HR 1666 IH
H. R. 1666
To amend the Internal Revenue Code of 1986 to establish an auction and revenue collection mechanism for a carbon market that ensures price stability with environmental integrity.
IN THE HOUSE OF REPRESENTATIVES
March 23, 2009
March 23, 2009
Mr. DOGGETT (for himself, Mr. COOPER, Mr. SHULER, Mr. THOMPSON of California, Mr. BLUMENAUER, Mr. STARK, Mr. LEWIS of Georgia, Ms. BERKLEY, Ms. LINDA T. SANCHEZ of California, Mr. YARMUTH, Mr. BRADY of Pennsylvania, Mr. COHEN, Mr. FATTAH, Mr. JOHNSON of Georgia, Mr. ROTHMAN of New Jersey, Mr. SIRES, Mr. NADLER of New York, Mr. FARR, Mr. CUMMINGS, Ms. CLARKE, Mr. ACKERMAN, and Ms. EDDIE BERNICE JOHNSON of Texas) introduced the following bill; which was referred to the Committee on Ways and Means, and in addition to the Committee on Energy and Commerce, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned
To amend the Internal Revenue Code of 1986 to establish an auction and revenue collection mechanism for a carbon market that ensures price stability with environmental integrity.
Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ‘Safe Markets Development Act of 2009’.
SEC. 2. FINDINGS.
The Congress finds--
(1) a market-based, national emissions cap and trade program for greenhouse gases shall help meet national mitigation goals with a high degree of certainty while creating a new market for emissions allowances;
(2) ensuring a smooth startup of the program is critical for meeting short- and long-term emissions goals and maintaining public and political support for the program;
(3) the economy-wide scale of the new allowance market and participation in the market of many regulated entities with little or no experience with cap and trade programs call for a careful startup phase for the program;
(4) stable and predictable prices for allowances shall support development of cost-effective mitigation technologies and ease the transition for businesses and consumers making long-term investment decisions;
(5) recent experiences in the oil, housing, electricity and financial markets suggest that many markets are subject to boom and bust cycles and can be vulnerable to market manipulation or speculative excesses and that lessons from these experiences should guide the design of the new cap and trade program; and
(6) the risks of speculative excess and market manipulation are highest in the initial period of a cap and trade program while the regulatory systems to monitor allowance markets are under development and regulated sources are less experienced in market participation.
SEC. 3. PURPOSES.
The purposes of this Act are to--
(1) establish an auction mechanism for the collection of revenue that ensures a smooth price path while achieving the emissions reductions necessary to stop climate change; and
(2) direct the revenue raised from the auction to a trust fund to be used for important public purposes.
SEC. 4. ISSUING, AUCTIONING, AND ADMINISTERING EMISSIONS ALLOWANCES AND COLLECTION OF REVENUE.
(a) In General- The Internal Revenue Code of 1986 is amended by adding at the end the following new subtitle:
‘Subtitle L--Auction Based Carbon Market
‘CHAPTER 101--EMISSION ALLOWANCES
‘Subchapter A. Allowance auctions and compliance obligations.
‘Subchapter B. Climate Oversight and Coordination Board.
‘Subchapter C. Auction Revenue Trust Fund.
‘Subchapter D. Assurance of cumulation emissions.
‘Subchapter E. Definitions.
‘Subchapter A--Allowance Auctions and Compliance Obligations
‘Sec. 9901. Allowance auctions.
‘Sec. 9902. Allowance transfer system.
‘Sec. 9903. Compliance obligation.
‘Sec. 9904. Excess Emissions Penalty.
‘Sec. 9905. Allowance banking.
‘SEC. 9901. ALLOWANCE AUCTIONS.
‘(a) Auctions- The Secretary shall conduct auctions of allowances in accordance with procedures established by the Board established under subchapter B to meet the target allowance price for the year determined by the Board. The auction schedule is as follows:
‘(1) Four auctions shall be undertaken during each trading year.
‘(2) The first auction of each trading year shall occur between April and June and at least three weeks after the Board announces a target price for the trading year.
‘(3) The fourth auction for each trading year shall be in the last month (March) of the trading year.
‘(b) Auction Revenue- All revenue from the auctions under this section shall be deposited in the Auction Revenue Trust Fund established under subchapter C. Amounts deposited in such trust fund may be used, subject to annual appropriation, only for the purposes specified in other provisions of law.
‘SEC. 9902. ALLOWANCE TRANSFER SYSTEM.
‘(a) Establishment- The Secretary shall establish a system for issuing, recording, and tracking emission allowances, and shall maintain a registry of allowances for each recorded holder of allowances.
‘(b) Recording Requirement- The Secretary shall establish, by rule, a mechanism for the recording of emission allowances.
‘(c) Holders Not Restricted- The privilege of purchasing, holding, and transferring emission allowances shall not be restricted to the owners and operators of covered facilities.
‘SEC. 9903. COMPLIANCE OBLIGATION.
‘(a) Submission of Allowances- Not later than 90 days after the end of a calendar year, the owner or operator of a covered facility shall submit to the Secretary an emission allowance for each carbon dioxide equivalent attributable to such facility as calculated by the Administrator under the Emissions Registry.
‘(b) Retirement of Allowances- Upon receipt of an emission allowance under subsection (a), the Secretary shall retire the allowance, and shall reduce that covered entity’s registry account by a corresponding amount. The Secretary may also retire other allowances as specified in section 9905.
‘SEC. 9904. EXCESS EMISSIONS PENALTY.
‘(a) Imposition of Penalty- The owner or operator of any covered facility that fails for any year to submit to the Secretary, by the deadline described in section 9903(a), 1 or more of the emission allowances due pursuant to that section shall be liable for the payment to the Secretary of an excess emissions penalty on the date of such failure.
‘(b) Amount- The amount of an excess emissions penalty required to be paid under paragraph (1) shall be an amount equal to the product obtained by multiplying--
‘(1) the number of excess emission allowances that the owner or operator failed to submit; and
‘(2) the greater of--
‘(A) $200; or
‘(B) 3 times the mean market value (as determined by the Secretary) of an emission allowance during the calendar year for which the emission allowance were due.
‘(c) Deficiency Procedures Not To Apply- Subchapter B of chapter 63 (relating to deficiency procedure for income, estate, gift, and certain excise taxes) shall not apply in respect of the assessment or collection of any penalty imposed by subsection (a).
‘(d) Coordination With Other Penalties- The penalty imposed by this section shall be in addition to any other penalty imposed under any other provision of law.
‘SEC. 9905. ALLOWANCE BANKING.
‘In Phase I of the program, the Secretary shall allow a covered entity to retain, after the retirement of allowances equal to its emissions in the previous calendar year, a sum of allowances equal to 5 percent of its emissions in the previous calendar year. The Secretary shall retire from a covered entity’s account any remaining allowances in excess of 5 percent of the entity’s emissions during the previous calendar year. The Secretary shall also retire all allowances in the registry accounts of non-covered entities at the end of each trading year in Phase I of the program.
‘Subchapter B--Climate Oversight and Coordination Board
‘Sec. 9911. Establishment of a Climate Program Oversight and Coordination Board.
‘Sec. 9912. Initial expectations for annual emissions.
‘SEC. 9911. ESTABLISHMENT OF A CLIMATE PROGRAM OVERSIGHT AND COORDINATION BOARD.
‘(a) Establishment- There is established a Climate Program Oversight and Coordination Board (hereafter in this Act referred to as the ‘Board’).
‘(b) Purposes- The purposes of the Board are to--
‘(1) coordinate and review the work of the Secretary, the Administrator, and other agencies in implementing this Act;
‘(2) make forecasts and to set targets for green house gas allowance prices;
‘(3) review the functioning of carbon markets, including allowance auctions, secondary markets in allowances and associated financial instruments (including futures, forwards, options, swaps, and other derivative contracts);
‘(4) review the regulation and oversight of carbon markets; and
‘(5) provide reports and testimony to Congress in April or May of each year beginning in 2012.
‘(c) Membership- (1) The Board shall include 6 members who shall be appointed by the President by and with the advice and consent of the Senate. In appointing members of the Board, the President shall select individuals with recognized expertise in relevant areas, including climate science and economics, and energy and financial markets. Such persons shall have no other employment. At least one member shall be a scientist with expertise in climate change and the effects of climate change on the environment. In addition, Board shall include the following three voting, ex-officio members: The Secretaries of the Treasury and Energy and the Administrator of the Environmental Protection Agency.
‘(2) The ex-officio members of the Board shall serve without additional compensation and may not serve as Chairman or Vice Chairman. The ex-officio members of the Board may, from time to time, designate other officers or employees of their respective organizations to carry out their duties on the Board.
‘(1) IN GENERAL- A member of the Board shall be compensated at the annual rate of basic pay prescribed for level II of the Executive Schedule under section 5313 of title 5, United States Code.
‘(2) CHAIRPERSON- The Chairperson of the Board shall be compensated at the annual rate of basic pay prescribed for level I of the Executive Schedule under section 5312 of title 5, United States Code.
‘(e) Terms; Vacancies-
‘(1) TERMS- The term of a member of the Board shall be 10 years, except that the members first appointed to the Board shall be appointed for terms in a manner that ensures that the term of not more than 1 member shall expire during any 2-year period, and no member serves a term of more than 10 years.
‘(2) OATH OF OFFICE- A member shall take the oath of office of the Board by not later than 15 days after the date on which the member is appointed.
‘(3) REMOVAL- A member may be removed from the Board on determination of the President for cause. The President shall submit to Congress a notification of any determination by the President to remove a member of the Board for cause.
‘(4) VACANCIES- A member of the Board the term of whom has expired or otherwise been terminated shall continue to serve until the date on which a replacement is appointed under subparagraph (A)(ii), if the President determines that service to be appropriate. A vacancy on the Board shall not affect the powers of the Board and shall be filled in the same manner as the original appointment was made.
‘(5) CHAIRPERSON AND VICE-CHAIRPERSON- From among members of the Board, the President shall appoint 1 member to serve as Chairperson of the Board for a term of 4 years and member to serve as Vice-Chairperson of the Board for a term of 4 years.
‘(6) EX-OFFICIO MEMBERS NOT COVERED- The provisions of this subsection apply only to Board members who are not ex-officio members.
‘(1) CONFLICTS OF INTEREST- The President shall not appoint to the Board an individual employed by, or holding any official relationship (including any shareholder) with, any entity engaged in the generation, transmission, distribution, or sale of energy, an individual who has any pecuniary interest in the generation, transmission, distribution, or sale of energy, or an individual who has a pecuniary interest in the implementation of this Act.
‘(2) NO OTHER EMPLOYMENT- A member of the Board (other than an ex-officio member) shall not hold any other employment during the term of service of the member.
‘(g) Resources- The Board may obtain the services of such experts and consultants as are necessary to carry out the provisions of this Act. The administrative costs of the Board shall be paid out of the revenue from auctions of greenhouse gas allowances.
‘(h) Powers and Duties of the Board-
‘(1) FORECAST EMISSIONS AND ALLOWANCE PRICES- Before April 30, 2012, and before April 30 of each successive year through 2019, the Board shall publish a forecast of gradually rising allowance prices for the trading years through 2020 that the Board expects shall be associated with a gradual reduction in emissions of greenhouse gases of covered entities until reaching the level of 4,911 million tons in 2020. In deciding upon a forecast of allowance prices the Board shall--
‘(A) review forecasts made by the Secretary of Energy (acting through the Energy Information Agency) and the Administrator of the Environmental Protection Agency, as well as those of private sector forecasters; and
‘(B) in the years 2013 through 2019, review and update its allowance price forecast as part of the assessment under paragraph (4) of this subsection.
‘(2) SELECT ANNUAL PRICE TARGETS- Before April 30, 2012, and before April 30 of each successive year through 2019, the Board shall select a target allowance price for the trading year that begins on April 1 of that calendar year, as follows:
‘(A) In 2012, the target price shall be set at the price the Board determines will achieve the annual emission expectation for the year as set forth in section 9912.
‘(B) In 2013 through 2019, the target price shall be the same as its forecast price for that year, which may have been revised according to paragraph (4).
‘(3) AUCTION PROCEDURES- The Board shall establish procedures for auctions of allowances that would achieve the target price on average over all trading of allowances during the year, including the sales of allowances in auctions as well as in secondary market trading. To achieve the target price, the total number of emission allowances issued in auctions in any particular year may be more or less than the expected emissions for that year as set forth in section 9912.
‘(4) CONDUCT AN ANNUAL ASSESSMENT- On or before April 30 of each year beginning in 2013, in consultation with the Secretary, the Secretary of Energy, and the Administrator, the Board shall prepare an assessment of the program. In Phase I of the program, the assessment shall include each of the following:
‘(A) Actual emissions of covered entities in the previous calendar year.
‘(B) The progress in achieving the environmental goals of the program.
‘(C) The effectiveness of the monitoring of emissions, the registration of allowances, and the enforcement of compliance requirements for covered entities.
‘(D) An analysis of the behavior of greenhouse gases markets.
‘(E) The effectiveness of the price target.
‘(F) The reasons for the difference between actual emissions and the expected levels given in section 9912. In considering the difference between actual and expected emissions, the Board shall estimate--
‘(i) the amount of the difference that was attributable to influences that pertain only to the given calendar year, including but not limited to unusual weather or other transitory changes in economic activity and energy use; and
‘(ii) the amount of the difference attributable to influences that shall likely persist for multiple calendar years and the likely duration of each such influence.
‘(G) A revision in its forecast of allowance prices through 2020 in response to the persistent influences identified in clause (ii) of subparagraph (F), but not in response to the transitory influences identified in clause (i) of subparagraph (F).
‘(5) MAKE ANNUAL REPORTS TO CONGRESS- The Chairman of the Board shall present the assessment in a written report and in testimony before each house of Congress in April or May of each year.
‘(6) CONDUCT A PROGRAM REVIEW IN 2017- The Board shall present a report containing a thorough review of the program to the Congress by October 1, 2017, and include in this report its recommendations for any adjustments in the design features for Phase II of the program.
‘(i) Review by Government Accountability Office- Not later than January 1, 2015, and every three years thereafter, the Comptroller General of the United States shall conduct a review of the efficacy of the Board in fulfilling the purposes and duties of the Board under this Act.
‘SEC. 9912. INITIAL EXPECTATIONS FOR ANNUAL EMISSIONS.
‘The initial expectation of the greenhouse gas emissions of covered facilities in the cap and trade program are the amounts for each of the calendar years 2012 through 2050 set forth in the following table:
‘Calendar Year Initial Expectation of Emissions (millions of tons of greenhouse gases)
‘Subchapter C--Auction Revenue Trust Fund
‘Sec. 9921. Trust Fund.
‘SEC. 9921. TRUST FUND.
‘(a) Creation of Auction Revenue Trust Fund- There is established in the Treasury of the United States, the Auction Revenue Trust Fund.
‘(b) Funds- An amount equivalent to all revenues received from the auction in subchapter A shall be credited to the Trust Fund.
‘Subchapter D--Assurance of Cumulation Emissions
‘Sec. 9931. Assurance of cumulative emissions reductions.
‘SEC. 9931. ASSURANCE OF CUMULATIVE EMISSIONS REDUCTIONS.
‘(a) Excess Emissions 2012-2019- If the cumulative emissions of covered entities over the years 2012 through 2019 exceed 1.1 times the sum of the expected emissions over those years shown in the table in section 9912 (1.1 times 44,878 million tons = 49,366 million tons), the excess over 49,366 million tons shall be made up through a reduction in the target for emissions in the year 2020 by an equivalent amount of tons.
‘(b) Excess Emissions 2012-2020- If the cumulative emissions of covered entities over the years 2012 through 2020 exceed the sum of the expected emissions over those years shown in section 9912 (49,789 million tons), the difference shall be made up through reductions in the expected emissions for the years 2021 through 2030. Equal percentage reductions shall be made in expected emissions for the years 2021 through 2030 so that the sum of those reductions equals the excess of actual emissions over the expected cumulative emissions for the years 2012 through 2020.
‘(c) Lower Emissions- If the cumulative emissions of covered entities over the years 2012 to 2020 are less than the sum of the expected emissions over those years shown in the above table (49,789 million tons), no adjustment shall be made in expected emissions in the years 2021 through 2030.
‘Sec. 9941. Definitions.
‘SEC. 9941. DEFINITIONS.
‘For purposes of this subtitle:
‘(1) The term ‘Administrator’ means the Administrator of the Environmental Protection Agency.
‘(2) The term ‘carbon dioxide equivalent’ means, for each greenhouse gas, the quantity of greenhouse gas that the Administrator determines makes the same contribution to global warming as 1 metric ton of carbon dioxide.
‘(3) The term ‘covered facility’ means, for each calendar year, a facility that emits greenhouse gases in that year and that has an obligation to submit emission allowances for such greenhouse gas emissions under any cap-and-trade program.
‘(4) The term ‘emission allowance’ ‘’ means an authorization, under any cap-and-trade program, to emit 1 carbon dioxide equivalent of greenhouse gas.
‘(5) The term ‘Emissions Registry’ ‘’ means a greenhouse gases emissions registry for all United States emissions of greenhouse gases developed by the Administrator.
‘(6) The term ‘program’ or ‘cap and trade program’ means an economy-wide program enacted by Congress that auctions emission allowances for the control of greenhouse gases.
‘(7) The term ‘Phase I of the program’ ‘’ means the years 2012 through 2019.
‘(8) The term ‘Phase II of the program’ ‘’ means the years 2020 through 2050.
‘(9) The term ‘price path’ is the forecast of emission allowance prices by the Climate Program Oversight and Coordination Board.
‘(10) The term ‘Secretary’ means the Secretary of the Treasury.
‘(11) The term ‘trading year’ means the period from April 1 of the concurrent calendar year through March 31 of the following calendar year (or the first subsequent business day if those dates fall on a weekend or holiday).
‘(12) The term ‘Auction Revenue Trust Fund’ means the trust fund established in the Treasury under section 9921.’.
(b) Clerical Amendment- The table of subtitles for the Internal Revenue Code of 1986 is amended by adding at the end the following new item:
‘Subtitle L. Auction based carbon market.’.