[Congressional Bills 117th Congress]
[From the U.S. Government Publishing Office]
[S. 4355 Introduced in Senate (IS)]
<DOC>
117th CONGRESS
2d Session
S. 4355
To amend the Internal Revenue Code of 1986 to create a carbon border
adjustment based on carbon intensity, and for other purposes.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
June 7, 2022
Mr. Whitehouse (for himself, Mr. Coons, Mr. Schatz, and Mr. Heinrich)
introduced the following bill; which was read twice and referred to the
Committee on Finance
_______________________________________________________________________
A BILL
To amend the Internal Revenue Code of 1986 to create a carbon border
adjustment based on carbon intensity, and for other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Clean Competition Act''.
SEC. 2. CARBON INTENSITY CHARGE.
(a) In General.--Chapter 38 of the Internal Revenue Code of 1986 is
amended by adding at the end the following new subchapter:
``Subchapter E--Carbon Intensity Charge
``Sec. 4691. Calculation of carbon intensity.
``Sec. 4692. Imposition of carbon intensity charge.
``Sec. 4693. Rebate.
``Sec. 4694. Definitions.
``SEC. 4691. CALCULATION OF CARBON INTENSITY.
``(a) Reporting Requirements.--Not later than June 30, 2025, and
annually thereafter, any covered entity shall, for each eligible
facility operated by such entity, report to the Secretary with respect
to the following:
``(1) Any information required to be reported to the
Administrator under the Greenhouse Gas Reporting Program (or
which would be required to be reported notwithstanding any
other provision of law prohibiting the implementation of or use
of funds for such requirements) for the preceding calendar
year.
``(2) The total amount of electricity used at such facility
during the preceding calendar year, including--
``(A) whether such electricity was provided through
the electric grid or a dedicated generation source,
``(B) the terms of any power purchase agreements
with respect to such facility, and
``(C) with respect to any electricity which was not
provided through the electric grid, the greenhouse gas
emissions associated with the production of such
electricity, provided that such emissions are not
reported pursuant to paragraph (1).
``(3) The total weight (expressed in tons) of each covered
primary good produced at such facility during the preceding
calendar year.
``(b) Calculation.--
``(1) Carbon intensity.--
``(A) Eligible facility.--For purposes of this
subchapter, for each calendar year, the carbon
intensity with respect to any eligible facility shall
be an amount equal to the quotient of--
``(i) the covered emissions (as determined
under paragraph (2)) with respect to such
facility, divided by
``(ii) the total weight (expressed in tons)
of covered primary goods produced at such
facility during the preceding calendar year.
``(B) Covered national industry.--For purposes of
this subchapter, the carbon intensity with respect to
any covered national industry shall be an amount equal
to the quotient of--
``(i) an amount equal to the sum of the
covered emissions (as determined under
paragraph (2)) with respect to all eligible
facilities which produce covered primary goods
which are included within such industry for
calendar year 2024, divided by
``(ii) the total weight (expressed in tons)
of covered primary goods produced at all such
eligible facilities during such year.
``(C) Petition for specific goods.--
``(i) In general.--In the case of any
covered national industry which produces more
than 1 covered primary good, a covered entity
may file a petition with the Secretary to
determine the carbon intensity with respect to
a specific covered primary good.
``(ii) Review.--With respect to any covered
primary good which is included in a petition
described in clause (i), the Secretary (in
coordination with the Administrator and the
Secretary of Energy) shall approve such
petition if--
``(I) the chemical, physical, or
mechanical production processes for
such good are substantially different
as compared to other covered primary
goods produced within the same covered
national industry, and
``(II) the carbon intensity
determined with respect to such good is
at least 25 percent greater than the
carbon intensity determined for other
covered primary goods produced within
the same covered national industry.
``(iii) Recalculation.--In the case of any
petition described in clause (i) which is
approved by the Secretary pursuant to clause
(ii), the Secretary (in coordination with the
Administrator) shall redetermine the carbon
intensity with respect to the covered national
industry which includes production of the
covered primary good which is the subject of
such petition by excluding any covered
emissions associated with the production of
such good for purposes of the determination
made under subparagraph (B) for such industry.
``(D) Determination.--Any determination of carbon
intensity under this paragraph shall be made by the
Secretary in coordination with the Administrator and
the Secretary of Energy.
``(2) Covered emissions.--
``(A) In general.--For purposes of this subsection,
for each calendar year, the amount of covered emissions
with respect to any eligible facility shall be an
amount (as determined by the Secretary, in coordination
with the Administrator) equal to--
``(i) the amount equal to the sum of--
``(I) the total greenhouse gas
emissions associated with the
production of covered primary goods at
such facility during the preceding
calendar year (as reported pursuant to
subsection (a)), plus
``(II) the total greenhouse gas
emissions associated with any
electricity used at such facility for
the production of such goods during the
preceding calendar year, minus
``(ii) the total greenhouse gas emissions
which are captured and disposed of in secure
geological storage (in compliance with the
regulations established under section
45Q(f)(2)) during the preceding calendar year.
``(B) Direct air capture.--For purposes of
subparagraph (A)(ii), in the case of any greenhouse gas
emissions which are captured directly from the ambient
air, the operator of the facility which captured such
emissions may apportion such emissions amongst any
eligible facilities which are under common control of
such operator.
``(C) Emissions for electricity used.--
``(i) In general.--For purposes of
subparagraph (A)(i)(II), the amount of
greenhouse gas emissions associated with
electricity provided through the electric grid
shall be determined based on the average carbon
intensity for the regional grid in which the
eligible facility is located for the preceding
calendar year.
``(ii) Exception.--In the case of an
eligible facility which is subject to a power
purchase agreement which guarantees that any
electricity provided under such agreement is
generated not less than 15 minutes prior to use
by such facility and within the same regional
transmission zone as such facility--
``(I) clause (i) shall not apply,
and
``(II) the amount of greenhouse gas
emissions associated with such
electricity shall be determined based
on the average carbon intensity of the
electricity provided under such
agreement.
``(3) Imported goods.--
``(A) In general.--In the case of any covered
primary good which is imported into the United States,
the carbon intensity with respect to such good shall be
determined by the Secretary (in coordination with the
relevant parties) based on--
``(i) the carbon intensity of the general
economy of the country of origin of such good,
or
``(ii) if the Secretary (in coordination
with the relevant parties) determines that
transparent, verifiable, and reliable
information is available with respect to any
covered national industry in the country of
origin of such good and that such country of
origin is a transparent market economy in which
inter-firm resource shuffling is unlikely to
occur, the carbon intensity of the covered
national industry in such country which
includes production of such good.
``(B) Petition.--
``(i) In general.--In the case of any
entity which imports a covered primary good for
which the carbon intensity can be determined
under subparagraph (A)(ii), such entity may
file a petition with the Secretary to determine
the charge under section 4692, if any, based on
the average carbon intensity with respect to
the production of such good by the manufacturer
within the country of origin.
``(ii) Aggregation rule.--For purposes of
this subparagraph, the average carbon intensity
with respect to the production of a covered
primary good shall be determined based upon
greenhouse gas emission and production data
from all facilities which produce such good
which are under common control of the
manufacturer of such good, including any
subsidiary, parent company, or joint venture of
such manufacturer within the country of origin.
``(iii) Inputs.--With respect to any
covered primary good which is imported into the
United States and for which other covered
primary goods (other than petroleum, natural
gas, or coal) were used as inputs by the
manufacturer in the production of the imported
covered primary good, any greenhouse gas
emissions associated with the production of the
covered primary goods used as inputs shall be
included in the determination of the greenhouse
gas emissions associated with production of the
imported covered primary good.
``(iv) Data provision.--In the case of an
entity which files a petition described in
clause (i), such entity shall provide the
Secretary with an environmental product
declaration containing any information which
would otherwise be required to be reported
under subsection (a) if the facilities which
produced the covered primary good to which the
petition applies were subject to the reporting
requirements under the Greenhouse Gas Reporting
Program.
``(C) Carbon intensity of the general economy.--For
purposes of this paragraph, with respect to any
country, the carbon intensity of the general economy of
such country shall be an amount equal to the quotient
of--
``(i) the gross domestic product of such
country for the year described in clause (ii),
divided by
``(ii) the production-based greenhouse gas
emissions of such country for the most recent
year for which the Secretary determines there
is reliable information.
``(D) Exclusion.--In the case of any covered
primary good which is imported into the United States
and was produced in a relatively least developed
country (as described in section 124 of the Foreign
Assistance Act of 1961 (22 U.S.C. 2151v)), this
paragraph shall not apply.
``(E) Inter-firm resource shuffling.--For purposes
of this paragraph, the term `inter-firm resource
shuffling' means any buying, selling, trading,
exchanging, or other transfer of control of production
facilities between entities based on the carbon
intensity of such facilities for the purpose of
creating entities with relatively lower carbon
intensity and entities with relatively higher carbon
intensity.
``(c) Publication.--The Secretary (in coordination with the
relevant parties) shall annually publish any carbon intensity which has
been determined under subsection (b) with respect to any eligible
facility, covered national industry, covered primary good, foreign
manufacturer, or country of origin.
``(d) Relevant Parties.--For purposes of this section, the term
`relevant parties' means--
``(1) the Administrator,
``(2) the Secretary of Energy,
``(3) the Secretary of Commerce,
``(4) the United States Trade Representative, and
``(5) the Chair and Vice Chair of the United States
International Trade Commission.
``SEC. 4692. IMPOSITION OF CARBON INTENSITY CHARGE.
``(a) In General.--
``(1) Importation of goods.--
``(A) In general.--
``(i) Covered primary goods.--In the case
of any covered primary good imported into the
United States during any calendar year
beginning after December 31, 2023, there is
hereby imposed a charge in an amount equal to
the product of--
``(I)(aa) in the case of a good for
which the carbon intensity is
determined under section
4691(b)(3)(A)(i), the amount (if any)
by which the amount determined under
clause (iii) with respect to such good
exceeds an amount equal to the
applicable percentage of the carbon
intensity (as determined under section
4691(b)(1)(B)) for the covered national
industry which includes such good, or
``(bb) in the case of a good for
which the carbon intensity is
determined under subparagraph (A)(ii)
or (B) of section 4691(b)(3), the
amount (if any) by which the carbon
intensity determined under such
subparagraph with respect to such good
exceeds an amount equal to the
applicable percentage of the carbon
intensity (as determined under section
4691(b)(1)(B)) for the covered national
industry which includes such good,
multiplied by
``(II) the total weight (expressed
in tons) of the good imported into the
United States, multiplied by
``(III) the carbon price.
``(ii) Finished goods.--
``(I) In general.--In the case of
any imported finished good which is
imported into the United States during
any calendar year beginning after
December 31, 2025, there is hereby
imposed a charge in an amount equal to
the sum of the amounts determined under
subclause (II) with respect to each
covered primary good which is a
component part of such imported
finished good.
``(II) Components.--The amount
determined under this subclause with
respect to any covered primary good
which is a component part of an
imported finished good is an amount
equal to the product of--
``(aa) the amount (if any)
determined under clause (i)(I)
if such clause were applied
with respect to such good,
multiplied by
``(bb) the total weight
(expressed in tons) of the
covered primary good,
multiplied by
``(cc) the carbon price.
``(iii) Calculation for certain foreign
goods.--For purposes of clause (i)(I)(aa), the
amount determined under this clause with
respect to any covered primary good shall be
equal to the product of--
``(I) an amount equal to the
quotient of--
``(aa) the carbon intensity
of the general economy (as
determined under section
4691(b)(3)(C)) of the country
of origin of such good, divided
by
``(bb) the carbon intensity
of the general economy (as so
determined) of the United
States, multiplied by
``(II) an amount equal to the
applicable percentage of the carbon
intensity (as determined under section
4691(b)(1)(B)) for the covered national
industry which includes such good.
``(B) Charge due.--The charge imposed under this
paragraph with respect to any goods imported during any
calendar year shall be paid by the entity which
imported such goods not later than September 30 of the
calendar year subsequent to such year.
``(C) Exclusion.--In the case of any covered
primary good (including any covered primary good which
is a component part of an imported finished good) which
is imported into the United States and was produced in
a relatively least developed country (as described in
section 124 of the Foreign Assistance Act of 1961 (22
U.S.C. 2151v)), this paragraph shall not apply.
``(2) Domestic production of covered primary goods.--
``(A) In general.--In the case of any eligible
facility, for each calendar year beginning after
December 31, 2023, there is hereby imposed a charge in
an amount equal to the product of--
``(i) the amount (if any) by which the
carbon intensity of such facility (as
determined under subparagraph (A) of section
4691(b)(1)) exceeds--
``(I) an amount equal to the
applicable percentage of the carbon
intensity for the covered national
industry (as determined under
subparagraph (B) of section 4691(b)(1))
which includes any covered primary good
produced by such facility, or
``(II) in the case of a covered
primary good produced by such facility
which is subject to an approved
petition under subparagraph (C) of such
section, an amount equal to the
applicable percentage of the carbon
intensity determined with respect to
such good, multiplied by
``(ii) the total weight (expressed in tons)
of any covered primary goods produced by such
facility during such calendar year, multiplied
by
``(iii) the carbon price.
``(B) Charge due.--The charge imposed under this
paragraph with respect to any calendar year shall be
paid by the covered entity not later than September 30
of the calendar year subsequent to such year.
``(b) Applicable Percentage.--For purposes of paragraphs (1)(A) and
(2)(A) of subsection (a), the applicable percentage shall be--
``(1) for calendar year 2024, 100 percent,
``(2) for calendar years 2025 through 2028, the applicable
percentage for the preceding calendar year, reduced by 2.5
percentage points, and
``(3) for any calendar year subsequent to calendar year
2028, the applicable percentage for the preceding calendar
year, reduced by 5 percentage points (but not less than zero).
``(c) Carbon Price.--
``(1) In general.--For purposes of paragraphs (1)(A) and
(2)(A) of subsection (a), the carbon price shall be--
``(A) for 2024, $55, and
``(B) for each calendar year subsequent to the
calendar year described in subparagraph (A), an amount
equal to the sum of--
``(i) the carbon price for the preceding
year, plus
``(ii) an amount equal to--
``(I) the amount described in
clause (i), multiplied by
``(II) the percentage by which the
CPI for the preceding calendar year
exceeds the CPI for the second
preceding calendar year, increased by 5
percentage points.
``(2) CPI.--Rules similar to the rules of paragraphs (4)
and (5) of section 1(f) shall apply for purposes of this
subsection.
``(3) Rounding.--Any applicable amount determined under
subsection (a) which is not a multiple of $1 shall be rounded
to the nearest dollar.
``SEC. 4693. REBATE.
``(a) Exports.--
``(1) In general.--In the case of a person who exports any
covered primary good from the United States which was produced
in an eligible facility for which a charge has been imposed
under section 4692, a refund shall be allowed to such person in
the same manner as if it were an overpayment of the charge
imposed by such section in an amount equal to the amount
determined under paragraph (2).
``(2) Recalculation.--In the case of a covered primary good
described in paragraph (1), the amount determined under this
paragraph is an amount equal to the charge that would be
imposed under section 4692 with respect to such good if
subsection (a)(1)(A) of such section were applied by
substituting `the carbon intensity of all eligible facilities
(as determined under subparagraph (A) of section 4691(b)(1))
operated by the covered entity which produced the covered
primary good described in section 4693(a)(1)' for `the carbon
intensity of such facility (as determined under subparagraph
(A) of section 4691(b)(1))'.
``SEC. 4694. DEFINITIONS.
``For purposes of this subchapter--
``(1) Administrator.--The term `Administrator' means the
Administrator of the Environmental Protection Agency.
``(2) C02-e.--
``(A) In general.--Subject to subparagraph (B), the
term `CO2-e' means, with respect to a greenhouse gas,
the quantity of such gas that has a global warming
potential equivalent to 1 metric ton of carbon dioxide,
as determined pursuant to table A-1 of subpart A of
part 98 of title 40, Code of Federal Regulations, as in
effect on the date of the enactment of this subchapter.
``(B) Methane.--In the case of methane, the term
`CO2-e' means the quantity of methane that has the same
global warming potential over a 20-year period as 1
metric ton of carbon dioxide, as determined by the
Administrator.
``(3) Covered entity.--The term `covered entity' means any
entity which--
``(A) produces any covered primary good, and
``(B) is required to report emissions of greenhouse
gases under the Greenhouse Gas Reporting Program (or
would be required to report such emissions
notwithstanding any other provision of law prohibiting
the implementation of or use of funds for such
requirements).
``(4) Covered national industry.--
``(A) In general.--The term `covered national
industry' means any industry which is assigned a 6-
digit NAICS code which is included in any of the
following clauses:
``(i) 211120 (petroleum extraction).
``(ii) 211130 (natural gas extraction).
``(iii) 212112 (underground coal mining).
``(iv) 322110 (pulp mills).
``(v) 322121 (paper mills).
``(vi) 322122 (newsprint mills).
``(vii) 322130 (paperboard mills).
``(viii) 324110 (petroleum refineries).
``(ix) 324121 (asphalt paving mixture and
block manufacturing).
``(x) 324122 (asphalt shingle and coating
materials manufacturing).
``(xi) 324199 (all other petroleum and coal
products manufacturing).
``(xii) 325110 (petrochemical
manufacturing).
``(xiii) 325120 (industrial gas
manufacturing).
``(xiv) 325193 (ethyl alcohol
manufacturing).
``(xv) 325199 (other basic organic chemical
manufacturing).
``(xvi) 325311 (nitrogenous fertilizer
manufacturing).
``(xvii) 327211, 327212, 327213, or 327215
(glass).
``(xviii) 327310 (cement).
``(xix) 327410 or 327420 (lime and gypsum
product manufacturing).
``(xx) 331110 (iron and steel).
``(xxi) 331313 (aluminum).
``(B) Exceptions.--
``(i) Industrial gas manufacturing.--
Subparagraph (A)(xiii) shall apply only with
respect to the production of hydrogen.
``(ii) Other basic organic chemical
manufacturing.--Subparagraph (A)(xv) shall
apply only with respect to the production of
adipic acid.
``(5) Covered primary good.--The term `covered primary
good' means any good which is produced as part of a trade or
business operating within a covered national industry.
``(6) Eligible facility.--The term `eligible facility'
means any facility (as such term is defined for purposes of the
Greenhouse Gas Reporting Program) which is--
``(A) operated by a covered entity for the
production of any covered primary good, and
``(B) located within the United States.
``(7) Greenhouse gas.--The term `greenhouse gas' has the
meaning given such term under section 211(o)(1)(G) of the Clean
Air Act, as in effect on the date of the enactment of this
subchapter.
``(8) Greenhouse gas emissions.--The term `greenhouse gas
emissions' means the amount of greenhouse gases, expressed in
metric tons of CO2-e, which were emitted to the atmosphere.
``(9) Greenhouse gas reporting program.--The term
`Greenhouse Gas Reporting Program' means the Greenhouse Gas
Reporting Program established under part 98 of title 40, Code
of Federal Regulations.
``(10) Imported finished good.--
``(A) In general.--The term `imported finished
good' means any good which--
``(i) is imported into the United States,
and
``(ii)(I) for calendar year 2026 and 2027,
contains greater than 500 pounds of any
combination of any covered primary goods, and
``(II) for any calendar year after calendar
year 2027, contains greater than 100 pounds of
any combination of any covered primary goods.
``(11) NAICS.--The term `NAICS' means the North American
Industrial Classification System.''.
(b) Clerical Amendment.--The table of subchapters for chapter 38 of
the Internal Revenue Code of 1986 is amended by adding at the end
thereof the following new item:
``subchapter e--carbon intensity charge''.
(c) Grant Program.--
(1) In general.--For fiscal year 2025 and each subsequent
fiscal year, there are appropriated, out of any funds in the
Treasury not otherwise appropriated, to the Department of the
Treasury amounts equal to applicable amount for the preceding
fiscal year, with such amounts to be used by the Secretary, in
conjunction with the Secretary of Energy and the Administrator
of the Environmental Protection Agency, to establish a
competitive grant program to award grants to eligible entities
for investments in new technology--
(A) in the case of an existing eligible facility,
to reduce their carbon intensity, and
(B) in the case of a proposed eligible facility, to
ensure best-in-class carbon intensity.
(2) Modeled on diesel emissions reduction act.--For
purposes of the program described in paragraph (1), such
program shall be administered in a manner similar to the
national grant program of the Environmental Protection Agency
under subtitle G of title VII of the Energy Policy Act of 2005
(42 U.S.C. 16131 et seq.).
(3) Awarding of grant amounts.--For purposes of awarding
grants under the program described in paragraph (1), the
Secretary (in conjunction with the Administrator and the
Secretary of Energy) shall--
(A) give preference to proposed investments--
(i) that would result in the greatest
decrease in carbon intensity,
(ii) for facilities located in economically
distressed communities that have experienced a
loss of manufacturing jobs,
(iii) that would maximize improvement in
local air quality, or
(iv) for facilities located in communities
with high cumulative pollution burdens (as
determined by the Administrator), and
(B) allocate grant funds to eligible facilities and
proposed eligible facilities which produce covered
primary goods that are included within a covered
national industry in approximate proportion to the
share of total greenhouse gas emissions for which such
industry is responsible for emitting.
(4) Recapture.--In the case of any eligible entity which
has been awarded a grant under the program described in
paragraph (1) with respect to any eligible facility or proposed
eligible facility, if such entity fails to--
(A) within 3 years of the awarding of such grant,
complete the proposed investments in new technology at
such facility, or
(B) during the 10-year period after such
investments are placed in service--
(i) in the case of an existing eligible
facility, achieve and maintain the reduction in
carbon intensity proposed in the application
for such grant, or
(ii) in the case of a proposed eligible
facility, achieve and maintain the best-in-
class carbon intensity proposed in the
application for such grant,
the Secretary shall recapture, pursuant to such regulations or
other guidance issued by the Secretary, the amount of the grant
awarded with respect to such facility.
(5) Applicable amount.--For purposes of this subsection,
the term ``applicable amount'' means, with respect to any
fiscal year, an amount equal to 75 percent of the increase in
revenues to the Treasury during such fiscal year by reason of
the application of subchapter E of chapter 38 of the Internal
Revenue Code of 1986 (as added by subsection (a)).
(6) Definitions.--For purposes of this subsection--
(A) In general.--The terms ``covered national
industry'', ``eligible facility'', and ``covered
primary good'' shall have the same meaning given such
terms under section 4694 of the Internal Revenue Code
of 1986 (as added by subsection (a)).
(B) Best-in-class carbon intensity.--The term
``best-in-class carbon intensity'' means, with respect
to any proposed eligible facility, that the carbon
intensity of such facility would be not greater than
the carbon intensity of the existing facility with the
lowest carbon intensity within the relevant covered
national industry (as determined of the date of the
application for a grant under the program described in
paragraph (1)).
(C) Eligible entity.--The term ``eligible entity''
means any person which operates an eligible facility or
will operate a proposed eligible facility.
(D) Secretary.--The term ``Secretary'' means the
Secretary of the Treasury (or the Secretary's
delegate).
(d) Economic Support Fund of Department of State.--
(1) In general.--For fiscal year 2025 and each subsequent
fiscal year, in addition to amounts otherwise available, there
are appropriated, out of any funds in the Treasury not
otherwise appropriated, to the Department of State an amount
equal to applicable amount for the preceding fiscal year, with
such amount to be made available for multilateral assistance to
support climate and clean energy programs.
(2) Applicable amount.--For purposes of this subsection,
the term ``applicable amount'' means, with respect to any
fiscal year, an amount equal to 25 percent of the increase in
revenues to the Treasury during such fiscal year by reason of
the application of subchapter E of chapter 38 of the Internal
Revenue Code of 1986 (as added by subsection (a)).
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