural
demonstration andaffected workers andassistance); worker
deployment programs. communities, and fishA new Energytransition assistance; and
Further, at least 50% ofand wildlife habitat.Assistance Fund isadaptation activities
revenue received mustfunded by some auction(including wildlife
be used for technologyproceeds. Activities toconservation and
deployment.be funded include low-restoration, aquatic
income and rural energyecosystems, and coastal
iki/CRS-RL33846assistance, andweatherization.habitats).
g/wRevenues would also fund
s.ora Climate Change and
leakNatural Security Council
://wikito report annually on theramifications of climate
httpchange for national
security.
Such sums as are
necessary to maintain a
fund of $1.1 billion is
directed toward wildland
fire suppression activities
by the Bureau of Land
Management and the
Forest Service.
eyProvisions includeProvisions includeEstablishes program toProvisions includeProvisions includeProvisions require new
sionsstudies of research onmandatory greenhouseencourage offsets frommandatory greenhouseperiodic review of theappliance standards in
abrupt climate changegas emission standardsthe agricultural sector. gas emission standardsactivities of the nations2012 and provide for new
and impact of climatefor vehicles by 2010, forOffset credits availablefor vehicles by 2010,5 largest tradingmodel building efficiency
change on the world’snew electricfor agricultural, forestry,and a new energypartners, an NASstandards by 2010.


poor, among others, andpowerplants that begingrazing, and wetlandsefficiency standardassessment of the status

CRS-15
TopicS. 280 (Lieberman)S. 309 (Sanders)S. 317 (Feinstein)S. 485 (Kerry)S. 1766 (Bingaman)S. 3036 (Boxer) / S. 2191as amended (Lieberman)
creation of a nationaloperation aftermanagement,beginning in 2009. of the science andBeginning in 2018,
greenhouse gasDecember 31, 2011, andsequestration projects,Establishes a Renewablecontrol technologies,requires annual review of
database.a new energy efficiencyor practices that meetPortfolio Standard andand energy securityforeign countries’ GHG
performance standard. specific criteria in thecredit program.implications. control actions.
A new Innovationproposal.
Infrastructure is created,Establishes a RenewableIncreases biofuelBeginning in 2019,Beginning in 2019,
along with programPortfolio Standard andOffset credits alsomandates under therequires foreignrequires foreign countries
initiatives to promotecredit program.available for approvedRenewable Fuelscountries that do notthat do not take
less carbon- intensiveemission reductionStandard, and mandatestake comparablecomparable emission
technology, adaptation,Establishes a new low-offset projects from ainfrastructure foremission reductionreduction actions to
sequestration, andcarbon generationvariety of activitiesbiofuels.actions to submitsubmit international
related activities.requirement and tradinglisted in the proposal.international reservereserve allowances (or
program.Expands and extendsallowances (or foreignforeign equivalents) to
Requires periodicRequires periodicexisting tax incentivesequivalents) toaccompany exports of any
review of targetRequires periodicreview of targetfor alternative fuel andaccompany exports ofcovered greenhouse gas
iki/CRS-RL33846adequacy by the UnderSecretary of Commercereview of targetadequacy by theadequacy by EPA,taking into account theadvanced technologyvehicles, and establishesany covered greenhousegas intensive goods andintensive goods andprimary products to the
g/wfor Oceans andNational Academy ofrecommendations of amanufacturer tax creditprimary products to theUnited States. Least
s.orAtmosphere.Sciences (NAS).newly establishedfor advanced technology United States. Leastdeveloped nations or
leakClimate Sciencevehicle investment.developed nations orthose that contribute no
://wikiAdvisory Panel.Establishes newthose that contribute nomore than 0.5% of more than 0.5% of globalemissions are excluded.
httpNational Climateglobal emissions are
Change Vulnerabilityexcluded. ProceedsRequires periodic review
and Resilience Program.from the sale of suchof the bill’s
reserve allowances areimplementation and
Requires periodicto be deposited in anpurposes by the NAS.
review of targetInternational Energy
adequacy by the NAS.Deployment Fund toEstablishes a separate cap-
encourage and financeand-trade program to limit
international technologyU.S. consumption of
development. hydrofluorocarbons.
Establishes a low carbon
fuel standard (LCFS)
requiring transportation
fuels to have, on average,
10% lower lifecycle
emissions per unit energy
by 2020.



CRS-16
Appendix B. Comparison of Key Provisions of House Greenhouse Gas Reduction Bills
TopicH.R. 620 (Olver)H.R. 1590 (Waxman)H.R. 4226(Gilchrest)H.R. 6186 (Markey)H.R. 6316 (Doggett)
issionAbsolute cap on totalAbsolute cap on totalAbsolute cap on totalAbsolute cap on total emissionsAbsolute cap on total
ion/emissions from all coveredemissions economy-wide.emissions from all coveredfrom all covered entities in theemissions from all covered
itation schemeentities in the electricentities in the electric power,electric power, transportation,entities in the electric power,
power, transportation,transportation, industry, andindustry, and commercial sectors.transportation, industry, and
industry, and commercialcommercial sectors.commercial sectors.
sectors.Also includes emission
performance standards that would
apply to specific non-capped
sectors.
sponsibleEPAEPAEPAEPATreasury Department
cy
e gasesSame six gases as S. 280.Same six gases as S. 280.Same six gases as S. 280.Same six gases as S. 280, plusSame six gases as S. 280.
iki/CRS-RL33846ined(Carbon dioxide, methane,nitrogen trifluoride (NF3).
g/wnitrous oxide (N2O),
s.orhydrofluorocarbons (HFCs),
leakperfluorocarbons (PFCs),
and sulfur hexafluoride
://wiki(SF6).)
httpissionsBeginning in 2012,Beginning in 2010,Beginning in 2012,Beginning in 2012, emissionsBeginning in 2012,
itsemissions from coveredemissions economy-wideemissions from coveredfrom covered entities are cappedemissions from covered
entities are capped at 6.15to be reduced by roughlyentities are capped at 2006at 6.098 billion metric tons; Cap isentities are capped at 6.351
billion metric tons, minus2% annually to caplevels, minus 2012 emissionsreduced annually thereafter untilbillion metric tons; Cap is
2012 emissions from non-emissions at 1990 levelsfrom non-covered entities. 2050.reduced annually thereafter
covered entities. by 2020.until 2050.
Beginning in 2020, emissionEmission cap for covered sources
Beginning in 2020,Beginning in 2021,cap declines to 85% of 2006in 2020 is 4.983 billion metricEmission cap for covered
emission cap declines tothrough 2050, emissionslevels, minus 2020 emissionstons.sources in 2020 is 6.087
5.232 billion metric tons,economy-wide to befrom non-covered entities.billion metric tons.
minus 2020 emissions fromreduced roughly 5%Emission cap for covered sources
non-covered entities.annually from previousBeginning in 2030, emissionin 2030 is 3.633 billion metricEmission cap for covered
years level. cap declines to 63% of 2006tons.sources in 2030 is 3.508
Beginning in 2030,levels, minus 2030 emissionsbillion metric tons.
emission cap declines toBeginning in 2050,from non-covered entities.Emission cap for covered sources
3.858 billion metric tons,emission cap set at 80%in 2040 is 2.283 billion metricEmission cap for covered
minus 2030 emissions frombelow 1990 levels.Beginning in 2050, emissiontons.sources in 2040 is 1.928
non-covered entities.cap further declines to 25%billion metric tons.



CRS-17
TopicH.R. 620 (Olver)H.R. 1590 (Waxman)H.R. 4226(Gilchrest)H.R. 6186 (Markey)H.R. 6316 (Doggett)
Beginning in 2050,of 2006 levels, minus annualEmission cap for covered sourcesEmission cap for covered
emission cap furtheremissions from non-coveredin 2050 is 0.930 billion metricsources in 2050 is 0.348
declines to 1.504 billionentities. tons.billion metric tons.
metric tons, minus annual
emissions from non-covered
entities.
In metric tons of carbonEPA promulgates ruleIn metric tons of carbonAny electric power or industrialAssuming no capture of
dioxide equivalent: anywithin two years ofdioxide equivalent: anyfacility that emits over 10,000GHGs, any producer or
electric power, industrial, orenactment that applies theelectric power, industrial, ormtCO2e; any producer orimporter of petroleum- or
commercial entity that emitsmost cost-effectivecommercial entity that emitsimporter of petroleum or coal-coal-based liquid or gaseous
over 10,000 metric tonsreduction options on theover 10,000 mtCO2ebased liquid products that, whenfuel that emits GHGs, or any
carbon dioxide equivalentlargest emitting sources orannually from any singlecombusted, will emit over 10,000facility that produces or
(mtCO2e) annually fromsectors to achievefacility owned by the entity;mtCO2e annually; localimports more than 10,000
any single facility owned byreduction goals.any refiner or importer ofdistribution company that deliversCO2e of GHG chemicals
the entity; any refiner orpetroleum products fornatural gas that, when combusted,annually; any facility that
iki/CRS-RL33846importer of petroleumtransportation use that, whenwill emit over 10,000 mtCO2euses more than 5,000 tons of
g/wproducts for transportationcombusted, will emit overannually; producer or importer ofcoal annually; any natural
s.oruse that, when combusted,10,000 mtCO2e annually;HFCs, PFCs, SF6, or NF3 [thatgas processing plant or
leakwill emit over 10,000and any importer or producerwhen used, will emit] over 10,000importer (including LNG);
mtCO2e annually; and anyof HFCs, PFCs, or SF6 that,mtCO2e; a site at which CO2 isor, any facility that emits
://wikiimporter or producer ofwhen used, will emit overgeologically sequestered on amore than 10,000 CO2e of
httpHFCs, PFCs, or SF6 that,when used, will emit over10,000 mtCO2e.commercial scale.HFCs annually as abyproduct of
10,000 mtCO2e.hydrochlorofluorocarbon
productio n.
neralA tradeable allowanceA tradeable allowanceA tradeable allowanceA tradeable allowance system isA tradeable allowance
cating andsystem is established: EPAsystem is established. Thesystem is established: EPAestablished; although the vastsystem is established.
plementingshall determine allocationsPresident submits toshall determine allocationsmajority of the allowances wouldBeginning in 2012, 5% of
ategybased on several economic,Congress an allocationbased on several economic,be auctioned, between 2012 andthe allowances are allocated
equity, and sector-specificplan within one year ofequity, and sector-specific2019, 6% of allowances would beto electric generators,
criteria, including economicenactment that includes acriteria, including economicdistributed to manufacturers ofdeclining to 0% in 2020;
efficiency, competitivecombination of auctionsefficiency, competitivetrade-exposed primary goods,”10% are allocated to energy
effects, and impact onand free allocation ofeffects, and impact onincluding (per bill text) aluminum,intensive industries,
consumers. Allowances areallowances. To theconsumers. Allowances arecement, iron/steel, glass, anddeclining to 0% in 2020.
to be allocated upstream tomaximum extentto be allocated upstream topaper; EPA would develop
refiners and importers ofpracticable, the allocationrefiners and importers ofdistribution system.Remaining allowances are
transportation fuel, alongand revenues receivedtransportation fuel, alongauctioned by the Treasury
with producers of HFCs,should maximize publicwith producers of HFCs,Auction revenues distributed (inDepartment with 15% of
PFCs, and SF6, andbenefits, promotePFCs, and SF6, andFY2010-FY2019) as follows:revenues transferred to the



CRS-18
TopicH.R. 620 (Olver)H.R. 1590 (Waxman)H.R. 4226(Gilchrest)H.R. 6186 (Markey)H.R. 6316 (Doggett)
downstream to electriceconomic growth, assist downstream to electric58.5% to middle- and low-incomeDeficit Reduction Trust
generation, industrial, andhouseholds and dislocatedgeneration, industrial, andhouseholds as tax credits and/orFund and 85% transferred to
commercial entities.workers, encourage commercial entities.rebates; 12.5% for developmentthe Citizen Protection Trust
energy efficiency,and promotion of low-carbonFund.
Allocations to coveredrenewable energy, andAllocations to coveredtechnology; 12.5% for energy
entities are provided at nosequestration activities,entities are provided at noefficiency programs; 4.5% for
cost.and assist states incost.biological sequestration; 1.5% for
addressing the impact ofworker transition assistance; 2%
climate change. Congressfor domestic adaptation efforts;
has one year to enact an1.5% for protection of natural
alternative to the plan;resources; 1.5% for international
otherwise, EPA shallforest protection; 3.5% for
implement it.international clean technology;
2% for international adaptation
e ffo r t s.
iki/CRS-RL33846EPA shall determine theThe President shallEPA shall determine theBetween 2012 and 2019, 94% ofBeginning in 2012, 85% of
g/wuction ofnumber of allowancesdetermine the number ofnumber of allowancesallowances auctioned; 100%allowances are auctioned.
s.orwancesallocated to the Climateallowances to beallocated to the Climateauctioned thereafter.This increases steadily to
leakChange Credit Corporationauctioned. The proceedsChange Credit Corporation100% in 2020 and
(CCCC) (established by theof the auction are to be(CCCC) (established by thethereafter.
://wikibill).deposited with the Climatebill).
httpThe CCCC may buy andReinvestment Fund createdby the Department of theThe CCCC may buy and sell
sell allowances, and use theTreasury. (See “Revenueallowances, and use the
proceeds to reduce costsrecycling below.) proceeds to reduce costs
borne by consumers andborne by consumers and
other purposes. (Seeother purposes. (See
Revenue recyclingRevenue recycling below.)
belo w.)
st-limitingNo explicit provision.No explicit provision.A Carbon Market EfficiencyNo explicit provision.A Carbon Market Efficiency
veBoard is established toBoard is established to
observe the allowanceobserve the allowance
market and implement cost-market and implement cost-
relief measures if necessary. relief measures if necessary.
Measures include permittingMeasures include increasing
increased allowanceavailable allowances by up
borrowing from futureto 5% in a given year, by
allocations; expandedmaking a compensating
payback period for suchreduction in allowance



CRS-19
TopicH.R. 620 (Olver)H.R. 1590 (Waxman)H.R. 4226(Gilchrest)H.R. 6186 (Markey)H.R. 6316 (Doggett)
allowances; lower interestavailability in future years,
charged for borrowedand by permitting increased
allowances; and expandeduse of offsets and foreign
total borrowed allowances.allowances in a given year
Increased borrowing limitedby covered entities.
to 5% of emission cap and
repayment schedule cannotIf the President determines a
be longer than 15 years.national security emergency
exists, the President may
temporarily adjust, suspend,
or waive any regulation
promulgated under this
program (subject to judicial
review).
alty for Excess emission penaltiesExcess emission penaltiesExcess emission penalties areExcess emission penalties per tonExcess emission penalties
iki/CRS-RL33846n-complianceare equal to three times theare equal to twice theequal to three times theare equal the greater of $200 orper ton are equal the greater
g/wmarket price for allowancesmarket price formarket price for allowancesthree times the mean market priceof $200 or three times the
s.oron the last day of the year atallowances as of Decemberon the last day of the year atfor allowances during the year themean market price for
leakissue.31 of the year at issue, plusissue.allowance was due;allowances during the year
a 1-to-1 offset from nextthe allowance was due;
://wikiyear’s allowanceIn addition, the covered facility is
httpallocation.required to offset excessemissions at a 1-to-1 ratio in theIn addition, the coveredfacility is required to offset
following year (or longer periodexcess emissions at a 1-to-1
prescribed by EPA).ratio in the following year
(or longer period prescribed
by EPA).
et treatmentUp to 15% of requiredMarket trading systems areUp to 15% of requiredCovered entities permitted to useUse of domestic offsets is
therreductions may be achievedincorporated into newreductions may be achieveddomestic offsets to meet up tolimited to no more than 10%
ibilitythrough credits obtainedenergy efficiencythrough credits obtained15% of their allowanceof a covered entitys
msthrough pre-certifiedperformance standard.through pre-certifiedsubmissions;allowance submission;
international emissionsinternational emissionscertain agricultural projects
trading programs, approvedNo explicit provision ontrading programs, approvedCovered entities may use eitherare subject to review by the
reduction projects inuse of domestic orreduction projects ininternational emission allowances,National Academy of
developing countries,international offsets todeveloping countries,international offsets, or someSciences and ultimately
domestic carbonmeet reductiondomestic carboncombination thereof to satisfylimited to 5% of allowance
sequestration, andrequirements. However,sequestration, and reductionsanother 15% of their allowancesubmission;
reductions from non-one goal of program is tofrom non-covered entities.submission;
covered entities.encourage sequestration ofUse of foreign allowances is



CRS-20
TopicH.R. 620 (Olver)H.R. 1590 (Waxman)H.R. 4226(Gilchrest)H.R. 6186 (Markey)H.R. 6316 (Doggett)
carbon in the forest andlimited to 15% of a covered
agricultural sectors.entitys allowance
submission;
Use of international forest
allowances is limited to 15%
of a covered entitys
allowance submission;
Overall limitation: covered
entities permitted to use a
combination of domestic
offsets and foreign
allowances to meet up to
25% of their allowance
iki/CRS-RL33846 sub missio ns.
g/wkingBanking of allowances isBanking of allowances isBanking of allowances isBanking of allowances isBanking of allowances is
s.orpermitted; allowances maypermitted; allowances maypermitted; allowances maypermitted; allowances may bepermitted; allowances may
leakbe saved for use in futurebe saved for use in futurebe saved for use in futuresaved for use in future years.be saved for use in future
years. years. years. years.
://wikirrowingBorrowing against futureNo specific provision.Borrowing against futureBorrowing against futureThe Carbon Market
httpreductions is permitted.reductions is permitted.reductions is permitted, butEfficiency Board may
limited.permit borrowing against
future reductions in certain
cases.
rly reductionEntities with registeredRecognizing andEntities with registeredUnder certain conditions, EPAOne percent of revenues
and bonusemission reductionsrewarding early reductionsemission reductions achievedmay issue credits for offsetallocated to the Citizen
achieved before 2012 mayis a stated goal of thebefore 2012 may receiveprojects that are developed beforeProtection Trust Fund is to
receive allowances forprogram.allowances for them.the 2012. be distributed to facilities
them.making reductions from
For the time period 2012-1994 to enactment.
For the time period 2012-2017, entities that haveEligibility to be determined
2017, entities that haveentered into an agreementby EPA regulations.


entered into an agreementwith EPA to reduce
with EPA to reduceemissions to 1990 levels by
emissions to 1990 levels by2012 are entitled to
2012 are entitled toadditional allowances to
additional allowances tocover their additional
cover their additionalreductions and are allowed to

CRS-21
TopicH.R. 620 (Olver)H.R. 1590 (Waxman)H.R. 4226(Gilchrest)H.R. 6186 (Markey)H.R. 6316 (Doggett)
reductions and are allowedachieve 35% of their
to achieve 35% of theirreduction requirement (as
reduction requirement (asopposed to 15%; see above)
opposed to 15%; see above)through international
through internationalemissions trading and
emissions trading andprojects, sequestration, or
projects, sequestration, orreductions by non-covered
reductions by non-coveredentities.
entities.
Revenues generated byRevenues generated byRevenues generated byAuction revenues distributed (inRevenues generated by
allowance auctions andallowance auctions andallowance auctions andFY2010-FY2019) as follows:allowance auctions and
trading proceeds arepenalties are received by atrading proceeds are receivedpenalties are deposited by
received by a new Climatenew Climate Reinvestmentby a new Climate Change58.5% to middle- and low-incomethe Treasury Department
Change Credit CorporationFund created by theCredit Corporation (CCCC).households as tax credits and/orinto two funds: 15% to the
(CCCC). Activities to beDepartment of theActivities to be fundedrebates; 12.5% for developmentDeficit Reduction Trust
iki/CRS-RL33846funded include mechanismsTreasury. Activities to beinclude mechanisms toand promotion of low-carbonFund and 85% to the Citizen
g/wto reduce consumer costsfunded includereduce consumer costs and totechnology; 12.5% for energyProtection Trust Fund.
s.orand to assist dislocatedmechanisms to rewardassist dislocated workers andefficiency programs; 4.5% forDistribution to the Citizen
leakworkers and affectedearly reductions, maximizeaffected communities, alongbiological sequestration; 1.5% forProtection Trust Fund are as
communities, along withpublic benefits, promotewith programs to encourageworker transition assistance; 2%follows:
://wikiprograms to encourageeconomic growth, assist deployment of newfor domestic adaptation efforts;
httpdeployment of newtechnology and wildlifehouseholds and dislocatedworkers, encourage energytechnology and wildliferestoration. Bill specifies that1.5% for protection of naturalresources; 1.5% for international54% for consumerassistance (66% of which
restoration.efficiency, renewable25% of allowances allocatedforest protection; 3.5% forgoes towards providing
energy, and sequestrationto the CCCC be used tointernational clean technology;health insurance coverage,
activities, and assist statesrestore large-scale freshwater2% for international adaptationthe remainder for rebates
in addressing the impact ofaquatic and estuarineefforts.and tax relief), 7% for
climate change. ecosystems.natural resource adaptation,
1% for early action; 2.7%
for states and tribes; 11.4%
for international activities,
4% for worker assistance,
3% for forestry and
agricultural activities, 0.4%
for education, 7.5% for
energy efficiency, 2% for
transportation alternatives,
and 7% for green energy
research.



TopicH.R. 620 (Olver)H.R. 1590 (Waxman)H.R. 4226(Gilchrest)H.R. 6186 (Markey)H.R. 6316 (Doggett)
eyProvisions include studiesProvisions includeThe President may establishEstablishes a program to requireEstablishes a program to
sionsof the impact of climatemandatory greenhouse gasa program to requireimporters to purchaserequire importers to
change on coastalemission standards forimporters to pay the value ofinternational reserve allowances”purchase “international
ecosystems andvehicles by 2010, and aGHGs emitted during theto account for GHG emissionsreserve allowances” to
communities, and thenew energy efficiencyproduction of goods orfrom the production oftrade-account for GHG emissions
world’s poor, among others;standard beginning inservices imported into theexposed goods” (e.g., iron/steel,from the production of
assessment of adaptation2010. Establishes aUnited States from countriescement, aluminum) from countriesprimary goods” (e.g.,
technologies; and creationRenewable Portfoliothat have no comparablethat have no comparable emissioniron/steel, cement,
of a national greenhouse gasStandard.emission restrictions to thoserestrictions to those of the Unitedaluminum) from countries
database.of the United States. TheStates; least developed nations orthat have no comparable
Requires periodic reviewprograms requirement maythose that contribute less thanemission restrictions to
Requires periodic review ofof target adequacy by thenot be imposed on countries0.5% of global emissions arethose of the United States;
target adequacy by theNAS.until negotiations to achieveexcluded;least developed nations or
Under Secretary ofagreement on suchthose that contribute less
Commerce for Oceans andrestrictions have beenRequires NAS to conduct a than 0.5% of global
Atmosphere.attempted. periodic review of climate changeemissions are excluded;
iki/CRS-RL33846Provisions include studies ofscience and the performance ofthe act; directs GAO toRequires EPA to promulgate
g/wthe impact of climate changeperiodically review theregulations within two years
s.oron coastal ecosystems andeffectiveness of auction revenueof enactment requiring that
leakcommunities, and thedistribution, both for domestic andemissions in uncovered
world’s poor, among others;international objectives;sectors do not grow (no
://wikiassessment of adaptationbaseline specified).


httptechnologies; creation of aDirects EPA to develop emission
national greenhouse gasperformance standards for non-
database; and an outreachcovered entities that exceed
initiative to inform10,000 mtCO2e per year; such
agriculture of the bill’ssources may include coal mines,
revenue opportunities.landfills, wastewater treatment
operations, and animal feeding
Requires periodic review ofoperations; agricultural soil
target adequacy by the Undermanagement and forest
Secretary of Commerce formanagement would be specifically
Oceans and Atmosphere.excluded;
Creates a performance standard
for coal-fired power plants that
commence construction on or
after January 1, 2009. For plants
that commence operation before
2020, they must capture and

TopicH.R. 620 (Olver)H.R. 1590 (Waxman)H.R. 4226(Gilchrest)H.R. 6186 (Markey)H.R. 6316 (Doggett)
geologically sequester not less
than 85% of their CO2 emissions
by 2016 or four years after
operations begin, whichever is
later; all other plants must meet
the standard when operations
begin, although plants that start up
before January 1, 2025, may seek
an extension of up to 18 months;
Overrides EPA denial of
California waiver needed to
implement GHG standards for
ve hi c l e s ;
Establishes a low carbon fuel
iki/CRS-RL33846standard (LCFS): by 2011, theLCFS freezes the per-unit-energy
g/wlifecycle GHG emissions from
s.ortransportation fuels at a baseline
leak(based on 2005 data); by 2023, the
LCFS requires a 5% reduction in
://wikilifecycle emissions below the fuel
httpemission baseline; this
requirement is separate from any
requirements under the
cap-and-trade program.



Appendix C. Common Terms
Allocation schemes (upstream and downstream). Regulatory approaches to
allocating allowances (as opposed to auction schemes) can choose different points
and participants along the production process to assign allowances and the resulting
compliance responsibility. Upstream allocation schemes establish emission caps and
assign allowances at a production, importation, or distribution point of products that
will eventually produce greenhouse emissions further down the production process.
For example, in the natural gas sector, emission caps could be established and
allowances assigned at processing facilities where facilities and participants shrink
from about 400,000 wells and 8,000 companies to 500 facilities and 200 companies.
In contrast, downstream allocation schemes establish emission caps and assign
allowances at the point in the process where the emissions are emitted. In the case
of the natural gas industry, to achieve the same coverage as the upstream scheme, this
would involve assigning allowances to natural gas-fired electric generators, industry,
and even residential users. Thus, some downstream proposals choose either to
exempt certain sectors (such as residential use) from a cap-and-trade program or to
employ a hybrid allocation scheme where some of the allowances are allocated
upstream and others downstream (such as the electric generators).
Allowance. An allowance is generally defined as a limited authorization by the
government to emit 1 ton of pollutant. In the case of greenhouse gases, an allowance
generally refers to a metric ton of carbon dioxide equivalent. Although used
generically, an allowance is technically different from a credit. A credit represents
a ton of pollutant that an entity has reduced in excess of its legal requirement.
However, the terms tend to be used interchangeably, along with others, such as
permits.
Auctions. Auctions can be used in market-based pollution control schemes in
several different ways. For example, Title IV of the 1990 Clean Air Act
Amendments uses an annual auction to ensure the liquidity of the credit trading
program. For this purpose, a small percentage of the credits permitted under the
program are auctioned annually, with the proceeds returned to the entities that would
have otherwise received them. Private parties are also allowed to participate. A
second possibility is to use an auction to raise revenues for a related (or unrelated)
program. For example, the Regional Greenhouse Gas Initiative (RGGI) is exploring
an auction to implement its public benefit program to assist consumers or pursue
strategic energy purposes. A third possibility is to use auctions as a means of
allocating some, or all, of the allowances established under a GHG control program.
Obviously, the impact that an auction would have on cost would depend on how
extensively it was used in any GHG control program, and to what purpose the
revenues were expended.
Banking. Although allowances are generally allocated on an annual basis, most
cap-and-trade programs do not require participants to either use the allowance that
year or else lose it. Under many proposals, allowances can be banked by the
receiving participant (or traded to another participant who can use or bank it) to be
used or traded in a future year. Banking reduces the absolute cost of compliance by
making annual emission caps flexible over time. The limited ability to shift the



reduction requirement across time allows affected entities to better accommodate
corporate planning for capital turnover, allow for technological progress, control
equipment construction schedules, and respond to transient events such as weather
and economic shocks.
Bubble. A bubble is a regulatory device that permits two or more sources of
pollutants to be treated as one for the purposes of emission compliance.
Cap-and-trade program. A cap-and-trade program is based on two premises.
First, a set amount of pollutant emitted by human activities can be assimilated by the
ecological system without undue harm. Thus, the goal of the cap-and-trade program
is to impose a ceiling (i.e., an emissions cap) on the total emissions of that pollutant
at a level below the assimilative capacity. Second, a market in pollution licenses
(i.e., allowances) between polluters is the most cost-effective means of reducing
emissions to the level of the cap. This market in allowances is designed so that
owners of allowances can trade those allowances with other emitters who need them
or retain (bank) them for future use or sale. In the case of the sulfur dioxide program
contained in the 1990 Clean Air Act Amendments, most allowances were allocated
free by the federal government to utilities according to statutory formulas related to
a given facility’s historic fuel use and emissions; other allowances have been
reserved by the government for periodic auctions to ensure market liquidity.
Carbon tax. A carbon tax is generally conceived as a levy on natural gas,
petroleum, and coal according to their carbon content, in the approximate ratio of 0.6
to 0.8 to 1, respectively. However, proposals have been made to impose the tax
downstream of the production process when the carbon dioxide is actually released
to the atmosphere. In contrast to a cap-and-trade program, in which the quantity of
emissions is limited and the price is determined by an allowance marketplace, with
a carbon tax, the price is limited and the quantity of emissions is determined by the
participants based on the cost of control versus the cost of the tax.
Coverage. Coverage is the breadth of economic sectors covered by a particular
greenhouse gas reduction program, as well as the breadth of covered entities within
a covered sector.
Emissions cap. A mandated limit on how much pollutant (or greenhouse gases)
an affected entity can release to the atmosphere. Caps can be either an absolute cap,
where the amount is specified in terms of tons of emissions on an annual basis, or a
rate-based cap, where the amount of emissions produced per unit of output (such as
electricity) is specified but not the absolute amount released. Caps may be imposed
on an entity, sector, or economy-wide basis.
Generation performance standard (GPS). Also called an output-based
allocation, allowances are allocated gratis to entities in proportion to their relative
share of total electricity generation in a recent year.
Grandfathering. Grandfathering generally refers an allocation scheme in
which allowances are distributed to affected entities on the basis of historic
emissions. These allowances are generally distributed free-of-charge by the
government to the affected entities. Grandfathering can also refer to entities that



because of age or because they have met an earlier standard, or other factors, are
exempted from a new regulatory requirement.
Greenhouse gases. The six gases recognized under the United Nations
Framework Convention on Climate Change are carbon dioxide (CO2), methane (CH4)
nitrous oxide (N2O), sulfur hexafluoride (SF6), hydrofluorocarbons (HFC), and
perfluorocarbons (PFC).
Hybrid Program. Generally a greenhouse gas reduction program that allows
emitters to choose between complying with the reduction requirement of a cap-and-
trade program or paying a set price (safety valve price) to the government in lieu of
making reductions.
Leakage. Decreases in greenhouse gas-related reductions or benefits outside
the boundaries set for defining a project’s or program’s net greenhouse gas impact
resulting from mitigation activities. For example, emissions could be reduced in an
area with greenhouse gas controls by moving an emitting industry to an area without
such controls.
“No regrets” policy. A “no regrets” policy is one of establishing programs for
other purposes that would have concomitant greenhouse gas reductions. Therefore,
only those policies that reduce greenhouse gas emissions at no additional cost are
considered.
Offsets. Offsets generally refer to emission credits achieved by activities not
directly related to the emissions of an affected source. Examples of offsets would
include forestry and agricultural activities that absorb carbon dioxide, and reduction
achieved by entities that are not regulated by a greenhouse gas reduction program.
Revenue recycling. Some greenhouse gas reduction programs create revenues
through auctions, compliance penalties, or imposition of a carbon tax. Revenue
recycling refers to how a program disposes of those revenues. How a program
handles revenues received can have a significant effect on the overall cost of the
program to the economy.
Safety valve. Devices designed to prevent or to respond to unacceptably high
compliance costs for greenhouse gas reductions. Generally triggered by prices in the
allowance markets, safety valve approaches can include (1) a set price alternative to
making reductions or buying allowances at the market price, (2) a slowdown in
tightening the emissions cap, and (3) lengthening of the time allowed for compliance.
Depending on the interplay between the emissions cap and safety valve and actual
compliance costs, a safety valve can affect the integrity of the emissions cap.
Sequestration. Sequestration is the process of capturing carbon dioxide from
emission streams or from the atmosphere and then storing it in such a way as to
prevent its release to the atmosphere.