Short title

This Act may be cited as the

Forest Carbon Emission Reduction Act

Findings

Congress finds that— (1)changes in land use patterns and forest sector emissions account for approximately 20 percent of global greenhouse gas emissions; (2)land conversion and deforestation are two of the largest sources of greenhouse gas emissions in the developing world, comprising approximately 40 percent of the total greenhouse gas emissions of the developing world; (3)with sufficient data, the rates of deforestation and forest degradation and the level of forest carbon stocks can be measured, subject to an acceptable degree of uncertainty; (4)encouraging reduced deforestation and reduced forest degradation in foreign countries could— (A)provide critical leverage to encourage voluntary participation by developing countries in emission limitation regimes; (B)facilitate greater overall reductions in greenhouse gas emissions than otherwise would be practicable; and (C)substantially benefit biodiversity, conservation, and indigenous and other forest-dependent people in developing countries; (5)in addition to forest carbon activities that can be readily measured, monitored, and verified through national-scale programs and projects, there is great value in reducing emissions and sequestering carbon through forest carbon projects in countries that lack the institutional arrangements to support national-scale accounting of forest carbon stocks; and (6)providing emission allowances in support of activities in countries that lack fully developed institutions for national-scale accounting could help to build capacity in those countries, increase the sequestration of additional carbon, and increase participation by developing countries in international climate agreements.

Definitions

In this Act: (1)

Administrator

The term Administrator means the Administrator of the Environmental Protection Agency. (2)

Developing countries

The term developing countries means countries considered to be ‘emerging and developing economies’ according to the International Monetary Fund’s World Economic Outlook Report, April 2008, except the term does not include countries determined by the Secretary to have repeatedly provided support for acts of international terrorism, as designated pursuant to section 6(j) of the Export Administration Act of 1979, section 40 of the Arms Export Control Act, and section 620A of the Foreign Assistance Act of 1961. (3)

International forest carbon activities

The term international forest carbon activities means national or subnational activities in developing countries that are directed at— (A)reducing greenhouse gas emissions from deforestation and forest degradation; (B)reducing greenhouse gas emissions from conversion of peatlands; and (C)increasing sequestration of carbon through— (i)restoration of forests; (ii)restoration of degraded land that has not been forested prior to restoration; (iii)afforestation, using native species where practicable; and (iv)improved forest management. (4)

Secretary

The term Secretary means the Secretary of State.

Voluntary participation in programs

(a)

Consultation requirement

No activity authorized by section 5 or 6 shall be carried out in a developing country until at least 30 days after the date on which the Administrator, in consultation with the Secretary, completes consultation about the activity with the government of that developing country. (b)

Compliance with local laws

No activity authorized by section 5 or 6 shall be carried out in a developing country if the activity is inconsistent with the laws of that developing country.

Set-aside of emission allowances to forest carbon activities in developing countries

(a)

Purpose

The purposes of this section are— (1)to facilitate voluntary participation in national-level activities and accounting in the forest sector in developing countries to ensure market readiness for emissions reductions and increased sequestration from international forest carbon activities in developing countries; and (2)to facilitate voluntary participation in international forest carbon activities at sub-national levels in developing countries that achieve low-cost emissions reductions or increased sequestration. (b)

Requirement to set-aside emission allowances

To the extent emission allowances are established under any provision of law to address greenhouse gas emissions, the Administrator shall allocate each calendar year, pursuant to subsection (c), a portion of the emission allowances to assist developing countries in their efforts to achieve emissions reductions or increase sequestration of carbon dioxide from international forest carbon activities. (c)

Allocation

(1)

One-percent allocation

Not later than 330 days before January 1 of each of calendar years 2013 through 2050, the Administrator shall allocate for distribution under this section one percent of the aggregate quantity of emission allowances established for that calendar year. (2)

Early action

For each of calendar years 2011 and 2012, the Administrator shall allocate for early action distribution not more than 10 percent of the aggregate quantity of emission allowances available for each of calendar years 2013 through 2022. (3)

Carryover

If the aggregate quantity of emission allowances for a calendar year is not allocated for distribution in the calendar year, the Administrator shall carry over to the next calendar year the remaining emission allowances. (d)

Ensuring market readiness in developing countries

(1)

Set-aside and auction

The Administrator shall— (A)set-aside a portion of the allowances to be allocated under subsection (c) for the purpose of ensuring market readiness in developing countries; and (B)auction those allowances, with the proceeds deposited into a market readiness account for distribution as provided in paragraph (2). (2)

Eligibility for proceeds

The Administrator shall establish criteria under which developing countries will be eligible to receive amounts from the market readiness account for the purpose of preparing a national forest carbon strategy, including— (A)developing a reliable estimate of the national forest carbon stocks and sources of forest emissions of the developing country; (B)defining the national emission reference baseline for the developing country based on past emission rates; (C)specifying options for reducing emissions; and (D)implementing mechanisms that will support policies, programs, and projects to reduce emissions. (e)

Incentive payments for low-cost emission reductions and sequestration activities

(1)

In general

The Administrator shall establish criteria under which developing countries will be eligible to receive emission allowances allocated under subsection (c), other than the allowances set-aside under subsection (d), to implement national strategies— (A)to reduce emissions from deforestation and forest degradation; (B)to implement low-cost emission reduction or sequestration projects in the forest sector; and (C)to implement activities with respect to largely intact native forests to guard against deforestation. (2)

Priority

Emission allowances under this subsection shall be awarded in a manner that favors— (A)achievement of the greatest quantity of carbon sequestration or emission reductions for the lowest cost; (B)broad geographical distribution of projects; and (C)reduction of international leakage, particularly in developing countries with largely intact native forests. (3)

Prohibition based on certain criteria

No emission allowances under this section shall be awarded to countries, or entities for projects in countries, that meet the criteria established to carry out subsection (d), as determined by the Administrator, after the two-year period beginning on the date the Administrator determines that those criteria first apply. (4)

Prohibitions based on emissions

(A)

Initial threshold

For any calender year after calendar year 2015 and before calendar year 2021, no allowances shall be awarded with respect to a project or activity in a country that generates greenhouse gas emissions accounting for more than one percent of global greenhouse gas emissions during the preceding calendar year. (B)

Subsequent threshold

For calendar year 2021 and any calender year thereafter, no allowances shall be awarded with respect to a project or activity in a country that generates greenhouse gas emissions accounting for more than 0.5 percent of global greenhouse gas emissions during the preceding calendar year. (C)

Exception

Upon a determination by the Administrator that provision of allowances to a project or activity in a country that would otherwise be subject to the exclusions in subparagraph (A) or (B) is in the interest of building needed capacity or reducing international carbon leakage, allowances may be issued to the project or activity subject to other criteria in this subsection. (f)

Quality and eligibility requirements

Not later than 18 months after the date of enactment of this Act, the Administrator, in consultation with the Secretary, shall promulgate regulations establishing eligibility requirements for the allocation of emission allowances under this section for international forest carbon activities, recognizing that the purpose of this section is to assist forested developing countries in achieving emission reductions or increased sequestration of carbon dioxide from international forest carbon activities, to ensure market readiness, and to build capacity to participate in international forest carbon activities. (g)

Other natural land that sequesters carbon

The Administrator may provide emission allowances under this section for a project for storage of carbon in other natural land if the Administrator determines that— (1)the natural land is capable of storing carbon; and (2)the project for storage of carbon in the natural land is capable of meeting the eligibility and quality criteria established pursuant to subsection (f). (h)

Limitation on double counting

Notwithstanding any other provision of this Act, activities that receive credit under section 5 shall not be eligible to receive emission allowances under this section. (i)

Effect on interaction between entities

Nothing in this section supersedes, limits, or otherwise affects any restriction imposed by Federal law (including regulations) on any interaction between an entity located in the United States and an entity located in a foreign country.

Offsets for international forest carbon activities

(a)

Regulations

Not later than two years after the date of enactment of this Act, the Administrator, in consultation with the Secretary, shall promulgate regulations (including regulations relating to quality and eligibility requirements) for the use of offset allowances for international forest carbon activities. (b)

Quality and eligibility requirements

The regulations promulgated pursuant to subsection (a) shall require that, in order to be approved for use under this section, offset allowances for an international forest carbon activity shall meet such quality and eligibility requirements as the Administrator may establish, including requirements that— (1)the activity shall be designed, carried out, and managed— (A)in accordance with widely-accepted, environmentally sustainable forestry practices; (B)to promote native species and conservation or restoration of native forests, if practicable, and to avoid the introduction of invasive nonnative species; (C)in a manner that is supportive of the internationally-recognized rights of indigenous and other forest-dependent people living in the affected areas; and (D)in a manner that enhances the capability, if consistent with the applicable laws in the country involved, of local communities to exercise prior informed consent regarding projects or other activities, and to prevent the improper taking of property; and (2)the emission reductions or sequestrations are real, permanent, additional, verifiable, and enforceable, with reliable measuring and monitoring and appropriate accounting for leakage. (c)

National level activities

(1)

In general

Not later than two years after the date of enactment of this Act, the Administrator, in consultation with the Secretary, shall prepare a list of countries that have— (A)demonstrated the capacity to participate in international forest carbon activities at a national level, including— (i)sufficient historical data on changes in national forest carbon stocks; (ii)the technical capacity to monitor and measure forest carbon fluxes with an acceptable level of uncertainty; and (iii)the institutional capacity to reduce emissions from deforestation and forest degradation; (B)capped greenhouse gas emissions or otherwise established a credible national baseline or emission reference baseline; (C)achieved national-level reductions of deforestation and degradation below an historical reference baseline, taking into consideration national circumstances and the average annual deforestation and degradation rates of the country during a period of at least five years; (D)implemented an emission reduction program for the forest sector; and (E)demonstrated those reductions using remote sensing technology, taking into consideration relevant international standards. (2)

Periodic review of national level reductions in deforestation and forest degradation

The Administrator, in consultation with the Secretary, shall periodically review and update the list of the names of countries included under paragraph (1). (3)

Crediting and additionality

A verified reduction in greenhouse gas emissions from deforestation and forest degradation under a cap or resulting from a nationwide emissions reference scenario described in paragraph (1)(B) shall be— (A)eligible for offset allowances; and (B)considered to satisfy the additionality criterion. (d)

Subnational level activities

With respect to foreign countries other than the foreign countries described in subsection (c), the Administrator shall recognize project scale international forest carbon activities as eligible for offset allowances, subject to the quality criteria for forest carbon activities described in subsection (b). (e)

Other international forest carbon activities

An international forest carbon activity, other than a reduction in deforestation or forest degradation, shall be eligible for offset allowances under this section, subject to the eligibility requirements and quality criteria for forest carbon activities described in subsection (b) or other regulations promulgated pursuant to this section. (f)

Discount

(1)

Initial discount

If, after the date that is 10 years after the date of enactment of this Act, the Administrator determines that a foreign country that, in the aggregate, generates greenhouse gas emissions accounting for more than 0.5 percent of global greenhouse gas emissions has not capped those emissions, established an emissions reference scenario based on historical data, or otherwise reduced total forest emissions of that foreign country, the Administrator shall apply a discount to distributions of offset allowances to international forest carbon activities in that country under this section. (2)

Subsequent termination

If, after the date that is 15 years after the date of enactment of this Act, the Administrator determines that a foreign country that, in the aggregate, generates greenhouse gas emissions accounting for more than 0.5 percent of global greenhouse gas emissions has not capped those emissions, established an emissions reference scenario based on historical data, or otherwise reduced total forest emissions of that foreign country, the Administrator shall cease distributions of offset allowances to international forest carbon activities in that country under this section. (g)

Facility certification

The owner or operator of a covered entity that submits an offset allowance generated under this section shall certify that the offset allowance has not been retired from use in any greenhouse gas emissions registry. (h)

Maximum use

The regulations promulgated pursuant to this section shall ensure that offset allowances are not issued for sequestration or emission reductions that have been used or will be used by any other country for compliance with a domestic or international obligation to limit or reduce greenhouse gas emissions. (i)

Reviews

Not later than three years after the date of enactment of this Act and every five years thereafter, the Administrator, in consultation with the Secretary, shall conduct a review of the activities undertaken pursuant to this section, including the effects of the activities on indigenous and forest-dependent peoples residing in affected areas.