[Congressional Record Volume 149, Number 3 (Thursday, January 9, 2003)]
[Senate]
[Pages S166-S174]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. LIEBERMAN (for himself and Mr. McCain):
  S. 139. A bill to provide for a program of scientific research on 
abrupt climate change, to accelerate the reduction of greenhouse gas 
emissions in the United States by establishing a market-driven system 
of greenhouse gas tradeable allowances that could be used 
interchangably with passenger vehicle fuel economy standard credits, to 
limit greenhouse gas emissions in the United States and reduce 
dependence upon foreign oil, and ensure benefits to consumers from the 
trading in such allowances; to the Committee on Environment and Public 
Works.
  Mr. LIEBERMAN. Mr. President, I rise today to join my friend and 
colleague, Senator McCain, to introduce the first ever comprehensive 
legislation to limit the emissions of greenhouse gases in the United 
States. Today we take the first step up a long mountain road, a road 
that will culminate with this country taking credible action to address 
the global problems of our warming planet. The rest of the world is now 
taking on the challenge this problem presents. The United States, as 
the world's largest emitter of the gases and the home of the world's 
strongest economy, must not have its head in the clouds.
  Climate change is not a new problem. Recently, I had come across my 
desk a 1979 document produced by the National Academy of Sciences at 
the request of then-President Carter. The document says, ``When it is 
assumed that the CO2 content of the atmosphere has doubled, the more 
realistic of the modeling efforts predict a global surface warming of 
between 2 degrees and 3.5 degrees with greater increases at higher 
altitudes.'' That is remarkably similar to last year's national 
communication on climate change that predicted a warming of 2.5 degrees 
to 4 degrees over the next century. So in some sense, we have known 
about this problem for over two decades. That's two decades of neglect. 
We don't need to spin our wheels in the mud any longer. It is time to 
get traction. It is time to take action.
  I do not believe there is any longer any credible dissent on the 
central question: namely, whether human-caused climate change is 
happening. The thermometer mercury is creeping up, glaciers are 
melting, and waters are rising. According to a NASA study released last 
month, the permanent, summer ice cap over the Arctic Ocean is 
disappearing far faster than previously thought and will at this rate 
be gone by the end of the century. And just last week, two major new 
research studies said global warming is already posing a dire threat to 
the world's plants and animals, a danger that is likely to rise 
dramatically, with the temperature, in the coming years.
  The scientific evidence is potent and persuasive. But we've witnessed 
other changes across the globe that have anecdotally announced the 
arrival of global warming to human populations. I noticed two examples 
recently that resonated with me; both come from the Arctic north, and 
in my view are canaries in the climate change coalmine.
  The first example comes from the Native American populations of 
Alaska and Northern Canada. In just the past few years, a robin 
appeared in an Inupiat village in Alaska. Unfortunately, the elders, 
despite an intimate awareness of their 10,000 year old language, did 
not know what to call the bird. You see, there is no word for robin in 
their language.
  A second example comes from the town of Nenana, AK, which has an 
annual lottery to determine when a tripod placed on the frozen Tenana 
River would break through the ice. And over the past 50 years, that 
breakthrough has occurred earlier and earlier.
  So, it's not only in the language of statistics that climate change 
is occurring. It's in the language of everyday life.
  The nature of this problem is that it gets worse every year we fail 
to face it head on. It's not unlike the federal budget deficit. The 
weight of the interest payments bearing down on us grow over time and 
dig us deeper and deeper into a hole of our own making. So too with 
global warming. Today the problem is manageable. Tomorrow, quite 
literally, we could be up to our waists in it.
  There are a few remaining skeptics who still doubt that human 
greenhouse gas emissions are contributing to climate change but even 
they should understand the wisdom of taking preventive action. Even 
they should realize that reducing greenhouse gas emissions now is the 
best insurance policy against the possibility of future catastrophe.
  The question remains, then, what we should do about it. There is no 
easy fix. Carbon dioxide, once released, stays in our atmosphere for 
about a century, so any solution needs to be long-term. But I believe 
that the legislation we have drafted and will soon introduce will take 
us on the path to that ultimate solution, and do so in a way that can 
provide an economic boost, not an economic burden, to American 
businesses. Given our flagging economy, this is a critical point for us 
all to absorb.
  Our approach works like this. The country's overall emissions will be 
capped, then individual companies will have the flexibility to find the 
most innovative and cost-effective ways to drive their emissions down. 
They will trade pollution credits, also called allowances, with each 
other rather than paying penalties to the government.
  The result of that innovative model is that we will unleash and 
focuses the genius of American enterprise to take on a critical common 
challenge. And the innovation unleashed as companies compete will 
create a boomlet of new, high-paying jobs. It's no wonder the Wall 
Street Journal editorial page endorsed this approach saying that it 
would achieve the same amount of overall pollution reduction at a lower 
cost than traditional regulation, and urging the Bush Administration to 
sign on.
  In making its endorsement, The Wall Street Journal looked, as we did, 
at the record. Many similar programs have helped solve pollution 
problems throughout the country and the world. The most well-known 
example is the Acid Rain Trading Program in the 1990 Clean Air Act, one 
of the most successful environmental programs in history and something 
I was proud to have a hand in creating. This program secured strict 
cuts in sulfur dioxide emissions from power plants at less than a 
quarter of the predicted costs to industry.
  We have some initial reaction to our proposal from our country's 
leading economists, and the response has been positive. For instance, 
Steven DeCanio, a professor of economics at the University of 
California, Santa Barbara and the former staff economist on this issue 
in the Reagan White House, stated the following about our proposal:

       The Climate Stewardship Act of 2003 is a good first step 
     towards the ultimate goal of stabilizing levels of greenhouse 
     gas emissions that will prevent dangerous anthropogenic 
     interference with the climate. The Bill embodies market 
     mechanisms that will enable emissions reductions to be 
     accomplished efficiently, and has provisions for an equitable 
     allocation of the emissions permits. Funds are set aside to 
     assist workers and communities that may be adversely affected 
     by the transition. The Bill permits flexibility in the manner 
     by which the emissions reductions are achieved, including 
     allowing credits for verifiable enhancement of carbon sinks 
     and limited international emissions trading. The proposed 
     legislation also encourages investment in energy-efficiency 
     technologies, as well as the establishment of a national 
     emissions database and funding for new research. All of these 
     features of the Bill are components of a strategy that can 
     enable the United States to begin to make meaningful 
     reductions in greenhouse gas emissions in a way that is 
     supportive of economic growth and beneficial to our standard 
     of living. It is entirely appropriate that the risks of 
     global climate change be addressed in specific legislation at 
     this time.

  But this bill is more than a broad policy proposal. It is a detailed 
legislative design for the system. Our staffs have been working 
ardently over the past 16 months to craft a detailed proposal that 
could find support both in the halls of industry and amongst the 
nation's leading environmental organizations. Hopefully that means that 
both sides of the aisle in Congress will find something to their 
liking. I hope all involved realized that this is no marker bill; it is 
a comprehensive proposal. Please indulge me as I run through a few of 
the key details.
  Our bill covers the four main sectors of the U.S. economy that emit 
greenhouse gases: electric utilities, industrial plants, 
transportation, and large commercial facilities. For each of these 
sectors, we ease back on the greenhouse gas accelerator, spreading the 
burden equally amongst the companies. The progress required is real but

[[Page S167]]

realistic. By the year 2010, we ask only that they return to 2000 
levels. By 2016, we ask that they return to their 1990 levels, in 
keeping with our treaty commitment under the Rio Convention.
  In doing so, we provide each participant with a generous amount of 
flexibility on how to comply with their obligations. There is no limit 
on the amount of allowances that they may obtain from other 
participants in the system. Moreover, companies in the system can avail 
themselves of ``alternative compliance'' options, including 
sequestration projects, international reductions, and verified 
reductions made by parties outside the system. Such ``alternative 
compliance'' options can be used to satisfy 300 percent of the average 
companies' obligation.
  These alternative compliance options will have other benefits as 
well. As many members of this committee already know, sequestration 
projects can produce environmental benefits beyond the benefit to the 
climate, including reduced deforestation and more sustainable 
agricultural practices. Such projects also bring a needed infusion of 
money into the farm economy not through subsidies, but through the sale 
of a new ``crop,'' sequestered carbon dioxide. Even now, with a purely 
speculative market in greenhouse gases, Entergy Services and Pacific 
Northwest Direct Seed Association brokered a deal for 30,000 million 
metric tons of carbon over 10 years. The sale price was not divulged, 
but the point is that the deal was made even in the absence of a real 
market. Our program would greatly increase the opportunity for these 
types of sales by farmers.
  Our businesses will benefit dramatically from the regulatory 
certainty that our bill will provide. Businesses now receive a 
confusing set of messages from the Federal Government. On the one hand, 
they know that, with climate change worsening every year, government 
will somehow and sometime have to require them to reduce their 
emissions. As the Conference Board recently noted in a June 2002 
report, ``climate change is an issue business executives ignore at 
their peril.'' On the other hand, businesses are being left uncertain 
about Washington's ultimate global warming policy plans, and therefore 
have a perverse incentive to put off any real anti-pollution technology 
investments.
  Indeed, our innovation economy more broadly is unwilling or unable to 
engage while the Federal Government continues to vacillate. As a 
result, we are losing countless dollars in new market and job 
opportunities. Europe and Japan already have an early head start in the 
pollution reduction industry. That lead will only grow if our 
government stands pat.
  Finally, I want to mention one other, perhaps unlikely reason to 
support this legislation beyond our economic and environmental well 
being, and that's foreign policy. Many of our most important allies are 
much more worried about climate change than we in the United States 
have historically been. When the Bush administration plays down the 
risks of global warming and shows no interest in devising a serious 
solution, it frays our relationship with those allies. That's 
especially true since we as a nation are responsible for about a 
quarter of the world's total climate change problem.
  We should never compromise critical American policy simply to satisfy 
the international community. But in this case, doing what's in our own 
best environmental and economic interests will also earn respect and 
support around the world. And lest we forget it also happens to be the 
right thing to do.
  The Earth is not only ours to use; we are stewards of it, who must 
hold it in trust for future generations to live in, breathe in, and, 
yes, prosper in. Regrettably, this Nation's climate change policy to 
date has not respected our role as stewards. It is time we reverse that 
trend, and our bill will help do exactly that.
  I ask unanimous consent that the text of the bill be printed in the 
Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                 S. 139

       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 ``Climate Stewardship Act of 
     2003''.

     SEC. 2. TABLE OF CONTENTS.

       The table of contents for this Act is as follows:
Sec. 1. Short title.
Sec. 2. Table of contents.
Sec. 3. Definitions.

    TITLE I--FEDERAL CLIMATE CHANGE RESEARCH AND RELATED ACTIVITIES

Sec. 101. National Science Foundation scholarships.
Sec. 102. Commerce Department study of technology transfer barriers.
Sec. 103. Report on United States impact of Kyoto protocol.
Sec. 104. Research grants.
Sec. 105. Abrupt climate change research.
Sec. 106. NIST greenhouse gas functions.
Sec. 107. Development of new measurement technologies.
Sec. 108. Enhanced environmental measurements and standards.
Sec. 109. Techonolgy development and diffusion.

               TITLE II--NATIONAL GREENHOUSE GAS DATABASE

Sec. 201. National greenhouse gas database and registry established.
Sec. 202. Inventory of greenhouse gas emissions for covered entities.
Sec. 203. Greenhouse gas reduction reporting.
Sec. 204. Measurement and verification.

           TITLE III--MARKET-DRIVEN GREENHOUSE GAS REDUCTIONS

     Subtitle A--Emission Reduction Requirements; Use of Tradeable 
                               Allowances

Sec. 311. Covered entities must submit allowances for emissions.
Sec. 312. Compliance.
Sec. 313. Tradeable allowances and fuel economy standard credits.
Sec. 314. Borrowing against future reductions.
Sec. 315. Other uses of tradable allowances.
Sec. 316. Exemption of source categories.

    Subitle B--Establishment and Allocation of Tradeable Allowances.

Sec. 331. Establishment of tradeable allowances.
Sec. 332. Determination of tradeable allowances allocations.
Sec. 333. Allocation of tradeable allowances.
Sec. 334. Initial allocations for early participation and accelerated 
              participation.
Sec. 335. Bonus for accelerated participation.
Sec. 336. Ensuring target adequacy.

             Subtitle C--Climate Change Credit Corporation

Sec. 351. Establishment.
Sec. 352. Purposes and functions.

            Subtitle D--Sequestration Accounting; Penalties

Sec. 371. Sequestration accounting.
Sec. 372. Penalties.

     SEC. 3. DEFINITIONS.

       In this Act:
       (1) Administrator.--The term ``Adminis-
     trator'' means the Administrator of the Environmental 
     Protection Agency.
       (2) Baseline.--The term ``baseline'' means the historic 
     greenhouse gas emission levels of an entity, as adjusted 
     upward by the Administrator to reflect actual reductions that 
     are verified in accordance with--
       (A) regulations promulgated under section 201(c)(1); and
       (B) relevant standards and methods developed under this 
     title.
       (3) Covered sectors.--The term ``covered sectors'' means 
     the electricity, transportation, industry, and commercial 
     sectors, as such terms are used in the Inventory.
       (4) Covered entity.--The term ``covered entity'' means an 
     entity (including a branch, department, agency, or 
     instrumentality of Federal, State, or local government) 
     that--
       (A) owns or controls a source of greenhouse gas emissions 
     in the electric power, industrial, or commercial sectors of 
     the United States economy (as defined in the Inventory), 
     refines or imports petroleum products for use in 
     transportation, or produces or imports hydrofluorocarbons, 
     perfluorocarbons, or sulfur hexaflouride; and
       (B) emits over 10,000 metric tons of greenhouse gas per 
     year, measured in units of carbon dioxide equivalance, or 
     produces or imports--
       (i) petroleum products that, when combusted, will emit,
       (ii) hydrofluorocarbons, perfluorocarbons, or sulfur 
     hexafluoride that, when used, will emit, or
       (iii) other greenhouse gases that, when used, will emit,

     over 10,000 metric tons of greenhouse gas per year, measured 
     in units of carbon dioxide equivalence.
       (5) Database.--The term ``database'' means the National 
     Greenhouse Gas Database established under section 201.
       (6) Direct emissions.--The term ``direct emissions'' means 
     greenhouse gas emissions by an entity from a facility that is 
     owned or controlled by that entity.
       (7) Facility.--The term ``facility'' means a building, 
     structure, or installation located on any 1 or more 
     contiguous or adjacent properties of an entity in the United 
     States.
       (8) Greenhouse gas.--The term ``greenhouse gas'' means--
       (A) carbon dioxide;
       (B) methane;
       (C) nitrous oxide;
       (D) hydrofluorocarbons;

[[Page S168]]

       (E) perfluorocarbons; and
       (F) sulfur hexafluoride.
       (9) Indirect emissions.--The term ``indirect emissions'' 
     means greenhouse gas emissions that are--
       (A) a result of the activities of an entity; but
       (B) emitted from a facility owned or controlled by another 
     entity; and
       (C) not reported as direct emissions by the entity from 
     which they were emitted.
       (10) Inventory.--The term ``Inventory'' means the Inventory 
     of U.S. Greenhouse Gas Emissions and Sinks, prepared in 
     compliance with the United Nations Framework Convention on 
     Climate Change Decision 3/CP.5.).
       (11) Phase i allotment.--The term ``Phase I allotment'' 
     means--
       (A) the amount of emissions emitted by a covered sector, as 
     identified in the Inventory for the calendar year preceding 
     the calendar year in which this Act is enacted (reduced by 
     the amount of allowances allocated by early and accelerated 
     participants under section 334 of this Act); multiplied by--
       (B) the result of--
       (i) the total greenhouse emissions for all covered sectors 
     for the year 2000, as identified in the 2000 Inventory; 
     divided by
       (ii) the total greenhouse emissions for all covered sectors 
     for the calendar year preceding the date of enactment of this 
     Act, as identified in the Inventory.
       (12) Phase ii allotment.--The term ``Phase II allotment'' 
     means--
       (A) the amount of emissions emitted by a covered sector, as 
     identified in the Inventory for the calendar year preceding 
     the calendar year in which this Act is enacted (reduced by 
     the amount of allowances allocated to early and accelerated 
     participants under section 334 of this Act); multiplied by--
       (B) the result of--
       (i) the total greenhouse emissions for all covered sectors 
     for the year 1990, as identified in the 1990 Inventory; 
     divided by
       (ii) the total greenhouse emissions for all covered sectors 
     for the calendar year preceding the date of enactment of this 
     Act, as identified in the Inventory.
       (13) Registry.--The term ``registry'' means the registry of 
     greenhouse gas emission reductions established under section 
     201(b)(2).
       (14) Secretary.--The term ``Secretary'' means the Secretary 
     of Commerce.
       (15) Sequestration.--
       (A) In general.--The term ``sequestration'' means the 
     capture, long-term separation, isolidation, or removal of 
     greenhouse gases from the atmosphere.
       (B) Inclusions.--The term ``sequestra-
     tion'' includes--
       (i) agricultural and conservation practices;
       (ii) reforestation;
       (iii) forest preservation; and
       (iv) any other appropriate method of capture, long-term 
     separation, isolation, or removal of greenhouse gases from 
     the atmosphere, as determined by the Administrator.
       (C) Exclusions.--The term ``sequestration'' does not 
     include--
       (i) any conversion of, or negative impact on, a native 
     ecosystem; or
       (ii) any introduction of non-native species or genetically 
     modified organisms.
       (16) Source category.--The term ``source category'' means a 
     process or activity that leads to direct emissions of 
     greenhouse gases, as listed in the Inventory.
    TITLE I--FEDERAL CLIMATE CHANGE RESEARCH AND RELATED ACTIVITIES.

     SEC. 101. NATIONAL SCIENCE FOUNDATION SCHOLARSHIPS.

       The Director of the National Science Foundation shall 
     establish a scholarship program for post-secondary students 
     studying global climate change, including capability in 
     observation, analysis, modeling, paleoclima-
     tology, consequences, and adaptation.

     SEC. 102. COMMERCE DEPARTMENT STUDY OF TECHNOLOGY TRANSFER 
                   BARRIERS.

       (a) Study.--The Assistant Secretary of Technology Policy at 
     Department of Commerce shall conduct a study of technology 
     transfer barriers, best practices, and outcomes of technology 
     transfer activities at Federal laboratories related to the 
     licensing and commercialization of energy efficient 
     technologies. The study shall be submitted to the Senate 
     Committee on Commerce, Science, and Transportation and the 
     House of Representatives Committee on Science within 6 months 
     after the date of enactment of this Act. The Assistant 
     Secretary shall work with the existing interagency working 
     group to address identified barriers.
       (b) Agency Report To Include Information on Technology 
     Transfer Income and Royalties.--Paragraph (2)(B) of section 
     11(f) of the Stevenson-Wydler Technology Innovation Act of 
     1980 (15 U.S.C. 3710(f) is amended--
       (1) by striking ``and'' after the semicolon in clause (vi);
       (2) by redesignating clause (vii) as clause (ix); and
       (3) by inserting after clause (vi) the following:
       ``(vii) the number of fully-executed licenses which 
     received royalty income in the preceding fiscal year for 
     climate-change or energy-efficient technology;
       ``(viii) the total earned royalty income for climate-change 
     or energy-efficient technology; and''.
       (c) Increased Incentives for Development of Climate-change 
     or Energy-efficient Technology.--Section 14(a) of the 
     Stevenson-Wydler Technology Innovation Act of 1980 (15 U.S.C. 
     3710c(a)) is amended--
       (1) by striking ``15 percent,'' in paragraph (1)(A) and 
     inserting ``15 percent (25 percent for climate change-related 
     technologies),''; and
       (2) by inserting ``($250,000 for climate change-related 
     technologies)'' after ``$150,000'' each place it appears in 
     paragraph (3).

     SEC. 103. REPORT ON UNITED STATES IMPACT OF KYOTO PROTOCOL.

       Within 6 months after the date of enactment of this Act, 
     the Secretary shall submit a report to the Senate Committee 
     on Commerce, Science, and Transportation and the House of 
     Representatives Committee on Science on the effects that the 
     entry into force of the Kyoto Protocol will have on--
       (1) United States industry and its ability to compete 
     globally;
       (2) international cooperation on scientific research and 
     development; and
       (3) United States participation in international 
     environmental climate change mitigation efforts and 
     technology deployment.

     SEC. 104. RESEARCH GRANTS.

       Section 105 of the Global Change Research Act of 1990 (15 
     U.S.C. 2935) is amended--
       (1) by redesignating subsection (c) as subsection (d); and
       (2) by inserting after subsection (b) the following:
       (c) Research Grants.
       ``(1) Committee to develop list of priority research 
     areas.--The Committee shall develop a list of priority areas 
     for research and development on climate change that are not 
     being addressed by Federal agencies.
       ``(2) Director of ostp to transmit list to NSF.--the 
     Director of the Office of Science and Technology Policy shall 
     transmit the list to the National Science Foundation.
       ``(3) Funding through nsf.
       ``(A) Budget request.--The National Science Foundation 
     shall include, as part of the annual request for 
     appropriations for the Science and Technology Policy 
     Institute, a request for appropriations to fund research in 
     the priority areas on the list developed under paragraph (1).
       ``(B) Authorization.--For fiscal year 2004 and each fiscal 
     year thereafter, there are authorized to be appropriated to 
     the National Science Foundation not less than $17,000,000, to 
     be made available through the Science and Technology Policy 
     Institute, for research in those priority areas.''.

     SEC. 105. ABRUPT CLIMATE CHANGE RESEARCH.

       ``(a) In General.--The Secretary, through the National 
     Oceanic and Atmospheric Administration, shall carry out a 
     program of scientific research on potential abrupt climate 
     change designed--
       (1) to develop a global array of terrestrial and 
     oceanographic indicators of paleoclimate in order 
     sufficiently to identify and describe past instances of 
     abrupt climate change;
       (2) to improve understanding of thresholds and 
     nonlinearities in geophysical systems related to the 
     mechanisms of abrupt climate change;
       (3) to incorporate these mechanisms into advanced 
     geophysical models of climate change; and
       (4) to test the output of these models against an improved 
     global array of records of past abrupt climate changes.
       (b) Abrupt Climate Change Defined.--In this section, the 
     term ``abrupt climate change'' means a change in climate that 
     occurs so rapidly or unexpectedly that human or natural 
     systems may have difficulty adapting to it.

     SEC. 106. NIST GREENHOUSE GAS FUNCTIONS.

       Section 2(c) of the National Institute of Standards and 
     Technology Act (15 U.S.C. 272(c)) is amended--
       (1) by striking ``and'' after the semicolon in paragraph 
     (21);
       (2) by redesignating paragraph (22) as paragraph (23); and
       (3) by inserting after paragraph (21) the following;
       ``(22) perform research to develop enhanced measurements, 
     calibrations, standards, and technologies which will enable 
     the reduced production in the United States of greenhouse 
     gases associated with global warming, including carbon 
     dioxide, methane, nitrous oxide, ozone, perfluorocarbons, 
     hydrofluorocarbons, and sulfur hexafluoride; and''.

     SEC. 107. DEVELOPMENT OF NEW MEASUREMENT TECHNOLOGIES.

       The Secretary shall initiate a program to develop, with 
     technical assistance from appropriate Federal agencies, 
     innovative standards and measurement technologies (including 
     technologies to measure carbon changes due to changes in land 
     use cover) to calculate--
       (1) greenhouse gas emissions and reductions from 
     agriculture, forestry, and other land use practices;
       (2) noncarbon dioxide greenhouse gas emissions from 
     transportation;
       (3) greenhouse gas emissions from facilities or sources 
     using remote sensing technology; and
       (4) any other greenhouse gas emission or reductions for 
     which no accurate or reliable measurement technology exists.

     SEC. 108. ENHANCED ENVIRONMENTAL MEASUREMENTS AND STANDARDS.

       The National Institute of Standards and Technology Act (15 
     U.S.C. 271 et seq.) is amended--
       (1) by redesignating sections 17 through 32 as sections 18 
     through 33, respectively; and
       (2) by inserting after section 16 the following:

[[Page S169]]

     ``SEC. 17. CLIMATE CHANGE STANDARDS AND PROCESSES.

       ``(a) In General.--The Director shall establish within the 
     Institute a program to perform and support research on global 
     climate change standards and processes, with the goal of 
     providing scientific and technical knowledge applicable to 
     the reduction of greenhouse gases (as defined in section 3(8) 
     of the Climate Stewardship Act of 2003).
       ``(b) Research Program.
       ``(1) In general.--The Director is authorized to conduct, 
     directly or through contracts or grants, a global climate 
     change standards and processes research program.
       ``(2) Research projects.--The specific contents and 
     priorities of the research program shall be determined in 
     consultation with appropriate Federal agencies, including the 
     Environmental Protection Agency, the National Oceanic and 
     Atmospheric Administration, and the National Aeronautics and 
     Space Administration. The program generally shall include 
     basic and applied research--
       ``(A) to develop and provide the enhanced measurements, 
     calibrations, data, models, and reference material standards 
     which will enable the monitoring of greenhouse gases;
       ``(B) to assist in establishing a baseline reference point 
     for future trading in greenhouse gases and the measurement of 
     progress in emissions reduction;
       ``(C) that will be exchanged internationally as scientific 
     or technical information which has the stated purpose of 
     developing mutually recognized measurements, standards, and 
     procedures for reducing greenhouse gases; and
       ``(D) to assist in developing improved industrial processes 
     designed to reduce or eliminate greenhouse gases.
       ``(c) National Measurement Laboratories.--
       ``(1) In general.--In carrying out this section, the 
     Director shall utilize the collective skills of the National 
     Measurement Laboratories of the National Institute of 
     Standards and Technology to improve the accuracy of 
     measurements that will permit better understanding and 
     control of these industrial chemical processes and result in 
     the reduction or elimination of greenhouse gases.
       ``(2) Material, process, and building research.--The 
     National Measurement Laboratories shall conduct research 
     under this subsection that includes--
       ``(A) developing material and manufacturing processes which 
     are designed for energy efficiency and reduced greenhouse gas 
     emissions into the environment;
       ``(B) developing environmentally-friendly, `green' chemical 
     processes to be used by industry; and
       ``(C) enhancing building performance with a focus in 
     developing standards or tools which will help incorporate 
     low- or no-emission technologies into building designs.
       ``(3) Standards and tools.--The National Measurement 
     Laboratories shall develop standards and tools under this 
     subsection that include software to assist designers in 
     selecting alternate building materials, performance data 
     on materials, artificial intelligence-aided design 
     procedures for building subsystems and `smart buildings', 
     and improved test methods and rating procedures for 
     evaluating the energy performance of residential and 
     commercial appliances and products.
       ``(d) National Voluntary Laboratory Accreditation 
     Program.--The Director shall utilize the National Voluntary 
     Laboratory Accreditation Program under this section to 
     establish a program to include specific calibration or test 
     standards and related methods and protocols assembled to 
     satisfy the unique needs for accreditation in measuring the 
     production of greenhouse gases. In carrying out this 
     subsection the Director may cooperate with other departments 
     and agencies of the Federal Government, State and local 
     governments, and private organizations.''.

     SEC. 109. TECHNOLOGY DEVELOPMENT AND DIFFUSION.

       The Director of the National Institute of Standards and 
     Technology, through the Manufacturing Extension Partnership 
     Program, may develop a program to support the implementation 
     of new ``green'' manufacturing technologies and techniques by 
     the more than 380,000 small manufacturers.
               TITLE II--NATIONAL GREENHOUSE GAS DATABASE

     SEC. 201. NATIONAL GREENHOUSE GAS DATABASE AND REGISTRY 
                   ESTABLISHED.

       (a) Establishment.--As soon as practicable after the date 
     of enactment of this Act, the Administrator, in coordination 
     with the Secretary, the Secretary of Energy, the Secretary of 
     Agriculture, and private sector and non-governmental 
     organizations, shall establish, operate, and maintain a 
     database, to be known as the ``National Greenhouse Gas 
     Database'', to collect, verify, and analyze information on 
     greenhouse gas emissions by entities.
       (b) National Greenhouse Gas Database Components.--The 
     database shall consist of--
       (1) an inventory of greenhouse gas emissions; and
       (2) a registry of greenhouse gas emission reductions and 
     increases in greenhouse gas sequestrations.
       (c) Comprehensive System.--
       (1) In general.--Not later than 2 years after the date of 
     enactment of this Act, the Administrator shall promulgate 
     regulations to implement a comprehensive system for 
     greenhouse gas emissions reporting, inventorying, and 
     reductions registration.
       (2) Requirements.--The Administrator shall ensure, to the 
     maximum extent practicable, that--
       (A) the comprehensive system described in paragraph (1) is 
     designed to--
       (i) maximize completeness, transparency, and accuracy of 
     information reported; and
       (ii) minimize costs incurred by entities in measuring and 
     reporting greenhouse gas emissions; and
       (B) the regulations promulgated under paragraph (1) 
     establish procedures and protocols necessary--
       (i) to prevent the reporting of some or all of the same 
     greenhouse gas emissions or emission reductions by more than 
     1 reporting entity;
       (ii) to provide for corrections to errors in data submitted 
     to the database;
       (iii) to provide for adjustment to data by reporting 
     entities that have had a significant organizational change 
     (including mergers, acquisitions, and divestiture), in order 
     to maintain comparability among data in the database over 
     time;
       (iv) to provide for adjustments to reflect new technologies 
     or methods for measuring or calculating greenhouse gas 
     emissions;
       (v) to account for changes in registration of ownership of 
     emission reductions resulting from a voluntary private 
     transaction between reporting entities; and
       (vi) to clarify the responsibility for reporting in the 
     case of any facility owned or controlled by more than 1 
     entity.
       (3) Serial numbers.--Through regulations promulgated under 
     paragraph (1), the Administrator shall develop and implement 
     a system that provides--
       (A) for the verification of submitted emissions reductions;
       (B) for the provision of unique serial numbers to identify 
     the verified emission reductions made by an entity relative 
     to the baseline of the entity; and
       (C) for the tracking of the reductions associated with the 
     serial numbers.

     SEC. 202. INVENTORY OF GREENHOUSE GAS EMISSIONS FOR COVERED 
                   ENTITIES.

       (a) In General.--Not later than July 1st of each calendar 
     year after 2008, a covered entity shall submit to the 
     Administrator a report that describes, for the preceding 
     calendar year, the entity-wide greenhouse gas emissions (as 
     reported at the facility level), including--
       (1) the total quantity of direct greenhouse gas emissions 
     from stationary sources, expressed in units of carbon dioxide 
     equivalence;
       (2) the amount of petroleum products sold or imported and 
     the amount of greenhouse gases, expressed in carbon dioxide 
     equivalents, that would be produced when these products are 
     used for transportation; and
       (3) such other categories of emissions as the Administrator 
     determines in the regulations promulgated under section 
     201(c)(1) may be practicable and useful for the purposes of 
     this Act, such as--
       (A) indirect emissions from imported electricity, heat, and 
     steam;
       (B) process and fugitive emissions; and
       (C) production or importation of greenhouse gases.
       (b) Collection and Analysis of Data.--The Administrator 
     shall collect and analyze information reported under 
     subsection (a) for use under title III.

     SEC. 203. GREENHOUSE GAS REDUCTION REPORTING.

       (a) In General.--Subject to the requirements described in 
     subsection (b)--
       (1) a covered entity may register greenhouse gas emission 
     reductions achieved after 1990 and before 2010 under this 
     section; and
       (2) an entity that is not a covered entity may register 
     greenhouse gas emission reductions achieved at any time since 
     1990 under this section.
       (b) Requirements.--
       (1) In general.--The requirements referred to in subsection 
     (a) are that an entity (other than an entity described in 
     paragraph (2)) shall--
       (A) establish a baseline; and
       (B) submit the report described in subsection (c)(1).
       (2) Requirements applicable to entities entering into 
     certain agreements.--An entity that enters into an agreement 
     with a participant in the registry for the purpose of a 
     carbon sequestration project shall not be required to comply 
     with the requirements specified in paragraph (1) unless 
     that entity is required to comply with the requirements by 
     reason of an activity other than the agreement.
       (c) Reports.--
       (1) Required report.--Not later than July 1st of the 
     calendar year beginning more than 2 years after the date of 
     enactment of this Act, but subject to paragraph (3), an 
     entity described in subsection (a) shall submit to the 
     Administrator a report that describes, for the preceding 
     calendar year, the entity-wide greenhouse gas emissions (as 
     reported at the facility level), including--
       (A) the total quantity of direct greenhouse gas emissions 
     from stationary sources, expressed in units of carbon dioxide 
     equivalence;
       (B) the amount of petroleum products sold or imported and 
     the amount of greenhouse gases, expressed in carbon dioxide 
     equivalents, that would be produced when these products are 
     used by vehicles; and
       (C) such other categories of emissions as the Administrator 
     determines in the regulations promulgated under section 
     201(c)(1)

[[Page S170]]

     may be practicable and useful for the purposes of this Act, 
     such as--
       (i) indirect emissions from imported electricity, heat, and 
     steam;
       (ii) process and fugitive emissions; and
       (iii) production or importation of greenhouse gases.
       (2) Voluntary reporting.--An entity described in subsection 
     (a) may (along with establishing a baseline and reporting 
     emissions under this section)--
       (A) submit a report described in paragraph (1) before the 
     date specified in that paragraph for the purposes of 
     achieving and commoditizing greenhouse gas reductions through 
     use of the registry; and
       (B) submit to the Administrator, for inclusion in the 
     registry, information that has been verified in accordance 
     with regulations promulgated under section 201(c)(1) and that 
     relates to--
       (i) any entity-wide greenhouse gas emission reductions 
     activities of the entity that were carried out during or 
     after 1990 and before the establishment of the National 
     Greenhouse Gas Database, verified in accordance with 
     regulations promulgated under section 201(c)(1), and 
     submitted to the Administrator before the date that is 4 
     years after the date of enactment of this Act; and
       (ii) with respect to the calendar year preceding the 
     calendar year in which the information is submitted, any 
     project or activity that results in an entity-wide reduction 
     of greenhouse gas emissions or an increase in net 
     sequestration of a greenhouse gas that is carried out by the 
     entity.
       (3) Provision of verification information by reporting 
     entities.--Each entity that submits a report under this 
     subsection shall provide information sufficient for the 
     Administrator to verify, in accordance with measurement and 
     verification methods and standards developed under section 
     203, that the greenhouse gas report of the reporting entity--
       (A) has been accurately reported; and
       (B) in the case of each voluntary report under paragraph 
     (2), represents--
       (i) actual reductions in direct greenhouse gas emissions--
       (I) relative to historic emission levels of the entity; and
       (II) after accounting for any increases in indirect 
     emissions described in paragraph (1)(C)(i); or
       (ii) actual increases in net sequestration.
       (4) Failure to submit report.--An entity that participates 
     or has participated in the registry and that fails to submit 
     a report required under this subsection shall be prohibited 
     from using, or allowing another entity to use, its registered 
     emissions reductions or increases in sequestration to satisfy 
     the requirements of section 311.
       (5) Independent third-party verification.--To meet the 
     requirements of this section and section 203, an entity that 
     is required to submit a report under this section may--
       (A) obtain independent third-party verification; and
       (B) present the results of the third-party verification to 
     the Administrator.
       (6) Availability of data.--
       (A) In general.--The Administrator shall ensure that 
     information in the database is--
       (i) published; and
       (ii) accessible to the public, including in electronic 
     format on the Internet.
       (B) Exception.--Subparagraph (A) shall not apply in any 
     case in which the Administrator determines that publishing or 
     otherwise making available information described in that 
     subparagraph poses a risk to national security.
       (7) Data infrastructure.--The Administrator shall ensure, 
     to the maximum extent practicable, that the database uses, 
     and is integrated with, Federal, State, and regional 
     greenhouse gas data collection and reporting systems in 
     effect as of the date of enactment of this Act.
       (8) Additional issues to be considered.--In promulgating 
     the regulations under section 201(c)(1) and implementing the 
     database, the Administrator shall take into consideration a 
     broad range of issues involved in establishing an effective 
     database, including--
       (A) the appropriate allowances for reporting each 
     greenhouse gas;
       (B) the data and information systems and measures necessary 
     to identify, track, and verify greenhouse gas emissions in a 
     manner that will encourage private sector trading and 
     exchanges;
       (C) the greenhouse gas reduction and sequestration methods 
     and standards applied in other countries, as applicable or 
     relevant;
       (D) the extent to which available fossil fuels, greenhouse 
     gas emissions, and greenhouse gas production and importation 
     data are adequate to implement the database; and
       (E) the differences in, and potential uniqueness of, the 
     facilities, operations, and business and other relevant 
     practices of persons and entities in the private and public 
     sectors that may be expected to participate in the database.
       (d) Annual Report.--The Administrator shall publish an 
     annual report that--
       (1) describes the total greenhouse gas emissions and 
     emission reductions reported to the database during the year 
     covered by the report;
       (2) provides entity-by-entity and sector-by-sector analyses 
     of the emissions and emission reductions reported;
       (3) describes the atmospheric concentrations of greenhouse 
     gases; and
       (4) provides a comparison of current and past atmospheric 
     concentrations of greenhouse gases.

     SEC. 204. MEASUREMENT AND VERIFICATION.

       (a) Standards.--
       (1) In general.--Not later than 1 year after the date of 
     enactment of this Act, the Secretary shall develop 
     comprehensive measurement and verification methods and 
     standards to ensure a consistent and technically accurate 
     record of greenhouse gas emissions, emission reductions, 
     sequestration, and atmospheric concentrations for use in the 
     registry.
       (2) Requirements.--The development of methods and standards 
     under paragraph (1) shall include--
       (A) a requirement that a covered entity use a continuous 
     emissions monitoring system, or another system of measuring 
     or estimating emissions that is determined by the Secretary 
     to provide information with the same precision, reliability, 
     accessibility, and timeliness as a continuous emissions 
     monitoring system provides;
       (B) establishment of standardized measurement and 
     verification practices for reports made by all entities 
     participating in the registry, taking into account--
       (i) protocols and standards in use by entities desiring to 
     participate in the registry as of the date of development of 
     the methods and standards under paragraph (1);
       (ii) boundary issues, such as leakage and shifted use;
       (iii) avoidable of double counting of greenhouse gas 
     emissions and emission reductions;
       (iv) protocols to prevent a covered entity from avoiding 
     the requirements of this Act by reorganization into multiple 
     entities that are under common control; and
       (v) such other factors as the Secretary, in consultation 
     with the Administrator, determines to be appropriate;
       (C) establishment of measurement and verification standards 
     applicable to actions taken to reduce, avoid, or sequester 
     greenhouse gas emissions;
       (D) in coordination with the Secretary of Agriculture, 
     standards to measure the results of the use of carbon 
     sequestration and carbon recapture technologies, including--
       (i) organic soil carbon sequestration practices; and
       (ii) forest preservation and reforestation activities that 
     adequately address the issues of permanence, leakage, and 
     verification;
       (E) establishment of such other measurement and 
     verification standards as the Secretary, in consultation with 
     the Secretary of Agriculture, the Administrator, and the 
     Secretary of Energy, determines to be appropriate;
       (F) establishment of standards for obtaining the 
     Secretary's approval of the suitability of geological storage 
     sites that include evaluation of both the geology of the site 
     and the entity's capacity to manage the site; and
       (G) establishment of other features that, as determined by 
     the Secretary, will allow entities to adequately establish a 
     fair and reliable measurement and reporting system.
       (b) Review and Revision.--The Secretary shall periodically 
     review, and revise as necessary, the methods and standards 
     developed under subsection (a).
       (c) Public Participation.--The Secretary shall--
       (1) make available to the public for comment, in draft form 
     and for a period of at least 90 days, the methods and 
     standards developed under subsection (a); and
       (2) after the 90-day period referred to in paragraph (1), 
     in coordination with the Secretary of Energy, the Secretary 
     of Agriculture, and the Administrator, adopt the methods and 
     standards developed under subsection (a) for use in 
     implementing the database.
       (d) Experts and Consultants.--
       (1) In general.--The Secretary may obtain the services of 
     experts and consultants in the private and nonprofit sectors 
     in accordance with section 3109 of title 5, United States 
     Code, in the areas of greenhouse gas measurement, 
     certification, and emission trading.
       (2) Available arrangements.--In obtaining any service 
     described in paragraph (1), the Secretary may use any 
     available grant, contract, cooperative agreement, or other 
     arrangement authorized by law.
           TITLE III--MARKET-DRIVEN GREENHOUSE GAS REDUCTIONS

     Subtitle A--Emission Reduction Requirements; Use of Tradeable 
                               Allowances

     SEC. 311. COVERED ENTITIES MUST SUBMIT ALLOWANCES FOR 
                   EMISSIONS.

       (a) In General.--Beginning with calendar year 2010--
       (1) each covered entity in the electric generation, 
     industrial, and commercial sectors shall submit to the 
     Administrator one tradeable allowance for every metric ton of 
     greenhouse gases, measured in units of carbon dioxide 
     equivalence, that it emits;
       (2) producer or importer of hydrofluorocarbons, 
     perfluorocarbons, or sulfur hexafluoride that is a covered 
     entity shall submit to the Administrator one tradeable 
     allowance for every metric ton of hydrofluorocarbons, 
     perfluorocarbons, or sulfur hexafluoride it produces or 
     imports, measured in units of carbon dioxide equivalence; and
       (3) each petroleum refiner or importer that is a covered 
     entity shall submit one tradeable allowance for every unit of 
     petroleum product it sells that will produce one metric 
     ton of greenhouse gases, measured in units of carbon 
     dioxide equivalence, when used for transportation.
       (b) Determination of Transportation Sector Amount.--For the 
     transportation

[[Page S171]]

     sector, the Administrator shall determine the amount of 
     greenhouse gases, measured in units of carbon dioxide 
     equivalence, that will be emitted when petroleum products are 
     used for transportation.
       (c) Exception for Certain Deposited Emissions.--
     Notwithstanding subsection (a), a covered entity is not 
     required to submit a tradeable allowance for any amount of 
     greenhouse gas that would otherwise have been emitted from a 
     source under the ownership or control of that entity if--
       (1) the emission is deposited in a geological storage 
     facility approved by the Administrator under section 
     204(a)(2)(F); and
       (2) the entity agrees to submit tradeable allowances for 
     any portion of the deposited emission that is subsequently 
     emitted from that facility.

     SEC. 312. COMPLIANCE.

       (a) In General.--
       (1) Source of tradeable allowances used.--A covered entity 
     may use a tradeable allowance to meet the requirements of 
     this section without regard to whether the tradeable 
     allowance was allocated to it under subtitle B or acquired 
     from another entity or the Climate Change Credit Corporation 
     established under section 351.
       (2) Verification of administrator.--At various times during 
     each year, the Administrator shall determine whether each 
     covered entity has met the requirements of this section. In 
     making that determination, the Administrator shall--
       (A) take into account tradeable allowances allocated to, or 
     acquired by, that covered entity; and
       (B) retire the serial number assigned to each such 
     tradeable allowance so used.
       (b) Alternative Means of Compliance From 2010 Through 
     2015.--For the years 2010, 2011, 2012, 2013, 2014, and 2015, 
     a covered entity may satisfy 15 percent of its total 
     allowance submission requirement under this section by--
       (1) submitting tradeable allowances from another nation's 
     market in greenhouse gas emissions if--
       (A) the Secretary certifies that the other nation's system 
     for trading in greenhouse gas emissions is complete, 
     accurate, and transparent and reviews that determination at 
     least once every 5 years;
       (B) the other nation has adopted enforceable limits on its 
     greenhouse gas emissions which the tradeable allowances were 
     issued to implement; and
       (C) the covered entity certifies that the tradeable 
     allowance has been retired unused in the other nation's 
     market;
       (2) submitting a registered net increase in sequestration, 
     as registered in the National Greenhouse Gas Database 
     established under section 201, adjusted, if necessary, to 
     comply with the accounting standards and methods established 
     under section 372;
       (3) submitting a greenhouse gas emissions reduction (other 
     than a registered net increase in sequestration) that was 
     registered in the National Greenhouse Gas Database by a 
     person that is not a covered entity; or
       (4) submitting credits obtained from the Administrator 
     under section 314
       (c) Alternative Means of Compliance After 2015.--For years 
     beginning after 2015, a covered entity may meet the 
     requirements of this section by any means described in 
     subsection (b), except that for the purpose of applying 
     subsection (d) after 2015, ``10 percent'' shall be 
     substituted for ``15 percent''.

     SEC. 313. TRADEABLE ALLOWANCES AND FUEL ECONOMY STANDARD 
                   CREDITS.

       (a) In General.--Section 32903 of title 49, United States 
     Code, is amended by striking the second sentence of 
     subsection (a) and inserting ``The credits may be--
       ``(1) applied to any of the 3 model years immediately 
     following the model year for which the credits are earned; or
       ``(2) if the average fuel economy of a manufacturer exceeds 
     the fuel efficiency standards by more than 20 percent, sold 
     to the registry established under section 201 of the Climate 
     Stewardship Act of 2003.''.
       (b) Conversion Ratio.--The Secretary of Transportation, in 
     consultation with the Administrator, shall determine the 
     conversion factor to be used for purposes of credits 
     purchased from, or sold to, the registry established under 
     section 201 of this Act and fuel economy standard credits 
     under section 32903 of title 49, United States Code.
       (c) Reduction of Transportation Sector Allocation.--If any 
     manufacturer sells credits under section 32903(a)(2) of title 
     49, United States Code, to the registry established under 
     section 201 of this Act in any calendar year, the amount of 
     tradeable allowances allocated to the transportation sector 
     under section 311(b) for the next calendar year, and the 
     total allocation of tradeable allowance available for 
     allocation in the next calendar years, shall be reduced by an 
     amount equivalent to the sum of the credits, measured in 
     units of carbon dioxide equivalents, sold to the registry by 
     such manufacturers during the preceding calendar year.

     SEC. 314. BORROWING AGAINST FUTURE REDUCTIONS.

       (a) In General.--The Administrator shall establish a 
     program under which a covered entity may--
       (1) receive a credit in the current calendar year for 
     anticipated reductions in emissions in a future calendar 
     year; and
       (2) use the credit in lieu of a tradeable allowance to meet 
     the requirements of this Act for the current calendar year, 
     subject to the limitation imposed by section 312(b).
       (b) Determination of Tradeable Allowance Credits.--The 
     Administrator may make credits available under subsection (a) 
     only for anticipated reductions in emissions that--
       (1) are attributable to the realization of capital 
     investments in equipment, the construction, reconstruction, 
     or acquisition of facilities, or the deployment of new 
     technologies--
       (A) for which the covered entity has executed a binding 
     contract and secured, or applied for, all necessary permits 
     and operating or implementation authority;
       (B) that will not become operational within the current 
     calendar year; and
       (C) that will become operational and begin to reduce 
     emissions from the covered source within 5 years after the 
     year in which the credit is used; and
       (2) will be realized within 5 years after the year in which 
     the credit is used.
       (c) Carrying Cost.--If a covered entity uses a credit under 
     this section to meet the requirements of this Act for a 
     calendar year (referred to as the use year), the tradeable 
     allowance requirement for the year from which the credit was 
     taken (referred to as the source year) shall be increased by 
     an amount equal to--
       (1) 10 percent for each credit borrowed from the source 
     year; multiplied by
       (2) the number of years beginning after the use year and 
     before the source year.
       (d) Maximum Borrowing Period.--A credit from a year 
     beginning more than 5 years after the current year may not be 
     used to meet the requirements of this Act for the current 
     year.
       (e) Failure to Achieve Reductions Generating Credit.--If a 
     covered entity that uses a credit under this section fails to 
     achieve the anticipated reduction for which the credit was 
     granted for the year from which the credit was taken, then--
       (1) the covered entity's requirements under this Act for 
     that year shall be increased by the amount of the credit, 
     plus the amount determined under subsection (c);
       (2) any tradeable allowances submitted by the covered 
     entity for that year shall be counted first against the 
     increase in those requirements; and
       (3) the covered entity may not use credits under this 
     section to meet the increased requirements.

     SEC. 315. OTHER USES OF TRADEABLE ALLOWANCES.

       (a) In General.--Tradeable allowances may be sold, 
     exchanged, purchased, retired, or used as provided in this 
     section.
       (b) Intersector Trading.--Covered entities may purchase or 
     otherwise acquire tradeable allowances from other covered 
     sectors to satisfy the requirements of section 311.
       (c) Climate Change Credit Organization.--The Climate Change 
     Credit Corporation established under section 351 may sell 
     tradeable allowances allocated to it under section 332(a)(2) 
     to any covered entity or to any investor, broker, or dealer 
     in such tradeable allowances. The Climate Change Credit 
     Corporation shall use all proceeds from such sales in 
     accordance with the provisions of section 352.
       (d) Banking of Tradeable Allowances.--Not withstanding the 
     requirements of section 311, a covered entity that has more 
     than a sufficient amount of tradeable allowances to satisfy 
     the requirements of section 311, may refrain from submitting 
     a tradeable allowance to satisfy the requirements in order to 
     sell, exchange, or use the tradeable allowance in the future.

     SEC. 316. EXEMPTION OF SOURCE CATEGORIES.

       (a) In General.--The Administrator may grant an exemption 
     from the requirements of this Act to a source category if the 
     Administrator determines, after public notice and comment, 
     that it is not feasible to measure or estimate emissions from 
     that source category.
       (b) Reduction of Limitations.--If the Administrator exempts 
     a source category under subsection (a), the Administrator 
     shall also reduce the total tradeable allowances under 
     section 321(a) as follows:
       (1) 2010 limitation.--For the tradeable allowances under 
     section 311(a)(1), the Administrator shall reduce the total 
     by the amount of greenhouse gas emissions that the exempted 
     source category emitted in calendar year 2000, as identified 
     in the 2000 Inventory.
       (2) 2016 limitation.--For the tradeable allowances under 
     subsection 311(a)(2), the Administrator shall reduce the 
     total by the amount of green-house gas emissions that the 
     exempted source category emitted in calendar year 1990, as 
     identified in the 1990 Inventory.
       (c) Limitation on Exemption.--The Administrator may not 
     grant an exemption under subsection (a) to carbon dioxide 
     produced from fossil fuel.

    Subtitle B--Establishment and Allocation of Tradeable Allowances

     SEC. 331. ESTABLISHMENT OF TRADEABLE ALLOWANCES.

       (a) In General.--The Administrator shall promulgate 
     regulations to establish tradeable allowances, denominated in 
     units of carbon dioxide equivalence--
       (1) for calendar years beginning after 2009 and before 
     2016, equal to--
       (A) 5896 million metric tons, measured in units of carbon 
     dioxide equivalence, reduced by
       (B) the amount of emissions of greenhouse gases in calendar 
     year 2000 from non-covered entities; and
       (2) for calendar years beginning after 2015, equal to--

[[Page S172]]

       (A) 5123 million metric tons, measured in units of carbon 
     dioxide equivalence, reduced by
       (B) the amount of emissions of greenhouse gases in calendar 
     year 1990 from non-covered entities.
       (b) Serial Numbers.--The Administrator shall assign a 
     unique serial number to each tradeable allowance established 
     under subsection (a), and shall take such action as may be 
     necessary to prevent counterfeiting of tradeable allowances.
       (c) Nature of Tradeable Allowances.--A tradeable allowance 
     is not a property right, and nothing in this title or any 
     other provision of law limits the authority of the United 
     States to terminate or limit a tradeable allowance.
       (d) Non-covered Entity.--In this section:
       (1) In general.--The term ``non-covered entity'' means an 
     entity that--
       (A) owns or controls a source of greenhouse gas emissions 
     in the electric power, industrial, or commercial sectors of 
     the United States economy (as defined in the Inventory), 
     refines or imports petroleum products for use in 
     transportation, or produces or imports hydrofluorocarbons, 
     perfluorocarbons, and sulfur hexafluoride; and
       (B) is not a covered entity, determined by applying the 
     definition in section 3(4) for the year 2000 (for the purpose 
     of subsection (a)(1)(B)) or the year 1990 (for the purpose of 
     subsection (a)(2)(B)).
       (2) Exception.--Notwithstanding paragraph (1), an entity 
     that is a covered entity for any calendar year beginning 
     after 2009 shall not be considered to be a non-covered entity 
     for the purpose of either subsection (a)(1)(B) or subsection 
     (a)(2)(B) only because it emitted, or its products would 
     have emitted, 10,000 metric tons or less of greenhouse 
     gas, measured in units of carbon dioxide equivalence, in 
     the year 2000 or 1990, respectively.

     SEC. 332. DETERMINATION OF TRADEABLE ALLOWANCE ALLOCATIONS.

       (a) In General.--The Secretary shall determine--
       (1) the amount of tradeable allowances to be allocated to 
     each covered sector of that sector's Phase I and Phase II 
     allotments; and
       (2) the amount of tradeable allowances to be allocated to 
     the Climate Change Credit Corporation established under 
     section 351.
       (b) Allocaiton Factors.--In making the determination 
     required by subsection (a), the Secretary shall consider--
       (1) the distributive effect of the allocations on household 
     income and net worth of individuals
       (2) the impact of the allocations on corporate income, 
     taxes, and asset value;
       (3) the impact of the allocations on income levels of 
     consumers and on their energy consumption;
       (4) the effects of the allocations in terms of economic 
     efficiency;
       (5) the ability of covered entities to pass through 
     compliance costs to their customers; and
       (6) the degree to which the amount of allocations to the 
     covered sectors should decrease over time.
       (c) Allocation Recommendations and Implementations.--Before 
     allocating or providing tradeable allowances under 
     subsection(a) and within 24 hours after the date of enactment 
     of this Act, the Secretary shall submit the determinations 
     under subsection (a) to the Senate Committee on Commerce, 
     Science, and Transportation, the Senate Committee on 
     Environment and Public Works, the House of Representatives 
     Committee on Science, and the House of Representatives 
     Committee on Energy and Commerce. The Secretary's 
     determinations under paragraph (1), including the allocations 
     and provision of tradeable allowances pursuant to that 
     determination, are deemed to be a major rule (as defined in 
     section 804(2) of title 5, United States Code), and subject 
     to the provisions of chapter 8 of that title.

     SEC. 333. ALLOCATION OF TRADEABLE ALLOWANCES.

       (a) In General.--Beginning with calendar year 2010 and 
     after taking into account any initial allocations under 
     section 334, the Administrator shall--
       (1) allocate to each covered sector that sector's Phase I 
     and Phase II allotments determined by the Administrator under 
     section 332 (adjusted for any such initial allocations and 
     the allocation to the Climate Change Credit Corporation 
     established under section 351); and
       (2) allocate to the Climate Change Credit Corporation 
     established under section 351 the tradeable allowances 
     allocable to that Corporation.
       (b) Intrasectorial Allotments.--The Administrator shall, by 
     regulation, establish a process for the allocation of 
     tradeable allowances under this section, without cost to 
     facilities within each sector, that will--
       (1) encourage investments that increase the efficiency of 
     the processes that produce greenhouse gas emissions;
       (2) minimize the costs to the government of allocating the 
     tradeable allowances;
       (3) not penalize a covered entity for registered emissions 
     reductions made before 2010; and
       (4) provide sufficient allocation for new entrants into the 
     sector.
       (c) Point Source Allocation.--The Administrator shall 
     allocate the tradeable allowances for the electricity 
     generation, industrial, and commercial sectors to the 
     entities owning or controlling the point sources of 
     greeenhouse gas emissions within that sector.
       (d) Hydrofluorocarbons, Perfluoro- carbons, and Sulfur 
     Hexafluoride.--The Administrator shall allocate the tradeable 
     allowances for producers or importers of hydrofluorocarbons, 
     perfluorocarbons, or sulfur hexafluoride one tradeable 
     allowance for every metric ton of hydrofluorocarbons, 
     perfluorocarbons, or sulfur hexafluoride produced or 
     imported, measured in units of carbon dioxide equivalence.
       (e) Special Rule for Allocation Within the Transportation 
     Sector.--The Administrator shall allocate the tradeable 
     allowances for the transportation sector to petroleum 
     refiners or importers that produce or import petroleum 
     products that will be used as fuel for transportation.

     SEC. 334. INITIAL ALLOCATIONS FOR EARLY PARTICIPATION AND 
                   ACCELERATED PARTICIPATION.

       Before making allocations under section 333, the 
     Administrator shall allocate--
       (1) to any covered entity an amount of tradeable allowances 
     equivalent to the amount of greenhouse gas emissions 
     reductions registered by that covered entity in the national 
     greenhouse gas database if--
       (A) the covered entity has requested to use the registered 
     reduction in the year of allocation;
       (B) the reduction was registered prior to 2010; and
       (C) the Administrator retires the unique serial number 
     assigned to the reduction under section 201(c)(3); and
       (2) to any covered entity that has entered into an 
     accelerated participation agreement under section 335, such 
     tradeable allowances as the Administrator has determined to 
     be appropriate under that section.

     SEC. 335. BONUS FOR ACCELERATED PARTICIPATION.

       (A) In General.--If a covered entity executes an agreement 
     with the Administrator under which it agrees to reduce its 
     level of greenhouse gas emissions to a level no greater than 
     the level of its greenhouse gas emissions for calendar year 
     1990 by the year 2010, then, for the 6-year period beginning 
     with calendar year 2010, the Administrator shall--
       (1) provide additional tradeable allowances to that entity 
     when allocating allowances under section 334 in order to 
     recognize the additional emissions reductions that will be 
     required of the covered entity;
       (2) allow that entry to satisfy 20 percent of its 
     requirements under section 311 by--
       (A) submitting tradeable allowances from another nation's 
     market in greenhouse gas emission under the conditions 
     described in section 312(b)(1);
       (B) submitting a registered net increase in sequestration, 
     as registered in the National Greenhouse Gas Database 
     established under section 201, and as adjusted by the 
     appropriate sequestration discount rate established under 
     section 372; or
       (C) submitting a greenhouse gas emission reduction (other 
     than a registered net increase in sequestration) that was 
     registered in the National Greenhouse Gas Database by a 
     person that is not a covered entity.
       (b) Termination.--An entity that executes an agreement 
     described in subsection (a) may terminate the agreement at 
     any time.
       (c) Failure to Meet Commitment.--If an entity that executes 
     an agreement described in subsection (a) fails to achieve the 
     level of emissions to which it committed by calendar year 
     2010--
       (1) its requirements under section 311 shall be increased 
     by the amount of any tradeable allowances provided to it 
     under subsection (a)(1); and
       (2) any tradeable allowances submitted thereafter shall be 
     counted first against the increase in those requirements.

     SEC. 336. ENSURING TARGET ADEQUACY.

       (a) In General.--Beginning 2 years after the date of 
     enactment of this Act, the Under Secretary of Commerce for 
     Oceans and Atmosphere shall review the allowances established 
     by subsection (a) no less frequently than biennially--
       (1) to re-evaluate the levels established by that 
     subsection, after taking into account the best available 
     science and the most currently available data, and
       (2) to re-evaluate the environmental and public health 
     impacts of specific concentration levels of greenhouse gases,

     to determine whether the allowances established by subsection 
     (a) continue to be consistent with the objective of the 
     United Nations' Framework Convention on Climate Change of 
     stabilizing levels of greenhouse gas emissions at a level 
     that will prevent dangerous anthropogenic interference with 
     the climate system.
       (b) Review of 2010 and 2016 Levels.--The Under Secretary 
     shall specifically review in 2008 the level established under 
     section 311(a)(1) and, in 2012, the level established under 
     section 311(a)(2), and transmit a report on his reviews, 
     together with any recommendations, including legislative 
     recommendations, for modification of the levels, to the 
     Senate Committee on Commerce, Science, and Transportation, 
     the Senate Committee on Environment and Public Works, the 
     House of Representatives Committee on Science, and the House 
     of Representatives Committee on Energy and Commerce.

             Subtitle C--Climate Change Credit Corporation

     SEC. 351. ESTABLISHMENT.

       (a) In General.--The Climate Change Credit Corporation is 
     established as a nonprofit corporation without stock. The 
     Corporation shall not be considered to be an

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     agency or establishment of the United States Government.
       (b) Applicable Laws.--The Corporation shall be subject to 
     the provisions of this title and, to the extent consistent 
     with this title, to the District of Columbia Business 
     Corporation Act.
       (c) Board of Directors.--The Corporation shall have a board 
     of directors of 5 individuals who are citizens of the United 
     States, of whom 1 shall be elected annually by the board to 
     serve as chairman. No more than 3 members of the board 
     serving at any time may be affiliated with the same 
     political party. The members of the board shall be 
     appointed by the President of the United States, by and 
     with the advice and consent of the Senate and shall serve 
     for terms of 5 years.

     SEC. 352. PURPOSES AND FUNCTIONS.

       (a) Trading.--The Corporation--
       (1) shall receive and manage tradeable allowances allocated 
     to it under section 333(a)(2); and
       (2) shall buy and sell tradeable allowances, whether 
     allocated to it under that section or obtained by purchase, 
     trade, or donation from other entities; but
       (3) may not retire tradeable allowances unused.
       (b) Use of Tradeable Allowances and Proceeds.--
       (1) In general.--The Corporation shall use the tradeable 
     allowances, and proceeds derived from its trading activities 
     in tradeable allowances, to reduce costs borne by consumers 
     as a result of the greenhouse gas reduction requirements of 
     this Act. The reductions--
       (A) may be obtained by buy-down, subsidy, negotiation of 
     discounts, consumer rebates, or otherwise;
       (B) shall be, as nearly as possible, equitably distributed 
     across all regions of the United States; and
       (C) may include arrangements for preferential treatment to 
     consumers who can least afford any such increased costs.
       (2) Transition assistance to dislocated workers and 
     communities.--The Corporation shall allocate a percentage of 
     the proceeds derived from its trading activities in tradeable 
     allowances to provide transition assistance to dislocated 
     workers and communities. Transition assistance may take the 
     form of--
       (A) grants to employers, employer associations, and 
     representatives of employees--
       (i) to provide training, adjustment assistance, and 
     employment services to dislocated workers; and
       (ii) to make income-maintenance and needs-related payments 
     to dislocated workers; and
       (B) grants to State and local governments to assist 
     communities in attracting new employers or providing 
     essential local government services.
       (3) Phase-out of transition assistance.--The percentage 
     allocated by the Corporation under paragraph (2)--
       (A) shall be 20 percent for 2010;
       (B) shall be reduced by 2 percentage points each year 
     thereafter; and
       (C) may not be reduced below zero.
       (c) Annual Report.--The Corporation shall issue an annual 
     report setting forth the results of its operations for the 
     year.

            Subtitle D--Sequestration Accounting; Penalties

     SEC. 371. SEQUESTRATION ACCOUNTING.

       (a) Sequestration Accounting.--If a covered entity uses a 
     registered net increase in sequestration to satisfy the 
     requirements of section 311 for any year, that covered entity 
     shall submit information to the Administrator every 5 years 
     thereafter sufficient to allow the Administrator to 
     determine, using the methods and standards created under 
     section 204, whether that net increase in sequestration still 
     exists. Unless the Administrator determines that the net 
     increase in sequestration continues to exist, the covered 
     entity shall offset any loss of sequestration by submitting 
     additional tradeable allowances of equivalent amount in the 
     calendar year following that determination.
       (b) Regulations Required.--The Secretary, acting through 
     the Under Secretary of Commerce for Science and Technology, 
     in coordination with the Secretary of Agriculture, the 
     Secretary of Energy, and the Administrator, shall issue 
     regulations establishing the sequestration accounting rules 
     for all classes of sequestration projects.
       (c) Criteria for Regulations.--In issuing regulations under 
     this section, the Secretary shall use the following criteria:
       (1) If the range of possible amounts of net increase in 
     sequestration for a particular class of sequestration project 
     is not more than 10 percent of the median of that range, the 
     amount of sequestration awarded shall be equal to the median 
     value of that range.
       (2) If the range of possible amounts of net increase in 
     sequestration for a particular class of sequestration project 
     is more than 10 percent of the median of that range, the 
     amount of sequestration awarded shall be equal to the fifth 
     percentile of that range.
       (3) The regulations shall include procedures for accounting 
     for potential leakage from sequestration projects and for 
     ensuring that any registered increase in sequestration is in 
     addition that which would have occurred if this Act had not 
     been enacted.
       (d) Updates.--The Secretary shall update the sequestration 
     accounting rules for every class of sequestration project at 
     least once every 5 years.

     SEC. 372. PENALTIES.

       Any covered entity that fails to meet the requirements of 
     section 311 for a year shall be liable for a civil penalty, 
     payable to the Administrator, equal to thrice the market 
     value (determined as of the last day of the year at issue) of 
     the tradeable allowances that would be necessary for that 
     covered entity to meet those requirements on the date of the 
     emission that resulted in the violation.
  Mr. McCAIN. Mr. President, the National Academy of Science has said, 
``Greenhouse gases are accumulating in the Earth's atmosphere as a 
result of human activities, causing surface air temperatures and 
subsurface ocean temperatures to rise. Temperatures are, in fact, 
rising. The changes observed over the last several decades are likely 
mostly due to human activities, but we cannot rule out that some 
significant part of these changes is also a reflection of natural 
variability.''
  Over the past five years, the Commerce Committee has held eight 
hearings on climate change. Two the last five years, 1998 and 2002, 
have been the warmest, in terms of average global temperatures, ever 
recorded. According to a recent report from the National Oceanic and 
Atmospheric Administration NOAA, nine of the warmest years have 
occurred since 1990. As reported in the New York Times on December 31, 
2002, many experts think it is more likely than not 2003 will either 
match or exceed the 1998 average temperature record of 58 degrees 
Fahrenheit.
  Researchers at the University of Texas, Wesleyan University, and 
Stanford University recently reported in the journal Nature that global 
warming is forcing species around the world, from California starfish 
to Alpine herbs, to move into new ranges or alter habits that could 
disrupt ecosystems. The report states there is ``very high 
confidence,'' defined as having more than 95 percent of observed 
changes which were principally caused by climate change, that climate 
change is already affecting living systems. The end result off these 
changes could be substantial ecological disruption, local losses in 
wildlife, and extinction of certain species.
  This and many other reports over the years have highlighted time and 
again the consequences of a warming climate system. We have seen the 
destruction of over 70 percent of the heat-sensitive corals reefs, the 
melting of glaciers at unprecedented levels, the increase of wildfires, 
and the spreading of diseases. A large German insurance company has 
estimated that global warming could cost $300 billion annually by 2050 
in weather damage, pollution, industrial and agricultural losses, and 
other expenses.
  Our international partners, the States, and private industry are 
reacting to this challenge. For example, California has enacted 
legislation that will regulate tailpipe emissions of greenhouse gases. 
The European Union just recently approved an emissions trading system. 
The World Bank has estimated that greenhouse gas trading will be a $10 
billion market by 2005. Financial ratification of the Kyoto Protocol 
rests with Russia.
  Industry is also paying attention to what's happening. Laws firms and 
insurance companies are setting up business units to deal with climate-
related risks.
  Thus far, however, little has actually been accomplished to reduce 
greenhouse gas emissions. The United States must do something, but it 
must also do the right thing. Many have focused on what we do not know 
or the uncertainties are climate change. I prefer a more sound and 
scientific approach of starting with what is known or given and then 
proceeding to solve the problem at hand.
  While we cannot say with 100 percent confidence what will happen in 
the future, we do know the mission of greenhouse gases is not healthy 
for the environment. As many of the top scientists through the world 
have stated, the sooner we start to reduce these emissions, the better 
off we will be in the future.
  In 2001, Senator Lieberman and I announced our intention to develop 
legislation to require mandatory reductions in greenhouse gases 
emissions and provide for the trading of emission allowances. We have 
been working with industry and the environmental community to develop 
legislation to move the country in the right direction and demonstrate 
leadership on this important issue. It will be the first comprehensive

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piece of legislation in this area. Not only will it not place the 
burden on any one sector, it would allow for the partnering across 
sectors through the trading system to most effectively meet the 
required reductions.
  The bill we are introducing will propose a ``cap and trade'' approach 
to reducing greenhouse gases emissions. It would require the 
promulgation of regulations to limit greenhouse gases emissions from 
the electricity generation, transportation, industrial and commercial 
economic sectors. The affected sectors request approximately 85 percent 
of the overall U.S. emissions for the year 2000. The bill also would 
provide for the trading of emissions allowances and reductions through 
the government provided greenhouse gas database, which would contain an 
inventory of emissions and a registry of reduction.
  I thank Senator Lieberman for his commitment and leadership in 
bringing this piece of legislative initiative. We hope that our 
colleagues in the Senate and the Administration will work with us to 
improve upon and ultimately adopt this much needed legislation.
  The U.S. is responsible for 25 percent of the worldwide greenhouse 
gases emissions. It is time for the U.S. government to do its part to 
address this global problem, and legislation on mandatory reductions is 
the form of leadership that is required to address this global problem.

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