[Congressional Bills 106th Congress]
[From the U.S. Government Publishing Office]
[H.R. 2520 Introduced in House (IH)]







106th CONGRESS
  1st Session
                                H. R. 2520

    To authorize the President to enter into agreements to provide 
  regulatory credit for voluntary early action to mitigate potential 
          environmental impacts from greenhouse gas emissions.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                             July 14, 1999

  Mr. Lazio (for himself, Mr. Dooley of California, Mr. Boehlert, Mr. 
 Kind, Mr. Castle, Mr. Moran of Virginia, Mr. Saxton, Mr. Roemer, Mr. 
 Ganske, Mr. Maloney of Connecticut, Mr. Gilchrest, Mr. Price of North 
 Carolina, and Mr. Smith of Washington) introduced the following bill; 
            which was referred to the Committee on Commerce

_______________________________________________________________________

                                 A BILL


 
    To authorize the President to enter into agreements to provide 
  regulatory credit for voluntary early action to mitigate potential 
          environmental impacts from 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; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Credit for 
Voluntary Actions Act''.
    (b) Table of Contents.--The table of contents of this Act is as 
follows:

Sec. 1. Short title; table of contents.
Sec. 2. Purpose.
Sec. 3. Definitions.
Sec. 4. Authority for voluntary action agreements.
Sec. 5. Entitlement to greenhouse gas reduction credit for voluntary 
                            action.
Sec. 6. Baseline and base period.
Sec. 7. Sources covered by voluntary action agreements.
Sec. 8. Measurement and verification.
Sec. 9. Participation by manufacturers and adopters of end-use, 
                            consumer, and similar technology.
Sec. 10. Increases in domestic carbon stocks.
Sec. 11. Trading and pooling.
Sec. 12. Relationship to future domestic greenhouse gas regulatory 
                            statute.

SEC. 2. PURPOSE.

    (a) In General.--The purpose of this Act is to encourage voluntary 
actions to mitigate potential environmental impacts of greenhouse gas 
emissions 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 taken 
before the end of the credit period and to ensure that their future 
emission baselines reflect these actions.
    (b) Rules of Construction Regarding Kyoto Protocol and Federal 
Regulatory Actions.--This Act may not be construed--
            (1) as an indication of support for, or an endorsement or 
        ratification of, the Kyoto Protocol; or
            (2) as establishing an obligation on the part of the 
        Congress to enact a domestic greenhouse gas regulatory statute 
        (as defined in section 3(9)).

SEC. 3. DEFINITIONS.

    In this Act:
            (1) Afforestation.--The term ``afforestation'' means 
        conversion of non-forest to forest on lands that have, 
        historically, not contained forests and did not in 1990.
            (2) Baseline carbon stocks.--The term ``baseline carbon 
        stocks'' means the average amount of carbon stocks (in tons 
        carbon) estimated to be present on a participant's land during 
        the participant's base period.
            (3) Best management practices.--The term ``best management 
        practices'' means sustainable land-management practices that 
        conserve resources while maintaining long-term productivity.
            (4) Carbon reservoir.--The term ``carbon reservoir'' means 
        quantifiable nonfossil storage of carbon in a natural or 
        managed ecosystem or other reservoir.
            (5) Carbon stocks.--The term ``carbon stocks'' means living 
        biomass carbon, dead biomass carbon, and soil carbon (organic 
        and mineral soils).
            (6) Compliance period.--The term ``compliance period'' 
        means any period during which a domestic greenhouse gas 
        regulatory statute is in effect.
            (7) Credit period.--The term ``credit period'' means--
                    (A) the period of January 1, 1999, through the 
                earlier of--
                            (i) the day before the beginning of the 
                        compliance period; or
                            (ii) the end of the ninth calendar year 
                        that begins after the date of enactment of this 
                        Act; or
                    (B) if a different period is determined for a 
                participant under section 5(e) or 6(c)(4), the period 
                so determined.
            (8) Domestic.--The term ``domestic'' means within the 
        territorial jurisdiction of the United States.
            (9) Domestic greenhouse gas regulatory statute.--The term 
        ``domestic greenhouse gas regulatory statute'' means a Federal 
        statute, enacted after the date of enactment of this Act, that 
        imposes a quantitative limitation on domestic greenhouse gas 
        emissions.
            (10) Ecosystems.--The term ``ecosystems'' include above- 
        and below-ground living biomass, soils (organic and mineral), 
        and necromass.
            (11) Existing source.--The term ``existing source'' means a 
        source that emitted greenhouse gases during the participant's 
        base period determined under section 6.
            (12) Forest.--The term ``forest'' means land at least 10 
        percent occupied by forest trees of any size or formerly having 
        had such tree cover and not currently developed for non-forest 
        use. Lands developed for non-forest use include areas for 
        crops, improved pasture, residential, or administrative areas, 
        improved roads of any width, and adjoining road clearing and 
        powerline clearing of any width. The land must be a minimum of 
        one acre in area. Roadside, streamside, and shelterbelt strips 
        of timber must have a crown width of at least 120 feet to 
        qualify as forest land; and unimproved roads, trails, streams, 
        and clearings within forest areas are classified as forest land 
        if they are less than 120 feet wide (USDA Forest Service 1972).
            (13) Greenhouse gas.--The term ``greenhouse gas'' means--
                    (A) carbon dioxide;
                    (B) methane;
                    (C) nitrous oxide;
                    (D) hydrofluorocarbons;
                    (E) perfluorocarbons; and
                    (F) sulfur hexafluoride.
            (14) 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 compliance period.
            (15) Mature primary forest.--The term ``mature primary 
        forest'' means forests where the majority of dominant and 
        codominant trees are greater than 100 years of age and where 
        there is no history of significant direct human disturbance, 
        with the exception of prescribed fire, over the last 100 years.
            (16) New source.--The term ``new source'' means--
                    (A) a source other than an existing source; and
                    (B) a facility that would be a source but for the 
                facility's use of renewable energy.
            (17) Own.--The term ``own'' means to have direct or 
        indirect ownership of an undivided interest in an asset.
            (18) Participant.--The term ``participant'' means a person 
        that enters into a voluntary action agreement with the United 
        States under this Act.
            (19) Person.--The term ``person'' includes a governmental 
        entity.
            (20) Reforestation.--The term ``reforestation'' means 
        conversion of non-forest to forest on lands which had, 
        historically, contained forests but which had been converted to 
        some other use as of 1990.
            (21) Region.--The term ``region'' has the meaning 
        applicable pursuant to the inventory and analysis survey unit 
        or units of the United States Forest Service in which the 
        participant's lands are located.
            (22) Source.--The term ``source'' means a source of 
        greenhouse gas emissions.
            (23) Ton-year.--The term ``ton year'' means the maintenance 
        of a carbon stock of one ton for one year.
            (24) Voluntary action agreement.--The term ``voluntary 
        action agreement'' means an agreement with the United States 
        entered into under section 4(a).

SEC. 4. AUTHORITY FOR VOLUNTARY ACTION AGREEMENTS.

    (a) Authority.--
            (1) In general.--The President may enter into a legally 
        binding voluntary action agreement with any person under which 
        the United States agrees to provide greenhouse gas reduction 
        credit usable beginning in the compliance period, if the person 
        takes an action described in section 5 that reduces greenhouse 
        gas emissions or section 10 that sequesters carbon before the 
        end of the credit period.
            (2) Requirements.--A voluntary action agreement entered 
        into under paragraph (1) shall meet either--
                    (A) the requirements for voluntary action 
                agreements under sections 5 through 8;
                    (B) in the case of a participant described in 
                section 9, the requirements of that section; or
                    (C) in the case of carbon sequestration, the 
                requirements of section 10.
    (b) Delegation.--The President may delegate any authority under 
this Act to any Federal department or agency.
    (c) Regulations.--The President may promulgate such regulations 
(including guidelines) as are appropriate to carry out this Act.

SEC. 5. ENTITLEMENT TO GREENHOUSE GAS REDUCTION CREDIT FOR VOLUNTARY 
              ACTION.

    (a) Creditable Actions Which Result in Increases to United States 
Limitations.--A participant shall receive greenhouse gas reduction 
credit under a voluntary action agreement if the participant takes an 
action that--
            (1) reduces greenhouse gas emissions or sequesters carbon 
        before the end of the credit period; and
            (2) will result in an addition to the United States 
        quantified emission limitation during the credit period.
    (b) United States Initiative for Joint Implementation.--
            (1) In general.--Subject to paragraph (2), a voluntary 
        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--
                    (A) is not creditable under subsection (a); and
                    (B) is for a project--
                            (i) accepted before December 31, 2000, 
                        under the United States Initiative for Joint 
                        Implementation; and
                            (ii) financing for which was provided or 
                        construction of which was commenced before that 
                        date.
            (2) Limitation on period during which credit may be 
        earned.--No greenhouse gas reduction credit may be earned under 
        this subsection after the earlier of--
                    (A) the earliest date on which credit may be earned 
                for a greenhouse gas emission reduction, carbon 
                sequestration, or comparable project under a 
                Congressionally authorized domestic greenhouse gas 
                regulatory statute; or
                    (B) the end of the credit period.
    (c) Prospective Domestic Actions.--
            (1) Emission reductions.--A participant shall receive 
        greenhouse gas reduction credit under a voluntary action 
        agreement if during the entire credit period the participant's 
        aggregate greenhouse gas emissions from domestic sources that 
        are covered by the voluntary action agreement are less than the 
        sum of the participant's annual source baselines during that 
        entire period (as determined under section 6 and adjusted under 
        subsections (a)(2), (c)(1), and (c)(2) of section 7).
            (2) Sequestration.--For the purpose of receiving greenhouse 
        gas reduction credit under paragraph (1), the amount by which 
        aggregate net carbon sequestration for the credit period in a 
        participant's domestic carbon reservoirs covered by a voluntary 
        action agreement exceeds the sum of the participant's annual 
        reservoir baselines for the credit period (as determined under 
        section 6 and adjusted under section 7(c)(1)(B)) shall be 
        treated as a greenhouse gas emission reduction.
    (d) Retrospective Domestic Actions.--
            (1) Credit.--A voluntary 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 actions that are--
                    (A) reported before January 1, 1999, under section 
                1605 of the Energy Policy Act of 1992 (42 U.S.C. 
                13385); or
                    (B) carried out and reported before January 1, 
                1999, under a Federal agency program to implement other 
                recognized greenhouse gas reductions efforts.
            (2) Verification.--The participant shall provide 
        information sufficient to verify to the satisfaction of the 
        President (in accordance with section 8 and the regulations 
        promulgated under section 4(c)) that actions reported under 
        paragraph (1)--
                    (A) have been accurately reported;
                    (B) are not double-counted; and
                    (C) represent actual reductions in greenhouse gas 
                emissions or actual increases in net carbon 
                sequestration.
            (3) Third-party certification.--All submissions made 
        pursuant to paragraph (2) shall be certified by qualified 
        third-party auditors.
    (e) Extension.--The parties to a voluntary action agreement may 
extend the credit period during which greenhouse gas reduction credit 
may be earned under the voluntary action agreement, if Congress permits 
such an extension by law enacted after the date of enactment of this 
Act.
    (f) Award of Greenhouse Gas Reduction Credit.--
            (1) Annual notification of cumulative balances.--After the 
        end of each calendar year, the President shall notify each 
        participant of the cumulative balance (if any) of greenhouse 
        gas reduction credit earned under a voluntary action agreement 
        as of the end of the calendar year.
            (2) Annual report to congress.--After the end of each 
        calendar year, the President shall notify Congress of the 
        cumulative balance of greenhouse gas emissions credits 
        potentially earned under all voluntary action agreements as of 
        the end of that calendar year, and shall notify Congress within 
        30 days of a determination that the cumulative balance of 
        greenhouse gas emission credits potentially earned under all 
        voluntary action agreements as of that time has reached, or 
        exceeded, 365,000,000.
            (3) Award of final credit.--Effective at the end of the 
        credit period, a participant shall have a contractual 
        entitlement, to the extent provided in the participant's 
        voluntary action agreement, to receive 1 ton of greenhouse gas 
        reduction credit for each 1 ton that is creditable under 
        subsections (a) through (d).
    (g) Automatic Fire Suppression Systems.--Credits shall not be 
issued under this Act for the reduction of greenhouse gases used in 
automatic fire suppression systems provided that such greenhouse 
gases--
            (1) remain in an approved fire suppression system 
        maintained strictly according to NFPA 2001 to ensure against 
        accidental or unnecessary discharges; and
            (2) upon decommissioning, the greenhouse gases in the 
        system are chemically transformed to eliminate any and all 
        global warming potential.

SEC. 6. BASELINE AND BASE PERIOD.

    (a) Source Baseline.--A participant's annual source baseline for 
each of the calendar years in the credit period shall be equal to the 
participant's average annual greenhouse gas emissions from domestic 
sources covered by the participant's voluntary action agreement during 
the participant's base period, adjusted for the calendar year as 
provided in subsections (a)(2), (c)(1), and (c)(2) of section 7, or 
subsections (c) and (d) of section 9, or subsection (e) of section 9. A 
participant's annual source baseline shall not include emissions that 
resulted from failure to comply with applicable requirements in force 
during the base period.
    (b) Reservoir Baseline.--A participant's annual reservoir baseline 
for each of the calendar years in the credit period shall be equal to 
the average level of carbon stocks in carbon reservoirs covered by the 
participant's voluntary action agreement for the participant's base 
period, adjusted for the calendar year as provided in section 7(c)(1).
    (c) Base Period.--
            (1) In general.--Except as provided in paragraphs (2) and 
        (3), a participant's base period shall be an average of the 3-
        year period ending with the year of enactment of this Act.
            (2) Data unavailable or unrepresentative.--The regulations 
        promulgated under section 4(c) may specify a base period other 
        than the period described in section 6(c)(1) that will be 
        applicable if adequate data are not available to determine a 
        baseline for those years or if such data are unrepresentative.
            (3) Elections.--The regulations promulgated under section 
        4(c) may permit a participant to elect a base period earlier 
        than the period described in section 6(c)(1) (not to include 
        any year earlier than 1990) to reflect voluntary reductions 
made before that period.
            (4) Adjustment of period during which credit may be 
        earned.--Notwithstanding subsections (c) and (d) of section 5, 
        except as otherwise provided by the regulations promulgated 
        under section 4(c), if an election is made for a base period 
        earlier than 1996--
                    (A) greenhouse gas reduction credit shall be 
                available under section 5(c) for the calendar year that 
                begins after the end of the base period and any 
                calendar year thereafter through the end of the credit 
                period; and
                    (B) greenhouse gas reduction credit shall be 
                available under section 5(d) only through the end of 
                the base period.

SEC. 7. SOURCES COVERED BY VOLUNTARY ACTION AGREEMENTS.

    (a) Sources.--
            (1) In general.--
                    (A) Covered sources.--Except as otherwise provided 
                in this subsection, a participant's voluntary action 
                agreement shall cover all domestic greenhouse gas 
                sources that the participant owns as of the date on 
                which the voluntary action agreement is entered into.
                    (B) Exclusions.--The regulations promulgated under 
                section 4(c) (or the terms of an early action 
                agreement) may exclude from coverage under a voluntary 
                action agreement small or diverse sources owned by the 
                participant where the emissions represent a de minimis 
                percentage of the participant's total emissions.
            (2) Economic change.--
                    (A) In general.--The regulations promulgated under 
                section 4(c) shall provide that a voluntary action 
                agreement shall provide for annual addition to, or 
                deduction from, a participant's emissions baseline to 
                account for economic change.
                    (B) Calculations.--Each participant's annual 
                baseline shall be the product of--
                            (i) its baseline emissions;
                            (ii) the participant's economic change 
                        factor; and
                            (iii) the GDP adjustment factor.
                    (C) Terms.--
                            (i) Economic change factor.--For purposes 
                        of subparagraph (B)(ii), the economic change 
                        factor represents the ratio, expressed in 
                        percentage terms, of the product output of the 
                        participant during the year and the average 
                        annual product output of the participant during 
                        the base period.
                            (ii) GDP adjustment factor.--For purposes 
                        of subparagraph (B)(iii), the GDP adjustment 
                        factor, expressed in percentage terms, 
                        represents the difference between 100 and the 
                        percentage by which the Gross Domestic Product 
                        of the United States has increased since the 
                        base period.
                            (iii) Demand-side management.--For purposes 
                        of clause (i), in the case of electricity 
                        generators, the calculations of product output 
                        shall take into account reductions in output 
                        due to demand-side management investments.
    (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 a voluntary action 
        agreement at the election of the participant.
            (2) Opt-in for carbon reservoirs.--
                    (A) In general.--A voluntary action agreement may 
                provide that domestic carbon reservoirs owned by a 
                participant may be covered under the voluntary 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 
                4(c)), if a participant elects to have domestic carbon 
                reservoirs covered under the voluntary action 
                agreement, all of the participant's domestic carbon 
                reservoirs shall be covered under the voluntary action 
                agreement.
    (c) Accounting Rules.--
            (1) Transfers.--If ownership of a carbon stock covered by a 
        voluntary action agreement is transferred to or from the 
        participant--
                    (A) the carbon stocks shall be adjusted to reflect 
                the transfer for the participant's base period;
                    (B) the net carbon sequestration shall be adjusted 
                to reflect the transfer for each year for which 
                greenhouse gas reduction credit is claimed; and
                    (C) pro rata adjustments shall be made to reflect 
                transfers that occur during a program year.
            (2) Displacement of emissions.--In addition to the baseline 
        adjustments made pursuant to subsection (a)(2), a voluntary 
        action agreement shall contain effective and workable 
        provisions that ensure that only net emission reductions will 
        be credited under section 5 in circumstances in which emissions 
        are displaced, as a result of outsourcing, from sources covered 
        by a voluntary action agreement to other sources.
            (3) Period of coverage.--Emissions from sources and net 
        carbon sequestration in carbon reservoirs shall be covered by a 
        voluntary action agreement for the entire credit period, except 
        as provided under paragraph (1) or by the regulations 
        promulgated under section 4(c).

SEC. 8. MEASUREMENT AND VERIFICATION.

    (a) In General.--In accordance with the regulations promulgated 
under section 4(c), a voluntary action agreement shall--
            (1) provide that, for each calendar year during which the 
        voluntary action agreement is in effect, the participant shall 
        report to the United States, as applicable--
                    (A) the participant's annual source baseline and 
                greenhouse gas emissions for the calendar year; and
                    (B) the requirements of section 10(d) pertaining to 
                carbon sequestration for the calendar year.
            (2) establish procedures under which the participant will 
        measure, track, and report the information required by 
        paragraph (1);
            (3) establish requirements for maintenance of records by 
        the participant and provisions for inspection of the records by 
        representatives of the United States; and
            (4) permit qualified independent third party entities to 
        measure, track, and report the information required by 
        paragraph (1) on behalf of the participant.
    (b) Availability of Reports to the Public.--Reports required to be 
made under subsection (a)(1) shall be available to the public.
    (c) Confidentiality.--The regulations promulgated under section 
4(c) shall make appropriate provision for protection of confidential 
commercial and financial information.

SEC. 9. PARTICIPATION BY MANUFACTURERS AND ADOPTERS OF END-USE, 
              CONSUMER, AND SIMILAR TECHNOLOGIES.

    (a) In General.--In the case of a participant that manufactures or 
constructs for sale to end-users equipment or facilities that emit 
greenhouse gases or which adopt end use efficiency technologies, the 
President may enter into a voluntary action agreement.
    (b) Emissions Baselines.--For each participant under subsection 
(a), its emissions baseline shall be established by determining the 
average annual number of products of the same type sold by the 
participant in the United States during the base period and multiplying 
that number by the expected useful life of the product and a numerical 
factor to determine the greenhouse gas emissions resulting from the 
electricity generated, or fossil fuel consumed, in connection with the 
operation of the product.
    (c) Economic Change.--
            (1) Calculations.--Each participant's annual baseline shall 
        be the product of--
                    (A) its baseline emissions;
                    (B) the participant's economic change factor; and
                    (C) the GDP adjustment factor.
            (2) Terms.--
                    (A) Economic change factor.--For purposes of 
                paragraph (1)(B), the economic change factor represents 
                the ratio, expressed in percentage terms, of the 
                products of the same type sold by the participant 
                during the year and the average annual number of such 
                products sold by the participant during the base 
                period.
                    (B) GDP adjustment factor.--For purposes of 
                paragraph (1)(C), the GDP adjustment factor, expressed 
                in percentage terms, represents the difference between 
                100 and the percentage by which the Gross Domestic 
                Product of the United States has increased since the 
                base period.
    (d) Calculation of Credits.--Each participant shall be entitled to 
receive greenhouse gas emissions reduction credits in an amount equal 
to the difference between--
            (1) the sum of its annual emissions baselines for the 
        program period, as calculated pursuant to subsections (b) and 
        (c); and
            (2) the product of--
                    (A) the number of products sold by the participant 
                in the United States;
                    (B) the expected useful life of each product; and
                    (C) the numerical factor used to determine the 
                greenhouse gas emissions resulting from the electricity 
                generated, or fossil fuel consumed, in connection with 
                the operation of the product.
    (e) Automotive Vehicles.--
            (1) In general.--Participants that manufacture automobiles, 
        including both passenger vehicles and light-duty trucks, may 
        enter into agreements authorized by this section.
            (2) Calculation of emissions baseline, annual baseline, and 
        reduction credits.--For purposes of this section, the 
        calculation of each participant's emissions baseline, annual 
        baseline, and reduction credits shall be based on the methods 
        and factors used in subsections (b), (c), and (d), which shall 
        be used to determine the greenhouse gas emissions reductions 
        achieved, and credits awarded, as a result of improvements made 
        by the participant in the actual fuel economy of its passenger 
        vehicles and light duty trucks.
    (f) Prevention of Double-Counting.--In the event the President 
determines that the adjustments to participants' baselines made 
pursuant to section 7(a)(2) are not adequate to effect the purposes of 
this subsection, the regulations promulgated under section 4(c) shall 
include provisions to ensure that, notwithstanding any other provision 
of this Act, no more than one credit shall be awarded for each ton of 
emissions of greenhouse gas emissions reduced pursuant to the 
agreements entered into pursuant to this Act.

SEC. 10. INCREASES IN DOMESTIC CARBON STOCKS.

    (a) Purpose.--The purpose of this section is to ensure that 
voluntary action credits earned for approved actions leading to 
increases in domestic carbon stocks are of a sufficient quality to 
allow comparable and tradable with other credits authorized by this 
Act.
    (b) In General.--A voluntary action agreement shall provide that a 
participant may be entitled to receive greenhouse gas reduction credit 
for permanent protection of carbon stocks in mature primary forests, 
reforestation and afforestation, and improved forest carbon stock 
management in forests that have merchantable timber.
    (c) Calculations.--Credits shall be subject to potential debiting 
pursuant to section 10(c)(2)(A), or shall be counted in ton-year 
credits pursuant to section 10(c)(2)(B).
            (1) Permanent protection.--In the case of permanent 
        protection of mature primary forests where protection is 
        initiated during the credit period, credits shall be equal to 
        50 percent of the carbon stock in above and belowground live 
        biomass, measured by the end of the credit period.
            (2) Reforestation and afforestation.--For reforestation and 
        afforestation initiated during the credit period, credits will 
        be equal to the full net increases in carbon stocks generated 
        by project activities during the credit period.
            (3) Improved forest carbon stock management.--In forests 
        that are not being permanently protected and have merchantable 
        timber, creditable net increases in carbon stocks must be 
        additional to those which would have occurred in the absence of 
        this legislation. These net increases are subject to 
        adjustments for leakage.
                    (A) Additionally.--For improved forest carbon stock 
                management, the annual amount of carbon stock increase 
                that is considered additional to that which would have 
                occurred in the absence of this legislation shall be 
                the difference between the net rate of increase in 
                carbon stocks during the credit period on all land 
                owned by the participant within the region, and the 
                average net rate of increase in carbon stocks on the 
                same area of land in similar privately owned forest 
                lands within the region. For the purpose of this 
                analysis, regulations promulgated under section 4(c) 
                shall establish average rates of change of carbon 
                stocks for forest type, productivity class, age, and 
                region, taking into account the most recent forest 
                inventory and analysis data. All analyses of rates of 
                change in carbon stocks shall exclude all 
                submerchantable timber. If the average per acre rate of 
                change in carbon stocks in similar forests within the 
                region is less than zero, net changes in those carbon 
                stocks shall be regarded as zero for the purpose of 
                comparison with the rates of change on an individual 
                landowner's property.
                    (B) Leakage.--If improved forest carbon stock 
                management results in a reduction in timber supply from 
                the participant's lands, there will be a deduction in 
                claimed credits equal to the product of the amount of 
                reduction in timber supply and the average direct and 
                indirect carbon emissions associated with supplying 
                similar timber. These emissions shall include those 
                identified in tables developed pursuant to section 
                10(d). No deduction for leakage will be required if it 
                can be demonstrated that the net rate of carbon stock 
                increase in the region has risen for the last period 
                for which such data is available, and the aggregate 
                output of all timber, fiber, and fuel producing mills 
                and facilities in the region has not declined, 
                subtracting any production which relied on imports of 
                timber or fiber from outside the region.
    (d) Limitations.--
            (1) Coverage.--The following applies under this section:
                    (A) Only private lands, and such lands that are 
                transferred into permanent protection under State or 
                Federal jurisdiction during the credit period, are 
                eligible to participate in the program established by 
                this section.
                    (B) Mature primary forests, and lands on which 
                reforestation and afforestation is initiated during the 
                credit period, are eligible for crediting under the 
                provisions of this legislation. Where increases in 
                carbon stocks are achieved through improved forest 
                carbon stock management, forests must be, at a minimum, 
                old enough to have merchantable timber to be eligible. 
                To determine the minimum age needed for these lands to 
                be eligible, rules issued under this Act shall describe 
                methods for determining forest age, and define the age 
                at which different forest types produce merchantable 
                pulpwood, sawtimber, or other timber products commonly 
                sold by landowners in the applicable region. For the 
                purposes of this Act, the age of the forest management 
                unit (each not to exceed 100 acres) is the oldest age 
                class that represents at least 20 percent of the 
                standing timber.
                    (C) A participant must enroll all the forest land 
                it owns to participate in the program established by 
                this section, except those lands used only for 
                ecosystem preservation during the entire early action 
                period, and small or diverse land holdings that 
                represent a de minimis percentage of the participant's 
                total carbon stocks. For the purposes of this Act, a 
                participant owns forest land if it owns a controlling 
interest in the timber on the land. To reduce transaction costs, 
landowners may pool their lands for enrollment and act as a single 
participant. Changes in carbon stocks, on all lands enrolled need to be 
included, and for those lands with a net loss in carbon stocks the loss 
needs to be subtracted from the creditable gain in carbon stocks 
calculated under this section.
            (2) Durability.--The following applies under this section:
                    (A) The participant may elect to receive credit 
                equal to the net increase in carbon stocks during the 
                credit period, as calculated under section 10(b). Under 
                this election, if at any time before 50 years have 
                passed since specific tracts were enrolled in the 
                program, the stock of carbon on those tracts covered by 
                the agreement is less than the stock of carbon at the 
                end of the credit period, the participant shall retire 
                a number of greenhouse gas reduction credits equal to 
                the difference between the 2 amounts.
                    (B) If the participant elects not to count the 
                greenhouse gas reductions accruing from their 
                activities as described above, the participant will be 
                awarded a fraction of 1 ton of credit (a ton-year 
                credit) for each year that the carbon stock is 
                maintained. This fraction shall be defined by the 
                Government agency responsible for the implementation of 
                this Act.
            (3) Land stewardship.--The following applies under this 
        section:
                    (A) To prevent the establishment of forests in 
                areas that currently support natural vegetative 
                communities other than forests, no credits will be 
                granted for afforestation of areas historically not 
                forested unless those areas have been supporting 
                systems other than natural vegetative communities (e.g. 
                cropland, non-native grasslands, abandoned mine lands, 
                parking lots) since 1990.
                    (B) Credits for carbon stock increases from land 
                use activities should encourage wise land stewardship. 
                All lands enrolled in a program for voluntary action 
                carbon credits must adhere to best management practices 
                as specified on a regional or State basis by the 
                appropriate Federal or State agency.
            (4) Credit limit.--No more than 20 percent of the 
        greenhouse reduction credits allocated under this Act shall be 
        awarded for carbon stock increases under this section.
    (e) Monitoring, Reporting, and Verification.--
            (1) Monitoring guidelines.--The rules issued pursuant to 
        section 4(c) shall include monitoring guidelines that, at a 
        minimum, provide:
                    (A) Accurate and transparent carbon stock 
                monitoring protocols based on statistically robust 
                inventory, soil sampling, ecological survey, and other 
                applicable scientific techniques.
                    (B) Requirements for periodic monitoring of 
                creditable activities. All enrolled carbon stocks that 
                may be decreasing, and significant indirect increases 
                in greenhouse gas emissions caused by project 
                activities, must be monitored and subtracted from 
                credits. Monitoring of enrolled carbon stocks that are 
                increasing is at the discretion of the participant. 
                Only monitored stocks may be included in calculations 
                under sections 10(a) and 10(b).
                    (C) Tables of estimated greenhouse gas emissions 
                associated with land management activities that result 
                in significant indirect increases in greenhouse gas 
                emissions (such as fertilizer production and 
                application, herbicide production, and fossil fuel 
                consumption).
                    (D) Procedures for delineating which carbon stocks 
                on a participant's lands that may be decreasing during 
                the credit period due to project activities need to be 
                monitored.
                    (E) Procedures for estimating baseline carbon 
                stocks on each participant's lands.
                    (F) Procedures to allow for appropriate estimation 
                of carbon stocks using tables and models derived from 
                forest inventory and analysis data of the United States 
                Forest Service or other credible sources for the 
                appropriate region, forest type, age, stand management 
                history, and site productivity.
            (2) Reporting guidelines.--The rules issued pursuant to 
        section 4(c) shall include reporting guidelines that, at a 
        minimum, provide as follows:
                    (A) Participants shall report claimed net increases 
                in carbon stocks during the credit period to the 
                Government agency responsible for implementation of 
                this Act, which will then evaluate the participant's 
                compliance with the guidelines. If not in compliance, 
                the participant will be notified and advised what 
                remedial actions are needed. Participants may not 
                receive greenhouse gas reduction credits until they are 
                in compliance with the guidelines issued under this 
                Act.
                    (B) Each participant's report must be supported by 
                a report from a recognized third party auditor. The 
                auditor must verify the carbon credits using a 
                statistically robust evaluation of a valid subsample of 
                the participant's lands.
            (3) Eligibility for assistance.--Participants who own less 
        than 50,000 acres will be eligible for monitoring and 
        verification assistance.

SEC. 11. 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 4(c) may 
permit pooling arrangements under which a group of participants agrees 
to act as a single participant for the purpose of entering into a 
voluntary action agreement.

SEC. 12. RELATIONSHIP TO FUTURE DOMESTIC GREENHOUSE GAS REGULATORY 
              STATUTE.

    A voluntary 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 a voluntary action agreement shall 
provide that--
            (1) greenhouse gas reduction credit earned by a participant 
        under a voluntary action agreement shall be provided to the 
        participant in addition to any otherwise available 
        authorizations of the participant to emit greenhouse gases 
        during the 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 
        during the compliance period is based on the level of a 
        participant's emissions during a historic period that is later 
        than the participant's base period under the participant's 
        voluntary action agreement, any greenhouse gas reduction credit 
        to which the participant was entitled under the voluntary 
        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.
                                 <all>