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H.R. 1862 (111th): Cap and Dividend Act of 2009

The text of the bill below is as of Apr 1, 2009 (Introduced).

I

111th CONGRESS

1st Session

H. R. 1862

IN THE HOUSE OF REPRESENTATIVES

April 1, 2009

(for himself, Mr. Thompson of California, Mr. Blumenauer, and Mr. Doggett) 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

A BILL

To cap the emissions of greenhouse gases through a requirement to purchase carbon permits, to distribute the proceeds of such purchases to eligible individuals, and for other purposes.

1.

Short title

This Act may be cited as the Cap and Dividend Act of 2009.

2.

Auction of carbon permits and distribution of Consumer dividends

(a)

In general

The Internal Revenue Code of 1986 is amended by adding at the end the following new subtitle:

L

Auction of Carbon Permits and Distribution of Consumer Dividends

Chapter 101. Cap and Dividend Program Rules.

Chapter 102. Consumer Dividends.

Chapter 103. Border Adjustments.

101

Cap and Dividend Program Rules

Sec. 9901. Definitions.

Sec. 9902. Carbon permits.

Sec. 9903. Auctions.

Sec. 9904. Compliance obligation.

Sec. 9905. Penalty for noncompliance.

Sec. 9906. Carbon capture and sequestration.

Sec. 9907. Trading.

Sec. 9908. Banking and borrowing.

9901.

Definitions

For purposes of this subtitle:

(1)

Administrator

The term Administrator means the Administrator of the Environmental Protection Agency.

(2)

Carbon permit

The term carbon permit means a carbon permit established by the Secretary under section 9902(a).

(3)

Covered entity

The term covered entity means a person who makes the first sale in United States markets of a covered fuel, as determined by the Secretary, in consultation with the Administrator.

(4)

Covered fuel

The term covered fuel means oil, natural gas, coal, or any other product derived therefrom for use as a combustible fuel offered for sale in United States markets.

(5)

Fair market value

The term fair market value means the average auction price for carbon permits during the 4 quarters immediately preceding a failure to surrender, when required under section 9904, the required number of carbon permits under such section.

(6)

State

The term State means the several States, the District of Columbia, the Commonwealth of Puerto Rico, the United States Virgin Islands, Guam, American Samoa, the Commonwealth of the Northern Mariana Islands, and any other commonwealth, territory, or possession of the United States.

(7)

Vintage year

The term vintage year means the calendar year for which a carbon permit is established under section 9902.

9902.

Carbon permits

(a)

In general

The Secretary, in consultation with the Administrator, shall establish a separate quantity of carbon permits for calendar year 2012 and each calendar year thereafter, as set forth under subsection (b).

(b)

Emissions reduction schedule

(1)

In general

The quantity of carbon permits established by the Secretary, in consultation with the Administrator, under subsection (a) shall represent equal, pro rata increments that meet the targets described in paragraph (2).

(2)

Targets

(A)

Initial target

The quantity of carbon permits established for 2012 shall be equal to the number of metric tons of carbon dioxide emitted in the United States in 2005.

(B)

Decadal targets

The quantity of carbon permits established for—

(i)

2020 shall be equal to 25 percent less than the number of metric tons of carbon dioxide emitted in the United States in 2005;

(ii)

2030 shall be equal to 45 percent less than the number of metric tons of carbon dioxide emitted in the United States in 2005;

(iii)

2040 shall be equal to 65 percent less than the number of metric tons of carbon dioxide emitted in the United States in 2005; and

(iv)

2050 shall be equal to 85 percent less than the number of metric tons of carbon dioxide emitted in the United States in 2005.

(3)

Report

The Secretary shall report to Congress if the Secretary, after consultation with the Administrator, determines the emissions reductions targets under this subsection should be revised in order to avert catastrophic climate impacts. Such report shall include recommended revisions to the existing emissions reduction schedule and the basis for those recommendations.

(c)

Identification numbers

The Secretary shall assign to each carbon permit established under subsection (a) a unique identification number that includes the vintage year for that carbon permit.

(d)

Legal status of carbon permits

(1)

In general

A carbon permit does not constitute a property right.

(2)

Termination or limitation

Nothing in this subtitle or any other provision of law shall be construed to limit or alter the authority of the United States, including the Secretary acting pursuant to statutory authority, to terminate or limit a carbon permit.

(3)

Other provisions unaffected

Nothing in this subtitle relating to carbon permits issued under this section shall affect the application of any other provision of law to a covered entity, or the responsibility for a covered entity to comply with any such provision of law. Regional and State greenhouse gas initiatives are not preempted by this subtitle.

(e)

Regulations

Not later than 24 months after the date of enactment of this subtitle, the Secretary shall promulgate regulations to carry out the provisions of this subtitle.

9903.

Auctions

(a)

Periodic auctions

The Secretary shall conduct periodic public auctions of carbon permits established under section 9902(a). The Secretary shall conduct at least 4 such auctions in each year for which carbon permits are established.

(b)

Auction rules

The Secretary shall—

(1)

limit auction participation only to owners of covered entities;

(2)

establish a limit on the amount of carbon permits that can be purchased by the owner of a single entity at each auction and an aggregate limit on the total amount of permits that can be held by the owner of a single entity at any one time that—

(A)

reflects anticipated sector and participant demand;

(B)

prevents speculation, manipulation, or hoarding of permits; and

(C)

does not interfere with normal market competition; and

(3)

have the authority to set a minimum permit price at auction.

9904.

Compliance obligation

(a)

In general

Not later than April 1, 2013, and April 1 of each year thereafter, the owner of a covered entity shall surrender to the Secretary a quantity of carbon permits at least as great as the number of metric tons of carbon dioxide that the Secretary, in consultation with the Administrator, determines would be emitted by the combustion of covered fuels with respect to which the covered entity made the first sale in United States markets during the previous calendar year.

(b)

Exemption

The owner of a covered entity shall not have to surrender a carbon permit for the sale of a covered fuel consumed for a non-emitting use, as defined and verified by the Secretary in consultation with the Administrator, unless such covered fuel is sold to a person issued carbon permits under section 9906.

9905.

Penalty for noncompliance

(a)

In general

The owner of any covered entity that fails for any year to surrender, by the deadline described in section 9904, one or more of the carbon permits due pursuant to such section shall be liable for payment to the Secretary of a penalty in the amount described in subsection (b).

(b)

Amount

The amount of a penalty required to be paid under subsection (a) shall be equal to the product obtained by multiplying—

(1)

the number of carbon permits that the owner failed to surrender by the deadline; by

(2)

3 times the fair market value of carbon permits issued for emissions occurring in the calendar year for which the carbon permits were due.

(c)

Timing

A penalty required under this section shall be immediately due and payable to the Secretary, without demand, in accordance with regulations promulgated by the Secretary, which shall be issued not later than 2 years after the date of enactment of this subtitle.

(d)

No effect on liability

A penalty due and payable by the owner of a covered entity under this section shall not diminish the liability of the owner for any fine, penalty, or assessment against the owner for the same violation under any other provision of law.

9906.

Carbon capture and sequestration

The Secretary shall issue, to any person who the Secretary, in consultation with the Administrator, determines has safely and verifiably captured and sequestered carbon dioxide from the combustion of covered fuels in the United States, carbon permits, in addition to the quantity of permits established under section 9902(a), in an amount equivalent to the number of metric tons of carbon dioxide so captured and sequestered.

9907.

Trading

(a)

Permitted transactions

The lawful holder of a carbon permit may—

(1)

hold the carbon permit, subject to the limits established by the Secretary under section 9903(b)(2);

(2)

sell, exchange, or transfer the carbon permit to the owner of a covered entity consistent with the limits established by the Secretary under section 9903(b)(2); or

(3)

request that the Secretary retire the carbon permit.

(b)

Effectiveness of carbon permit transfers

No transfer of a carbon permit shall be effective until a written certification of the transfer, signed by a responsible official of the transferor, is received and recorded by the Secretary in accordance with regulations promulgated under section 9902(e).

(c)

Carbon permit tracking system

The regulations promulgated under section 9902(e) shall include a system for issuing, recording, holding, and tracking carbon permits that shall specify all necessary procedures and requirements for an orderly and competitive functioning of the carbon permit system. Such regulations shall provide for appropriate publication of the information in the system on the Internet.

9908.

Banking and borrowing

(a)

Banking

A carbon permit may be used to meet the compliance obligation requirements of section 9904 for emissions in—

(1)

the vintage year for the carbon permit; or

(2)

any calendar year subsequent to the vintage year for the carbon permit.

(b)

Expiration

A carbon permit shall not expire unless—

(1)

it is surrendered to the Secretary under section 9904 or section 9907(a)(3); or

(2)

the Secretary determines by regulation that expiration is necessary to ensure the authenticity and integrity of carbon permits or the carbon permit tracking system.

(c)

Borrowing future vintage year carbon permits

If the auction price for carbon permits increases by more than 100 percent above the average auction price for carbon permits during the preceding two years (or, if before the third year for which auctions are conducted, the average auction price for carbon permits during the preceding auctions), the Secretary shall auction as many additional carbon permits as are necessary to stabilize the auction price, not to exceed 8 percent of the total amount of carbon permits otherwise available at that auction. Any carbon permits made available under this subsection shall result in an equivalent reduction in the aggregate amount of carbon permits made available in vintage years 2030 through 2050 as set forth in section 9902, and the Secretary shall reduce the number of carbon permits by an equal percentage in each of those vintage years.

102

Consumer Dividends

Sec. 9911. Healthy Climate Trust Fund.

Sec. 9912. Consumer Dividend payment.

Sec. 9913. Transparency.

9911.

Healthy Climate Trust Fund

(a)

Establishment

There is established in the Treasury of the United States a trust fund to be known as the Healthy Climate Trust Fund, consisting of such amounts as may be appropriated to such trust fund as provided for in this section.

(b)

Transfers

(1)

Proceed amounts

There are appropriated to the Healthy Climate Trust Fund amounts equivalent to funds received as proceeds under section 9903.

(2)

Penalty amounts

There are appropriated to the Healthy Climate Trust Fund amounts equivalent to funds received as penalties under section 9905.

(c)

Expenditures

(1)

Administrative expenses

Such amounts as may be necessary from the Healthy Climate Trust Fund shall be available to pay the administrative expenses necessary to carry out this section for each month, but not exceeding 0.50 percent of the amounts appropriated to such trust fund under subsection (b) in such month.

(2)

Consumer Dividend Payments

Amounts in the Healthy Climate Trust Fund not used under paragraph (1) for any month shall be available for making Consumer Dividend payments under section 9912.

9912.

Consumer Dividend Payments

(a)

In general

For purposes of this section:

(1)

Consumer Dividend payment

The term Consumer Dividend payment means the individual pro-rata share, as determined by the Secretary, of amounts available for any month in the Healthy Climate Trust Fund under section 9911(c)(2). For purposes of the preceding sentence, the amounts available for any month shall be the fraction of the total amount made available from an auction conducted under section 9903—

(A)

the numerator of which is 1, and

(B)

the denominator of which is the number of months in the period beginning with the month in which such auction is conducted and ending with the month before the month in which the next such auction is scheduled to be conducted.

(2)

Eligible individual

The term eligible individual means, with respect to any month, any individual with a valid social security number (other than a nonresident alien individual) who is lawfully present in the United States for such month, as determined and verified by the Secretary in consultation with any other Federal entity the Secretary determines appropriate.

(b)

Payment of Consumer Dividend

From amounts made available under section 9911(c)(2), the Secretary shall make a Consumer Dividend payment not later than the end of the month after the month in which such amounts are appropriated to the Healthy Climate Trust Fund under section 9911 to each individual who is an eligible individual for that month.

(c)

Regulations

The Secretary shall prescribe such regulations and other guidance as may be necessary or appropriate to carry out this section.

9913.

Transparency

(a)

Report to Congress

Not later than February 1, 2013, and at least annually thereafter, the Secretary shall transmit to Congress a report accounting for the disposition of amounts in the Healthy Climate Trust Fund in the previous calendar year.

(b)

Healthy Climate Trust Fund Website

Not later than 90 days after the date of the enactment of this subtitle, the Secretary shall establish and maintain a website to provide the public with information on the disposition of any amounts in the Healthy Climate Trust Fund.

103

Border Adjustments

Sec. 9921. Carbon equivalency fee.

Sec. 9922. Definitions.

Sec. 9923. Sense of Congress.

9921.

Carbon equivalency fee

(a)

Imports

The Secretary shall impose carbon equivalency fees to be collected by the Commissioner responsible for U.S. Customs and Border Control on imports of carbon-intensive goods. The amount of the carbon equivalency fee shall be equal to the cost that domestic producers of a comparable carbon-intensive good incur as a result of—

(1)

prices paid in the acquisition of carbon permits by covered entities under this subtitle; and

(2)

carbon equivalency fees paid by importers of carbon-intensive goods used in the production of the comparable carbon-intensive good.

(b)

Payments to Exporters

The Secretary shall pay without interest to persons exporting from the United States carbon-intensive goods produced in the United States. The amount of the payment shall be equal to the cost that domestic producers of the carbon-intensive good incur as a result of—

(1)

prices paid in the acquisition of carbon permits by covered entities under this subtitle; and

(2)

carbon equivalency fees paid by importers of carbon-intensive goods used in the production of the comparable carbon-intensive good.

(c)

Expiration

This section shall cease to have effect at such time as and to the extent that—

(1)

an international agreement requiring countries that emit greenhouse gases and produce carbon-intensive goods for export markets to adopt equivalent measures comes into effect; or

(2)

the country of export has implemented equivalent measures, as determined by the Secretary, in consultation with the Secretary of State.

9922.

Definitions

In this chapter:

(1)

Carbon-intensive good

The term carbon-intensive good means a good that, as identified by the Secretary, in consultation with the Administrator, by rule—

(A)

is a primary product; or

(B)

is a manufactured item in which one or more primary products are inputs and the cost of production of which in the United States is significantly increased by reason of the requirements under this subtitle.

(2)

Primary product

The term primary product means—

(A)

iron, steel, steel mill products (including pipe and tube), aluminum, cement, glass (including flat, container, and specialty glass and fiberglass), pulp, paper, chemicals, or industrial ceramics; and

(B)

any other manufactured product that the Secretary, in consultation with the Administrator, determines—

(i)

is sold for purposes of further manufacture; and

(ii)

generates, in the course of the manufacture of the product, direct and indirect greenhouse gas emissions that are comparable (on an emissions-per-dollar of output basis) to emissions generated in the manufacture or production of a primary product identified in subparagraph (A).

(3)

Equivalent measure

The term ‘equivalent measure’ means a tax, or other regulatory requirement that imposes a cost, on manufacturers of carbon-intensive goods located outside the United States, by reason of greenhouse gas emissions in the production of such goods by such manufacturers, approximately equal to the cost imposed by this subtitle on manufacturers of comparable carbon-intensive goods located in the United States.

9923.

Sense of Congress

It is the sense of Congress that the United States should work proactively under the United Nations Framework Convention on Climate Change and in other appropriate fora, to establish binding agreements committing all major greenhouse gas emitting countries and countries with globally competitive producers of carbon-intensive goods to contribute equitably to the reduction of global greenhouse gas emissions.

.

(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 of Carbon Permits and Distribution of Consumer Dividends.

.

3.

Disclosure of information

(a)

Limited disclosure of identity

Subsection (l) of section 6103 of the Internal Revenue Code of 1986 is amended by adding at the end the following new paragraph:

(21)

Limited disclosure of identity information relating to Consumer Dividend payments

(A)

Department of the Treasury

Individual identity information shall, without written request, be open to inspection by or disclosure to officers and employees of the Department of the Treasury whose official duties require such inspection or disclosure for purposes of section 9912.

(B)

Commissioner of Social Security

The Commissioner of Social Security shall, on written request, disclose to officers and employees of the Department of the Treasury individual identity information which has been disclosed to the Social Security Administration as provided by paragraph (1) or (5).

(C)

Restriction on disclosure

Information disclosed under this paragraph shall be disclosed only for purposes of, and to the extent necessary in, carrying out section 9912.

.

(b)

Conforming amendments

Section 6103(p)(3)(A) of the Internal Revenue Code of 1986 is amended by striking or (18) and inserting , (18), or (21).

4.

Effective date

The amendments made by this Act shall take effect on the date of the enactment of this Act.