Sec. 3. Carbon dividends and carbon fee
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The Internal Revenue Code of 1986 is amended by adding at the end the following new subtitle: Chapter 101. Carbon Fees Chapter 102. Carbon Border Fee Adjustment 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. For purposes of this subtitle: The term Administrator means the Administrator of the Environmental Protection Agency. 2 -e The term carbon dioxide equivalent or CO means the number of metric tons of carbon dioxide emissions with the same global warming potential as one metric ton of another greenhouse gas. 2 -e The term carbon-intensive product means, as identified by the Secretary by rule— any manufactured or agricultural product which the Secretary in consultation with the Administrator determines is emissions-intensive and trade-exposed, except that no covered fuel is a carbon-intensive product, and until such time that the Secretary promulgates rules identifying carbon-intensive products, the following shall be considered carbon-intensive products: 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.
The term carbon leakage means an increase of global greenhouse gas emissions which are substantially due to the relocation of greenhouse gas sources from the United States to jurisdictions which lack comparable controls upon greenhouse gas emissions. The term cost of carbon or carbon costs means a national or sub-national government policy which explicitly places a price on greenhouse gas pollution and shall be limited to either a tax on greenhouse gases or a system of cap-and-trade.
The cost of carbon is expressed as the price per ton of CO 2 -e. The term covered entity means— in the case of crude oil— a refinery operating in the United States, and any importer of any petroleum or petroleum product into the United States, in the case of coal— any coal mining operation in the United States, and any importer of coal into the United States, in the case of natural gas— any entity entering pipeline quality natural gas into the natural gas transmission system, and any importer of natural gas into the United States, in the case of fluorinated gases any entity required to report the emission of a fluorinated gas under part 98 of title 40, Code of Federal Regulations, and any entity or class of entities which, as determined by the Secretary, is transporting, selling, or otherwise using a covered fuel in a manner which emits a greenhouse gas to the atmosphere and which has not been covered by the carbon fee, the fluorinated greenhouse gas fee, or the carbon border fee adjustment.
The term covered fuel means crude oil, natural gas, coal, or any other product derived from crude oil, natural gas, or coal which shall be used so as to emit greenhouse gases to the atmosphere. The term crude oil means unrefined petroleum. The term export means to transport a product from within the jurisdiction of the United States to persons outside the United States. The term fluorinated greenhouse gas means sulfur hexafluoride (SF 6 ), nitrogen trifluoride (NF 3 ), and any fluorocarbon except for controlled substances as defined in subpart A of part 82 of title 40, Code of Federal Regulation, and substances with vapor pressures of less than 1 mm of Hg absolute at 25 degrees.
With these exceptions, fluorinated greenhouse gas includes but is not limited to any hydrofluorocarbon, any perfluorocarbon, any fully fluorinated linear, branched or cyclic alkane, ether, tertiary amine or aminoether, any perfluoropolyether, and any hydrofluoropolyether. The term fossil fuel means coal, coal products, petroleum, petroleum products, or natural gas. The term full fuel cycle greenhouse gas emissions means the greenhouse gas content of a covered fuel plus that covered fuel’s upstream greenhouse gas emissions.
The term global warming potential means the ratio of the time-integrated radiative forcing from the instantaneous release of one kilogram of a trace substance relative to that of one kilogram of carbon dioxide. The term greenhouse gas means carbon dioxide (CO 2 ), methane (CH 4 ), nitrous oxide (N 2 O), sulfur hexafluoride (SF 6 ), hydrofluorocarbons (HFCs), perfluorocarbon (PFCs), and other gases as defined by rule of the Administrator. The term greenhouse gas content means the amount of greenhouse gases, expressed in metric tons of CO 2 -e, which would be emitted to the atmosphere by the use of a covered fuel and shall include, nonexclusively, emissions of carbon dioxide (CO 2 ), nitrous oxide (N 2 O), methane (CH 4 ), and other greenhouse gases as identified by rule of the Administrator.
The term greenhouse gas effect means the adverse effects of greenhouse gases on health or welfare caused by the greenhouse gas’s heat-trapping potential or its effect on ocean acidification. Irrespective of any other definition in law or treaty, the term import means to land on, bring into, or introduce into any place subject to the jurisdiction of the United States. The term petroleum means oil removed from the earth or the oil derived from tar sands or shale. The term production greenhouse gas emissions means the quantity of greenhouse gases, expressed in metric tons of CO 2 -e, emitted to the atmosphere resulting from, nonexclusively, the production, manufacture, assembly, transportation, or financing of a product.
The term upstream greenhouse gas emissions means the quantity of greenhouse gases, expressed in metric tons of CO 2 -e, emitted to the atmosphere resulting from, nonexclusively, the extraction, processing, transportation, financing, or other preparation of a covered fuel for use. There is hereby imposed a carbon fee on any covered entity’s emitting use, or sale or transfer for an emitting use, of any covered fuel. The carbon fee imposed by this section is an amount equal to— the greenhouse gas content of the covered fuel, multiplied by the carbon fee rate.
For purposes of this section— The carbon fee rate, with respect to any use, sale, or transfer during a calendar year, shall be— in the case of calendar year 2019, $15, and except as provided in paragraph (2), in the case of any calendar year thereafter, the carbon fee rate in effect under this subsection for the preceding calendar year, plus $10. In the case of any year immediately following a year for which the Secretary determines under 9903(b) that the actual emissions of greenhouse gases from covered fuels exceeded the emissions reduction target for the previous year, paragraph (1)(B) shall be applied by substituting $15 for $10 .
In the case of any year immediately following a year for which the Secretary determines under 9903(b) that actual emissions of greenhouse gases from covered fuels is not more than 10 percent of the greenhouse gas emissions from covered fuels during the year 2015, paragraph (1)(B) shall be applied by substituting $0 for $10 . The Secretary shall prescribe such rules as are necessary to ensure the fee imposed by this section is not imposed with respect to any nonemitting use, or any sale or transfer for a nonemitting use, including rules providing for the refund of any carbon fee paid under this section with respect to any such use, sale, or transfer.
If any covered fuel or its derivative is used on a farm for a farming purpose, the Secretary shall pay (without interest) to the ultimate purchaser of such covered fuel or its derivative, the total amount of carbon fees previously paid upon that covered fuel, as specified by rule of the Secretary. The terms farm , farming use , and farming purpose shall have the respective meanings given such terms under section 6420(c). The carbon fee shall not be levied upon non-fossil fuel greenhouse gas emissions which occur on a farm.
An emissions reduction schedule for greenhouse gas emissions from covered fuels is hereby established, as follows: The greenhouse gas emissions from covered fuels during the year 2015 shall be the reference amount of emissions and shall be determined from the Inventory of U.S. Greenhouse Gas Emissions and Sinks: 1990–2015 published by the Environmental Protection Agency in April of 2017. The first emission reduction target shall be for the year 2022. The emission target for each year thereafter shall be the previous year’s target emissions minus a percentage of emissions during the reference year determined in accordance with the following table:
Year Emissions Reduction Target 2015 Reference year 2018 to 2021 No emissions reduction target 2022 to 2030 5 percent of 2015 emissions per year 2030 to 2040 2.5 percent of 2015 emissions per year 2040 to 2050 1.5 percent of 2015 emissions per year Not later than 60 days after the beginning of each calendar year beginning after the enactment of this section, the Secretary, in consultation with the Administrator, shall determine whether actual emissions of greenhouse gases from covered fuels exceeded the emissions reduction target for the preceding calendar year.
The Secretary shall make such determination using the same greenhouse gas accounting method as was used to determine the greenhouse gas emissions in the Inventory of U.S. Greenhouse Gas Emissions and Sinks: 1990–2015 published by the Environmental Protection Agency in April of 2017. A fee is hereby imposed upon any fluorinated greenhouse gas which is required to be reported under part 98 of title 40, Code of Federal Regulations. The fee to be paid by the covered entity required to so report shall be an amount equal to— the total amount, in metric tons of CO 2 -e, of emitted fluorinated greenhouse gases (or, in the case of a supplier, emissions that would result determined under the rules of such part), multiplied by an amount equal to 10 percent of the carbon fee rate in effect under section 9902(d)(1) for the calendar year of such emission.
At such time that— the Secretary determines under 9903(b) that actual emissions of greenhouse gases from covered fuels is not more than 10 percent of the greenhouse gas emissions from covered fuels during the year 2015, and the monthly carbon dividend payable to an adult eligible individual has been less than $20 for 3 consecutive years, the Secretary shall decommission in an orderly manner all bureaus and programs associated with administering the carbon fee, the carbon border fee adjustment, and the Carbon Dividend Trust Fund.
In the case of any calendar year after 2018, the $20 amount under subsection (a)(2) shall be increased by an amount equal to— such dollar amount, multiplied by cost-of-living adjustment determined under section 1(f)(3) for the calendar year, determined by substituting calendar year 2017 for calendar year 2016 in subparagraph (A)(ii) thereof. The Secretary, in consultation with the Administrator and the Secretary of Energy, shall prescribe regulations for making payments as provided in subsection
(b)to qualified facilities which capture and sequester qualified carbon dioxide. The Secretary shall make payments to a qualified facility in the same manner as if such payment was a refund of an overpayment of the carbon fee imposed by section 9902, in cases in which such qualified facility— uses any covered fuel— with respect to which the carbon fee has been paid, and which results in the emission of qualified carbon dioxide, captures such emitted qualified carbon dioxide, and sequesters such qualified carbon dioxide in a manner which is safe, permanent, and in compliance with any applicable local, State, and Federal laws, or utilizes such qualified carbon dioxide in a manner provided in paragraph (3)(C). The payment determined under this section shall be an amount equal to the lesser of— the adjusted metric tons of qualified carbon dioxide captured and sequestered or utilized, multiplied by the carbon fee rate during the year in which the carbon fee was imposed by section 9902 upon the covered fuel to which such carbon dioxide relates, or the amount of the carbon fee imposed by section 9902 with respect to such covered fuel. For purposes of this section— The term qualified carbon dioxide has the same meaning given such term under section 45Q(b). The term qualified facility means any industrial facility at which carbon capture equipment is placed in service. The adjusted total metric tons of qualified carbon dioxide captured and sequestered or utilized shall be the total tons of qualified carbon dioxide captured and sequestered or utilized, reduced by the amount of any carbon dioxide likely to escape and be emitted into the atmosphere due to imperfect storage technology or otherwise, as determined by the Secretary in consultation with the Administrator. The Secretary, in consultation with the Administrator, shall establish regulations providing for the methods and processes by which qualified carbon dioxide may be utilized so as to remove that qualified dioxide safely and permanently from the atmosphere. Utilization may include the production of substances such as but not limited to plastics and chemicals. Such regulations shall minimize the escape or further emission of the qualified carbon dioxide into the atmosphere. Not later 540 days after the date of the enactment of this section, the Secretary, in consultation with the Administrator, shall prescribe regulations identifying the conditions under which carbon dioxide may be safely and permanently sequestered. At such time that the Secretary prescribes regulations implementing this section, no payment under this section shall be allowed to a taxpayer to whom a credit has been allowed for any taxable year under section 45Q. The Secretary in consultation with the Administrator shall prescribe such regulations, and other guidance, as may be necessary to carry out the purposes of this subtitle and assess and collect the carbon fee imposed by section 9902 and the fluorinated greenhouse gas fee imposed by section 9904. Such regulations and guidance shall include— the identification of an effective point in the production, distribution, or use of a covered fuel or fluorinated greenhouse gas for collecting such carbon fee or fluorinated greenhouse gas fee, in such a manner so as to minimize administrative burden and maximize the extent to which full fuel cycle greenhouse gas emissions from covered fuels or fluorinated greenhouse gases have the carbon fee or fluorinated greenhouse gas fee levied upon them, the identification of covered entities which shall be liable for the payment of the carbon fee or the fluorinated greenhouse gas fee, requirements for the monthly payment of such fees, as may be necessary or convenient, rules for distinguishing between different types of covered fuels, as may be necessary or convenient, rules for distinguishing between a covered fuel’s greenhouse gas content and its upstream greenhouse gas emissions, rules to ensure that no covered fuel or fluorinated greenhouse gas has the carbon fee, fluorinated greenhouse gas fee, or carbon border fee adjustment imposed upon it more than once, and rules to ensure that the domestic implementation of the carbon fee and the fluorinated greenhouse gas fee coordinate with the implementation of the carbon border fee adjustment of chapter 102. Sec. 9908. Carbon border fee adjustment. Sec. 9909. Administration of the carbon border fee adjustment. Sec. 9910. Allocation of carbon border fee adjustment revenues. The fees imposed by, and refunds allowed under, this section shall be referred to as the carbon border fee adjustment . The purpose of the carbon border fee adjustment is to protect animal, plant, and human life and health, to conserve exhaustible natural resources by preventing carbon leakage, and to facilitate the creation of international agreements. In the case of any person that imports into the United States any covered fuel, there shall be imposed a fee equal to the excess (if any) of— an amount equal to— the amount of full fuel cycle greenhouse gas emissions of such fuel, multiplied by the carbon fee rate in effect for the year in which such fuel is imported, over the total foreign cost of carbon carried by such fuel. In the case of any person that imports into the United States any carbon-intensive products, there shall be imposed a fee equal to the excess (if any) of— an amount equal to— production greenhouse gas emissions of such product, multiplied by the carbon fee rate in effect for the year in which the production greenhouse gas emissions of such product were emitted into the atmosphere, over the total foreign cost of carbon carried by such product. Under regulations prescribed by the Secretary, there shall be allowed a credit or refund (without interest) to exporters of carbon-intensive products manufactured or produced in the United States an amount equal to the excess (if any) of— an amount equal to— the production greenhouse gas emissions of the exported carbon-intensive product, multiplied by the carbon fee rate during the year in which the carbon fee or fluorinated greenhouse gas fee was paid upon the production greenhouse gas emissions of the exported carbon-intensive product, over any total cost of carbon to be levied upon the carbon-intensive product by any jurisdiction to which the carbon-intensive product is to be imported. Any such credit or refund shall be allowed in the same manner as if it were an overpayment of the fee imposed by section 9902 or 9904. The Secretary shall establish fair, timely, impartial, and as necessary confidential procedures by which any exporter of any product from the United States may petition the Secretary to include that exported product on the list of carbon-intensive products. Under regulations prescribed by the Secretary, in the case of a covered fuel produced in the United States with respect to which the fee under section 9902 was paid, there shall be allowed as a credit or refund (without interest) to any exporter of such covered fuels an amount equal to the excess (if any) of— an amount equal to— the full fuel cycle greenhouse gas emissions of the covered fuel, multiplied by the carbon fee rate at the time the carbon fee was paid upon the full fuel cycle greenhouse gas emissions of the exported covered fuel, over any total cost of carbon to be levied upon the covered fuel by a jurisdiction to which the carbon-intensive product is to be imported. Any such credit or refund shall be allowed in the same manner as if it were an overpayment of tax imposed by section 9902. For purposes of this section— The term foreign cost of carbon or foreign carbon cost means the cost of any laws of a foreign jurisdiction which impose a system of cap-and-trade with respect to, or a tax or fee on, greenhouse gas. Such cost shall be determined and expressed as a price per ton of CO2-e. The term total cost of carbon carried means an amount equal to— the production greenhouse gas emissions of a carbon-intensive product or the full fuel cycle greenhouse gas emissions of a covered fuel, multiplied by the cost of carbon with respect to such product or fuel, reduced by any amount refunded with respect to such product or fuel by a foreign jurisdiction. The total cost of carbon carried shall be expressed as price in United States dollars. The term total foreign cost of carbon carried means an amount equal to— the production greenhouse gas emissions of a carbon-intensive product, or the full fuel cycle greenhouse gas emissions of a covered fuel, multiplied by the foreign cost of carbon with respect to such product or fuel, reduced by the amount refunded with respect to such product or fuel by a foreign jurisdiction. The total foreign cost of carbon carried shall be expressed as price in United States dollars. The Secretary in consultation with the Administrator shall prescribe regulations and guidance which implement the carbon border fee adjustment under section 9908. In determining the production greenhouse gas emissions of an imported carbon-intensive product, the upstream greenhouse gas emissions of an imported covered fuel, the full fuel cycle greenhouse gas emissions of an imported covered fuel, or the foreign cost of carbon, or otherwise administering the carbon border fee adjustment, it is the sense of Congress that the Secretary should collaborate with authorized officers of any jurisdiction, including sub-national governments, affected by the carbon border fee adjustment. In determining the production greenhouse gas emissions of an imported carbon-intensive product, the upstream greenhouse gas emissions of an imported covered fuel, the full fuel cycle greenhouse gas emissions of an imported covered fuel, or the foreign cost of carbon, the Secretary shall use reliable methodologies, which— as may be necessary or convenient— distinguish between different types of covered fuels, distinguish between a covered fuel’s greenhouse gas content and that covered fuel’s upstream greenhouse gas emissions, distinguish between the different types of greenhouse gas emissions which compose a covered fuel’s upstream greenhouse gas emissions or greenhouse gas content, as well as the various processes which produced those emissions, and distinguish between the different types of greenhouse gas emissions which compose a carbon-intensive product’s production greenhouse gas emissions, as well as the various processes which produced those emissions, ensure that no covered fuel, covered fluorinated greenhouse gas, or carbon-intensive product has the carbon fee, the fluorinated greenhouse gas fee, or the border fee adjustment imposed upon it more than once, ensure that the implementation of the border carbon adjustment aligns with the carbon fee and the fluorinated gas fee, in the case of incomplete data, rely upon the best available methodologies for interpolating data gaps, and are consistent with international treaties and agreements. The Secretary shall determine— not later than 3 years after the date of the enactment of this section, the production greenhouse gas emissions of imported carbon-intensive products, not later than 180 days after the date of the enactment of this section, the full fuel cycle greenhouse gas emissions and the upstream greenhouse gas emissions of every imported covered fuel, and not later than 3 years after the date of the enactment of this section, the foreign cost of carbon in all jurisdictions. The Secretary shall establish fair, timely, impartial, and as necessary confidential procedures by which the importer of any carbon-intensive product or any covered fuel may petition the Secretary to revise the Secretary’s determination of the production greenhouse gas emissions, full fuel cycle greenhouse gas emissions, or upstream greenhouse gas emissions of that importer’s imported covered fuel or imported carbon-intensive product, or the foreign cost of carbon carried by that importer’s imported carbon-intensive product. Notwithstanding any other treaty, law, or policy, shipments of covered fuels or carbon-intensive products from the United States to Guam, the United States Virgin Islands, Samoa, Puerto Rico, and the Northern Mariana Islands shall be eligible for a refund of the carbon fee under section 9908(e). Notwithstanding any other treaty, law, or policy, imports of covered fuels or carbon-intensive products to Guam, the United States Virgin Islands, Samoa, Puerto Rico, and the Northern Mariana Islands shall not be subject to Section 9908(c) or 9908(d).” The revenues collected under this chapter may be used to supplement appropriations made available in fiscal years 2018 and thereafter— to U.S. Customs and Border Protection, in such amounts as are necessary to administer the carbon border fee adjustment, then to the Department of Treasury, in such amounts as are necessary to allow refunds under section 9908(e) to exporters of carbon-intensive products and exporters of covered fuels. . Section 45Q(f) is amended by adding at the end the following new paragraph: No credit shall be allowed under this section to a taxpayer which has received any payment under section 9906. . In the case that the Appellate Body of the World Trade Organization, or any other authoritative international treaty interpreter, shall find any portion of the carbon border fee adjustment under chapter 102 of the Internal Revenue Code of 1986 to violate any treaty to which the United States is a party, the Secretary of the Treasury is authorized to alter any aspect of such carbon border fee adjustment so as to bring the carbon border fee adjustment into conformance with international law. The Congress finds the international mitigation of greenhouse gas emissions to be of national importance. Therefore, the Congress encourages the Secretary of State, or the Secretary’s designee, to commence and complete negotiations with other nations with the goal of forming treaties, environmental agreements, accords, partnerships or any other instrument that effectively reduces global greenhouse gas emissions to 10 percent of 2015 levels by 2050 and which respect the principle of common but differentiated responsibilities and respective capabilities. Any part of the carbon border fee adjustment shall be suspended, in whole or in part— by treaty or other international agreement which includes provisions for the suspension of the carbon border fee adjustment, in whole or in part, with any party signatory to the treaty or other international agreement, or by a finding of the Secretary that a jurisdiction of importation has implemented policies which, in the case of high emitting countries, reduce greenhouse gas emissions at a rate at least equivalent to United States greenhouse gas emission reductions, or, in the case of low emitting countries, prevent the increase in greenhouse gas emissions. Any such finding shall be reviewed at least every 3 years and amended or revoked as required.