I 116TH CONGRESS 1ST SESSION H. R. 763 To create a Carbon Dividend Trust Fund for the American people in order to encourage market-driven innovation of clean energy technologies and market efficiencies which will reduce harmful pollution and leave a healthier, more stable, and more prosperous nation for future genera- tions. IN THE HOUSE OF REPRESENTATIVES JANUARY 24, 2019 Mr. DEUTCH (for himself, Mr. LIPINSKI, Mr. CRIST, Mr. PETERS, Ms. ESHOO, Ms. JUDY CHU of California, and Mr. ROONEY of Florida) intro- duced the following bill; which was referred to the Committee on Ways and Means, and in addition to the Committees on Energy and Commerce, and Foreign Affairs, 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 create a Carbon Dividend Trust Fund for the American people in order to encourage market-driven innovation of clean energy technologies and market efficiencies which will reduce harmful pollution and leave a healthier, more stable, and more prosperous nation for future gen- erations. Be it enacted by the Senate and House of Representa- 1 tives of the United States of America in Congress assembled, 2 VerDate Sep 11 2014 22:19 Feb 05, 2019 Jkt 089200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\H763.IH H763 pbinns on DSK79D2C42PROD with BILLS 2 •HR 763 IH SECTION 1. SHORT TITLE. 1 This Act may be cited as the ‘‘Energy Innovation and 2 Carbon Dividend Act of 2019’’. 3 SEC. 2. FINDINGS. 4 The Congress finds that— 5 (1) efficient markets strengthen our economy 6 and benefit our Nation by encouraging competition, 7 innovation, and technological progress; 8 (2) efficient markets should reflect all costs of 9 goods to ensure that they advance America’s pros- 10 perity and national interests; 11 (3) emissions of carbon pollution and other 12 harmful pollutants into our Nation’s air impose sub- 13 stantial costs on all Americans and on future gen- 14 erations; and 15 (4) creation of a Carbon Dividend Trust Fund, 16 to be distributed to the American people, will make 17 markets more efficient, create jobs, and stimulate 18 competition, innovation, and technological progress 19 that benefit all Americans and future generations. 20 SEC. 3. CARBON DIVIDENDS AND CARBON FEE. 21 (a) IN GENERAL.—The Internal Revenue Code of 22 1986 is amended by adding at the end the following new 23 subtitle: 24 VerDate Sep 11 2014 22:19 Feb 05, 2019 Jkt 089200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H763.IH H763 pbinns on DSK79D2C42PROD with BILLS 3 •HR 763 IH ‘‘Subtitle L—CARBON DIVIDENDS 1 AND CARBON FEE 2 ‘‘CHAPTER 101. CARBON FEES. ‘‘CHAPTER 102. CARBON BORDER FEE ADJUSTMENT. ‘‘CHAPTER 101—CARBON FEES 3 ‘‘Sec. 9901. Definitions. ‘‘Sec. 9902. Carbon fee. ‘‘Sec. 9903. Emissions reduction schedule. ‘‘Sec. 9904. Fee on fluorinated greenhouse gases. ‘‘Sec. 9905. Decommissioning of Carbon Administration. ‘‘Sec. 9906. Carbon Capture and Sequestration. ‘‘Sec. 9907. Administrative authority. ‘‘SEC. 9901. DEFINITIONS. 4 ‘‘For purposes of this subtitle: 5 ‘‘(a) ADMINISTRATOR.—The term ‘Administrator’ 6 means the Administrator of the Environmental Protection 7 Agency. 8 ‘‘(b) CARBON DIOXIDE EQUIVALENT OR CO2-E.— 9 The term ‘carbon dioxide equivalent’ or ‘CO2-e’ means the 10 number of metric tons of carbon dioxide emissions with 11 the same global warming potential as one metric ton of 12 another greenhouse gas. 13 ‘‘(c) CARBON-INTENSIVE PRODUCT.—The term ‘car- 14 bon-intensive product’ means, as identified by the Sec- 15 retary by rule— 16 ‘‘(1) any manufactured or agricultural product 17 which the Secretary in consultation with the Admin- 18 istrator determines is emissions-intensive and trade- 19 VerDate Sep 11 2014 22:19 Feb 05, 2019 Jkt 089200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H763.IH H763 pbinns on DSK79D2C42PROD with BILLS 4 •HR 763 IH exposed, except that no covered fuel is a carbon-in- 1 tensive product, and 2 ‘‘(2) until such time that the Secretary promul- 3 gates rules identifying carbon-intensive products, the 4 following shall be considered carbon-intensive prod- 5 ucts: iron, steel, steel mill products (including pipe 6 and tube), aluminum, cement, glass (including flat, 7 container, and specialty glass and fiberglass), pulp, 8 paper, chemicals, or industrial ceramics. 9 ‘‘(d) CARBON LEAKAGE.—The term ‘carbon leakage’ 10 means an increase of global greenhouse gas emissions 11 which are substantially due to the relocation of greenhouse 12 gas sources from the United States to jurisdictions which 13 lack comparable controls upon greenhouse gas emissions. 14 ‘‘(e) COST OF CARBON OR CARBON COSTS.—The 15 term ‘cost of carbon’ or ‘carbon costs’ means a national 16 or sub-national government policy which explicitly places 17 a price on greenhouse gas pollution and shall be limited 18 to either a tax on greenhouse gases or a system of cap- 19 and-trade. The cost of carbon is expressed as the price 20 per metric ton of CO2-e. 21 ‘‘(f) COVERED ENTITY.—The term ‘covered entity’ 22 means— 23 ‘‘(1) in the case of crude oil— 24 VerDate Sep 11 2014 22:19 Feb 05, 2019 Jkt 089200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H763.IH H763 pbinns on DSK79D2C42PROD with BILLS 5 •HR 763 IH ‘‘(A) a refinery operating in the United 1 States, and 2 ‘‘(B) any importer of any petroleum or pe- 3 troleum product into the United States, 4 ‘‘(2) in the case of coal— 5 ‘‘(A) any coal mining operation in the 6 United States, and 7 ‘‘(B) any importer of coal into the United 8 States, 9 ‘‘(3) in the case of natural gas— 10 ‘‘(A) any entity entering pipeline quality 11 natural gas into the natural gas transmission 12 system, and 13 ‘‘(B) any importer of natural gas into the 14 United States, 15 ‘‘(4) in the case of fluorinated gases any entity 16 required to report the emission of a fluorinated gas 17 under part 98 of title 40, Code of Federal Regula- 18 tions, and 19 ‘‘(5) any entity or class of entities which, as de- 20 termined by the Secretary, is transporting, selling, 21 or otherwise using a covered fuel in a manner which 22 emits a greenhouse gas to the atmosphere and which 23 has not been covered by the carbon fee, the 24 VerDate Sep 11 2014 22:19 Feb 05, 2019 Jkt 089200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H763.IH H763 pbinns on DSK79D2C42PROD with BILLS 6 •HR 763 IH fluorinated greenhouse gas fee, or the carbon border 1 fee adjustment. 2 ‘‘(g) COVERED FUEL.—The term ‘covered fuel’ 3 means crude oil, natural gas, coal, or any other product 4 derived from crude oil, natural gas, or coal which shall 5 be used so as to emit greenhouse gases to the atmosphere. 6 ‘‘(h) CRUDE OIL.—The term ‘crude oil’ means 7 unrefined petroleum. 8 ‘‘(i) EXPORT.—The term ‘export’ means to transport 9 a product from within the jurisdiction of the United States 10 to persons outside the United States. 11 ‘‘(j) FLUORINATED GREENHOUSE GAS.—The term 12 ‘fluorinated greenhouse gas’ means sulfur hexafluoride 13 (SF6), nitrogen trifluoride (NF3), and any fluorocarbon 14 except for controlled substances as defined in subpart A 15 of part 82 of title 40, Code of Federal Regulation, and 16 substances with vapor pressures of less than 1 mm of Hg 17 absolute at 25 degrees. With these exceptions, ‘fluorinated 18 greenhouse gas’ includes but is not limited to any 19 hydrofluorocarbon, any perfluorocarbon, any fully 20 fluorinated linear, branched or cyclic alkane, ether, ter- 21 tiary amine or aminoether, any perfluoropolyether, and 22 any hydrofluoropolyether. 23 VerDate Sep 11 2014 22:19 Feb 05, 2019 Jkt 089200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\H763.IH H763 pbinns on DSK79D2C42PROD with BILLS 7 •HR 763 IH ‘‘(k) FOSSIL FUEL.—The term ‘fossil fuel’ means 1 coal, coal products, petroleum, petroleum products, or nat- 2 ural gas. 3 ‘‘(l) FULL FUEL CYCLE GREENHOUSE GAS EMIS- 4 SIONS.—The term ‘full fuel cycle greenhouse gas emis- 5 sions’ means the greenhouse gas content of a covered fuel 6 plus that covered fuel’s upstream greenhouse gas emis- 7 sions. 8 ‘‘(m) GLOBAL WARMING POTENTIAL.—The term 9 ‘global warming potential’ means the ratio of the time- 10 integrated radiative forcing from the instantaneous release 11 of one kilogram of a trace substance relative to that of 12 one kilogram of carbon dioxide. 13 ‘‘(n) GREENHOUSE GAS.—The term ‘greenhouse gas’ 14 means carbon dioxide (CO2), methane (CH4), nitrous 15 oxide (N2O), sulfur hexafluoride (SF6), 16 hydrofluorocarbons (HFCs), perfluorocarbon (PFCs), and 17 other gases as defined by rule of the Administrator. 18 ‘‘(o) GREENHOUSE GAS CONTENT.—The term 19 ‘greenhouse gas content’ means the amount of greenhouse 20 gases, expressed in metric tons of CO2-e, which would be 21 emitted to the atmosphere by the use of a covered fuel 22 and shall include, nonexclusively, emissions of carbon diox- 23 ide (CO2), nitrous oxide (N2O), methane (CH4), and other 24 VerDate Sep 11 2014 22:19 Feb 05, 2019 Jkt 089200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\H763.IH H763 pbinns on DSK79D2C42PROD with BILLS 8 •HR 763 IH greenhouse gases as identified by rule of the Adminis- 1 trator. 2 ‘‘(p) GREENHOUSE GAS EFFECT.—The term ‘green- 3 house gas effect’ means the adverse effects of greenhouse 4 gases on health or welfare caused by the greenhouse gas’s 5 heat-trapping potential or its effect on ocean acidification. 6 ‘‘(q) IMPORT.—Irrespective of any other definition in 7 law or treaty, the term ‘import’ means to land on, bring 8 into, or introduce into any place subject to the jurisdiction 9 of the United States. 10 ‘‘(r) PETROLEUM.—The term ‘petroleum’ means oil 11 removed from the earth or the oil derived from tar sands 12 or shale. 13 ‘‘(s) PRODUCTION GREENHOUSE GAS EMISSIONS.— 14 The term ‘production greenhouse gas emissions’ means 15 the quantity of greenhouse gases, expressed in metric tons 16 of CO2-e, emitted to the atmosphere resulting from, non- 17 exclusively, the production, manufacture, assembly, trans- 18 portation, or financing of a product. 19 ‘‘(t) UPSTREAM GREENHOUSE GAS EMISSIONS.— 20 The term ‘upstream greenhouse gas emissions’ means the 21 quantity of greenhouse gases, expressed in metric tons of 22 CO2-e, emitted to the atmosphere resulting from, non- 23 exclusively, the extraction, processing, transportation, fi- 24 nancing, or other preparation of a covered fuel for use. 25 VerDate Sep 11 2014 22:19 Feb 05, 2019 Jkt 089200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\H763.IH H763 pbinns on DSK79D2C42PROD with BILLS 9 •HR 763 IH ‘‘SEC. 9902. CARBON FEE. 1 ‘‘(a) CARBON FEE.—There is hereby imposed a car- 2 bon fee on any covered entity’s emitting use, or sale or 3 transfer for an emitting use, of any covered fuel. 4 ‘‘(b) AMOUNT OF THE CARBON FEE.—The carbon 5 fee imposed by this section is an amount equal to— 6 ‘‘(1) the greenhouse gas content of the covered 7 fuel, multiplied by 8 ‘‘(2) the carbon fee rate. 9 ‘‘(c) CARBON FEE RATE.—For purposes of this sec- 10 tion— 11 ‘‘(1) IN GENERAL.—The carbon fee rate, with 12 respect to any use, sale, or transfer during a cal- 13 endar year, shall be— 14 ‘‘(A) in the case of calendar year 2019, 15 $15, and 16 ‘‘(B) except as provided in paragraph (2), 17 in the case of any calendar year thereafter— 18 ‘‘(i) the carbon fee rate in effect 19 under this subsection for the preceding cal- 20 endar year, plus 21 ‘‘(ii) $10. 22 ‘‘(2) EXCEPTIONS.— 23 ‘‘(A) INCREASED CARBON FEE RATE 24 AFTER MISSED ANNUAL EMISSIONS REDUCTION 25 TARGET.—In the case of any year immediately 26 VerDate Sep 11 2014 22:19 Feb 05, 2019 Jkt 089200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\H763.IH H763 pbinns on DSK79D2C42PROD with BILLS 10 •HR 763 IH following a year for which the Secretary deter- 1 mines under 9903(b) that the actual emissions 2 of greenhouse gases from covered fuels exceeded 3 the emissions reduction target for the previous 4 year, paragraph (1)(B)(ii) shall be applied by 5 substituting ‘$15’ for the dollar amount other- 6 wise in effect for the calendar year under such 7 paragraph. 8 ‘‘(B) CESSATION OF CARBON FEE RATE IN- 9 CREASE AFTER CERTAIN EMISSION REDUCTIONS 10 ACHIEVED.—In the case of any year imme- 11 diately following a year for which the Secretary 12 determines under 9903(b) that actual emissions 13 of greenhouse gases from covered fuels is not 14 more than 10 percent of the greenhouse gas 15 emissions from covered fuels during the year 16 2016, paragraph (1)(B)(ii) shall be applied by 17 substituting ‘$0’ for the dollar amount other- 18 wise in effect for the calendar year under such 19 paragraph. 20 ‘‘(3) INFLATION ADJUSTMENT.—In the case of 21 any calendar year after 2019, each of the dollar 22 amounts in paragraphs (1)(A), (1)(B)(ii), and 23 (2)(A) shall be increased by an amount equal to— 24 ‘‘(A) such dollar amount, multiplied by 25 VerDate Sep 11 2014 22:19 Feb 05, 2019 Jkt 089200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\H763.IH H763 pbinns on DSK79D2C42PROD with BILLS 11 •HR 763 IH ‘‘(B) the cost-of-living adjustment deter- 1 mined under section 1(f)(3) for the calendar 2 year, determined by substituting ‘calendar year 3 2018’ for ‘calendar year 2016’ in subparagraph 4 (A)(ii) thereof. 5 ‘‘(d) EXEMPTION AND REFUND.—The Secretary 6 shall prescribe such rules as are necessary to ensure the 7 fee imposed by this section is not imposed with respect 8 to any nonemitting use, or any sale or transfer for a non- 9 emitting use, including rules providing for the refund of 10 any carbon fee paid under this section with respect to any 11 such use, sale, or transfer. 12 ‘‘(e) EXEMPTIONS.— 13 ‘‘(1) AGRICULTURE.— 14 ‘‘(A) FUEL.—If any covered fuel or its de- 15 rivative is used on a farm for a farming pur- 16 pose, the Secretary shall pay (without interest) 17 to the ultimate purchaser of such covered fuel 18 or its derivative, the total amount of carbon 19 fees previously paid upon that covered fuel or 20 its derivative, as specified by rule of the Sec- 21 retary. 22 ‘‘(B) FARM, FARMING USE, AND FARMING 23 PURPOSE.—The terms ‘farm’, ‘farming use’, 24 and ‘farming purpose’ shall have the respective 25 VerDate Sep 11 2014 22:19 Feb 05, 2019 Jkt 089200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\H763.IH H763 pbinns on DSK79D2C42PROD with BILLS 12 •HR 763 IH meanings given such terms under section 1 6420(c). 2 ‘‘(C) OTHER GREENHOUSE GASES EMIS- 3 SIONS FROM AGRICULTURE.—The carbon fee 4 shall not be levied upon non-fossil fuel green- 5 house gas emissions which occur on a farm. 6 ‘‘(2) ARMED FORCES OF THE UNITED 7 STATES.—If any covered fuel or its derivative is 8 used by the Armed Forces of the United States as 9 supplies for vessels of war, vehicles, or el [Text truncated for display. 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