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Market-Based Greenhouse Gas Control: Selected Proposals in the 111th Congress Congressional Research Service Summary As of the date of this report, Members in the 111th Congress have introduced seven stand-alone proposals that would control greenhouse gas (GHG) emissions. The proposals offered to date would employ market-based approacheseither a cap-and-trade or carbon tax system, or some combination thereofto reduce GHG emissions. The legislative proposals are varied in their overall approaches in controlling GHG emissions. Some control emissions by setting a quantity (or cap); others control emissions by setting a price (or tax/fee). In addition, the proposals differ in their inclusion of particular design elements, such as whether or not to allow offsets (emission reduction opportunities from economic sectors not directly addressed by the primary approach). H.R. 2454 (Waxman/Markey) has been the primary energy and climate change legislative proposal in the 111th Congress. It was introduced May 15, 2009, and subsequently modified and offered as a Managers Amendment (May 18, 2009) for markup in the House Committee on Energy and Commerce. After making several amendments to the bill (most relating to the bills energy provisions), the committee ordered the bill reported May 21, 2009. H.R. 2454 (Waxman/Markey) and H.R. 1862 (Van Hollen) would establish cap-and-trade programs, but they would differ in their implementation. For example, the latter would not allow offsets to be used for compliance purposes, while the former would allow covered entities to satisfy an increasing percentage (approximately 30% in 2012) of their compliance obligation with offsets. H.R. 1666 (Doggett) would also create a cap-and-trade system, but in the early years of the program, the number of emission allowances distributed would be based on achieving a specified allowance price. Three of the proposalsH.R. 594 (Stark), H.R. 1337 (Larson), and H.R. 2380 (Inglis)would use a carbon tax approach to address carbon dioxide (CO2) emissions from fossil fuel combustion. H.R. 1683 (McDermott) would establish a program that may be described as a dynamic carbon tax: its tax rate would be linked with annual emission allocations (or caps). A key element in GHG emission reduction bills is how, to whom, and for what purpose the value of emission allowances or carbon tax revenue would be distributed. The distribution strategy is a critical policy decision, because it would affect (1) the overall cost of the program and (2) how program costs are distributed throughout the economy. In the early years of the program, H.R. 2454 would distribute allowances at no cost to both covered and non-covered entities to support various policy objectives. In addition, an increasing percentage (approximately 18% in 2016) of the allowances would be sold through auction. As with the distribution of no-cost allowances, auction revenues would be used to further various policy objectives.

Related Legislation:
• H.R.2454
• H.R.1862
• H.R.1666
• H.R.594
• H.R.1337
• H.R.2380
• H.R.1683

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