I 116TH CONGRESS 1ST SESSION H. R. 1960 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. IN THE HOUSE OF REPRESENTATIVES MARCH 28, 2019 Mr. BEYER introduced the following bill; which was referred to the Committee on Energy and Commerce, and in addition to the Committee on Ways and Means, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the juris- diction of the committee concerned A BILL To cap the emissions of greenhouse gases through a require- ment to purchase carbon permits, to distribute the pro- ceeds of such purchases to eligible individuals, and for other purposes. Be it enacted by the Senate and House of Representa- 1 tives of the United States of America in Congress assembled, 2 SECTION 1. SHORT TITLE. 3 This Act may be cited as the ‘‘Healthy Climate and 4 Family Security Act of 2019’’. 5 SEC. 2. FINDINGS. 6 The Congress finds the following: 7 VerDate Sep 11 2014 01:20 Apr 11, 2019 Jkt 089200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\H1960.IH H1960 pamtmann on DSKBFK8HB2PROD with BILLS 2 •HR 1960 IH (1) Carbon dioxide and other greenhouse gas 1 emissions continue to rise. 2 (2) The warming of our planet has led to more 3 frequent, dangerous and expensive extreme weather 4 events, including heat waves, storms, fires, droughts, 5 floods and tornadoes. 6 (3) A 2018 report by the Intergovernmental 7 Panel on Climate Change (IPCC) recommends that 8 serious efforts be made to limit global warming to 9 1.5°C, which would require that CO2 emissions fall 10 by 45 percent below 2010 levels by 2030, which 11 would be equivalent to approximately 50 percent 12 below 2005 levels by 2030. 13 (4) The atmosphere is a common resource that 14 belongs equally to all. 15 (5) Stabilizing the climate can and must be 16 done in a way that supports vibrant economic 17 growth and a thriving middle class. 18 (6) Legislation to address climate change and 19 accelerate the transition to a clean energy economy 20 must be fair, transparent and built to last. 21 VerDate Sep 11 2014 01:20 Apr 11, 2019 Jkt 089200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H1960.IH H1960 pamtmann on DSKBFK8HB2PROD with BILLS 3 •HR 1960 IH SEC. 3. AUCTION OF CARBON PERMITS AND DISTRIBUTION 1 OF HEALTHY CLIMATE DIVIDENDS. 2 (a) IN GENERAL.—The Internal Revenue Code of 3 1986 is amended by adding at the end the following new 4 subtitle: 5 ‘‘Subtitle L—Auction of Carbon 6 Permits and Distribution of 7 Healthy Climate Dividends 8 ‘‘Chapter 101. Cap and Dividend Program Rules. ‘‘Chapter 102. Healthy Climate Dividends. ‘‘Chapter 103. Border Adjustments. ‘‘CHAPTER 101—CAP AND DIVIDEND 9 PROGRAM RULES 10 ‘‘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. ‘‘SEC. 9901. DEFINITIONS. 11 ‘‘For purposes of this subtitle: 12 ‘‘(1) ADMINISTRATOR.—The term ‘Adminis- 13 trator’ means the Administrator of the Environ- 14 mental Protection Agency. 15 ‘‘(2) CARBON PERMIT.—The term ‘carbon per- 16 mit’ means a carbon permit established by the Sec- 17 retary under section 9902(a). 18 VerDate Sep 11 2014 01:20 Apr 11, 2019 Jkt 089200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H1960.IH H1960 pamtmann on DSKBFK8HB2PROD with BILLS 4 •HR 1960 IH ‘‘(3) COVERED ENTITY.—The term ‘covered en- 1 tity’ means— 2 ‘‘(A) in the case of crude oil— 3 ‘‘(i) a refinery operating in the United 4 States which is designed to serve the pri- 5 mary purpose of processing liquid fuel 6 from crude oil, and 7 ‘‘(ii) any importer of any petroleum or 8 petroleum product (not including crude oil) 9 into the United States, 10 ‘‘(B) in the case of coal— 11 ‘‘(i) any coal mine operating in the 12 United States, and 13 ‘‘(ii) any importer of coal into the 14 United States, and 15 ‘‘(C) in the case of natural gas— 16 ‘‘(i) any person required to submit a 17 report to the Energy Information Agency 18 on Form 176 by reason of delivering nat- 19 ural gas to an end user, and 20 ‘‘(ii) any natural gas processor not de- 21 scribed in clause (i) with respect to sales of 22 natural gas in the United States. 23 ‘‘(4) COVERED FUEL.—The term ‘covered fuel’ 24 means crude oil, natural gas, coal, or any other 25 VerDate Sep 11 2014 01:20 Apr 11, 2019 Jkt 089200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H1960.IH H1960 pamtmann on DSKBFK8HB2PROD with BILLS 5 •HR 1960 IH product derived therefrom for use as a combustible 1 fuel offered for sale in United States markets. 2 ‘‘(5) CRUDE OIL.—The term ‘crude oil’ includes 3 crude oil condensates, natural gasoline, shale oil, any 4 bitumen or bituminous mixture, any oil derived from 5 a bitumen or bituminous mixture, and any oil de- 6 rived from kerogen-bearing sources. 7 ‘‘(6) FAIR MARKET VALUE.—The term ‘fair 8 market value’ means the average auction price for 9 carbon permits during the 4 quarters immediately 10 preceding a failure to surrender, when required 11 under section 9904, the required number of carbon 12 permits under such section. 13 ‘‘(7) STATE.—The term ‘State’ means the sev- 14 eral States, the District of Columbia, the Common- 15 wealth of Puerto Rico, the United States Virgin Is- 16 lands, Guam, American Samoa, the Commonwealth 17 of the Northern Mariana Islands, and any other 18 commonwealth, territory, or possession of the United 19 States. 20 ‘‘(8) VINTAGE YEAR.—The term ‘vintage year’ 21 means the calendar year for which a carbon permit 22 is established under section 9902. 23 VerDate Sep 11 2014 01:20 Apr 11, 2019 Jkt 089200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H1960.IH H1960 pamtmann on DSKBFK8HB2PROD with BILLS 6 •HR 1960 IH ‘‘SEC. 9902. CARBON PERMITS. 1 ‘‘(a) IN GENERAL.—The Secretary, in consultation 2 with the Administrator, shall establish a separate quantity 3 of carbon permits for calendar year 2020 and each cal- 4 endar year thereafter, as set forth under subsection (b). 5 ‘‘(b) EMISSIONS REDUCTION SCHEDULE.— 6 ‘‘(1) IN GENERAL.—The quantity of carbon 7 permits established by the Secretary, in consultation 8 with the Administrator, under subsection (a) for any 9 calendar year before 2040 that is between the near- 10 est target years specified in paragraph (2) preceding 11 and succeeding such calendar year shall be the quan- 12 tity of such permits that represents an equal, pro 13 rata reduction from the preceding year to the suc- 14 ceeding year. 15 ‘‘(2) TARGETS.— 16 ‘‘(A) INITIAL TARGET.—The quantity of 17 carbon permits established for 2020 shall be 18 equal to 12.5 percent less than the number of 19 metric tons of carbon dioxide emitted in the 20 United States in 2005. 21 ‘‘(B) DECADAL TARGETS.—The quantity 22 of carbon permits established for— 23 ‘‘(i) 2025 shall be equal to 35 percent 24 less than the number of metric tons of car- 25 VerDate Sep 11 2014 01:20 Apr 11, 2019 Jkt 089200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\H1960.IH H1960 pamtmann on DSKBFK8HB2PROD with BILLS 7 •HR 1960 IH bon dioxide emitted in the United States in 1 2005, 2 ‘‘(ii) 2030 shall be equal to 50 percent 3 less than the number of metric tons of car- 4 bon dioxide emitted in the United States in 5 2005, 6 ‘‘(iii) 2035 shall be equal to 60 per- 7 cent less than the number of metric tons 8 of carbon dioxide emitted in the United 9 States in 2005, and 10 ‘‘(iv) 2040 shall be equal to 80 per- 11 cent less than the number of metric tons 12 of carbon dioxide emitted in the United 13 States in 2005. 14 ‘‘(3) REPORTS.— 15 ‘‘(A) CALENDAR YEAR 2038.—In 2038 the 16 Secretary, after consultation with the Adminis- 17 trator, shall submit a report to Congress mak- 18 ing recommendations concerning the program 19 established under this subtitle for years after 20 2040, including the quantity of carbon permits 21 to be established and any reductions that may 22 be necessary to ensure a healthy climate. 23 ‘‘(B) AVERTING CATASTROPHIC CLIMATIC 24 IMPACT.—The Secretary shall report to Con- 25 VerDate Sep 11 2014 01:20 Apr 11, 2019 Jkt 089200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\H1960.IH H1960 pamtmann on DSKBFK8HB2PROD with BILLS 8 •HR 1960 IH gress if the Secretary, after consultation with 1 the Administrator, determines the emissions re- 2 ductions targets under this subsection should be 3 revised in order to avert catastrophic climate 4 impacts. Such report shall include rec- 5 ommended revisions to the existing emissions 6 reduction schedule and the basis for those rec- 7 ommendations. 8 ‘‘(c) IDENTIFICATION NUMBERS.—The Secretary 9 shall assign to each carbon permit established under sub- 10 section (a) a unique identification number that includes 11 the vintage year for that carbon permit. 12 ‘‘(d) LEGAL STATUS OF CARBON PERMITS.— 13 ‘‘(1) IN GENERAL.—A carbon permit does not 14 constitute a property right. 15 ‘‘(2) TERMINATION OR LIMITATION.—Nothing 16 in this subtitle or any other provision of law shall be 17 construed to limit or alter the authority of the 18 United States, including the Secretary acting pursu- 19 ant to statutory authority, to terminate or limit a 20 carbon permit. 21 ‘‘(3) OTHER PROVISIONS UNAFFECTED.—Noth- 22 ing in this subtitle relating to carbon permits issued 23 under this section shall affect the application of any 24 other provision of law to a covered entity (including 25 VerDate Sep 11 2014 01:20 Apr 11, 2019 Jkt 089200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\H1960.IH H1960 pamtmann on DSKBFK8HB2PROD with BILLS 9 •HR 1960 IH the Clean Air Act), or the responsibility for a cov- 1 ered entity to comply with any such provision of law. 2 Regional and State greenhouse gas initiatives are 3 not preempted by this subtitle. 4 ‘‘(e) REGULATIONS.—Not later than December 31, 5 2020, the Secretary shall promulgate regulations to carry 6 out the provisions of this subtitle. 7 ‘‘SEC. 9903. AUCTIONS. 8 ‘‘(a) PERIODIC AUCTIONS.—The Secretary shall con- 9 duct periodic public auctions of carbon permits established 10 under section 9902(a). The Secretary shall conduct at 11 least 4 such auctions in each year for which carbon per- 12 mits are established. 13 ‘‘(b) AUCTION RULES.—The Secretary shall— 14 ‘‘(1) limit auction participation only to covered 15 entities, 16 ‘‘(2) establish a limit on the amount of carbon 17 permits that can be purchased by a single entity at 18 each auction and an aggregate limit on the total 19 amount of permits that can be held by a single enti- 20 ty at any one time that— 21 ‘‘(A) reflects anticipated sector and partici- 22 pant demand, 23 ‘‘(B) prevents speculation, manipulation, 24 or hoarding of permits, and 25 VerDate Sep 11 2014 01:20 Apr 11, 2019 Jkt 089200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\H1960.IH H1960 pamtmann on DSKBFK8HB2PROD with BILLS 10 •HR 1960 IH ‘‘(C) does not interfere with normal mar- 1 ket competition, and 2 ‘‘(3) have the authority to set a minimum per- 3 mit price at auction. 4 ‘‘(c) UNSOLD PERMITS.—Any carbon permit unsold 5 at auction may be offered at the next quarterly auction 6 in the calendar year. Any carbon permit unsold after the 7 last auction for a calendar year shall be transferred to the 8 reserve established under section 9908. 9 ‘‘SEC. 9904. COMPLIANCE OBLIGATION. 10 ‘‘(a) IN GENERAL.—Not later than April 1, 2021, 11 and April 1 of each year thereafter, each covered entity 12 shall surrender to the Secretary a quantity of carbon per- 13 mits at least as great as the number of metric tons of 14 carbon dioxide that the Secretary, in consultation with the 15 Administrator, determines would be emitted by the com- 16 bustion of covered fuels with respect to which the covered 17 entity made the first sale in United States markets during 18 the previous calendar year. 19 ‘‘(b) USE TREATED AS SALE.—For purposes of sub- 20 section (a), consumption for an emitting use by the cov- 21 ered entity of covered fuels produced by the covered entity 22 shall be treated as a first sale. 23 ‘‘(c) EXEMPTION.—A covered entity shall not have to 24 surrender a carbon permit for the sale of a covered fuel 25 VerDate Sep 11 2014 01:20 Apr 11, 2019 Jkt 089200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\H1960.IH H1960 pamtmann on DSKBFK8HB2PROD with BILLS 11 •HR 1960 IH consumed for a non-emitting use, as defined and verified 1 by the Secretary in consultation with the Administrator, 2 unless such covered fuel is sold to a person issued carbon 3 permits under section 9906. 4 ‘‘SEC. 9905. PENALTY FOR NONCOMPLIANCE. 5 ‘‘(a) IN GENERAL.—Any covered entity that fails for 6 any year to surrender, by the deadline described in section 7 9904, one or more of the carbon permits due pursuant 8 to such section shall be liable for payment to the Secretary 9 of a penalty in the amount described in subsection (b). 10 ‘‘(b) AMOUNT.—The amount of a penalty required to 11 be paid under subsection (a) shall be equal to the product 12 obtained by multiplying— 13 ‘‘(1) the number of carbon permits that the cov- 14 ered entity failed to surrender by the deadline, by 15 ‘‘(2) 3 times the fair market value of carbon 16 permits issued for emissions occurring in the cal- 17 endar year for which the carbon permits were due. 18 ‘‘(c) TIMING.—A penalty required under this section 19 shall be immediately due and payable to the Secretary, 20 without demand, in accordance with regulations promul- 21 gated by the Secretary, which shall be issued not later 22 than 1 year after the date of enactment of this subtitle. 23 ‘‘(d) NO EFFECT ON LIABILITY.—A penalty due and 24 payable by the covered entity under this section shall not 25 VerDate Sep 11 2014 01:20 Apr 11, 2019 Jkt 089200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\H1960.IH H1960 pamtmann on DSKBFK8HB2PROD with BILLS 12 •HR 1960 IH diminish the liability of the covered entity for any fine, 1 penalty, or assessment against the covered entity for the 2 same violation under any other provision of law. 3 ‘‘(e) PENALTY NOT DEDUCTIBLE.—No deduction 4 shall be allowed under subtitle A for a penalty paid under 5 this section. 6 ‘‘SEC. 9906. CARBON CAPTURE AND SEQUESTRATION. 7 ‘‘(a) IN GENERAL.—The Secretary shall issue a car- 8 bon permit to any person who the Secretary, in consulta- 9 tion with the Administrator, determines has safely and 10 verifiably captured and sequestered carbon dioxide from 11 the combustion of covered fuels in the United States. 12 ‘‘(b) QUANTITY.—The quantity of each permit issued 13 under subsection (a) shall be in the amount equivalent to [Text truncated for display. Full text available on Congress.gov.]