Order Code RL33846
Greenhouse Gas Reduction:
Cap-and-Trade Bills in the 110th Congress
Updated January 31, 2008
Larry Parker and Brent D. Yacobucci
Specialists in Energy Policy
Resources, Science, and Industry Division

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Greenhouse Gas Reduction:
Cap-and-Trade Bills in the 110th Congress
Summary
Proposals to advance programs that reduce greenhouse gases have been
introduced in the 110th Congress, and one bill, S. 2191, was reported on December
5, 2007, by the Senate Committee on Environment and Public Works by an 11-8
vote. In general, these proposals 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 report
presents a side-by-side comparison of the major provisions of those bills and includes
a glossary of common terms (Appendix C).
Although the purpose of these bills is to reduce greenhouse gases (GHGs), the
specifics of each differ greatly. Five bills (S. 280, S. 309, S. 485, H.R. 620, and H.R.
1590) cap greenhouse gas emission from covered entities at 1990 levels in the year
2020. S. 317 places its first emissions cap at 2001 levels in 2015; S. 1766 targets
reductions at 2006 levels in 2020; S. 2191 as reported would cap GHGs at about 19%
below 2005 levels in 2020; and H.R. 4226 would limit 2020 emissions to 85% of
their 2006 levels. Seven bills (S. 280, S. 317, S. 485, S. 2191, H.R. 620, H.R. 1590,
and H.R. 4226) would establish cap-and-trade systems to implement their emission
caps. In contrast, S. 1766 provides for two compliance systems — a cap-and-trade
program and an alternative safety valve payment — and allows the covered entities
to choose one or employ a combination of both. Finally, S. 309 provides
discretionary authority to the Environmental Protection Agency (EPA) to establish
a cap-and-trade program to implement its emission cap.
The differences continue with respect to entities covered under the programs.
Three bills (S. 309, S. 485, H.R. 1590) provide discretionary authority to EPA to
determine covered entities by applying cost-effective criteria to reduction options.
In contrast, S. 317’s emission cap is imposed solely on the electric generating sector.
The other five bills (S. 280, S. 1766, S. 2191, H.R. 620, H.R. 4226) cover most
economic sectors but not all (e.g., they exclude the agricultural sector). Thus, the
overall reductions achieved by the bills depend partly on the breadth of entities
covered.
Beyond the basics of these bills, each contains other important provisions. For
example, S. 280 creates a new innovation infrastructure, while S. 1766, S. 2191, and
H.R. 4226 encourage foreign countries to undertake comparable control actions and
specify potential consequences if they don’t. Other provisions include mandatory
greenhouse gas standards for vehicles (S. 309, S. 485, H.R. 1590), and a renewable
portfolio standard for the electric generating sector (S. 309, S. 485, H.R. 1590). All
bills contain some provisions for the periodic review of the program’s adequacy in
addressing climate change.
This comparison should be considered a guide to the basic provisions contained
in each bill. It is not a substitute for careful examination of each bill’s language and
provisions. Further action on S. 2191 is expected.

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Contents
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Proposed Legislation in 110th Congress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Legislative Action in the 110th Congress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Appendix A. Comparison of Key Provisions of Senate Greenhouse Gas
Reduction Bills . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Appendix B. Comparison of Key Provisions of House Greenhouse Gas
Reduction Bills . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Appendix C. Common Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

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Greenhouse Gas Reduction:
Cap-and-Trade 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
Congress should enact legislation establishing a mandatory, market-based program
to slow, stop, and reverse the growth of greenhouse gases 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.

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CRS-2
is to enact energy and related programs that would have the added effect of reducing
greenhouse gases4; 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. (For a review of
additional climate change related bills, see CRS Report RL34067, Climate Change
Legislation in the 110th Congress, by Jonathan L. Ramseur and Brent D. Yacobucci.)
Proposed Legislation in 110th Congress
In the 110th Congress, nine bills have been introduced that include provisions
to impose or permit some form of market-based controls on emissions of greenhouse
gases. General descriptions of those bills follow, beginning with S. 2191, which was
reported, with amendments, on December 5, 2007, by the Senate Committee on
Environment and Public Works. The major provisions of the six Senate bills are
compared in Appendix A. The major provisions of the three House bills are
compared in Appendix B.
S. 2191, as introduced October 18, 2007, by Senators Lieberman and Warner,
would cap greenhouse gas emissions from the electric generation, industrial, and
transportation sectors (for facilities that emit more than 10,000 metric tons of carbon
dioxide equivalent). As introduced, the cap is estimated by the sponsors to reduce
emissions to 15% below 2005 levels in 2020, declining steadily to 63% below 2005
levels in 2050. The program would be implemented through an expansive allowance
trading program to maximize opportunities for cost-effective reductions. Credits
obtained from increases in carbon sequestration and acquisition of allowances from
foreign sources could be used to comply with 30% of reduction requirements. The
bill also establishes a Carbon Market Efficiency Board to observe the allowance
market and implement cost-relief measures if necessary. (For recent action on S.
2191 and for modifications to the provisions, see the next section.)
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
4 For discussions of relevant energy legislation, see CRS Report RL34294, Energy
Independence and Security Act of 2007: A Summary of Major Provisions, by Fred Sissine,
and CRS Report RL33831, Energy Efficiency and Renewable Energy Legislation in the
110th Congress, by Fred Sissine, et al.

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CRS-3
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.
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.
S. 1766, introduced July 11, 2007, by Senator Bingaman, would set emissions
targets on most of the country’s greenhouse gas emissions. Greenhouse gas emitting
activities such as methane emissions from landfills, coal mines, animal waste, and
municipal wastewater projects, along with nitrous oxide emissions from agricultural
soil management, wastewater treatment, and manure management, are not included
under the targets, although credits for use by covered entities are available or may be
generated by verified GHG reductions in these areas. Beginning in 2012, covered
entities would have emissions targets set at their 2006 levels in 2020. The emissions
targets would decline steadily until 2030 when the emission target would be set at the
entities’ 1990 levels. Compliance can be secured either through an allowance trading
program or by paying a safety valve price (called a Technology Accelerator Payment

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CRS-4
or TAP). Under the trading program, allowances are allocated according to various
categories, including covered entities; eligible facilities, such as coal mines and
carbon-intensive industries; states; and sequestration activities. Initially, 24% of all
allowances are auctioned, a percentage that increases over time. The TAP is set at
$12 a metric ton of carbon dioxide equivalent; it increases 5% annually above the
rate of inflation. The bill also requires countries that do not take comparable action
to control emissions to submit special allowances (or their foreign equivalent) to
accompany exports to the United States of any covered greenhouse intensive goods
and primary products.
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 credits 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.
H.R. 4226, introduced November 15, 2007, by Representative Gilchrest, is a
modified version of H.R. 620. Using the same basic structure as H.R. 620, emission
limitations are based on percentages of 2006 emission levels. Reductions from
affected sectors (electric generation, transportation, industrial, and commercial)
would be set at 2006 levels in 2012 and then steadily decline until the cap is equal
to about one-fourth of facilities’ 2006 levels in 2050. The bill provides that the
President may establish a program to require importers to pay the value of GHGs
emitted during the production of goods or services imported into the United States
from countries that have no comparable emission restrictions to those of the United
States. The program’s requirement may not be imposed on countries until
negotiations to achieve agreement on such restrictions have been attempted. In
addition, the bill also establishes a Carbon Market Efficiency Board to observe the
allowance market and implement cost-relief measures if necessary.

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CRS-5
Legislative Action in the 110th Congress
On November 1, 2007, the Senate Committee on Environment and Public
Works’ Subcommittee on Private Sector and Consumer Solutions to Global Warming
and Wildlife Protection reported out a revised version of S. 2191. As reported from
subcommittee, S. 2191 is estimated to reduce greenhouse gas emissions 19% below
2005 levels by 2020 (up from 15% as introduced) and 63% below 2005 levels by
2050. The increase in the estimated reductions in 2020 is the result of amended text
that includes greenhouse gases from all natural gas uses under the overall emissions
cap. Other amendments approved included modifications to eligibility requirements
for the advanced technology vehicles manufacturing incentive program and the
advanced coal generation technology demonstration program. Modifications were
also made to the proposed allocation of allowances to help tribal communities
respond to climate change and to encourage international forest carbon activities,
along with 1% of allowances reserved for rural cooperatives and a corresponding
reduction in allowances allocated to the rest of the electric power industry. The
revised bill also added two new recipients of auction revenues: a Bureau of Land
Management Emergency Firefighting Fund ($300 million) and a Forest Service
Emergency Firefighting Fund ($800 million).
On December 5, 2007, the full committee ordered reported out a revised version
of S. 2191 by a 11 to 8 vote. The revised bill expands the greenhouse gas reduction
program coverage by replacing the previous definition of covered facility based on
the electric power, transportation, and industrial sectors with a comprehensive
upstream definition, including coal mines, oil refineries, and natural gas processing
plants. Among the amendments agreed to by the full committee were a new Low-
Carbon Performance Standard that would require the carbon intensity of
transportation fuel to be frozen in 2011 and then reduced by 5% in 2015 and 10% in
2020. Other amendments agreed to would increase incentives for states to modify
their utility regulatory structures to encourage energy efficiency, and would broaden
the ability of states to use their allowance allocations to mitigate adverse economic
impacts resulting from the bill’s implementation.
Further action on S. 2191 is expected.

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CRS-6
Appendix A. Comparison of Key Provisions of Senate Greenhouse Gas Reduction Bills
S. 309
S. 2191 as reported
Topic
S. 280 (Lieberman)
S. 317 (Feinstein)
S. 485 (Kerry)
S. 1766 (Bingaman)
(Sanders)
(Lieberman/Warner)
Emission
Absolute cap on total
Absolute cap on total
Absolute cap on total
Absolute cap on total
Emissions targets for
Absolute cap on total
reduction/
emissions from all
emissions economy-
emissions from
emissions economy-
all covered entities
emissions from all
limitation
covered entities in the
wide.
covered electric
wide.
that refine petroleum,
covered entities in the
scheme
electric power,
generators.
process natural gas,
electric power,
transportation,
consume coal, or
transportation, and
industry, and
import petroleum
industry sectors.
commercial sectors.
products, coke, and
natural gas. Includes
importers of HFCs,
PFCs, SF , N O, or
6
2
products containing
such compounds.
Responsible
Environmental
EPA.
EPA.
EPA.
To be determined by
EPA.
agency
Protection Agency
the President.
(EPA).
Greenhouse
Carbon dioxide,
Same six gases as S.
Same six gases as S.
Same six gases as S.
Same six gases as S.
Same six gases as S.
gases defined
methane, nitrous oxide 280.
280.
280.
280.
280.
(N O),
2
hydrofluorocarbons
(HFCs),
perfluorocarbons
(PFCs), and sulfur
hexafluoride (SF ).
6
Specific
Beginning in 2012,
Beginning in 2010,
Beginning in 2011,
Beginning in 2010,
In 2012, the emissions In 2012, emissions from
emissions
emissions from
emissions economy-
emissions from
emissions economy-
target for covered
covered entities are
limits
covered entities are
wide to be reduced 2% affected electric
wide to be reduced by
entities is set at 6.652
capped at 5.2 billion
capped at 6.13 billion
annually.
generators capped at
appropriate measures
billion metric tons.
metric tons. Cap is
metric tons, minus
2006 levels.
to cap emissions at
Target is reduced
reduced annually
2012 emissions from
Beginning in 2020,
1990 levels by 2020.
annually thereafter
thereafter until 2050.

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CRS-7
S. 309
S. 2191 as reported
Topic
S. 280 (Lieberman)
S. 317 (Feinstein)
S. 485 (Kerry)
S. 1766 (Bingaman)
(Sanders)
(Lieberman/Warner)
non-covered entities.
emission cap on
Beginning in 2015,
Beginning in 2021,
until 2030.
Emission cap for
economy-wide basis
emissions from
emissions economy-
covered sources in 2020
Beginning in 2020,
set at 1990 level, with
affected electric
wide to be reduced
Emission target for
is 4.432 billion metric
emission cap declines
declining emission
generators capped at
2.5% annually from
covered sources in
tons.
to 5.239 billion metric
caps of 26.7% below
their 2001 levels,
previous year’s level.
2020 is 6.188 billion
tons, minus 2020
1990 levels in 2030
declining 1% annually
metric tons.
Emission cap for
emissions from non-
and 53.3% in 2040.
from previous year’s
Beginning in 2031
covered sources in 2030
covered entities.
level from 2016 to
through 2050,
Emission target for
is 3.472 billion metric
Beginning in 2050,
2020.
emissions economy-
covered sources in
tons.
Beginning in 2030,
emission cap set at
wide to be reduced
2030 is 4.819 billion
emission cap declines
80% below 1990
Beginning in 2020,
3.5% annually from
metric tons.
Emission cap for
to 4.1 billion metric
levels.
emission cap declines
previous year’s level.
covered sources in 2040
tons, minus 2030
1.5% annually from
If the President
is 2.512 billion metric
emissions from non-
previous year’s level.
determines that
tons.
covered entities.
scientific,
technological, and
Emission cap for
Beginning in 2050,
international
covered sources in 2050
emission cap further
considerations suggest is 1.56 billion metric
declines to 2.096
further reductions are
tons.
billion metric tons,
warranted, his
minus annual
recommendations are
emissions from non-
to be considered by
covered entities.
Congress under
expedited procedures.
Covered
In metric tons of
EPA promulgates rule
Any fossil fuel-fired
EPA promulgates rule
Regulated fuel
Assuming no capture of
entities
carbon dioxide
within two years of
electric generating
within two years of
distributors include
GHGs, any producer or
equivalents (CO e):
enactment that applies
facility that has a
enactment that applies
petroleum refineries,
importer of petroleum-
2
any electric power,
the most cost-effective capacity of greater
the most cost-effective natural gas processing
or coal-based liquid or
industrial, or
reduction options on
than 25 megawatts and reduction options on
plants, and imports of
gaseous fuel that emits
commercial entity that sources or sectors to
generates electricity
the largest emitting
petroleum products,
GHGs, or any facility
emits over 10,000
achieve reduction
for sale, including
sources or sectors to
coke, or natural gas.
that produces or imports
CO e annually from
goals.
cogeneration and
achieve reduction
Regulated coal
more than 10,000 CO e
2
2

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CRS-8
S. 309
S. 2191 as reported
Topic
S. 280 (Lieberman)
S. 317 (Feinstein)
S. 485 (Kerry)
S. 1766 (Bingaman)
(Sanders)
(Lieberman/Warner)
any single facility
government-owned
goals.
facilities are entities
of GHG chemicals
owned by the entity;
facilities.
that consume more
annually; any facility
any refiner or importer
than 5,000 tons of coal that uses more than
of petroleum products
a year. Regulated
5,000 tons of coal
for transportation use
nonfuel entities are
annually; any natural
that, when combusted,
importers of HFCs,
gas processing plant or
will emit over 10,000
PFC, SF , N O, or
importer (including
6
2
metric tons annually;
products containing
LNG); or, any facility
and any importer or
such compounds.
that emits more than
producer of HFCs,
10,000 CO e of HFCs
2
PFCs, or SF that,
annually as a byproduct
6
when used, will emit
of hydrochlorofluoro-
over 10,000 CO e.
carbon production.
2
General
A tradeable allowance
Tradeable allowance
Tradeable allowance
A tradeable allowance
Two compliance
A tradeable allowance
allocating
system is established:
system permitted. In
system is established.
system is established.
systems are provided.
system is established. In
and
EPA shall determine
implementing
Allocations to existing The President submits
Covered entities may
2012 (adjusted in future
implementing allocations based on
reduction program,
sources based on
to Congress an
choose which one to
years): 40% of
strategy
several economic,
EPA shall select the
historic electricity
allocation plan within
use or employ a
allowances allocated to
equity, and sector-
most cost-effective
output, and includes
one year of enactment
combination of both.
covered electric
specific criteria,
emission reduction
allowance allocations
that includes a
utilities, industrial
including economic
strategies.
for incremental
combination of
First, a tradeable
facilities, and coops,
efficiency,
nuclear capacity and
auctions and free
allowance system is
declining steadily to 0
competitive effects,
EPA shall allocate to
renewable energy,
allocation of
established. In 2012,
in 2036; 9% allocated to
and impact on
various sectors and
along with
allowances. To the
53% of allowances
states for conservation,
consumers.
interests any
sequestration and
maximum extent
allocated to covered
extra reductions, and
Allowances are to be
allowances that are not early action
practicable, the
and eligible industrial
other activities; 11.5%
allocated upstream to
allocated to affected
provisions.
allocation and
entities; 23% allocated for various
refiners and importers
entities, including
revenues received
to States and for
sequestration activities;
of transportation fuel,
households, dislocated From 2011 on, an
should maximize
sequestration and
10% allocated for
along with producers
workers, energy
increasing percentage
public benefits,
early reduction
electricity consumer
of HFCs, PFCs, and
efficiency and
of all allowances are
promote economic
activities; 24% are
assistance; 5% for early
SF , and downstream
renewable energy
to be auctioned, with
growth, assist
auctioned to fund low
reductions; 0.5% for
6

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CRS-9
S. 309
S. 2191 as reported
Topic
S. 280 (Lieberman)
S. 317 (Feinstein)
S. 485 (Kerry)
S. 1766 (Bingaman)
(Sanders)
(Lieberman/Warner)
to electric generation,
activities,
100% of allowances
households and
income assistance,
tribal governments; and
industrial, and
sequestration
auctioned in 2036 and
dislocated workers,
carbon capture and
18% (plus an early
commercial entities.
activities, and
thereafter.
encourage energy
storage, and
auction of 6%)
ecosystem protection
efficiency, renewable
adaptation activities.
auctioned to fund
Allocations to covered activities.
energy, and
The percentage
technology deployment,
entities are provided at
sequestration
auctioned increases
carbon capture and
no cost.
activities, and assist
steadily, reaching
storage, low income and
states in addressing
53% by 2030.
rural assistance, and
the impact of climate
adaptation activities.
change. Congress has
Second, a Technology
The percentage
one year to enact an
Accelerator Payment
auctioned for CCCC
alternative to the plan; (i.e., safety valve)
activities increases
otherwise, EPA shall
may be paid in lieu of
steadily, reaching 73%
implement it.
submitting one or
by 2036 and thereafter.
more allowances.
Public
EPA shall determine
EPA may choose to
From 2011 on, an
The President shall
Beginning in 2012,
Beginning in 2012, 18%
sale/auction
the number of
provide for trustees to
increasing percentage
determine the number
24% of available
(plus 6% from an early
of allowances
allowances allocated
sell allowances for the of all allowances are
of allowances to be
allowances are
auction of 2012
to the Climate Change
benefit of entities
to be auctioned, with
auctioned. The
auctioned to fund low
allowances) of
Credit Corporation
eligible to receive
100% of allowances
proceeds of the
income assistance,
allowances are
(CCCC) (established
assistance under the
auctioned in 2036 and
auction to be
technology, and
auctioned to fund the
by the bill).
proposal (see above).
thereafter.
deposited with the
adaptation activities.
activities of the CCCC.
Climate Reinvestment
The percentage
This percentage
EPA shall allocate to
Revenues from the
Fund created by the
auctioned increases
increases steadily to
the CCCC allowances
auction are to be
Department of the
steadily, reaching
73% by 2036 and
before 2012 to auction
deposited in the
Treasury. (See
53% by 2030; after
thereafter.
to raise revenue for
Climate Action Trust
“Revenue recycling”
that it increases 1
technology
Fund created by the
below.)
percentage point
Revenues from the
deployment and
Department of the
annually through
auction are to be
dissemination.
Treasury.
2043.
deposited in one of six
funds created by the
The CCCC may buy
Revenues from the
Department of the

---

CRS-10
S. 309
S. 2191 as reported
Topic
S. 280 (Lieberman)
S. 317 (Feinstein)
S. 485 (Kerry)
S. 1766 (Bingaman)
(Sanders)
(Lieberman/Warner)
and sell allowances,
auction are to be
Treasury: the Climate
and use the proceeds
deposited in one of
Change Worker
to reduce costs borne
three funds created by
Training Fund, the
by consumers and
the Department of the
Adaptation Fund, the
other purposes. (See
Treasury: the Energy
Climate Change and
“Revenue recycling”
Technology
National Security Fund,
below.)
Deployment Fund, the the Energy Assistance
Climate Adaptation
Fund, and two
Fund, and the Energy
Emergency Firefighting
Assistance Fund.
Funds.
Cost-limiting
No explicit provision.
No explicit provision. No explicit provision. No explicit provision.
A Technology
A Carbon Market
safety valve
Accelerator Payment
Efficiency Board is
However, if the
However, limited
(TAP) (i.e., safety
established to observe
President determines a borrowing against
valve) may be paid in
the allowance market
national security
future reductions is
lieu of submitting one
and implement cost-
emergency exists, the
permitted if EPA
or more allowances.
relief measures if
President may
determines allowance
For 2012, the TAP
necessary. Measures
temporarily adjust,
prices have reached
price is set at $12 per
include permitting
suspend, or waive any
and sustained a level
metric ton, rising 5%
increased allowance
regulation
that is or will cause
above inflation
borrowing from future
promulgated under
significant harm to the
annually thereafter.
allocations; increased
this program (subject
U.S. economy. Also,
offsets and foreign
to judicial review).
EPA may increase to
If the President
allowance use;
50% the share of
determines the TAP
expanded payback
international credits
should be increased or period for such
that can be used in
eliminated to achieve
allowances; lower
such cases.
the act’s purposes, his
interest charged for
recommendations are
borrowed allowances;
to be considered by
and expanded total
Congress under
borrowed allowances.
expedited procedures.
Increased borrowing
limited to 5% of

---

CRS-11
S. 309
S. 2191 as reported
Topic
S. 280 (Lieberman)
S. 317 (Feinstein)
S. 485 (Kerry)
S. 1766 (Bingaman)
(Sanders)
(Lieberman/Warner)
emission cap and
repayment schedule can
not be longer than 15
years.
If the President
determines a national
security emergency
exists, the President
may temporarily adjust,
suspend, or waive any
regulation promulgated
under this program
(subject to judicial
review).
Penalty for
Excess emission
Existing enforcement
$100 per excess ton
Excess emission
Excess emissions
Excess emission
non-
penalties are equal to
provisions of Section
indexed to inflation
penalties are equal to
penalties are equal to
penalties per ton are
compliance
three times the market
113 of the Clean Air
plus a 1.3 to 1 offset
twice the market price
three times the TAP
equal to the higher of
price for allowances
Act are extended to
from future
for allowances as of
price for that calendar
$200 or three times the
on the last day of the
program.
allowances. If the
December 31 of the
year. In addition, civil
mean market price for
year at issue.
market price for an
year at issue, plus a 1
penalties are $25,000
allowances during the
allowance exceeds
to 1 offset from next
a day for violating
year the allowance was
$60, the penalty is
year’s allowance
provisions of the act.
due, plus a 1-to-1 offset
$200 per excess ton,
allocation.
from a future year
adjusted for inflation.
allocation.
Other market Up to 30% of required Market trading
Up to 25% (50% for
Market trading
If the President
Up to 15% of required
trading
reductions may be
systems incorporated
new affected units) of
systems incorporated
determines that
reductions may be
system
achieved through
into Renewable
required reductions
into Renewable
emission credits
achieved through credits
features
credits obtained
Portfolio Standard,
may be achieved with
Portfolio Standard and issued under foreign
obtained through
through pre-certified
new energy efficiency
credits obtained
new energy efficiency
programs or foreign
agricultural
international
performance standard, through EPA-
performance standard.
offset projects are
sequestration, land use
emissions trading
and new low-carbon
approved foreign
comparable to U.S.
change, forestry,

---

CRS-12
S. 309
S. 2191 as reported
Topic
S. 280 (Lieberman)
S. 317 (Feinstein)
S. 485 (Kerry)
S. 1766 (Bingaman)
(Sanders)
(Lieberman/Warner)
programs, approved
generation
government programs
No limit on use of
ones, he may
manure management,
reduction projects in
requirement.
developed under
domestic biological
promulgate rules
and other specified
developing countries,
United Nations
sequestration to meet
allowing such credits
activities. Percentage
domestic carbon
No limit on use of
Framework
reductions
or offsets to be used to may be increased by the
sequestration, and
domestic biological
Convention on
requirements.
meet the act’s
Carbon Market
reductions from non-
sequestration to meet
Climate Change
emission targets.
Efficiency Board
covered entities.
reductions
(UNFCCC) protocols.
No more than 10% of
requirements.
an entity’s emissions
Up to 15% of required
Borrowing against
Limited borrowing
target can be met
reductions may be
future reductions is
against future
through foreign offset
achieved through
permitted.
reductions is permitted
project credits.
allowances obtained
if EPA determines
through certified foreign
allowance prices have
Establishes program
allowance market.
reached and sustained
to provide credits
Percentage may be
a level that is causing
obtained through
increased by the Carbon
or will cause
verified reductions
Market Efficiency
significant harm to the
from non-covered
Board.
U.S. economy. Also,
activities. No limit on
EPA may increase to
their use to meet
Borrowing against
50% the share of
reduction targets.
future reductions is
international credits
permitted.
that can be used in
such cases.
Banking
Banking of allowances No specific
Banking of allowances Banking of allowances Banking of
Banking of allowances
is permitted;
prohibition on
is permitted;
is permitted;
allowances is
is permitted; allowances
allowances may be
banking.
allowances may be
allowances may be
permitted; allowances
may be saved for use in
saved for use in future
saved for use in future
saved for use in future
may be saved for use
future years.
years.
years.
years.
in future years.
Early
Entities with
Reductions previously Entities with
Recognizing and
One percent of
Five percent of
reduction
registered emission
achieved under state
reductions achieved
rewarding early
allowances available
allowances established
credits and
reductions achieved
programs that are at
from 2000 through
reductions is a stated
from 2012 through
for 2012 (declining
bonus credits
before 2012 may
least as stringent as a
2010 shall receive
goal of the program.
2020 are allocated to
steadily to 0 in 2017)

---

CRS-13
S. 309
S. 2191 as reported
Topic
S. 280 (Lieberman)
S. 317 (Feinstein)
S. 485 (Kerry)
S. 1766 (Bingaman)
(Sanders)
(Lieberman/Warner)
receive allowances for federal trading
credits under specific
early reductions
are allocated to early
them, including
program may be
criteria, including
reported under the
reductions reported
reductions achieved
recognized by the
EPA rules that ensure
1992 Energy Policy
under the 1992 Energy
under more stringent
federal program.
reductions are real,
Act’s 1605(b)
Policy Act’s 1605(b)
mandatory state
additional, verifiable,
program, EPA’s
program, EPA’s
programs.
Entities that
enforceable, and
Climate Leaders
Climate Leaders
demonstrate
permanent, and that
Program, or a State-
Program, a State-
For the time period
reductions achieved
they were reported
administered or
administered or
2012-2017, entities
early (but not before
under either 1605(b)
privately administered voluntary program.
that have entered into
1992) that are as
of the 1992 Energy
registry.
an agreement with
verifiable as
Policy Act, or
Four percent of
EPA to reduce
reductions under a
according to a state or
Geologic
allowances established
emissions to 1990
federal trading
regional registry.
sequestration projects
for 2012 through 2035
levels by 2012 are
program may be
Quantity of credits
built from 2008
available on a steadily
entitled to additional
recognized by the
given is limited to
through 2030 receive
declining basis from
allowances to cover
federal program.
10% of the 2011
bonus allowances for
2012 through 2039 for
their additional
allowance allocation.
the first 10 years of
geologic sequestration
reductions and are
operation.
projects for electric
allowed to achieve
generating plants built
40% of their reduction
from 2008 through
requirement (as
2035. The bonus
opposed to 30%; see
allowances are limited
above) through
to the first 10 years of
international
operation.
emissions trading and
projects,
sequestration, or
reductions by non-
covered entities.
Revenue
Revenues generated
Allowances may be
Revenues generated
Revenues generated
A new Energy
Revenues received by
recycling
by allowance auctions
allocated by EPA to
from the auction are to by allowance auctions
Technology
allowance auctions are
and trading proceeds
households, dislocated be deposited in the
and penalties are
Deployment Fund is
to be received by the

---

CRS-14
S. 309
S. 2191 as reported
Topic
S. 280 (Lieberman)
S. 317 (Feinstein)
S. 485 (Kerry)
S. 1766 (Bingaman)
(Sanders)
(Lieberman/Warner)
are received by a new
workers, energy
Climate Action Trust
received by a new
funded by TAPs
Climate Change Credit
Climate Change
efficiency and
Fund created by the
Climate Reinvestment
received and some
Corporation (CCCC).
Credit Corporation
renewable energy
Department of the
Fund created by the
auction proceeds.
Activities to be funded
(CCCC). Activities to
activities,
Treasury. Activities
Department of the
Activities to be
include technology
be funded include
sequestration
to be funded include
Treasury. Activities
funded include zero-
deployment activities
mechanisms to reduce
activities, and
an Innovative Low-
to be funded include
or low-carbon energy,
(including zero- or low-
consumer costs and to
ecosystem protection
and Zero-emitting
mechanisms to reward advanced coal and
carbon energy,
assist dislocated
activities.
Carbon Technologies
early reductions,
sequestration,
advanced coal and
workers, low-income
Program, a Clean Coal maximize public
cellulosic biomass,
sequestration, cellulosic
persons, and affected
Technologies
benefits, promote
and advanced
biomass, and advanced
communities, along
Program, and an
economic growth,
technology vehicles.
technology vehicles);
with programs to
Energy Efficiency
assist households and
assistance activities
encourage deployment
Technology Program,
dislocated workers,
A new Climate
(including low income,
of new technology and
along with research
encourage energy
Adaptation Fund is
weatherization, and
wildlife restoration.
and development.
efficiency, renewable
funded by some
rural assistance); worker
Allocations to the
energy, and
auction proceeds.
transition assistance;
CCCC are to be
Adaptation and
sequestration
Activities to be
and adaptation activities
determined by EPA
mitigation activities to activities, and assist
funded include
(including wildlife
based on the funding
be funded include
states in addressing
coastal, arctic, and
conservation and
needs of the advanced
affected workers and
the impact of climate
fish and wildlife
restoration, aquatic
technologies
communities, and fish
change.
impact mitigation.
ecosystems, and coastal
demonstration and
and wildlife habitat.
habitats).
deployment programs.
A new Energy
Further, at least 50%
Assistance Fund is
Revenues would also
of revenue received
funded by some
fund a Climate Change
must be used for
auction proceeds.
and Natural Security
technology
Activities to be
Council to report
deployment.
funded include low-
annually on the
income and rural
ramifications of climate
energy assistance, and
change for national
weatherization.
security.

---

CRS-15
S. 309
S. 2191 as reported
Topic
S. 280 (Lieberman)
S. 317 (Feinstein)
S. 485 (Kerry)
S. 1766 (Bingaman)
(Sanders)
(Lieberman/Warner)
$1.1 billion from
auction revenues is
directed toward
wildland fire
suppression activities by
the Bureau of Land
Management and the
Forest Service.
Other key
Provisions include
Provisions include
Establishes program to Provisions include
Provisions include
Provisions require new
provisions
studies of research on
mandatory greenhouse encourage offsets
mandatory greenhouse periodic review of the
appliance standards in
abrupt climate change
gas emission standards from the agricultural
gas emission standards activities of the
2012 and provide for
and impact of climate
for vehicles by 2010,
sector. Offset credits
for vehicles by 2010,
nation’s 5 largest
new model building
change on the world’s
for new electric
available for
and a new energy
trading partners, an
efficiency standards by
poor, among others,
powerplants that begin agricultural, forestry,
efficiency standard
NAS assessment of
2010 and a new low-
and creation of a
operation after
grazing, and wetlands
beginning in 2009.
the status of the
carbon fuel performance
national greenhouse
December 31, 2011,
management,
Establishes a
science and control
standard for the
gas database.
and a new energy
sequestration projects, Renewable Portfolio
technologies, and
transportation sector
efficiency
or practices that meet
Standard and credit
energy security
beginning in 2011.
A new Innovation
performance standard. specific criteria in the
program.
implications.
Infrastructure is
proposal.
Beginning in 2018,
created, along with
Establishes a
Increases biofuel
Beginning in 2019,
requires annual review
program initiatives to
Renewable Portfolio
Offset credits also
mandates under the
requires foreign
of foreign countries’
promote less carbon-
Standard and credit
available for approved Renewable Fuels
countries that do not
GHG control actions.
intensive technology,
program.
emission reduction
Standard, and
take comparable
adaptation,
offset projects from a
mandates
emission reduction
Beginning in 2019,
sequestration, and
Establishes a new low- variety of activities
infrastructure for
actions to submit
requires foreign
related activities.
carbon generation
listed in the proposal.
biofuels.
international reserve
countries that do not
requirement and
allowances (or foreign take comparable
Requires periodic
trading program.
Requires periodic
Expands and extends
equivalents) to
emission reduction
review of target
review of target
existing tax incentives
accompany exports of
actions to submit
adequacy by the
Requires periodic
adequacy by EPA,
for alternative fuel and any covered
international reserve
Under Secretary of
review of target
taking into account the advanced technology
greenhouse gas
allowances (or foreign

---

CRS-16
S. 309
S. 2191 as reported
Topic
S. 280 (Lieberman)
S. 317 (Feinstein)
S. 485 (Kerry)
S. 1766 (Bingaman)
(Sanders)
(Lieberman/Warner)
Commerce for Oceans
adequacy by the
recommendations of a
vehicles, and
intensive goods and
equivalents) to
and Atmosphere.
National Academy of
newly established
establishes
primary products to
accompany exports of
Sciences (NAS).
Climate Science
manufacturer tax
the United States.
any covered greenhouse
Advisory Panel.
credit for advanced
Least developed
gas intensive goods and
technology vehicle
nations or those that
primary products to the
investment.
contribute no more
United States. Least
than 0.5% of global
developed nations or
Establishes new
emissions are
those that contribute no
National Climate
excluded. Proceeds
more than 0.5% of
Change Vulnerability
from the sale of such
global emissions are
and Resilience
reserve allowances are excluded.
Program.
to be deposited in an
International Energy
Requires periodic
Requires periodic
Deployment Fund to
review of the bill’s
review of target
encourage and finance implementation and
adequacy by the NAS.
international
purposes by the NAS.
technology
development.

---

CRS-17
Appendix B. Comparison of Key Provisions of House Greenhouse Gas Reduction Bills
H.R. 620
H.R. 4226
Topic
H.R. 1590 (Waxman)
(Olver)
(Gilchrest)
Emission reduction/
Absolute cap on total emissions from all
Absolute cap on total emissions economy-
Absolute cap on total emissions from all
limitation scheme
covered entities in the electric power,
wide.
covered entities in the electric power,
transportation, industry, and commercial
transportation, industry, and commercial
sectors.
sectors.
Responsible agency
EPA.
EPA.
EPA.
Greenhouse gases
Same six gases as S. 280. (Carbon dioxide,
Same six gases as S. 280.
Same six gases as S. 280.
defined
methane, nitrous oxide (N O),
2
hydrofluorocarbons (HFCs),
perfluorocarbons (PFCs), and sulfur
hexafluoride (SF ).)
6
Specific emissions limits
Beginning in 2012, emissions from covered
Beginning in 2010, emissions economy-
Beginning in 2012, emissions from
entities are capped at 6.15 billion metric
wide to be reduced by roughly 2% annually
covered entities are capped at 2006
tons, minus 2012 emissions from non-
to cap emissions at 1990 levels by 2020.
levels, minus 2012 emissions from non-
covered entities.
covered entities.
Beginning in 2021, through 2050, emissions
Beginning in 2020, emission cap declines to
economy-wide to be reduced roughly 5%
Beginning in 2020, emission cap
5.232 billion metric tons, minus 2020
annually from previous year’s level.
declines to 85% of 2006 levels, minus
emissions from non-covered entities.
2020 emissions from non-covered
Beginning in 2050, emission cap set at 80%
entities.
Beginning in 2030, emission cap declines to
below 1990 levels.
3.858 billion metric tons, minus 2030
Beginning in 2030, emission cap
emissions from non-covered entities.
declines to 63% of 2006 levels, minus
2030 emissions from non-covered
Beginning in 2050, emission cap further
entities.
declines to 1.504 billion metric tons, minus
annual emissions from non-covered entities.
Beginning in 2050, emission cap further
declines to 25% of 2006 levels, minus
annual emissions from non-covered
entities.

---

CRS-18
H.R. 620
H.R. 4226
Topic
H.R. 1590 (Waxman)
(Olver)
(Gilchrest)
Covered entities
In metric tons of carbon dioxide equivalent:
EPA promulgates rule within two years of
In metric tons of carbon dioxide
any electric power, industrial, or commercial enactment that applies the most cost-
equivalent: any electric power, industrial,
entity that emits over 10,000 metric tons
effective reduction options on the largest
or commercial entity that emits over
carbon dioxide equivalent annually from any emitting sources or sectors to achieve
10,000 metric tons carbon dioxide
single facility owned by the entity; any
reduction goals.
equivalent annually from any single
refiner or importer of petroleum products for
facility owned by the entity; any refiner
transportation use that, when combusted,
or importer of petroleum products for
will emit over 10,000 metric tons annually;
transportation use that, when combusted,
and any importer or producer of HFCs,
will emit over 10,000 metric tons
PFCs, or SF that, when used, will emit over
annually; and any importer or producer
6
10,000 metric tons of carbon dioxide
of HFCs, PFCs, or SF that, when used,
6
equivalent.
will emit over 10,000 metric tons of
carbon dioxide equivalent.
General allocating and
A tradeable allowance system is established: A tradeable allowance system is established. A tradeable allowance system is
implementing strategy
EPA shall determine allocations based on
The President submits to Congress an
established: EPA shall determine
several economic, equity, and sector-specific allocation plan within one year of enactment allocations based on several economic,
criteria, including economic efficiency,
that includes a combination of auctions and
equity, and sector-specific criteria,
competitive effects, and impact on
free allocation of allowances. To the
including economic efficiency,
consumers. Allowances are to be allocated
maximum extent practicable, the allocation
competitive effects, and impact on
upstream to refiners and importers of
and revenues received should maximize
consumers. Allowances are to be
transportation fuel, along with producers of
public benefits, promote economic growth,
allocated upstream to refiners and
HFCs, PFCs, and SF , and downstream to
assist households and dislocated workers,
importers of transportation fuel, along
6
electric generation, industrial, and
encourage energy efficiency, renewable
with producers of HFCs, PFCs, and SF ,
6
commercial entities.
energy, and sequestration activities, and
and downstream to electric generation,
assist states in addressing the impact of
industrial, and commercial entities.
Allocations to covered entities are provided
climate change. Congress has one year to
at no cost.
enact an alternative to the plan; otherwise,
Allocations to covered entities are
EPA shall implement it.
provided at no cost.
Public sale/auction of
EPA shall determine the number of
The President shall determine the number of
EPA shall determine the number of
allowances
allowances allocated to the Climate Change
allowances to be auctioned. The proceeds of allowances allocated to the Climate
Credit Corporation (CCCC) (established by
the auction are to be deposited with the
Change Credit Corporation (CCCC)
the bill).
Climate Reinvestment Fund created by the
(established by the bill).

---

CRS-19
H.R. 620
H.R. 4226
Topic
H.R. 1590 (Waxman)
(Olver)
(Gilchrest)
The CCCC may buy and sell allowances,
Department of the Treasury. (See “Revenue
The CCCC may buy and sell allowances,
and use the proceeds to reduce costs borne
recycling” below.)
and use the proceeds to reduce costs
by consumers and other purposes. (See
borne by consumers and other purposes.
“Revenue recycling” below.)
(See “Revenue recycling” below.)
Cost-limiting safety valve No explicit provision.
No explicit provision.
A Carbon Market Efficiency Board is
established to observe the allowance
market and implement cost-relief
measures if necessary. Measures include
permitting increased allowance
borrowing from future allocations;
expanded payback period for such
allowances; lower interest charged for
borrowed allowances; and expanded total
borrowed allowances. Increased
borrowing limited to 5% of emission cap
and repayment schedule cannot be longer
than 15 years.
Penalty for
Excess emission penalties are equal to three
Excess emission penalties are equal to twice
Excess emission penalties are equal to
non-compliance
times the market price for allowances on the
the market price for allowances as of
three times the market price for
last day of the year at issue.
December 31 of the year at issue, plus a 1-
allowances on the last day of the year at
to-1 offset from next year’s allowance
issue.
allocation.
Other market trading
Up to 15% of required reductions may be
Market trading systems are incorporated into Up to 15% of required reductions may be
system features
achieved through credits obtained through
new energy efficiency performance
achieved through credits obtained
pre-certified international emissions trading
standard.
through pre-certified international
programs, approved reduction projects in
emissions trading programs, approved
developing countries, domestic carbon
No explicit provision on use of domestic or
reduction projects in developing
sequestration, and reductions from non-
international offsets to meet reduction
countries, domestic carbon sequestration,
covered entities.
requirements. However, one goal of
and reductions from non-covered
program is to encourage sequestration of
entities.
Borrowing against future reductions is
carbon in the forest and agricultural sectors.

---

CRS-20
H.R. 620
H.R. 4226
Topic
H.R. 1590 (Waxman)
(Olver)
(Gilchrest)
permitted.
Borrowing against future reductions is
permitted.
Banking
Banking of allowances is permitted;
Banking of allowances is permitted;
Banking of allowances is permitted;
allowances may be saved for use in future
allowances may be saved for use in future
allowances may be saved for use in
years.
years.
future years.
Early reduction credits
Entities with registered emission reductions
Recognizing and rewarding early reductions
Entities with registered emission
and bonus credits
achieved before 2012 may receive
is a stated goal of the program.
reductions achieved before 2012 may
allowances for them.
receive allowances for them.
For the time period 2012-2017, entities that
For the time period 2012-2017, entities
have entered into an agreement with EPA to
that have entered into an agreement with
reduce emissions to 1990 levels by 2012 are
EPA to reduce emissions to 1990 levels
entitled to additional allowances to cover
by 2012 are entitled to additional
their additional reductions and are allowed
allowances to cover their additional
to achieve 35% of their reduction
reductions and are allowed to achieve
requirement (as opposed to 15%; see above)
35% of their reduction requirement (as
through international emissions trading and
opposed to 15%; see above) through
projects, sequestration, or reductions by non-
international emissions trading and
covered entities.
projects, sequestration, or reductions by
non-covered entities.
Revenue recycling
Revenues generated by allowance auctions
Revenues generated by allowance auctions
Revenues generated by allowance
and trading proceeds are received by a new
and penalties are received by a new Climate
auctions and trading proceeds are
Climate Change Credit Corporation
Reinvestment Fund created by the
received by a new Climate Change
(CCCC). Activities to be funded include
Department of the Treasury. Activities to be Credit Corporation (CCCC). Activities to
mechanisms to reduce consumer costs and to funded include mechanisms to reward early
be funded include mechanisms to reduce
assist dislocated workers and affected
reductions, maximize public benefits,
consumer costs and to assist dislocated
communities, along with programs to
promote economic growth, assist
workers and affected communities, along
encourage deployment of new technology
households and dislocated workers,
with programs to encourage deployment
and wildlife restoration.
encourage energy efficiency, renewable
of new technology and wildlife
energy, and sequestration activities, and
restoration. Bill specifies that 25% of
assist states in addressing the impact of
allowances allocated to the CCCC be

---

CRS-21
H.R. 620
H.R. 4226
Topic
H.R. 1590 (Waxman)
(Olver)
(Gilchrest)
climate change.
used to restore large-scale freshwater
aquatic and estuarine ecosystems.
Other key provisions
Provisions include studies of the impact of
Provisions include mandatory greenhouse
The President may establish a program to
climate change on coastal ecosystems and
gas emission standards for vehicles by 2010, require importers to pay the value of
communities, and the world’s poor, among
and a new energy efficiency standard
GHGs emitted during the production of
others; assessment of adaptation
beginning in 2010. Establishes a Renewable goods or services imported into the
technologies; and creation of a national
Portfolio Standard.
United States from countries that have no
greenhouse gas database.
comparable emission restrictions to those
Requires periodic review of target adequacy
of the United States. The program’s
Requires periodic review of target adequacy
by the NAS.
requirement may not be imposed on
by the Under Secretary of Commerce for
countries until negotiations to achieve
Oceans and Atmosphere.
agreement on such restrictions have been
attempted.
Provisions include studies of the impact
of climate change on coastal ecosystems
and communities, and the world’s poor,
among others; assessment of adaptation
technologies; creation of a national
greenhouse gas database; and an
outreach initiative to inform agriculture
of the bill’s revenue opportunities.
Requires periodic review of target
adequacy by the Under Secretary of
Commerce for Oceans and Atmosphere.

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Appendix C. 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

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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

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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 (CH )
2
4
nitrous oxide (N O), sulfur hexafluoride (SF ), hydrofluorocarbons (HFC), and
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.

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