[Congressional Bills 111th Congress]
[From the U.S. Government Publishing Office]
[H.R. 1666 Introduced in House (IH)]

111th CONGRESS
  1st Session
                                H. R. 1666

To amend the Internal Revenue Code of 1986 to establish an auction and 
  revenue collection mechanism for a carbon market that ensures price 
                stability with environmental integrity.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                             March 23, 2009

   Mr. Doggett (for himself, Mr. Cooper, Mr. Shuler, Mr. Thompson of 
   California, Mr. Blumenauer, Mr. Stark, Mr. Lewis of Georgia, Ms. 
Berkley, Ms. Linda T. Sanchez of California, Mr. Yarmuth, Mr. Brady of 
   Pennsylvania, Mr. Cohen, Mr. Fattah, Mr. Johnson of Georgia, Mr. 
Rothman of New Jersey, Mr. Sires, Mr. Nadler of New York, Mr. Farr, Mr. 
 Cummings, Ms. Clarke, Mr. Ackerman, and Ms. Eddie Bernice Johnson of 
    Texas) introduced the following bill; which was referred to the 
Committee on Ways and Means, and in addition to the Committee on Energy 
    and Commerce, for a period to be subsequently determined by the 
  Speaker, in each case for consideration of such provisions as fall 
           within the jurisdiction of the committee concerned

_______________________________________________________________________

                                 A BILL


 
To amend the Internal Revenue Code of 1986 to establish an auction and 
  revenue collection mechanism for a carbon market that ensures price 
                stability with environmental integrity.

    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 ``Safe Markets Development Act of 
2009''.

SEC. 2. FINDINGS.

    The Congress finds--
            (1) a market-based, national emissions cap and trade 
        program for greenhouse gases shall help meet national 
        mitigation goals with a high degree of certainty while creating 
        a new market for emissions allowances;
            (2) ensuring a smooth startup of the program is critical 
        for meeting short- and long-term emissions goals and 
        maintaining public and political support for the program;
            (3) the economy-wide scale of the new allowance market and 
        participation in the market of many regulated entities with 
        little or no experience with cap and trade programs call for a 
        careful startup phase for the program;
            (4) stable and predictable prices for allowances shall 
        support development of cost-effective mitigation technologies 
        and ease the transition for businesses and consumers making 
        long-term investment decisions;
            (5) recent experiences in the oil, housing, electricity and 
        financial markets suggest that many markets are subject to boom 
        and bust cycles and can be vulnerable to market manipulation or 
        speculative excesses and that lessons from these experiences 
        should guide the design of the new cap and trade program; and
            (6) the risks of speculative excess and market manipulation 
        are highest in the initial period of a cap and trade program 
        while the regulatory systems to monitor allowance markets are 
        under development and regulated sources are less experienced in 
        market participation.

SEC. 3. PURPOSES.

    The purposes of this Act are to--
            (1) establish an auction mechanism for the collection of 
        revenue that ensures a smooth price path while achieving the 
        emissions reductions necessary to stop climate change; and
            (2) direct the revenue raised from the auction to a trust 
        fund to be used for important public purposes.

SEC. 4. ISSUING, AUCTIONING, AND ADMINISTERING EMISSIONS ALLOWANCES AND 
              COLLECTION OF REVENUE.

    (a) In General.--The Internal Revenue Code of 1986 is amended by 
adding at the end the following new subtitle:

               ``Subtitle L--Auction Based Carbon Market

                   ``CHAPTER 101--EMISSION ALLOWANCES

````Subchapter A. Allowance auctions and compliance obligations.
````Subchapter B. Climate Oversight and Coordination Board.
````Subchapter C. Auction Revenue Trust Fund.
````Subchapter D. Assurance of cumulation emissions.
````Subchapter E. Definitions.

     ``Subchapter A--Allowance Auctions and Compliance Obligations

``Sec. 9901. Allowance auctions.
``Sec. 9902. Allowance transfer system.
``Sec. 9903. Compliance obligation.
``Sec. 9904. Excess Emissions Penalty.
``Sec. 9905. Allowance banking.

``SEC. 9901. ALLOWANCE AUCTIONS.

    ``(a) Auctions.--The Secretary shall conduct auctions of allowances 
in accordance with procedures established by the Board established 
under subchapter B to meet the target allowance price for the year 
determined by the Board. The auction schedule is as follows:
            ``(1) Four auctions shall be undertaken during each trading 
        year.
            ``(2) The first auction of each trading year shall occur 
        between April and June and at least three weeks after the Board 
        announces a target price for the trading year.
            ``(3) The fourth auction for each trading year shall be in 
        the last month (March) of the trading year.
    ``(b) Auction Revenue.--All revenue from the auctions under this 
section shall be deposited in the Auction Revenue Trust Fund 
established under subchapter C. Amounts deposited in such trust fund 
may be used, subject to annual appropriation, only for the purposes 
specified in other provisions of law.

``SEC. 9902. ALLOWANCE TRANSFER SYSTEM.

    ``(a) Establishment.--The Secretary shall establish a system for 
issuing, recording, and tracking emission allowances, and shall 
maintain a registry of allowances for each recorded holder of 
allowances.
    ``(b) Recording Requirement.--The Secretary shall establish, by 
rule, a mechanism for the recording of emission allowances.
    ``(c) Holders Not Restricted.--The privilege of purchasing, 
holding, and transferring emission allowances shall not be restricted 
to the owners and operators of covered facilities.

``SEC. 9903. COMPLIANCE OBLIGATION.

    ``(a) Submission of Allowances.--Not later than 90 days after the 
end of a calendar year, the owner or operator of a covered facility 
shall submit to the Secretary an emission allowance for each carbon 
dioxide equivalent attributable to such facility as calculated by the 
Administrator under the Emissions Registry.
    ``(b) Retirement of Allowances.--Upon receipt of an emission 
allowance under subsection (a), the Secretary shall retire the 
allowance, and shall reduce that covered entity's registry account by a 
corresponding amount. The Secretary may also retire other allowances as 
specified in section 9905.

``SEC. 9904. EXCESS EMISSIONS PENALTY.

    ``(a) Imposition of Penalty.--The owner or operator of any covered 
facility that fails for any year to submit to the Secretary, by the 
deadline described in section 9903(a), 1 or more of the emission 
allowances due pursuant to that section shall be liable for the payment 
to the Secretary of an excess emissions penalty on the date of such 
failure.
    ``(b) Amount.--The amount of an excess emissions penalty required 
to be paid under paragraph (1) shall be an amount equal to the product 
obtained by multiplying--
            ``(1) the number of excess emission allowances that the 
        owner or operator failed to submit; and
            ``(2) the greater of--
                    ``(A) $200; or
                    ``(B) 3 times the mean market value (as determined 
                by the Secretary) of an emission allowance during the 
                calendar year for which the emission allowance were 
                due.
    ``(c) Deficiency Procedures Not To Apply.--Subchapter B of chapter 
63 (relating to deficiency procedure for income, estate, gift, and 
certain excise taxes) shall not apply in respect of the assessment or 
collection of any penalty imposed by subsection (a).
    ``(d) Coordination With Other Penalties.--The penalty imposed by 
this section shall be in addition to any other penalty imposed under 
any other provision of law.

``SEC. 9905. ALLOWANCE BANKING.

    ``In Phase I of the program, the Secretary shall allow a covered 
entity to retain, after the retirement of allowances equal to its 
emissions in the previous calendar year, a sum of allowances equal to 5 
percent of its emissions in the previous calendar year. The Secretary 
shall retire from a covered entity's account any remaining allowances 
in excess of 5 percent of the entity's emissions during the previous 
calendar year. The Secretary shall also retire all allowances in the 
registry accounts of non-covered entities at the end of each trading 
year in Phase I of the program.

        ``Subchapter B--Climate Oversight and Coordination Board

``Sec. 9911. Establishment of a Climate Program Oversight and 
                            Coordination Board.
``Sec. 9912. Initial expectations for annual emissions.

``SEC. 9911. ESTABLISHMENT OF A CLIMATE PROGRAM OVERSIGHT AND 
              COORDINATION BOARD.

    ``(a) Establishment.--There is established a Climate Program 
Oversight and Coordination Board (hereafter in this Act referred to as 
the `Board').
    ``(b) Purposes.--The purposes of the Board are to--
            ``(1) coordinate and review the work of the Secretary, the 
        Administrator, and other agencies in implementing this Act;
            ``(2) make forecasts and to set targets for green house gas 
        allowance prices;
            ``(3) review the functioning of carbon markets, including 
        allowance auctions, secondary markets in allowances and 
        associated financial instruments (including futures, forwards, 
        options, swaps, and other derivative contracts);
            ``(4) review the regulation and oversight of carbon 
        markets; and
            ``(5) provide reports and testimony to Congress in April or 
        May of each year beginning in 2012.
    ``(c) Membership.--(1) The Board shall include 6 members who shall 
be appointed by the President by and with the advice and consent of the 
Senate. In appointing members of the Board, the President shall select 
individuals with recognized expertise in relevant areas, including 
climate science and economics, and energy and financial markets. Such 
persons shall have no other employment. At least one member shall be a 
scientist with expertise in climate change and the effects of climate 
change on the environment. In addition, Board shall include the 
following three voting, ex-officio members: The Secretaries of the 
Treasury and Energy and the Administrator of the Environmental 
Protection Agency.
    ``(2) The ex-officio members of the Board shall serve without 
additional compensation and may not serve as Chairman or Vice Chairman. 
The ex-officio members of the Board may, from time to time, designate 
other officers or employees of their respective organizations to carry 
out their duties on the Board.
    ``(d) Compensation.--
            ``(1) In general.--A member of the Board shall be 
        compensated at the annual rate of basic pay prescribed for 
        level II of the Executive Schedule under section 5313 of title 
        5, United States Code.
            ``(2) Chairperson.--The Chairperson of the Board shall be 
        compensated at the annual rate of basic pay prescribed for 
        level I of the Executive Schedule under section 5312 of title 
        5, United States Code.
    ``(e) Terms; Vacancies.--
            ``(1) Terms.--The term of a member of the Board shall be 10 
        years, except that the members first appointed to the Board 
        shall be appointed for terms in a manner that ensures that the 
        term of not more than 1 member shall expire during any 2-year 
        period, and no member serves a term of more than 10 years.
            ``(2) Oath of office.--A member shall take the oath of 
        office of the Board by not later than 15 days after the date on 
        which the member is appointed.
            ``(3) Removal.--A member may be removed from the Board on 
        determination of the President for cause. The President shall 
        submit to Congress a notification of any determination by the 
        President to remove a member of the Board for cause.
            ``(4) Vacancies.--A member of the Board the term of whom 
        has expired or otherwise been terminated shall continue to 
        serve until the date on which a replacement is appointed under 
        subparagraph (A)(ii), if the President determines that service 
        to be appropriate. A vacancy on the Board shall not affect the 
        powers of the Board and shall be filled in the same manner as 
        the original appointment was made.
            ``(5) Chairperson and vice-chairperson.--From among members 
        of the Board, the President shall appoint 1 member to serve as 
        Chairperson of the Board for a term of 4 years and member to 
        serve as Vice-Chairperson of the Board for a term of 4 years.
            ``(6) Ex-officio members not covered.--The provisions of 
        this subsection apply only to Board members who are not ex-
        officio members.
    ``(f) Prohibitions.--
            ``(1) Conflicts of interest.--The President shall not 
        appoint to the Board an individual employed by, or holding any 
        official relationship (including any shareholder) with, any 
        entity engaged in the generation, transmission, distribution, 
        or sale of energy, an individual who has any pecuniary interest 
        in the generation, transmission, distribution, or sale of 
        energy, or an individual who has a pecuniary interest in the 
        implementation of this Act.
            ``(2) No other employment.--A member of the Board (other 
        than an ex-officio member) shall not hold any other employment 
        during the term of service of the member.
    ``(g) Resources.--The Board may obtain the services of such experts 
and consultants as are necessary to carry out the provisions of this 
Act. The administrative costs of the Board shall be paid out of the 
revenue from auctions of greenhouse gas allowances.
    ``(h) Powers and Duties of the Board.--
            ``(1) Forecast emissions and allowance prices.--Before 
        April 30, 2012, and before April 30 of each successive year 
        through 2019, the Board shall publish a forecast of gradually 
        rising allowance prices for the trading years through 2020 that 
        the Board expects shall be associated with a gradual reduction 
        in emissions of greenhouse gases of covered entities until 
        reaching the level of 4,911 million tons in 2020. In deciding 
        upon a forecast of allowance prices the Board shall--
                    ``(A) review forecasts made by the Secretary of 
                Energy (acting through the Energy Information Agency) 
                and the Administrator of the Environmental Protection 
                Agency, as well as those of private sector forecasters; 
                and
                    ``(B) in the years 2013 through 2019, review and 
                update its allowance price forecast as part of the 
                assessment under paragraph (4) of this subsection.
            ``(2) Select annual price targets.--Before April 30, 2012, 
        and before April 30 of each successive year through 2019, the 
        Board shall select a target allowance price for the trading 
        year that begins on April 1 of that calendar year, as follows:
                    ``(A) In 2012, the target price shall be set at the 
                price the Board determines will achieve the annual 
                emission expectation for the year as set forth in 
                section 9912.
                    ``(B) In 2013 through 2019, the target price shall 
                be the same as its forecast price for that year, which 
                may have been revised according to paragraph (4).
            ``(3) Auction procedures.--The Board shall establish 
        procedures for auctions of allowances that would achieve the 
        target price on average over all trading of allowances during 
        the year, including the sales of allowances in auctions as well 
        as in secondary market trading. To achieve the target price, 
        the total number of emission allowances issued in auctions in 
        any particular year may be more or less than the expected 
        emissions for that year as set forth in section 9912.
            ``(4) Conduct an annual assessment.--On or before April 30 
        of each year beginning in 2013, in consultation with the 
        Secretary, the Secretary of Energy, and the Administrator, the 
        Board shall prepare an assessment of the program. In Phase I of 
        the program, the assessment shall include each of the 
        following:
                            ``(A) Actual emissions of covered entities 
                        in the previous calendar year.
                            ``(B) The progress in achieving the 
                        environmental goals of the program.
                            ``(C) The effectiveness of the monitoring 
                        of emissions, the registration of allowances, 
                        and the enforcement of compliance requirements 
                        for covered entities.
                            ``(D) An analysis of the behavior of 
                        greenhouse gases markets.
                            ``(E) The effectiveness of the price 
                        target.
                            ``(F) The reasons for the difference 
                        between actual emissions and the expected 
                        levels given in section 9912. In considering 
                        the difference between actual and expected 
                        emissions, the Board shall estimate--
                                    ``(i) the amount of the difference 
                                that was attributable to influences 
                                that pertain only to the given calendar 
                                year, including but not limited to 
                                unusual weather or other transitory 
                                changes in economic activity and energy 
                                use; and
                                    ``(ii) the amount of the difference 
                                attributable to influences that shall 
                                likely persist for multiple calendar 
                                years and the likely duration of each 
                                such influence.
                            ``(G) A revision in its forecast of 
                        allowance prices through 2020 in response to 
                        the persistent influences identified in clause 
                        (ii) of subparagraph (F), but not in response 
                        to the transitory influences identified in 
                        clause (i) of subparagraph (F).
            ``(5) Make annual reports to congress.--The Chairman of the 
        Board shall present the assessment in a written report and in 
        testimony before each house of Congress in April or May of each 
        year.
            ``(6) Conduct a program review in 2017.--The Board shall 
        present a report containing a thorough review of the program to 
        the Congress by October 1, 2017, and include in this report its 
        recommendations for any adjustments in the design features for 
        Phase II of the program.
    ``(i) Review by Government Accountability Office.--Not later than 
January 1, 2015, and every three years thereafter, the Comptroller 
General of the United States shall conduct a review of the efficacy of 
the Board in fulfilling the purposes and duties of the Board under this 
Act.

``SEC. 9912. INITIAL EXPECTATIONS FOR ANNUAL EMISSIONS.

    ``The initial expectation of the greenhouse gas emissions of 
covered facilities in the cap and trade program are the amounts for 
each of the calendar years 2012 through 2050 set forth in the following 
table:


----------------------------------------------------------------------------------------------------------------
                                                          Initial Expectation of Emissions  (millions of tons of
                    ``Calendar Year                                         greenhouse gases)
----------------------------------------------------------------------------------------------------------------
2012                                                     6,153
----------------------------------------------------------------------------------------------------------------
2013                                                     5,998
----------------------------------------------------------------------------------------------------------------
2014                                                     5,843
----------------------------------------------------------------------------------------------------------------
2015                                                     5,687
----------------------------------------------------------------------------------------------------------------
2016                                                     5,532
----------------------------------------------------------------------------------------------------------------
2017                                                     5,377
----------------------------------------------------------------------------------------------------------------
2018                                                     5,222
----------------------------------------------------------------------------------------------------------------
2019                                                     5,066
----------------------------------------------------------------------------------------------------------------
2020                                                     4,911
----------------------------------------------------------------------------------------------------------------
2021                                                     4,756
----------------------------------------------------------------------------------------------------------------
2022                                                     4,600
----------------------------------------------------------------------------------------------------------------
2023                                                     4,445
----------------------------------------------------------------------------------------------------------------
2024                                                     4,290
----------------------------------------------------------------------------------------------------------------
2025                                                     4,135
----------------------------------------------------------------------------------------------------------------
2026                                                     3,979
----------------------------------------------------------------------------------------------------------------
2027                                                     3,824
----------------------------------------------------------------------------------------------------------------
2028                                                     3,669
----------------------------------------------------------------------------------------------------------------
2029                                                     3,514
----------------------------------------------------------------------------------------------------------------
2030                                                     3,358
----------------------------------------------------------------------------------------------------------------
2031                                                     3,203
----------------------------------------------------------------------------------------------------------------
2032                                                     3,048
----------------------------------------------------------------------------------------------------------------
2033                                                     2,892
----------------------------------------------------------------------------------------------------------------
2034                                                     2,737
----------------------------------------------------------------------------------------------------------------
2035                                                     2,582
----------------------------------------------------------------------------------------------------------------
2036                                                     2,427
----------------------------------------------------------------------------------------------------------------
2037                                                     2,271
----------------------------------------------------------------------------------------------------------------
2038                                                     2,116
----------------------------------------------------------------------------------------------------------------
2039                                                     1,961
----------------------------------------------------------------------------------------------------------------
2040                                                     1,806
----------------------------------------------------------------------------------------------------------------
2041                                                     1,650
----------------------------------------------------------------------------------------------------------------
2042                                                     1,495
----------------------------------------------------------------------------------------------------------------
2043                                                     1,340
----------------------------------------------------------------------------------------------------------------
2044                                                     1,184
----------------------------------------------------------------------------------------------------------------
2045                                                     1,029
----------------------------------------------------------------------------------------------------------------
2046                                                     874
----------------------------------------------------------------------------------------------------------------
2047                                                     719
----------------------------------------------------------------------------------------------------------------
2048                                                     563
----------------------------------------------------------------------------------------------------------------
2049                                                     408
----------------------------------------------------------------------------------------------------------------
2050                                                     253
----------------------------------------------------------------------------------------------------------------

               ``Subchapter C--Auction Revenue Trust Fund

``Sec. 9921. Trust Fund.

``SEC. 9921. TRUST FUND.

    ``(a) Creation of Auction Revenue Trust Fund.--There is established 
in the Treasury of the United States, the Auction Revenue Trust Fund.
    ``(b) Funds.--An amount equivalent to all revenues received from 
the auction in subchapter A shall be credited to the Trust Fund.

           ``Subchapter D--Assurance of Cumulation Emissions

``Sec. 9931. Assurance of cumulative emissions reductions.

``SEC. 9931. ASSURANCE OF CUMULATIVE EMISSIONS REDUCTIONS.

    ``(a) Excess Emissions 2012-2019.--If the cumulative emissions of 
covered entities over the years 2012 through 2019 exceed 1.1 times the 
sum of the expected emissions over those years shown in the table in 
section 9912 (1.1 times 44,878 million tons = 49,366 million tons), the 
excess over 49,366 million tons shall be made up through a reduction in 
the target for emissions in the year 2020 by an equivalent amount of 
tons.
    ``(b) Excess Emissions 2012-2020.--If the cumulative emissions of 
covered entities over the years 2012 through 2020 exceed the sum of the 
expected emissions over those years shown in section 9912 (49,789 
million tons), the difference shall be made up through reductions in 
the expected emissions for the years 2021 through 2030. Equal 
percentage reductions shall be made in expected emissions for the years 
2021 through 2030 so that the sum of those reductions equals the excess 
of actual emissions over the expected cumulative emissions for the 
years 2012 through 2020.
    ``(c) Lower Emissions.--If the cumulative emissions of covered 
entities over the years 2012 to 2020 are less than the sum of the 
expected emissions over those years shown in the above table (49,789 
million tons), no adjustment shall be made in expected emissions in the 
years 2021 through 2030.

                      ``Subchapter E--Definitions

``Sec. 9941. Definitions.

``SEC. 9941. DEFINITIONS.

    ``For purposes of this subtitle:
            ``(1) The term `Administrator' means the Administrator of 
        the Environmental Protection Agency.
            ``(2) The term `carbon dioxide equivalent' means, for each 
        greenhouse gas, the quantity of greenhouse gas that the 
        Administrator determines makes the same contribution to global 
        warming as 1 metric ton of carbon dioxide.
            ``(3) The term `covered facility' means, for each calendar 
        year, a facility that emits greenhouse gases in that year and 
        that has an obligation to submit emission allowances for such 
        greenhouse gas emissions under any cap-and-trade program.
            ``(4) The term `emission allowance' `' means an 
        authorization, under any cap-and-trade program, to emit 1 
        carbon dioxide equivalent of greenhouse gas.
            ``(5) The term `Emissions Registry' `' means a greenhouse 
        gases emissions registry for all United States emissions of 
        greenhouse gases developed by the Administrator.
            ``(6) The term `program' or `cap and trade program' means 
        an economy-wide program enacted by Congress that auctions 
        emission allowances for the control of greenhouse gases.
            ``(7) The term `Phase I of the program' `' means the years 
        2012 through 2019.
            ``(8) The term `Phase II of the program' `' means the years 
        2020 through 2050.
            ``(9) The term `price path' is the forecast of emission 
        allowance prices by the Climate Program Oversight and 
        Coordination Board.
            ``(10) The term `Secretary' means the Secretary of the 
        Treasury.
            ``(11) The term `trading year' means the period from April 
        1 of the concurrent calendar year through March 31 of the 
        following calendar year (or the first subsequent business day 
        if those dates fall on a weekend or holiday).
            ``(12) The term `Auction Revenue Trust Fund' means the 
        trust fund established in the Treasury under section 9921.''.
    (b) Clerical Amendment.--The table of subtitles for the Internal 
Revenue Code of 1986 is amended by adding at the end the following new 
item:

``Subtitle L. Auction based carbon market.''.
                                 <all>