[Congressional Bills 105th Congress]
[From the U.S. Government Publishing Office]
[S. 2617 Introduced in Senate (IS)]

  2d Session
                                S. 2617

  To amend the Clean Air Act to authorize the President to enter into 
 agreements to provide regulatory credit for voluntary early action to 
                   mitigate greenhouse gas emissions.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

             October 10 (legislative day, October 2), 1998

 Mr. Chafee (for himself, Mr. Mack, and Mr. Lieberman) introduced the 
 following bill; which was read twice and referred to the Committee on 
                      Environment and Public Works

_______________________________________________________________________

                                 A BILL


 
  To amend the Clean Air Act to authorize the President to enter into 
 agreements to provide regulatory credit for voluntary early action to 
                   mitigate greenhouse gas emissions.

    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 ``Credit for Voluntary Early Action 
Act''.

SEC. 2. PURPOSE.

    The purpose of this Act is to encourage voluntary greenhouse gas 
emission mitigation actions by authorizing the President to enter into 
binding agreements under which entities operating in the United States 
will receive credit, usable in any future domestic program that 
requires mitigation of greenhouse gas emissions, for voluntary 
mitigation actions before 2008.

SEC. 3. CREDIT FOR VOLUNTARY GREENHOUSE GAS EMISSION MITIGATION 
              ACTIONS.

    The Clean Air Act (42 U.S.C. 7401 et seq.) is amended by adding at 
the end the following:

 ``TITLE VII--CREDIT FOR VOLUNTARY GREENHOUSE GAS EMISSION MITIGATION 
                                ACTIONS

``SEC. 701. DEFINITIONS.

    ``In this title:
            ``(1) Carbon reservoir.--The term `carbon reservoir' means 
        quantifiable nonfossil storage of carbon in a natural or 
        managed ecosystem or other reservoir.
            ``(2) Domestic.--The term `domestic' means within the 
        territorial jurisdiction of the United States.
            ``(3) Domestic greenhouse gas regulatory statute.--The term 
        `domestic greenhouse gas regulatory statute' means a Federal 
        statute, enacted after the date of enactment of this title, 
        that imposes a quantitative limitation on domestic greenhouse 
        gas emissions, or taxes such emissions.
            ``(4) Early action agreement.--The term `early action 
        agreement' means an agreement with the United States entered 
        into under section 702(a).
            ``(5) Existing source.--The term `existing source' means a 
        source that emitted greenhouse gases in the participant's base 
        period determined under section 704.
            ``(6) First compliance period.--The term `first compliance 
        period' means the first period during which a domestic 
        greenhouse gas regulatory statute takes effect.
            ``(7) Greenhouse gas.--The term `greenhouse gas' means--
                    ``(A) carbon dioxide; and
                    ``(B) to the extent provided by an early action 
                agreement--
                            ``(i) methane;
                            ``(ii) nitrous oxide;
                            ``(iii) hydrofluorocarbons;
                            ``(iv) perfluorocarbons; and
                            ``(v) sulfur hexafluoride.
            ``(8) Greenhouse gas reduction credit.--The term 
        `greenhouse gas reduction credit' means an authorization under 
        a domestic greenhouse gas regulatory statute to emit 1 metric 
        ton of greenhouse gas (expressed in terms of carbon dioxide 
        equivalent) that is provided because of greenhouse gas emission 
        reductions or carbon sequestration carried out before the first 
        compliance period.
            ``(9) New source.--The term `new source' means a source 
        other than an existing source.
            ``(10) Own.--The term `own' means to have direct or 
        indirect ownership of an undivided interest in an asset.
            ``(11) Participant.--The term `participant' means a person 
        that enters into an early action agreement with the United 
        States under this title.
            ``(12) Person.--The term `person' includes a governmental 
        entity.
            ``(13) Source.--The term `source' means a source of 
        greenhouse gas emissions.

``SEC. 702. AUTHORITY FOR EARLY ACTION AGREEMENTS.

    ``(a) Authority.--
            ``(1) In general.--The President may enter into a legally 
        binding early action agreement with any person under which the 
        United States agrees to provide greenhouse gas reduction credit 
        usable beginning in the first compliance period, if the person 
        takes an action that reduces greenhouse gas emissions or 
        sequesters carbon before January 1, 2008.
            ``(2) Requirements.--An early action agreement entered into 
        under paragraph (1) shall meet either--
                    ``(A) the requirements for early action agreements 
                under sections 703 through 706; or
                    ``(B) in the case of a participant described in 
                section 707, the requirements of that section.
    ``(b) Delegation.--The President may delegate any authority under 
this title to any Federal department or agency.
    ``(c) Regulations.--The President may promulgate such regulations 
(including guidelines) as are appropriate to carry out this title.

``SEC. 703. ENTITLEMENT TO GREENHOUSE GAS REDUCTION CREDIT FOR EARLY 
              ACTION.

    ``(a) In General.--
            ``(1) International activities.--
                    ``(A) Internationally creditable actions.--A 
                participant shall receive greenhouse gas reduction 
                credit under an early action agreement if the 
                participant takes an action that--
                            ``(i) reduces greenhouse gas emissions or 
                        sequesters carbon before January 1, 2008; and
                            ``(ii) under any applicable international 
                        agreement, will result in an addition to the 
                        United States quantified emission limitation 
                        for the first compliance period.
                    ``(B) United states initiative for joint 
                implementation.--
                            ``(i) In general.--Subject to clause (ii), 
                        an early action agreement may provide that a 
                        participant shall be entitled to receive 
                        greenhouse gas reduction credit for a 
                        greenhouse gas emission reduction or carbon 
                        sequestration that--
                                    ``(I) is not creditable under 
                                subparagraph (A); and
                                    ``(II) is for a project accepted 
                                before 2000 under the United States 
                                Initiative for Joint Implementation.
                            ``(ii) Limitation on period in which credit 
                        may be earned.--No greenhouse gas reduction 
                        credit may be earned under this subparagraph 
                        after the earlier of--
                                    ``(I) the earliest date on which 
                                credit may be earned for a greenhouse 
                                gas emission reduction, carbon 
                                sequestration, or comparable project 
                                under an applicable international 
                                agreement; or
                                    ``(II) December 31, 2007.
            ``(2) Domestic activities.--
                    ``(A) Emission reductions.--A participant shall 
                receive greenhouse gas reduction credit under an early 
                action agreement if, during the 1999 through 2007 
                period--
                            ``(i) the participant's aggregate 
                        greenhouse gas emissions from domestic sources 
                        that are covered by the early action agreement; 
                        are less than
                            ``(ii) the sum of the participant's annual 
                        source baselines during that period as 
                        determined under section 704.
                    ``(B) Sequestration.--For the purpose of receiving 
                greenhouse gas reduction credit under subparagraph (A), 
                the amount by which aggregate net carbon sequestration 
                for the 1999 through 2007 period in a participant's 
                domestic carbon reservoirs covered by an early action 
                agreement exceeds the sum of the participant's annual 
                reservoir baselines for calendar years 1999 through 
                2007 shall be treated as a greenhouse gas emission 
                reduction.
                    ``(C) Section 1605 activity.--An early action 
                agreement may provide that a participant shall be 
                entitled to receive 1 ton of greenhouse gas reduction 
                credit for each ton of greenhouse gas emission 
                reductions or carbon sequestration for the 1991 through 
                1998 period from domestic activities that--
                            ``(i) are--
                                    ``(I) reported before January 1, 
                                1999, under section 1605 of the Energy 
                                Policy Act of 1992 (42 U.S.C. 13385); 
                                or
                                    ``(II) carried out and reported 
                                under a Federal agency program to 
                                implement the Climate Change Action 
                                Plan; and
                            ``(ii) are verified (in accordance with 
                        section 706) as--
                                    ``(I) being accurately reported;
                                    ``(II) not being double-counted; 
                                and
                                    ``(III) representing actual 
                                reductions in greenhouse gas emissions 
                                or in actual net carbon sequestration.
            ``(3) Extension.--The parties to an early action agreement 
        may extend the 1999 through 2007 period during which greenhouse 
        gas reduction credit may be earned under the early action 
        agreement, if Congress permits such an extension by law enacted 
        after the date of enactment of this title.
    ``(b) Award of Greenhouse Gas Reduction Credit.--
            ``(1) Notification of provisional credit.--The President 
        shall annually notify each participant of the quantity of 
        greenhouse gas reduction credit provisionally earned under an 
        early action agreement.
            ``(2) Award of final credit.--Effective on January 1, 2008, 
        a participant shall be entitled to receive 1 ton of greenhouse 
        gas reduction credit for each 1 ton that is creditable under 
        subsection (a).

``SEC. 704. BASELINE AND BASE PERIOD.

    ``(a) Source Baseline.--A participant's annual source baseline for 
each of calendar years 1999 through 2007 shall be equal to the 
participant's average annual greenhouse gas emissions from domestic 
sources covered by the participant's early action agreement during a 
1996 through 1998 base period, adjusted for the calendar year as 
provided in subsections (a)(2), (c)(1), and (c)(2) of section 705.
    ``(b) Reservoir Baseline.--A participant's annual reservoir 
baseline for each of calendar years 1999 through 2007 shall be equal to 
the average level of carbon stocks in carbon reservoirs covered by the 
participant's early action agreement for a 1996 through 1998 base 
period, adjusted for the calendar year as provided in section 
705(c)(1).
    ``(c) Alternative Base Periods.--
            ``(1) Data unavailable or unrepresentative.--The 
        regulations promulgated under section 702(c) may specify a base 
        period other than 1996 through 1998 that will be applicable if 
        adequate data are not available to determine a 1996 through 
        1998 baseline or if such data are unrepresentative.
            ``(2) Elections.--The regulations promulgated under section 
        702(c) may permit a participant to elect a base period earlier 
        than 1996 through 1998 (not to include any year earlier than 
        1990) to reflect voluntary reductions made before January 1, 
        1996.
            ``(3) Section 1605 activity.--Except as otherwise provided 
        by the regulations promulgated under section 702(c), if an 
        election is made for a base period earlier than 1996 through 
        1998, no greenhouse gas reduction credit shall be available 
        under section 703(a)(2)(C).

``SEC. 705. SOURCES AND CARBON RESERVOIRS COVERED BY EARLY ACTION 
              AGREEMENTS.

    ``(a) Sources.--
            ``(1) In general.--
                    ``(A) Covered sources.--Except as otherwise 
                provided in this subsection, a participant's early 
                action agreement shall cover all domestic greenhouse 
                gas sources that the participant owns as of the date on 
                which the early action agreement is entered into.
                    ``(B) Exclusions.--The regulations promulgated 
                under section 702(c) (or the terms of an early action 
                agreement) may exclude from coverage under an early 
                action agreement--
                            ``(i) small or diverse sources owned by the 
                        participant; and
                            ``(ii) sources owned by more than 1 person.
            ``(2) New sources.--
                    ``(A) In general.--The regulations promulgated 
                under section 702(c) may provide that an early action 
                agreement may provide for an annual addition to a 
                participant's source baseline to account for new 
                sources owned by the participant.
                    ``(B) Amount of addition.--The amount of an 
                addition under subparagraph (A) shall reflect the 
                emission performance of the most efficient commercially 
                available technology for sources of the same type as a 
                new source (determined as of the date on which the 
                early action agreement is entered into).
    ``(b) Opt-in Provisions.--
            ``(1) Opt-in for other owned sources.--Domestic sources 
        owned by a participant that are not required to be covered 
        under subsection (a) may be covered under an early action 
        agreement at the election of the participant.
            ``(2) Opt-in for carbon reservoirs.--
                    ``(A) In general.--An early action agreement may 
                provide that domestic carbon reservoirs owned by a 
                participant may be covered under the early action 
                agreement at the election of the participant.
                    ``(B) Coverage.--Except in the case of small or 
                diverse carbon reservoirs owned by the participant (as 
                provided in the regulations promulgated under section 
                702(c)), if a participant elects to have domestic 
                carbon reservoirs covered under the early action 
                agreement, all of the participant's domestic carbon 
                reservoirs shall be covered under the early action 
                agreement.
            ``(3) Opt-in for sources and carbon reservoirs not owned by 
        participant.--Any source or carbon reservoir not owned by the 
        participant, or any project that decreases greenhouse gas 
        emissions from or sequesters carbon in such a source or carbon 
        reservoir, may be covered by an early action agreement, with 
        the consent of each owner of the source or carbon reservoir and 
        in accordance with the regulations promulgated under section 
        702(c).
    ``(c) Accounting Rules.--
            ``(1) Transfers.--If ownership of a source or carbon 
        reservoir covered by an early action agreement is transferred 
        to or from the participant--
                    ``(A) in the case of a source, the source's 
                emissions shall be adjusted to reflect the transfer for 
                the base period and each year for which greenhouse gas 
                reduction credit is claimed; and
                    ``(B) in the case of a carbon reservoir--
                            ``(i) the carbon reservoir's carbon stocks 
                        shall be adjusted to reflect the transfer for 
                        the base period; and
                            ``(ii) the carbon reservoir's net carbon 
                        sequestration shall be adjusted to reflect the 
                        transfer for each year for which greenhouse gas 
                        reduction credit is claimed.
            ``(2) Displacement of emissions.--An early action agreement 
        shall contain effective and workable provisions that ensure 
        that only net emission reductions will be credited under 
        section 703 in circumstances in which emissions are displaced 
        from sources covered by an early action agreement to sources 
        not covered by an early action agreement.
            ``(3) Period of coverage.--Emissions from sources and net 
        carbon sequestration in carbon reservoirs shall be covered by 
        an early action agreement for the 1999 through 2007 period, 
        except as provided under paragraph (1) or by the regulations 
        promulgated under section 702(c).
            ``(4) Partial years.--An early action agreement shall 
        contain appropriate provisions for any partial year of coverage 
        of a source or carbon reservoir.

``SEC. 706. MEASUREMENT AND VERIFICATION.

    ``An early action agreement shall provide that the participant, in 
accordance with the regulations promulgated under section 702(c)--
            ``(1) shall annually measure, track, and publicly report 
        greenhouse gas emissions for the term of the early action 
        agreement; and
            ``(2) shall establish procedures for measurement and 
        reporting of emissions, emission reductions, and carbon 
        sequestration by qualified independent third party entities.

``SEC. 707. AUTHORITY TO ENTER INTO AGREEMENTS THAT ACHIEVE COMPARABLE 
              REDUCTIONS.

    ``In the case of a participant that manufactures or constructs for 
sale to end-users equipment or facilities that emit greenhouse gases, 
the President may enter into an early action agreement that does not 
meet the requirements of sections 703 through 705, if the President 
determines that--
            ``(1) an early action agreement that meets the requirements 
        of those sections is infeasible;
            ``(2) an alternative form of agreement would better carry 
        out this title; and
            ``(3) an agreement under this section would achieve tonnage 
        reductions of greenhouse gas emissions that are comparable to 
        reductions that would be achieved under an agreement that meets 
        the requirements of those sections.

``SEC. 708. TRADING AND POOLING.

    ``(a) Trading.--A participant may--
            ``(1) purchase earned greenhouse gas reduction credit from 
        and sell the credit to any other participant; and
            ``(2) sell the credit to any person that is not a 
        participant.
    ``(b) Pooling.--The regulations promulgated under section 702(c) 
may permit pooling arrangements under which a group of participants 
agree to act as a single participant for the purpose of entering into 
an early action agreement.

``SEC. 709. RELATIONSHIP TO FUTURE DOMESTIC GREENHOUSE GAS REGULATORY 
              STATUTE.

    ``(a) In General.--An early action agreement shall not bind the 
United States to adopt (or not to adopt) any particular form of 
domestic greenhouse gas regulatory statute, except that an early action 
agreement shall provide that--
            ``(1) greenhouse gas reduction credit earned by a 
        participant under an early action agreement shall be provided 
        to the participant in addition to any otherwise available 
        authorizations of the participant to emit greenhouse gases in 
        the first compliance period under a domestic greenhouse gas 
        regulatory statute; and
            ``(2) if the allocation of authorizations under a domestic 
        greenhouse gas regulatory statute to emit greenhouse gases in 
        the first compliance period is based on the level of a 
        participant's emissions in a historic period that is later than 
        the participant's base period under the participant's early 
        action agreement, any greenhouse gas reduction credit to which 
        the participant was entitled under the early action agreement 
        for domestic greenhouse gas reductions during that historic 
        period shall, for the purpose of that allocation, be added back 
        to the participant's greenhouse gas emissions level for the 
        historic period.
    ``(b) Limitation.--Nothing in this title authorizes aggregate 
greenhouse gas emissions from domestic sources in an amount that 
exceeds any greenhouse gas emission limitation applicable to the United 
States under an international agreement that has been ratified by the 
United States and has entered into force.''.
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