Lieberman-Lieberman-WarnerWarner

Reduction ScheduleReduction Schedule

2012: 2005 Levels2012: 2005 Levels 2020: 15% reduction2020: 15% reduction 2030: 33% reduction2030: 33% reduction 2040: 50% reduction2040: 50% reduction 2050: 70% reduction2050: 70% reduction

2005 Emissions of Covered Units:5,200 Million Metric Tons of CO2

Covered EntitiesCovered Entities

Fossil-Fuel Power Plants

2300 MMT CO2

Industrial Plants

950 MMT CO2

Transportation Sector1900 MMT CO2

Chemical Producers/Importers

300 MMT CO2

Represent 75% of US greenhouse gas emissions

2012 Emission Cap5200 MMT CO2

2012 Allocation to Covered 2012 Allocation to Covered EntitiesEntities

5200 MMT CO2 total Allowances5200 MMT CO2 total Allowances 40% of Allowances Freely Given to 40% of Allowances Freely Given to

Covered EntitiesCovered Entities

20%20% 20%20% 0%0%

Fossil-Fuel Power Plants

2300 MMT CO2 emissions 1040 allowances

Industrial Plants

950 MMT CO2 emissions1040 allowances

Transportation1900 MMT CO2 emissions

0 allowances

Electric Power SectorElectric Power Sector 20% of the allowances (1040 MMT CO2) will be 20% of the allowances (1040 MMT CO2) will be

distributed to covered electric power sector facilities distributed to covered electric power sector facilities from 2012 through 2016. from 2012 through 2016. The percentage then declines by 1% each year, such that zero The percentage then declines by 1% each year, such that zero

allowances are allocated to the electric power sector in 2036.allowances are allocated to the electric power sector in 2036. Incumbents Incumbents are defined as those facilities that are defined as those facilities that

operated during the calendar year preceding the operated during the calendar year preceding the enactment date. enactment date. Allowances are distributed in proportion to each facility’s Allowances are distributed in proportion to each facility’s

recent, historical emissions (the three calendar years recent, historical emissions (the three calendar years preceding the enactment date).preceding the enactment date).

New Entrants New Entrants are defined as those covered facilities are defined as those covered facilities that commence operation on or after January 1, 2008.that commence operation on or after January 1, 2008. The new entrant set aside will be distributed to new entrants The new entrant set aside will be distributed to new entrants

based on their electricity generation:based on their electricity generation:

Industrial SectorIndustrial Sector

The allowances allocated to the The allowances allocated to the industrial sector decrease in the same industrial sector decrease in the same manner as the allowances allocated to manner as the allowances allocated to the electric power sector. the electric power sector.

20% is allocated in 2012 to 2016 (1040 20% is allocated in 2012 to 2016 (1040 MMT CO2), and then the percentage MMT CO2), and then the percentage declines by 1% each year, such that it declines by 1% each year, such that it reaches 0% in 2036.reaches 0% in 2036.

Transportation SectorTransportation Sector

Transportation Fuel Producers and Transportation Fuel Producers and Importers (i.e. oil companies) will be Importers (i.e. oil companies) will be responsible for all CO2 emissions responsible for all CO2 emissions caused by the production and the use caused by the production and the use of their fuels.of their fuels. This is called an “upstream cap” since the This is called an “upstream cap” since the

point of regulation is at the fuel point of regulation is at the fuel production and not the fuel use (i.e production and not the fuel use (i.e vehicle emissions).vehicle emissions).

The Transportation Sector receives no The Transportation Sector receives no free allowances.free allowances.

2012 Allocation to 2012 Allocation to Non-Covered EntitiesNon-Covered Entities

5200 MMT CO2 total Allowances5200 MMT CO2 total Allowances 40% of Allowances Freely Given to 40% of Allowances Freely Given to

Covered EntitiesCovered Entities 36% of Allowances Freely Given to 36% of Allowances Freely Given to

Non-Covered EntitiesNon-Covered Entities

10%Electricity Consumers

520M Allowances

4%Carbon Capture

and Sequestration 208M Allowances

5%Domestic Agriculture

and Forestry260M Allowances

3%International

Forest Protection156M Allowances

5%Early Reduction Credit

260M Allowances

9%States and Tribes

468M Allowances

Electricity ConsumersElectricity Consumers 10% of the allowances (520 MMT CO2) to load 10% of the allowances (520 MMT CO2) to load

serving entities (LSEs) based on kWh deliveredserving entities (LSEs) based on kWh delivered

An LSE must sell its allowances within one year of An LSE must sell its allowances within one year of receiving an allowance and must pursue fair receiving an allowance and must pursue fair market valuemarket value

LSEs must use the proceeds from the sale of the LSEs must use the proceeds from the sale of the allowances for two purposes:allowances for two purposes: to mitigate economic impacts on low- and middle-income to mitigate economic impacts on low- and middle-income

energy consumers, including by reducing transmission energy consumers, including by reducing transmission charges or issuing rebates; andcharges or issuing rebates; and

to promote energy efficiency on the part of energy to promote energy efficiency on the part of energy consumers.consumers.

States and TribesStates and Tribes9% of Allowances9% of Allowances

1% to states that have adopted regulation to reduce energy 1% to states that have adopted regulation to reduce energy demand demand

1% to states for that are in compliance with State Building 1% to states for that are in compliance with State Building Energy Efficiency CodesEnergy Efficiency Codes

2% to states that, before the bill’s enactment, enacted 2% to states that, before the bill’s enactment, enacted statewide GHG emission reduction targets that are more statewide GHG emission reduction targets that are more stringent than the bill’s nationwide targets stringent than the bill’s nationwide targets and and by the time by the time of the allocation, require covered facilities to meet emission of the allocation, require covered facilities to meet emission limits more stringent than those imposed on covered limits more stringent than those imposed on covered facilities under the bill. facilities under the bill.

4.5% to all states based on the following formula:4.5% to all states based on the following formula: ⅓ ⅓ of the available allowances based on Low Income Home of the available allowances based on Low Income Home

Energy Assistance Program expenditures;Energy Assistance Program expenditures; ⅓ ⅓ of the available allowances based on population; andof the available allowances based on population; and ⅓ ⅓ of the available allowances based on “quantity of carbon of the available allowances based on “quantity of carbon

dioxide embedded within coal that is mined, natural gas that is dioxide embedded within coal that is mined, natural gas that is processed, and petroleum that is refined within the boundaries processed, and petroleum that is refined within the boundaries of a State, as determined by the Secretary of Energy.”of a State, as determined by the Secretary of Energy.”

States and TribesStates and TribesStates must either retire or use at least 90% of its allocation States must either retire or use at least 90% of its allocation in the following ways:in the following ways:

to mitigate impacts on low-income energy consumers;to mitigate impacts on low-income energy consumers; to promote energy efficiency;to promote energy efficiency; to promote investment in non-emitting electricity generation technology;to promote investment in non-emitting electricity generation technology; to improve public transportation and passenger rail service and promote to improve public transportation and passenger rail service and promote

reductions in vehicle miles traveled;reductions in vehicle miles traveled; to encourage advances in energy technology that reduce or sequester to encourage advances in energy technology that reduce or sequester

GHG emissions;GHG emissions; to address local or regional impacts of climate change, including the to address local or regional impacts of climate change, including the

relocation of communities displaced by the impacts of climate change;relocation of communities displaced by the impacts of climate change; to mitigate obstacles to investment by new entrants in electricity to mitigate obstacles to investment by new entrants in electricity

generation markets and energy-intensive manufacturing sectors;generation markets and energy-intensive manufacturing sectors; to address local or regional impacts of climate change policy, including to address local or regional impacts of climate change policy, including

providing assistance to displaced workers;providing assistance to displaced workers; to mitigate impacts on energy-intensive industries in internationally to mitigate impacts on energy-intensive industries in internationally

competitive markets;competitive markets; to reduce hazardous fuels and to prevent and suppress wildland fires; orto reduce hazardous fuels and to prevent and suppress wildland fires; or to fund rural, municipal, and agricultural water projects that are to fund rural, municipal, and agricultural water projects that are

consistent with sustainable use of water resources.consistent with sustainable use of water resources.

Early Action CreditEarly Action Credit

allowances to owners and operators allowances to owners and operators of covered facilities for actions taken of covered facilities for actions taken since January 1, 1994 that resulted since January 1, 1994 that resulted in verified and credible reductions of in verified and credible reductions of GHG emissions:GHG emissions: 5% in 2012;5% in 2012; 4% in 2013;4% in 2013; 3% in 2014;3% in 2014; 2% in 2015; and2% in 2015; and 1% in 2016.1% in 2016.

Carbon Capture and Carbon Capture and SequestrationSequestration

4% of the allowances are to be placed into 4% of the allowances are to be placed into a Bonus Allowance Account. a Bonus Allowance Account.

Bonus Allowances are to be used as a Bonus Allowances are to be used as a reward for electricity generators that reward for electricity generators that actually inject CO2 into geological actually inject CO2 into geological formations. formations.

The number of bonus allowances that a The number of bonus allowances that a company receives for injecting a metric ton company receives for injecting a metric ton of CO2 underground starts out at of CO2 underground starts out at 4.5 in 4.5 in 20122012 and gradually decreases, until it and gradually decreases, until it reaches zero in 2040. reaches zero in 2040.

3.9 billion total allowances are available 3.9 billion total allowances are available for the Bonus Allowance Accountfor the Bonus Allowance Account

Domestic AgricultureDomestic Agriculture and Forestry and Forestry

5% of the Allowances are to be used in—5% of the Allowances are to be used in— reducing greenhouse gas emissions from the reducing greenhouse gas emissions from the

agriculture and forestry sectors of the United agriculture and forestry sectors of the United States economy; andStates economy; and

increasing greenhouse gas sequestration from increasing greenhouse gas sequestration from those sectors.those sectors.

The Secretary of Agriculture is to establish The Secretary of Agriculture is to establish a program to distribute the allowances to a program to distribute the allowances to entities that carry out sequestration entities that carry out sequestration projects on agricultural and forest land that projects on agricultural and forest land that achieve long-term greenhouse gas emission achieve long-term greenhouse gas emission mitigation benefits. mitigation benefits.

International International Forest ProtectionForest Protection

3% of the allowances are for carrying out 3% of the allowances are for carrying out forest protection activities in countries other forest protection activities in countries other than the United States.than the United States.

Eligible Forest Protection activities are those Eligible Forest Protection activities are those carried out and managed in accordance with carried out and managed in accordance with widely-accepted environmentally sustainable widely-accepted environmentally sustainable forestry practices; and designed—forestry practices; and designed— to promote native species and restoration of to promote native species and restoration of

native forests, where practicable; andnative forests, where practicable; and to avoid the introduction of invasive nonnative to avoid the introduction of invasive nonnative

species.species.

Distribution of AllowancesDistribution of Allowancesin 2012in 2012

2012 Allowance Auction2012 Allowance Auction

5200 MMT CO2 total Allowances5200 MMT CO2 total Allowances 40% of Allowances Freely Given to 40% of Allowances Freely Given to

Covered EntitiesCovered Entities 36% of Allowances Freely Given to Non-36% of Allowances Freely Given to Non-

Covered EntitiesCovered Entities 24% of Allowances to be Auctioned24% of Allowances to be Auctioned

Allowance AuctionAllowance Auction A newly established Climate Change Credit Corporation A newly established Climate Change Credit Corporation

will be responsible for administering the auction and will be responsible for administering the auction and administering the proceeds. administering the proceeds. The Corporation will have a board of directors composed of five The Corporation will have a board of directors composed of five

individuals appointed by the President and approved by the individuals appointed by the President and approved by the Senate for staggered five-year terms. Senate for staggered five-year terms.

Early Auction: Within 180 days of the enactment date, Early Auction: Within 180 days of the enactment date, the Administrator will auction:the Administrator will auction: 6% of the emission allowances for 20126% of the emission allowances for 2012 4% of the emission allowances for 20134% of the emission allowances for 2013 2% of the emission allowances for 20142% of the emission allowances for 2014 all the proceeds of the early auctions are to go to the Energy all the proceeds of the early auctions are to go to the Energy

Technology Deployment Program Technology Deployment Program Annual Auction: In addition to the 6% above, Annual Auction: In addition to the 6% above,

18% of the emission allowances would be auctioned for 2012. 18% of the emission allowances would be auctioned for 2012. 37% of the total emission allowances will be auctioned in 2020. 37% of the total emission allowances will be auctioned in 2020. By 2050, 73% of the emission allowances are auctioned.By 2050, 73% of the emission allowances are auctioned.

Distribution of Auction Distribution of Auction ProceedsProceeds

The Climate Change Credit Corporation is The Climate Change Credit Corporation is directed to use the proceeds from the annual directed to use the proceeds from the annual auction to carry out the following programs:auction to carry out the following programs:

1.1. Zero- or low-carbon energy technologies: 24.75%Zero- or low-carbon energy technologies: 24.75%2.2. Energy Assistance Fund: 17.78%Energy Assistance Fund: 17.78%3.3. Adaptation Fund: 17.78%Adaptation Fund: 17.78%4.4. Advanced coal and sequestration technologies: 15.4%Advanced coal and sequestration technologies: 15.4%5.5. Advanced technology vehicles manufacturing: 11%Advanced technology vehicles manufacturing: 11%6.6. Climate Change and National Security Program: 5%Climate Change and National Security Program: 5%7.7. Climate Change Worker Training Fund: 4.44%Climate Change Worker Training Fund: 4.44%8.8. Cellulosic biomass ethanol technology: 3.85%Cellulosic biomass ethanol technology: 3.85%

Zero- or Low-Carbon Zero- or Low-Carbon Energy TechnologiesEnergy Technologies

An award for zero- or low-carbon An award for zero- or low-carbon generation under this subsection generation under this subsection shall be in the form of a contract to shall be in the form of a contract to provide a production payment for provide a production payment for each year during the first 10 years of each year during the first 10 years of commercial service of the commercial service of the generation unit.generation unit.

Similar to the Production Tax Credit Similar to the Production Tax Credit currently provided for renewables.currently provided for renewables.

Energy Assistance Fund:Energy Assistance Fund:

Monies in the Energy Assistance Fund Monies in the Energy Assistance Fund are to be distributed to the following are to be distributed to the following programs:programs: 50 percent of the funds to the low-income 50 percent of the funds to the low-income

home energy assistance program established home energy assistance program established under the Low Income Home Energy under the Low Income Home Energy Assistance ActAssistance Act

25 percent of the funds to the Weatherization 25 percent of the funds to the Weatherization Assistance Program for Low-Income Persons Assistance Program for Low-Income Persons

25 percent of the funds to rural energy 25 percent of the funds to rural energy assistance.assistance.

Adaptation FundAdaptation Fund To carry out activities that assist fish and To carry out activities that assist fish and

wildlife, fish and wildlife habitat, plants, and wildlife, fish and wildlife habitat, plants, and associated ecological processes in adapting to associated ecological processes in adapting to and surviving the impacts of climate change.and surviving the impacts of climate change.

40 percent shall be allocated to States through 40 percent shall be allocated to States through the Wildlife Conservation and Restoration the Wildlife Conservation and Restoration Account to carry out adaptation activities in Account to carry out adaptation activities in accordance with comprehensive wildlife accordance with comprehensive wildlife conservation strategies and, where appropriate, conservation strategies and, where appropriate, other fish and wildlife conservation strategies.other fish and wildlife conservation strategies.

The remaining funds will dispersed to the The remaining funds will dispersed to the Department of Interior, Environmental Department of Interior, Environmental Protection Agency, the Department of Protection Agency, the Department of Agriculture, Department of Commerce, and the Agriculture, Department of Commerce, and the Army Corps of Engineers.Army Corps of Engineers.

Advanced Coal and Advanced Coal and Sequestration Sequestration Technologies:Technologies:

25% to support 25% to support demonstration projectsdemonstration projects using using advanced coal generation technology, including advanced coal generation technology, including retrofit technology that could be deployed on retrofit technology that could be deployed on existing coal generation facilities. existing coal generation facilities.

25% to provide Federal financial incentives to 25% to provide Federal financial incentives to facilitate the facilitate the deploymentdeployment of not more than 20 of not more than 20 gigawatts of advanced coal generation gigawatts of advanced coal generation technologies. technologies.

50% for large-scale geological carbon storage 50% for large-scale geological carbon storage demonstration projects that store carbon dioxide demonstration projects that store carbon dioxide captured from facilities for the generation of captured from facilities for the generation of electricity using coal gasification or other electricity using coal gasification or other advanced coal combustion processes.advanced coal combustion processes.

Advanced Technology Advanced Technology Vehicles ManufacturingVehicles Manufacturing

Facility conversion funding awards to Facility conversion funding awards to automobile manufacturers and component automobile manufacturers and component suppliers to pay up to 30 percent of the cost of—suppliers to pay up to 30 percent of the cost of— (1) reequipping or expanding an existing (1) reequipping or expanding an existing

manufacturing facility to produce—manufacturing facility to produce— (A) qualifying advanced technology vehicles; or(A) qualifying advanced technology vehicles; or (B) qualifying components; and(B) qualifying components; and

(2) engineering integration of qualifying vehicles and (2) engineering integration of qualifying vehicles and qualifying components.qualifying components.

Period of Availability.—Period of Availability.— (1) facilities and equipment placed in service after the (1) facilities and equipment placed in service after the

date of enactment of this Act and date of enactment of this Act and before January 1, before January 1, 20162016; and; and

(2) engineering integration costs incurred after the (2) engineering integration costs incurred after the date of enactment of this Act.date of enactment of this Act.

Climate Change Climate Change Worker Training FundWorker Training Fund

All funds deposited into the Climate Change All funds deposited into the Climate Change Worker Training Fund are to be used by the Worker Training Fund are to be used by the Department of Labor:Department of Labor: to provide quality job training to any workers displaced to provide quality job training to any workers displaced

by this Act;by this Act; to provide assistance in the form of temporary wages to provide assistance in the form of temporary wages

and health care benefits to workers in training;and health care benefits to workers in training; to transition workers into jobs created as a result of to transition workers into jobs created as a result of

this Act;this Act; to provide skilled workers to enterprises developing to provide skilled workers to enterprises developing

and marketing advanced technologies and practices and marketing advanced technologies and practices that reduce greenhouse gas emissions of the United that reduce greenhouse gas emissions of the United States; andStates; and

to provide funding for State worker training programs.to provide funding for State worker training programs.

Cellulosic Biomass Ethanol Cellulosic Biomass Ethanol TechnologyTechnology

Deployment incentives to encourage Deployment incentives to encourage a variety of projects to produce a variety of projects to produce transportation fuels from cellulosic transportation fuels from cellulosic biomass, relying on different biomass, relying on different feedstocks in different regions of the feedstocks in different regions of the United States.United States.

Global CompetitivenessGlobal Competitiveness

The Executive Branch is directed to The Executive Branch is directed to intensify its efforts to convince other intensify its efforts to convince other nations to start reducing their nations to start reducing their greenhouse-gas emissions. greenhouse-gas emissions.

If a major emitting nation has not taken If a major emitting nation has not taken comparable action, the President can comparable action, the President can require importers of greenhouse-gas-require importers of greenhouse-gas-intensive manufactured products (steel, intensive manufactured products (steel, aluminum, etc.) to submit credits equal aluminum, etc.) to submit credits equal to those required of US manufacturers.to those required of US manufacturers.

OffsetsOffsets Beginning with calendar year 2012, the Beginning with calendar year 2012, the

owner or operator of a covered entity may owner or operator of a covered entity may satisfy satisfy 15 percent15 percent of the total allowance of the total allowance submission requirement by submitting submission requirement by submitting offset allowances.offset allowances.

Offset allowances must be generated by Offset allowances must be generated by projects in the United States and can come projects in the United States and can come only from certain agricultural, forestry, only from certain agricultural, forestry, and other land use-related projects.and other land use-related projects.

The Administrator may identify other types The Administrator may identify other types of projects that can be used for offsets. of projects that can be used for offsets.