Order Code RL33846
Climate Change: Greenhouse Gas Reduction Bills
in the 110th Congress
Updated April 24, 2007
Larry Parker and Brent D. Yacobucci
Specialists in Energy Policy
Resources, Science, and Industry Division

---

Climate Change: Greenhouse Gas Reduction Bills
in the 110th Congress
Summary
A number of congressional proposals to advance programs that reduce
greenhouse gases have been introduced in the 110th Congress. Proposals receiving
particular attention would create market-based greenhouse gas reduction programs
along the lines of the trading provisions of the current acid rain reduction program
established by the 1990 Clean Air Act Amendments. This paper presents a side-by-
side comparison of the major provisions of those bills and includes a glossary of
common terms.

---

Contents
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Proposed Legislation in 110th Congress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Appendix A. Comparison of Key Provisions of Greenhouse Gas Reduction
Bills . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Appendix B. Common Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

---

Climate Change: Greenhouse Gas
Reduction Bills in the 110th Congress
Introduction
Climate change is generally viewed as a global issue, but proposed responses
generally require action at the national level. In 1992, the United States ratified the
United Nations Framework Convention on Climate Change (UNFCCC), which called
on industrialized countries to take the lead in reducing the six primary greenhouse
gases to 1990 levels by the year 2000.1 For more than a decade, a variety of
voluntary and regulatory actions have been proposed or undertaken in the United
States, including monitoring of power plant carbon dioxide emissions, improved
appliance efficiency, and incentives for developing renewable energy sources.
However, carbon dioxide emissions have continued to increase.
In 2001, President George W. Bush rejected the Kyoto Protocol, which called
for legally binding commitments by developed countries to reduce their greenhouse
gas emissions.2 He also rejected the concept of mandatory emissions reductions.
Since then, the Administration has focused U.S. climate change policy on voluntary
initiatives to reduce the growth in greenhouse gas emissions. In contrast, in 2005, the
Senate passed a Sense of the Senate resolution on climate change declaring that a
mandatory, market-based program to slow, stop, and reverse the growth of
greenhouse gases should be enacted at a rate and in a manner that “will not
significantly harm the United States economy” and “will encourage comparable
action” by other nations.3
A number of congressional proposals to advance programs designed to reduce
greenhouse gases have been introduced in the 110th Congress. These have generally
followed one of three tracks. The first is to improve the monitoring of greenhouse
gas emissions to provide a basis for research and development and for any potential
future reduction scheme. The second is to enact a market-oriented greenhouse gas
reduction program along the lines of the trading provisions of the current acid rain
reduction program established by the 1990 Clean Air Act Amendments. The third
1 Under the United Nations Framework Convention on Climate Change (UNFCCC), those
gases are carbon dioxide (CO ), methane (CH ), nitrous oxide (N O), hydrofluorocarbons
2
4
2
(HFCs), perfluorocarbons (PFCs), and sulfur hexafluoride (SF ). Some greenhouse gases
6
are controlled under the Montreal Protocol on Substances that Deplete the Ozone Layer, and
are not covered under UNFCCC.
2 For further information, see CRS Report RL30692, Global Climate Change: The Kyoto
Protocol, by Susan R. Fletcher.
3 S.Amdt. 866, passed by voice vote after a motion to table failed 43-54, June 22, 2005.

---

CRS-2
is to enact energy and related programs that would have the added effect of reducing
greenhouse gases; an example would be a requirement that electricity producers
generate a portion of their electricity from renewable resources (a renewable portfolio
standard). This report focuses on the second category of bills.
Proposed Legislation in 110th Congress
In the 110th Congress, six bills have been introduced that would impose controls
on emissions of greenhouse gases. A comparison of major provisions is provided in
Appendix 1.
S. 280, introduced January 12, 2007, by Senator Lieberman, would cap
emissions of the six greenhouse gases specified in the United Nations Framework
Convention on Climate Change, at reduced levels, from the electric generation,
transportation, industrial, and commercial sectors — sectors that account for about
85% of U.S. greenhouse gas emissions. The reductions would be implemented in
four phases, with an emissions cap in 2012 based on the affected facilities’ 2004
emissions (for an entity that has a single unit that emits more than 10,000 metric tons
of carbon dioxide equivalent); the cap steadily declines until it is equal to one-third
of the facilities’ 2004 levels. The program would be implemented through an
expansive allowance trading program to maximize opportunities for cost-effective
reductions, and credits obtained from increases in carbon sequestration, reductions
from non-covered sources, and acquisition of allowances from foreign sources could
be used to comply with 30% of reduction requirements. The bill also contains an
extensive new infrastructure to encourage innovation and new technologies.
S. 309, introduced January 16, 2007, by Senator Sanders, would cap greenhouse
gas emissions on an economy-wide basis beginning in 2010. Beginning in 2020, the
country’s emissions would be capped at their 1990 levels, and then proceed to
decline steadily until they were reduced to 20% of their 1990 levels in the year 2050.
The EPA has the discretion to employ a market-based allowance trading program or
any combination of cost-effective emission reduction strategies. The bill also
includes new mandatory greenhouse gas emission standards for vehicles and new
powerplants, along with a new energy efficiency performance standard. The bill
would establish a renewable portfolio standard (RPS) and a new low-carbon
generation requirement and trading program.
S. 317, introduced January 17, 2007, by Senator Feinstein, would cap
greenhouse gas emissions from electric generators over 25 megawatts. Beginning in
2011, affected generators would be capped at their 2006 levels, declining to 2001
levels by 2015. After that, the emission cap would decline 1% annually until 2020,
when the rate of decline would increase to 1.5%. The allowance trading program
includes an allocation scheme that provides for an increasing percentage of all
allowances to be auctioned, with 100% auctioning in 2036 and thereafter. The cap-
and-trade program allows some of an entity’s reduction requirement to be meet with
credits obtained from foreign sources and a variety of other activities specified in the
bill.

---

CRS-3
S. 485, introduced February 1, 2007, by Senator Kerry, would cap greenhouse
gas emissions on an economy-wide basis beginning in 2010. Beginning in 2020, the
country’s emissions would be capped at their 1990 levels. After 2020, emissions
economy-wide would be reduced 2.5% annually from their previous year’s level until
2031, when that percentage would increase to 3.5% through 2050. The allowance
trading system includes an allocation scheme that requires an unspecified percentage
of allowances to be auctioned. The bill also includes new mandatory greenhouse gas
emission standards for vehicles, along with a new energy efficiency performance
standard. The bill would establish a renewable portfolio standard (RPS), increase
biofuel mandates under the Renewable Fuels Standard, and mandate new
infrastructure for biofuels. Finally, the bill expands and extends existing tax
incentives for alternative fuels and advanced technology vehicles, and establishes a
manufacturer tax credit for advanced technology vehicle investment.
H.R. 620, introduced February 7, 2007, by Representative Olver, is a
substantially modified version of S. 280. Using the same basic structure as S. 280,
the emission caps under H.R. 620 are more stringent. Reductions from affected
sectors (electric generation, transportation, industrial, and commercial) would be set
at 2004 levels in 2012 and then steadily decline until the cap is equal to about one-
fourth of facilities’ 2004 levels. Although H.R. 620 permits affected entities to
comply with the reduction requirements with credits from foreign sources,
sequestration, and reductions from non-covered entities, these sources are limited to
15% of the source’s reduction requirement.
H.R. 1590, introduced March 20, 2007, by Representative Waxman, is similar
to S. 485. H.R. 1590 would cap greenhouse gas emissions on an economy-wide basis
beginning in 2010. Beginning in 2020, the country’s emissions would be capped at
their 1990 levels. After 2020, emissions economy-wide would be reduced by roughly
5% annually from their previous year’s level through 2050, when emissions levels
would be capped at 80% below 1990 levels. The allowance trading system includes
an allocation scheme that requires an unspecified percentage of allowances to be
auctioned. The bill also includes new mandatory greenhouse gas emission standards
for vehicles, along with a new energy efficiency performance standard. The bill
would also establish a renewable portfolio standard (RPS).

---

CRS-4
Appendix A. Comparison of Key Provisions of Greenhouse Gas Reduction Bills
Topic
S. 280 (Lieberman)
S. 309 (Sanders)
S. 317 (Feinstein)
S. 485 (Kerry)
H.R. 620 (Olver)
H.R. 1590 (Waxman)
Emission
Absolute cap on total
Absolute cap on total
Absolute cap on total
Absolute cap on total
Absolute cap on total
Absolute cap on total
reduction/
emissions from all
emissions economy-wide. emissions from covered
emissions economy-wide. emissions from all
emissions economy-wide.
limitation
covered entities in the
electric generators.
covered entities in the
scheme
electric power,
electric power,
transportation, industry,
transportation, industry,
and commercial sectors.
and commercial sectors.
Responsible
Environmental
EPA.
EPA.
EPA.
EPA.
EPA.
agency
Protection Agency
(EPA).
Greenhouse
Carbon dioxide,
Same six gases as S. 280. Same six gases as S. 280. Same six gases as S. 280. Same six gases as S. 280. Same six gases as
gases defined methane, nitrous oxide
S. 280.
(N O),
2
hydrofluorocarbons
(HFCs),
perfluorocarbons (PFCs),
and sulfur hexafluoride
(SF ).
6

---

CRS-5
Topic
S. 280 (Lieberman)
S. 309 (Sanders)
S. 317 (Feinstein)
S. 485 (Kerry)
H.R. 620 (Olver)
H.R. 1590 (Waxman)
Specific
Beginning in 2012,
Beginning in 2010,
Beginning in 2011,
Beginning in 2010,
Beginning in 2012,
Beginning in 2010,
emissions
emissions from covered
emissions economy-wide
emissions from affected
emissions economy-wide
emissions from covered
emissions economy-wide
limits
entities are capped at
to be reduced 2%
electric generators capped to be reduced by
entities are capped at 6.15 to be reduced by roughly
6.13 billion metric tons,
annually.
at 2006 levels.
appropriate measures to
billion metric tons, minus 2% annually to cap
minus 2012 emissions
cap emissions at 1990
2012 emissions from non- emissions at 1990 levels
from non-covered
Beginning in 2020,
Beginning in 2015,
levels by 2020.
covered entities.
by 2020.
entities.
emission cap on
emissions from affected
economy-wide basis set at electric generators capped Beginning in 2021,
Beginning in 2020,
Beginning in 2021,
Beginning in 2020,
1990 level, with declining at their 2001 levels,
emissions economy-wide
emission cap declines to
through 2050, emissions
emission cap declines to emission caps of 26.7%
declining 1% annually
to be reduced 2.5%
5.232 billion metric tons, economy-wide to be
5.239 billion metric tons, below 1990 levels in 2030 from previous year’s level annually from previous
minus 2020 emissions
reduced roughly 5%
minus 2020 emissions
and 53.3% in 2040.
from 2016 to 2020.
year’s level.
from non-covered
annually from previous
from non-covered
entities.
year’s level.
entities.
Beginning in 2050,
Beginning in 2020,
Beginning in 2031
emission cap set at 80%
emission cap declines
through 2050, emissions
Beginning in 2030,
Beginning in 2050,
Beginning in 2030,
below 1990 levels.
1.5% annually from
economy-wide to be
emission cap declines to
emission cap set at 80%
emission cap declines to
previous year’s level.
reduced 3.5% annually
3.858 billion metric tons, below 1990 levels.
4.1billion metric tons,
from previous year’s
minus 2030 emissions
minus 2030 emissions
level.
from non-covered
from non-covered
entities.
entities.
Beginning in 2050,
Beginning in 2050,
emission cap further
emission cap further
declines to 1.504 billion
declines to 2.096 billion
metric tons, minus annual
metric tons, minus
emissions from non-
annual emissions from
covered entities.
non-covered entities.

---

CRS-6
Topic
S. 280 (Lieberman)
S. 309 (Sanders)
S. 317 (Feinstein)
S. 485 (Kerry)
H.R. 620 (Olver)
H.R. 1590 (Waxman)
Covered
In metric tons of carbon
EPA promulgates rule
Any fossil fuel-fired
EPA promulgates rule
In metric tons of carbon
EPA promulgates rule
entities
dioxide equivalents: any within two years of
electric generating facility within two years of
dioxide equivalents: any
within two years of
electric power,
enactment that applies the that has a capacity of
enactment that applies the electric power, industrial, enactment that applies the
industrial, or commercial most cost-effective
greater than 25 megawatts most cost-effective
or commercial entity that
most cost-effective
entity that emits over
reduction options on
and generates electricity
reduction options on the
emits over 10,000 metric reduction options on the
10,000 metric tons
sources or sectors to
for sale, including
largest emitting sources or tons carbon dioxide
largest emitting sources or
carbon dioxide
achieve reduction goals.
cogeneration and
sectors to achieve
equivalent annually from
sectors to achieve
equivalent annually from
government-owned
reduction goals.
any single facility owned
reduction goals.
any single facility owned
facilities.
by the entity; any refiner
by the entity; any refiner
or importer of petroleum
or importer of petroleum
products for
products for
transportation use that,
transportation use that,
when combusted, will
when combusted, will
emit over 10,000 metric
emit over 10,000 metric
tons annually; and any
tons annually; and any
importer or producer of
importer or producer of
HFCs, PFCs, or SF that,
6
HFCs, PFCs, or SF that,
when used, will emit over
6
when used, will emit
10,000 metric tons of
over 10,000 metric tons
carbon dioxide
of carbon dioxide
equivalent.
equivalent.

---

CRS-7
Topic
S. 280 (Lieberman)
S. 309 (Sanders)
S. 317 (Feinstein)
S. 485 (Kerry)
H.R. 620 (Olver)
H.R. 1590 (Waxman)
General
A tradeable allowance
Tradeable allowance
Tradeable allowance
A tradeable allowance
A tradeable allowance
A tradeable allowance
allocating
system is established:
system permitted. In
system is established.
system is established.
system is established:
system is established.
and
EPA shall determine
implementing reduction
Allocations to existing
The President submits to
EPA shall determine
The President submits to
implementing allocations based on
program, EPA shall select sources based on historic
Congress an allocation
allocations based on
Congress an allocation
strategy
several economic,
the most cost-effective
electricity output, and
plan within one year of
several economic, equity, plan within one year of
equity, and sector-
emission reduction
includes allowance
enactment that includes a and sector-specific
enactment that includes a
specific criteria,
strategies.
allocations for
combination of auctions
criteria, including
combination of auctions
including economic
incremental nuclear
and free allocation of
economic efficiency,
and free allocation of
efficiency, competitive
EPA shall allocate to
capacity and renewable
allowances. To the
competitive effects, and
allowances. To the
effects, and impact on
various sectors and
energy, along with
maximum extent
impact on consumers.
maximum extent
consumers. Allowances interests any allowances
sequestration and early
practicable, the allocation Allowances are to be
practicable, the allocation
are to be allocated
that are not allocated to
action provisions.
and revenues received
allocated upstream to
and revenues received
upstream to refiners and
affected entities,
should maximize public
refiners and importers of
should maximize public
importers of
including households,
From 2011 on, an
benefits, promote
transportation fuel, along benefits, promote
transportation fuel, along dislocated workers,
increasing percentage of
economic growth, assist
with producers of HFCs,
economic growth, assist
with producers of HFCs, energy efficiency and
all allowances are to be
households and dislocated PFCs, and SF , and
households and dislocated
6
PFCs, and SF , and
renewable energy
auctioned, with 100% of
workers, encourage
downstream to electric
workers, encourage
6
downstream to electric
activities, sequestration
allowances auctioned in
energy efficiency and
generation, industrial, and energy efficiency and
generation, industrial,
activities, and ecosystem
2036 and thereafter.
renewable energy
commercial entities.
renewable energy
and commercial entities. protection activities.
activities, sequestration
activities, sequestration
activities, and assist states Allocations to covered
activities, and assist states
Allocations to covered
in addressing the impact
entities are provided at no in addressing the impact
entities are provided at
of climate change.
cost.
of climate change.
no cost.
Congress has one year to
Congress has one year to
enact an alternative to the
enact an alternative to the
plan; otherwise, EPA
plan; otherwise, EPA
shall implement it.
shall implement it.

---

CRS-8
Topic
S. 280 (Lieberman)
S. 309 (Sanders)
S. 317 (Feinstein)
S. 485 (Kerry)
H.R. 620 (Olver)
H.R. 1590 (Waxman)
Public
EPA shall determine the EPA may choose to
From 2011 on, an
The President shall
EPA shall determine the
The President shall
sale/auction
number of allowances
provide for trustees to sell increasing percentage of
determine the number of
number of allowances
determine the number of
of allowances allocated to the Climate
allowances for the benefit all allowances are to be
allowances to be
allocated to the Climate
allowances to be
Change Credit
of entities eligible to
auctioned, with 100% of
auctioned. The proceeds
Change Credit
auctioned. The proceeds
Corporation (CCCC)
receive assistance under
allowances auctioned in
of the auction to be
Corporation (CCCC)
of the auction to be
(established by the bill).
the proposal (see above).
2036 and thereafter.
deposited with the
(established by the bill).
deposited with the
Climate Reinvestment
Climate Reinvestment
EPA shall allocate to the
Revenues from the
Fund created by the
The CCCC may buy and
Fund created by the
CCCC allowances before
auction are to be
Department of the
sell allowances, and use
Department of the
2012 to auction to raise
deposited in the Climate
Treasury. (See “Revenue the proceeds to reduce
Treasury. (See “Revenue
revenue for technology
Action Trust Fund created recycling” below.)
costs borne by consumers recycling” below.)
deployment and
by the Department of the
and other purposes. (See
dissemination.
Treasury.
“Revenue recycling”
below.)
The CCCC may buy and
sell allowances, and use
the proceeds to reduce
costs borne by
consumers and other
purposes. (See
“Revenue recycling”
below.)

---

CRS-9
Topic
S. 280 (Lieberman)
S. 309 (Sanders)
S. 317 (Feinstein)
S. 485 (Kerry)
H.R. 620 (Olver)
H.R. 1590 (Waxman)
Cost-limiting No explicit provision.
No explicit provision.
No explicit provision.
No explicit provision.
No explicit provision.
No explicit provision.
safety valve
However, if the President However, limited
determines a national
borrowing against future
security emergency exists, reductions is permitted if
the President may
EPA determines
temporarily adjust,
allowance prices have
suspend, or waive any
reached and sustained a
regulation promulgated
level that is or will cause
under this program
significant harm to the
(subject to judicial
U.S. economy. Also, EPA
review).
may increase to 50% the
share of international
credits that can be used in
such cases.
Penalty for
Excess emission
Existing enforcement
$100 per excess ton
Excess emission penalties Excess emission penalties Excess emission penalties
non-
penalties are equal to
provisions of Section 113 indexed to inflation plus a are equal to twice the
are equal to three times
are equal to twice the
compliance
three times the market
of the Clean Air Act are
1.3 to 1 offset from future market price for
the market price for
market price for
price for allowances on
extended to program.
allowances. If the market allowances as of
allowances on the last day allowances as of
the last day of the year at
price for an allowance
December 31 of the year
of the year at issue.
December 31 of the year
issue.
exceeds $60, the penalty
at issue, plus a 1 to 1
at issue, plus a 1-to-1
is $200 per excess ton,
offset from next year’s
offset from next year’s
adjusted for inflation.
allowance allocation.
allowance allocation.

---

CRS-10
Topic
S. 280 (Lieberman)
S. 309 (Sanders)
S. 317 (Feinstein)
S. 485 (Kerry)
H.R. 620 (Olver)
H.R. 1590 (Waxman)
Other market Up to 30% of required
Market trading systems
Up to 25% (50% for new Market trading systems
Up to 15% of required
Market trading systems
trading
reductions may be
incorporated into
affected units) of required incorporated into
reductions may be
incorporated into new
system
achieved through credits Renewable Portfolio
reductions may be
Renewable Portfolio
achieved through credits
energy efficiency
features
obtained through pre-
Standard, neew energy
achieved with credits
Standard and new energy obtained through pre-
performance standard.
certified international
efficiency performance
obtained through EPA-
efficiency performance
certified international
emissions trading
standard, and new low-
approved foreign
standard.
emissions trading
No explicit provision on
programs, approved
carbon generation
government programs
programs, approved
use of domestic or
reduction projects in
requirement.
developed under United
No limit on use of
reduction projects in
international offsets to
developing countries,
Nations Framework
domestic biological
developing countries,
meet reduction
domestic carbon
No limit on use of
Convention on Climate
sequestration to meet
domestic carbon
requirements. However,
sequestration, and
domestic biological
Change (UNFCCC)
reductions requirements.
sequestration, and
one goal of program is to
reductions from non-
sequestration to meet
protocols.
reductions from non-
encourage sequestration
covered entities.
reductions requirements.
covered entities.
of carbon in the forest and
Limited borrowing
agricultural sectors.
Borrowing against future
against future reductions
Borrowing against future
reductions is permitted.
is permitted if EPA
reductions is permitted.
determines allowance
prices have reached and
sustained a level that is
causing or will cause
significant harm to the
U.S. economy. Also,
EPA may increase to 50%
the share of international
credits that can be used in
such cases.
Banking
Banking of allowances is No specific prohibition on Banking of allowances is
Banking of allowances is
Banking of allowances is
Banking of allowances is
permitted; allowances
banking.
permitted; allowances
permitted; allowances
permitted; allowances
permitted; allowances
may be saved for use in
may be saved for use in
may be saved for use in
may be saved for use in
may be saved for use in
future years.
future years.
future years.
future years.
future years.

---

CRS-11
Topic
S. 280 (Lieberman)
S. 309 (Sanders)
S. 317 (Feinstein)
S. 485 (Kerry)
H.R. 620 (Olver)
H.R. 1590 (Waxman)
Early
Entities with registered
Reductions previously
Entities with reductions
Recognizing and
Entities with registered
Recognizing and
reduction
emission reductions
achieved under state
achieved from 2000
rewarding early
emission reductions
rewarding early
credits and
achieved before 2012
programs that are at least
through 2010 shall
reductions is a stated goal achieved before 2012
reductions is a stated goal
bonus credits may receive allowances
as stringent as a federal
receive credits under
of the program.
may receive allowances
of the program.
for them, including
trading program may be
specific criteria, including
for them.
reductions achieved
recognized by the federal EPA rules that ensure
under more stringent
program.
reductions are real,
For the time period 2012-
mandatory state
additional, verifiable,
2017, entities that have
programs.
Entities that demonstrate
enforceable, and
entered into an agreement
reductions achieved early permanent, and that they
with EPA to reduce
For the time period
(but not before 1992) that were reported under
emissions to 1990 levels
2012-2017, entities that
are as verifiable as
either 1605(b) of the 1992
by 2012 are entitled to
have entered into an
reductions under a federal Energy Policy Act, or
additional allowances to
agreement with EPA to
trading program may be
according to a state or
cover their additional
reduce emissions to 1990 recognized by the federal regional registry.
reductions and are
levels by 2012 are
program.
Quantity of credits given
allowed to achieve 35%
entitled to additional
is limited to 10% of the
of their reduction
allowances to cover their
2011 allowance
requirement (as opposed
additional reductions and
allocation.
to 15%; see above)
are allowed to achieve
through international
40% of their reduction
emissions trading and
requirement (as opposed
projects, sequestration, or
to 30%; see above)
reductions by non-
through international
covered entities.
emissions trading and
projects, sequestration,
or reductions by non-
covered entities.

---

CRS-12
Topic
S. 280 (Lieberman)
S. 309 (Sanders)
S. 317 (Feinstein)
S. 485 (Kerry)
H.R. 620 (Olver)
H.R. 1590 (Waxman)
Revenue
Revenues generated by
Allowances may be
Revenues generated from Revenues generated by
Revenues generated by
Revenues generated by
recycling
allowance auctions and
allocated by EPA to
the auction are to be
allowance auctions and
allowance auctions and
allowance auctions and
trading proceeds are
households, dislocated
deposited in the Climate
penalties are received by
trading proceeds are
penalties are received by
received by a new
workers, energy
Action Trust Fund created a new Climate
received by a new
a new Climate
Climate Change Credit
efficiency and renewable
by the Department of the
Reinvestment Fund
Climate Change Credit
Reinvestment Fund
Corporation (CCCC).
energy activities,
Treasury. Activities to be created by the Department Corporation (CCCC).
created by the Department
Activities to be funded
sequestration activities,
funded include an
of the Treasury.
Activities to be funded
of the Treasury.
include mechanisms to
and ecosystem protection Innovative Low- and
Activities to be funded
include mechanisms to
Activities to be funded
reduce consumer costs
activities.
Zero-emitting Carbon
include mechanisms to
reduce consumer costs
include mechanisms to
and to assist dislocated
Technologies Program, a
reward early reductions,
and to assist dislocated
reward early reductions,
workers, low-income
Clean Coal Technologies maximize public benefits, workers and affected
maximize public benefits,
persons, and affected
Program, and an Energy
promote economic
communities, along with
promote economic
communities, along with
Efficiency Technology
growth, assist households programs to encourage
growth, assist households
programs to encourage
Program, along with
and dislocated workers,
deployment of new
and dislocated workers,
deployment of new
research and
encourage energy
technology and wildlife
encourage energy
technology and wildlife
development.
efficiency and renewable
restoration.
efficiency and renewable
restoration. Allocations
energy activities,
energy activities,
to the CCCC are to be
Adaption and mitigation
sequestration activities,
sequestration activities,
determined by EPA
activities to be funded
and assist states in
and assist states in
based on the funding
include affected workers
addressing the impact of
addressing the impact of
needs of the advanced
and communities, and fish climate change.
climate change.
technologies
and wildlife habitat.
demonstration and
deployment programs.
Further, at least 50% of
revenue received must be
used for technology
deployment.

---

CRS-13
Topic
S. 280 (Lieberman)
S. 309 (Sanders)
S. 317 (Feinstein)
S. 485 (Kerry)
H.R. 620 (Olver)
H.R. 1590 (Waxman)
Other key
Provisions include
Provisions include
Establishes program to
Provisions include
Provisions include studies Provisions include
provisions
studies of research on
mandatory greenhouse
encourage offsets from
mandatory greenhouse
of the impact of climate
mandatory greenhouse
abrupt climate change
gas emission standards for the agricultural sector.
gas emission standards for change on coastal
gas emission standards for
and impact of climate
vehicles by 2010, for new Offset credits available
vehicles by 2010, and a
ecosystems and
vehicles by 2010, and a
change on the world’s
electric powerplants that
for agricultural, forestry,
new energy efficiency
communities, and the
new energy efficiency
poor, among others, and
begin operation after
grazing, and wetlands
standard beginning in
world’s poor, among
standard beginning in
creation of a national
December 31, 2011, and a management,
2009. Establishes a
others; assessment of
2010. Establishes a
greenhouse gas database. new energy efficiency
sequestration projects, or
Renewable Portfolio
adaptation technologies;
Renewable Portfolio
performance standard.
practices that meet
Standard and credit
and creation of a national Standard.
A new Innovation
specific criteria in the
program.
greenhouse gas database.
Infrastructure is created, Establishes a Renewable
proposal.
Requires periodic review
along with program
Portfolio Standard and
Increases biofuel
Requires periodic review
of target adequacy by the
initiatives to promote
credit program.
Offset credits also
mandates under the
of target adequacy by the National Academy of
less carbon- intensive
available for approved
Renewable Fuels
Under Secretary of
Sciences.
technology, adaption,
Establishes a new low-
emission reduction offset
Standard, and mandates
Commerce for Oceans
sequestration, and related carbon generation
projects from a variety of infrastructure for biofuels. and Atmosphere.
activities.
requirement and trading
activities listed in the
program.
proposal.
Expands and extends
Requires periodic review
existing tax incentives for
of target adequacy by the Requires periodic review
Requires periodic review
alternative fuel and
Under Secretary of
of target adequacy by the of target adequacy by
advanced technology
Commerce for Oceans
National Academy of
EPA taking into account
vehicles, and establishes
and Atmosphere.
Sciences.
the recommendations of a manufacturer tax credit
newly established Climate for advanced technology
Science Advisory Panel.
vehicle investment.
Establishes new National
Climate Change
Vulnerability and
Resilience Program.
Requires periodic review
of target adequacy by the
National Academy of
Sciences.

---

CRS-14
Appendix B. Common Terms
Allocation schemes (upstream and downstream). Regulatory approaches to
allocating allowances (as opposed to auction schemes) can choose different points
and participants along the production process to assign allowances and the resulting
compliance responsibility. Upstream allocation schemes establish emission caps and
assign allowances at a production, importation, or distribution point of products that
will eventually produce greenhouse emissions further down the production process.
For example, in the natural gas sector, emission caps could be established and
allowances assigned at processing facilities where facilities and participants shrink
from about 400,000 wells and 8,000 companies to 500 plants and 200 companies.
In contrast, downstream allocation schemes establish emission caps and assign
allowances at the point in the process where the emissions are emitted. In the case
of the natural gas industry, to achieve the same coverage as the upstream scheme, this
would involve assigning allowances to natural gas-fired electric generators, industry,
and even residential users. Thus, some downstream proposals choose either to
exempt certain sectors (such as residential use) from a cap-and-trade program or to
employ a hybrid allocation scheme where some of the allowances are allocated
upstream and others downstream (such as the electric generators).
Allowance. An allowance is generally defined as a limited authorization by the
government to emit 1 ton of pollutant. In the case of greenhouse gases, an allowance
generally refers to a metric ton of carbon dioxide equivalent. Although used
generically, an allowance is technically different from a credit. A credit represents
a ton of pollutant that an entity has reduced in excess of its legal requirement.
However, the terms tend to be used interchangeably, along with others, such as
permits.
Auctions. Auctions can be used in market-based pollution control schemes in
several different ways. For example, Title IV of the 1990 Clean Air Act
Amendments uses an annual auction to ensure the liquidity of the credit trading
program. For this purpose, a small percentage of the credits permitted under the
program are auctioned annually, with the proceeds returned to the entities that would
have otherwise received them. Private parties are also allowed to participate. A
second possibility is to use an auction to raise revenues for a related (or unrelated)
program. For example, the Regional Greenhouse Gas Initiative (RGGI) is exploring
an auction to implement its public benefit program to assist consumers or pursue
strategic energy purposes. A third possibility is to use auctions as a means of
allocating some, or all, of the credits mandated under a GHG control program.
Obviously, the impact that an auction would have on cost would depend on how
extensively it was used in any GHG control program, and to what purpose the
revenues were expended.
Banking. Although allowances are generally allocated on an annual basis, most
cap-and-trade programs do not require participants to either use the allowance that
year or else lose it. Under many proposals, allowances can be banked by the
receiving participant (or traded to another participant who can use or bank it) to be
used or traded in a future year. Banking reduces the absolute cost of compliance by
making annual emission caps flexible over time. The limited ability to shift the

---

CRS-15
reduction requirement across time allows affected entities to better accommodate
corporate planning for capital turnover, allow for technological progress, control
equipment construction schedules, and respond to transient events such as weather
and economic shocks.
Bubble. A bubble is a regulatory device that permits two or more sources of
pollutants to be treated as one for the purposes of emission compliance.
Cap-and-trade program. A cap-and-trade program is based on two premises.
First, a set amount of pollutant emitted by human activities can be assimilated by the
ecological system without undue harm. Thus, the goal of the cap-and-trade program
is to impose a ceiling (i.e., an emissions cap) on the total emissions of that pollutant
at a level below the assimilative capacity. Second, a market in pollution licenses
(i.e., allowances) between polluters is the most cost-effective means of reducing
emissions to the level of the cap. This market in allowances is designed so that
owners of allowances can trade those allowances with other emitters who need them
or retain (bank) them for future use or sale. In the case of the sulfur dioxide program
contained in the 1990 Clean Air Act Amendments, most allowances were allocated
free by the federal government to utilities according to statutory formulas related to
a given facility’s historic fuel use and emissions; other allowances have been
reserved by the government for periodic auctions to ensure market liquidity.
Carbon tax. A carbon tax is generally conceived as a levy on natural gas,
petroleum, and coal according to their carbon content, in the approximate ratio of 0.6
to 0.8 to 1, respectively. However, proposals have been made to impose the tax
downstream of the production process when the carbon dioxide is actually released
to the atmosphere. In contrast to a cap-and-trade program, in which the quantity of
emissions is limited and the price is determined by an allowance marketplace, with
a carbon tax, the price is limited and the quantity of emissions is determined by the
participants based on the cost of control versus the cost of the tax.
Coverage. Coverage is the breadth of economic sectors covered by a particular
greenhouse gas reduction program.
Emissions cap. A mandated limit on how much pollutant (or greenhouse gases)
an affected entity can release to the atmosphere. Caps can be either an absolute cap,
where the amount is specified in terms of tons of emissions on an annual basis, or a
rate-based cap, where the amount of emissions produced per unit of output (such as
electricity) is specified but not the absolute amount released. Caps may be imposed
on an entity, sector, or economy-wide basis.
Generation performance standard (GPS). Also called an output-based
allocation, allowances are allocated gratis to entities in proportion to their relative
share of total electricity generation in a recent year.
Grandfathering. Grandfathering generally refers an allocation scheme in
which allowances are distributed to affected entities on the basis of historic
emissions. These allowances are generally distributed free-of-charge by the
government to the affected entities. Grandfathering can also refer to entities that

---

CRS-16
because of age or because they have met an earlier standard, or other factors, are
exempted from a new regulatory requirement.
Greenhouse gases. The six gases recognized under the United Nations
Framework Convention on Climate Change are carbon dioxide (CO ), methane
2
(CH ) nitrous oxide (N O), sulfur hexafluoride (SF ), hydrofluorocarbons (HFC), and
4
2
6
perfluorocarbons (PFC).
Hybrid Program. Generally a greenhouse gas reduction program that allows
emitters to choose between complying with the reduction requirement of a cap-and-
trade program or paying a set price (safety valve price) to the government in lieu of
making reductions.
Leakage. Decreases in greenhouse gas-related reductions or benefits outside
the boundaries set for defining a project’s or program’s net greenhouse gas impact
resulting from mitigation activities. For example, emissions could be reduced in an
area with greenhouse gas controls by moving an emitting industry to an area without
such controls.
“No regrets” policy. A “no regrets” policy is one of establishing programs for
other purposes that would have concomitant greenhouse gas reductions. Therefore,
only those policies that reduce greenhouse gas emissions at no cost are considered.
Offsets. Offsets generally refer to emission credits achieved by activities not
directly related to the emissions of an affected source. Examples of offsets would
include forestry and agricultural activities that absorb carbon dioxide, and reduction
achieved by entities that are not regulated by a greenhouse gas reduction program.
Revenue recycling. Some greenhouse gas reduction programs create revenues
through auctions, compliance penalties, or imposition of a carbon tax. Revenue
recycling refers to how a program disposes of those revenues. How a program
handles revenues received can have a significant effect on the overall cost of the
program to the economy.
Safety valve. Devices designed to prevent or to respond to unacceptably high
compliance costs for greenhouse gas reductions. Generally triggered by prices in the
allowance markets, safety valve approaches can include (1) a set price alternative to
making reductions or buying allowances at the market price, (2) a slowdown in
tightening the emissions cap, and (3) lengthening of the time allowed for compliance.
Depending on the interplay between the emissions cap and safety valve and actual
compliance costs, a safety valve can affect the integrity of the emissions cap.
Sequestration. Sequestration is the process of capturing carbon dioxide from
emission streams or from the atmosphere and then storing it in such a way as to
prevent its release to the atmosphere.

---