Sec. 3. Carbon fee
2,981 words·~14 min read·
/bill/117/s/685/is/section-3A research copy — for the controlling text, always check the official state or federal source. Not legal advice.
Chapter 38 of subtitle D of the Internal Revenue Code of 1986 is amended by adding at the end the following new subchapter: Sec. 4691. Definitions. Sec. 4692. Carbon fee. Sec. 4693. Fee on noncovered fuel emissions. Sec. 4694. Refunds for carbon capture, sequestration, and utilization. Sec. 4695. Border adjustments. For purposes of this subchapter— 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 over a 100-year period as one metric ton of another greenhouse gas. 2 -e The term carbon-intensive product means— 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 any manufactured product which the Secretary, in consultation with the Administrator, the Secretary of Commerce, and the Secretary of Energy, determines is energy-intensive and trade-exposed (with the exception of any covered fuel).
The term covered entity means— in the case of crude oil— any operator of a United States refinery (as described in subsection (d)(1) of section 4611), and any person entering such product into the United States for consumption, use, or warehousing (as described in subsection (d)(2) of such section), in the case of coal— any producer subject to the tax under section 4121, and any importer of coal into the United States, in the case of natural gas— any entity which produces natural gas (as defined in section 613A(e)(2)) from a well located in the United States, and any importer of natural gas into the United States, in the case of any noncovered fuel emissions, the entity which is the source of such emissions, provided that the total amount of carbon dioxide or methane emitted by such entity for the preceding year (as determined using the methodology required under section 4692(e)(4)) was not less than 25,000 metric tons, 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 into the atmosphere and which has not been covered by the carbon fee, the fee on noncovered fuel emissions, 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 greenhouse gas — has the meaning given such term in section 901 of the Energy Independence and Security Act of 2007 ( 42 U.S.C. 17321 ), and includes any other gases identified 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.
The term noncovered fuel emission means any carbon dioxide or methane emitted as a result of the production, processing, transport, or use of any product or material within the energy or industrial sectors— including any fugitive or process emissions associated with the production, processing, or transport of a covered fuel, and excluding any emissions from the combustion or use of a covered fuel. The term qualified carbon oxide has the meaning given the term in section 45Q(c).
The term United States shall be treated as including each possession of the United States (including the Commonwealth of Puerto Rico and the Commonwealth of the Northern Mariana Islands). In this section: The term applicable period means, with respect to any determination made by the Secretary under subsection (e)(3) for any calendar year, the period— beginning on January 1, 2023, and ending on December 31 of the preceding calendar year. The term cumulative emissions means an amount equal to the sum of any greenhouse gas emissions resulting from the use of covered fuels and any noncovered fuel emissions for all years during the applicable period.
The term cumulative emissions target means an amount equal to the sum of the emissions targets for all years during the applicable period. The term emissions target means the target for greenhouse gas emissions during a calendar year as determined under subsection (e)(1). During any calendar year that begins after December 31, 2022, there is imposed a carbon fee on any covered entity’s use, sale, or transfer 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, as determined under subsection (d).
The carbon fee rate shall be determined in accordance with the following: The carbon fee rate, with respect to any use, sale, or transfer during a calendar year, shall be— in the case of calendar year 2023, $25, and except as provided in paragraphs
(2)and (3), in the case of any calendar year after 2023, the amount equal to the sum of— the amount under subparagraph (A), plus in the case of calendar year 2024, $10, and in the case of any calendar year after 2024, the amount in effect under this clause for the preceding calendar year, plus $10. In the case of any calendar year after 2023, the amount determined under paragraph (1)(B) shall be increased by an amount equal to— that dollar amount, multiplied by the cost-of-living adjustment determined under section 1(f)(3) for that calendar year, determined by substituting 2022 for 2016 in subparagraph (A)(ii) thereof. If any increase determined under subparagraph
(A)is not a multiple of $1, such increase shall be rounded up to the next whole dollar amount. In the case of any calendar year following a determination by the Secretary pursuant to subsection (e)(3) that the cumulative emissions for the preceding calendar year exceeded the cumulative emissions target for such year, paragraph (1)(B)(ii)(II) shall be applied— in the case of calendar years 2026 through 2030, by substituting $15 for $10 , in the case of calendar years 2031 through 2040, by substituting $20 for $10 , and in the case of any calendar year beginning after 2040, by substituting $25 for $10 . In the case of any year following a determination by the Secretary pursuant to subsection (e)(3) that— the average annual emissions of greenhouse gases from covered entities over the preceding 3-year period are not more than 10 percent of the greenhouse gas emissions during the year 2018, and the cumulative emissions did not exceed the cumulative emissions target, paragraph (1)(B)(ii)(II) shall be applied by substituting $0 for $10 . With respect to any year, the annual greenhouse gas emissions and cumulative emissions described in subparagraph
(A)or
(B)shall be determined using the methodology required under subsection (e)(4). For purposes of subsection (d), the emissions target for any year shall be the amount of greenhouse gas emissions that is equal to— for calendar years 2023 and 2024, the applicable percentage of the total amount of greenhouse gas emissions from the use of any covered fuel during calendar year 2018, and for calendar year 2025 and each calendar year thereafter, the applicable percentage of the total amount of greenhouse gas emissions from the use of any covered fuel and noncovered fuel emissions during calendar year 2018. For purposes of subparagraph (A), with respect to determining the total amount of greenhouse gas emissions from the use of any covered fuel and noncovered fuel emissions during calendar year 2018, the Administrator shall use such methods as are determined appropriate, provided that such methods are, to the greatest extent practicable, comparable to the methods established under paragraph (4). In the case of calendar years 2023 through 2035, the applicable percentage shall be determined as follows: Year Applicable percentage 2023 81 percent 2024 75 percent 2025 70 percent 2026 67 percent 2027 63 percent 2028 60 percent 2029 57 percent 2030 55 percent 2031 52 percent 2032 49 percent 2033 46 percent 2034 43 percent 2035 40 percent In the case of calendar years 2036 through 2050, the applicable percentage shall be equal to— the applicable percentage for the preceding year, minus 2 percentage points. In the case of any calendar year beginning after 2050, the applicable percentage shall be equal to 10 percent. Not later than September 30, 2024, and annually thereafter, the Administrator, in consultation with the Secretary, shall make available to the public a report on— the cumulative emissions with respect to the preceding calendar year, and any other relevant information, as determined appropriate by the Administrator. Not later than September 30, 2025, and annually thereafter, the Administrator, in consultation with the Secretary and as part of the report described in subparagraph (A), shall determine whether cumulative emissions with respect to the preceding calendar year exceeded the cumulative emissions target with respect to such year. Not later than January 1, 2023, the Administrator shall prescribe rules for greenhouse gas accounting for covered entities for purposes of this subchapter, which shall— to the greatest extent practicable, employ existing data collection methodologies and greenhouse gas accounting practices, ensure that the method of accounting— applies to— all greenhouse gas emissions from covered fuels and all noncovered fuel emissions, and all covered entities, excludes— any greenhouse gas emissions which are not described item
(aa)of subclause (I), and any entities which are not described in item
(bb)of such subclause, and appropriately accounts for— qualified carbon oxide which is captured and disposed or used in a manner described in section 4694, and nonemitting uses of covered fuels, as described in subsection (f), subject to such penalties as are determined appropriate by the Administrator, require any covered entity to report, not later than April 1 of each calendar year— the total greenhouse gas content of any covered fuels used, sold, or transferred by such covered entity during the preceding calendar year, and the total noncovered fuel emissions of the covered entity during the preceding calendar year, and require any information reported pursuant to clause
(iii)to be verified by a third-party entity that, subject to such process as is determined appropriate by the Administrator, has been certified by the Administrator with respect to the qualifications, independence, and reliability of such entity. For purposes of establishing the rules described in subparagraph (A), the Administrator may elect to modify the activities of the Greenhouse Gas Reporting Program to satisfy the requirements described in clauses
(i)through
(iv)of such subparagraph. With respect to any determination made by the Administrator as to the amount of greenhouse gas emissions for any calendar year (including calendar year 2018), any subsequent revision by the Administrator with respect to such amount shall apply for purposes of the fee imposed under subsection
(b)for any calendar years beginning after such revision. The Secretary shall prescribe such rules as are necessary to ensure the carbon 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. The Secretary, in consultation with the Administrator, shall prescribe such regulations, and other guidance, to assess and collect the carbon fee imposed by this section, including— the identification of covered entities that are liable for payment of a fee under this section or section 4693, as may be necessary or convenient, rules for distinguishing between different types of covered entities, as may be necessary or convenient, rules for distinguishing between the greenhouse gas emissions of a covered entity and the greenhouse gas emissions that are attributed to the covered entity but not directly emitted by the covered entity, requirements for the quarterly payment of such fees, and rules to ensure that the carbon fee under this section, the fee on noncovered fuel emissions under section 4693, or the carbon border fee adjustment is not imposed on an emission from covered fuel or noncovered fuel emission more than once. During any calendar year that begins after December 31, 2024, there is imposed a fee on a covered entity for any noncovered fuel emissions which occur during the calendar year. The fee to be paid under subsection
(a)by the covered entity which is the source of the emissions described in that subsection shall be an amount equal to— the total amount, in metric tons of CO 2 -e, of emitted greenhouse gases, multiplied by an amount equal to the carbon fee rate in effect under section 4692(d) for the calendar year of such emission. The Secretary, in consultation with the Administrator, shall prescribe such regulations, and other guidance, to assess and collect the carbon fee imposed by this section, including regulations describing the requirements for the quarterly payment of such fees. The Secretary, in consultation with the Administrator and the Secretary of Energy, shall prescribe regulations for providing payments to any person which captures qualified carbon oxide which is— disposed of by such person in secure geological storage, as described in section 45Q(f)(2), or used in a manner which has been approved by the Secretary pursuant to subsection (c). If the person described in paragraph
(1)makes an election under this paragraph in such time and manner as the Secretary may prescribe by regulations, the credit under this section— shall be allowable to the person that owns the facility described in subsection (b)(1), and shall not be allowable to the person described in paragraph (1). In the case of any facility for which carbon capture equipment has been placed in service, the Secretary shall make payments in the same manner as if such payment was a refund of an overpayment of the fee imposed by section 4692 or 4693. The payment determined under this subsection shall be an amount equal to— the metric tons of qualified carbon oxide captured and disposed of, used, or utilized in a manner consistent with subsection (a), multiplied by the carbon fee rate during the year in which the carbon fee was imposed by section 4692 on the covered fuel to which such carbon oxide relates, or in the case of a direct air capture facility (as defined in section 45Q(e)(1)), the carbon fee rate during the year in which the qualified carbon oxide was captured and disposed of, used, or utilized. The Secretary, in consultation with Administrator and the Secretary of Energy, shall, through regulation or other public guidance, determine which uses of qualified carbon oxide are eligible for payments under this section, which may include— utilization in a manner described in clause
(i)or
(ii)of section 45Q(f)(5)(A), or any other use which ensures minimal leakage or escape of such carbon oxide. In the case of any facility which is owned by an entity that is determined to be— in violation of any applicable air or water quality regulations, or with respect to any environmental justice community (as defined in section 2(d)(1)(D) of the America's Clean Future Fund Act ), creating health or environmental harm to such community, such facility shall not be eligible for any payment under this section during the period of such violation. The fees imposed by, and refunds allowed under, this section shall be referred to as ‘the carbon border fee adjustment’. In the case of any carbon-intensive product which is exported from the United States, the Secretary shall pay to the person exporting such product a refund equal to the amount of the cost of such product attributable to any fees imposed under this subchapter related to the manufacturing of such product (as determined under regulations established by the Secretary). In the case of any covered fuel which is exported from the United States, the Secretary shall pay to the person exporting such fuel a refund equal to the amount of the cost of such fuel attributable to any fees imposed under this subchapter related to the use, sale, or transfer of such fuel. In the case of any carbon-intensive product imported into the United States, there is imposed an equivalency fee on the person importing such product in an amount equal to the cost of such product that would be attributable to any fees imposed under this subchapter related to the manufacturing of such product if any inputs or processes used in manufacturing such product were subject to such fees (as determined under regulations established by the Secretary). The amount of the equivalency fee under subparagraph
(A)shall be reduced by the amount, if any, of any fees imposed on the carbon-intensive product by the foreign nation or governmental units from which such product was imported. In the case of any covered fuel imported into the United States, there is imposed a fee on the person importing such fuel in an amount equal to the amount of any fees that would be imposed under this subchapter related to the use, sale, or transfer of such fuel. The amount of the fee under subparagraph
(A)shall be reduced by the amount, if any, of any fees imposed on the covered fuel by the foreign nation or governmental units from which the fuel was imported. Under regulations established by the Secretary, foreign policies that have substantially the same effect in reducing emissions of greenhouse gases as fees shall be treated as fees for purposes of subsections
(b)and (c). The Secretary shall consult with the Administrator, the Secretary of Commerce, and the Secretary of Energy in establishing rules and regulations implementing the purposes of this section. The Secretary, in consultation with the Secretary of State, may adjust the applicable amounts of the refunds and equivalency fees under this section in a manner that is consistent with any obligations of the United States under an international agreement. . The amendment made by this section shall apply to periods beginning after December 31, 2022.
Connectionstraces to 1
Traces to 1 document
U.S. Code