Subtitle A—Protecting American Manufacturing Jobs and Preventing Carbon Leakage

The bill contains several provisions affecting international trade. Most importantly, the bill creates the possibility of border measures under the International Reserve Allowance Program (IRAP). That program would require international emission allowances, purchased in a marketplace, to be submitted for certain sectors of goods entering the United States. These allowances will be auctioned, and will therefore act as border taxes or charges that may be found to violate the World Trade Organization (WTO) obligations of the United States.

The bill also amends the Harmonized Tariff Schedule by extending the suspension of duties on certain components used in nuclear facilities. Finally, the bill establishes mechanisms for the United States to monitor international climate change progress and assist developing countries in reducing greenhouse gas emissions.

Allowance rebate system and international allowances. The bill's primary focus is to establish an annual overall limit on greenhouse gas emissions and a system of allowances to be disbursed among domestic industrial sectors. However, the bill also has a corollary goal of preventing foreign countries from taking advantage of domestic compliance costs resulting from emissions controls imposed in the United States. See Section 771(a). Foreign emissions increases resulting from U.S. cost increases are known as "leakage." The bill would deal with this issue in several ways.

First, in order to prevent leakage, the bill: (1) provides rebates to domestic industries to counter increased costs from the legislation; and (2) establishes the International Reserve Allowance Program as a border control measure for goods from countries which do not have similarly strict emissions regulations. Both of these measures are intended to ensure that foreign countries take substantial control measures with respect to greenhouse gas emissions. See Section 771(c).

The domestic rebate system grants rebates only to "eligible industrial sectors." See Section 772. The eligible sectors will be determined by the Administrator of the EPA. The bill presumes that industrial sectors that have both high energy "intensity" and high trade "intensity" will be "eligible." High energy intensity refers to high fuel costs or overall emissions relative to the value of total shipments of the sector. High trade intensity refers to high total imports and exports relative to total shipments of the sector; in other words, sectors which are "trade-exposed" or subject to a high volume of import competition will be considered trade intensive. See Section 773.

The other measure in the bill to reduce leakage involves the International Reserve Allowance Program. This program proceeds from the United States goal of establishing binding agreements for all major greenhouse gas emitting countries to reduce global greenhouse gas emissions. See Section 775(a). Section 775(c) requires the President to notify foreign countries of this United States goal, encourage them to take measures aimed at reducing emissions, and inform them that an international reserve allowance system may be required depending on whether the domestic rebates cover the costs of compliance for domestic sectors. See Section 775(c).

Section 776(a) requires the President, by 2019, to complete a study of whether the domestic allowance rebates (plus other free allowances to electricity providers) have been effective in mitigating or eliminating leakage, including whether an international allowance system would help prevent leakage.

By 2020, if no satisfactory binding international agreement on emissions has entered into effect, the President must establish under Section 776(b) an international allowance program for certain eligible industrial sectors, unless he determines that international allowances would not be in the national economic interest. Under Section 776(c), an allowance program will be created for eligible industrial sectors based on whether more than 70 percent of global production in that sector is produced or manufactured in countries that are: (1) party to an international agreement on emissions at least as strict as the bill, (2) party to a multilateral or bilateral emissions reduction agreement in which the United States is also a party, or (3) have an energy intensity for the sector that is equal to or less than that of the United States

If less than 70 percent of production meets the above criteria, the President must try to mitigate leakage by making it easier for domestic sectors to obtain rebates of allowances and/or creating or continuing an international reserve allowance system. If more than 70 percent of production meets the above criteria, under Section 776(d) an international reserve system is not permitted or, if already in place, must be ended.

An international allowance system for a particular sector is a border measure that will require submission of allowances for those sector's goods to enter the United States Under Section 777(a), the allowances can be bought, sold, transferred, or banked internationally. Importantly, certain countries' goods will be completely exempt from the allowance requirement, namely those countries that belong to a sufficiently strict emissions agreement, have a less energy-intensive sector than the United States, are identified by the United Nations as among the least developed countries, or emit only a miniscule portion of overall global emissions and have less than 5 percent of global production in that sector.

The amount of allowances that a foreign producer needs to submit to import its covered good into the United States depends on the value of domestic rebates as well as free allowances provided to that sector. Importantly, if emission allowance rebates for a sector are greater than the emissions costs to that sector, no allowances will be required to import goods. In that situation, allowances are not needed to mitigate or prevent leakage, the stated goal of the international allowance system. See Section 777(b).

Finally, the President has discretion under Section 777(c) to not establish an international allowance system for an eligible sector if the President determines the system would not be in the national economic or environmental interest of the United States

Changes to the harmonized tariff schedule for nuclear facility components. The bill also makes changes to a small portion of the Harmonized Tariff Schedule: it extends the suspension of duties on nuclear facility components to December 31, 2020. Such components include; watertube boilers, reactor vessels, pressurizers, reactor coolant system loop pipe and cold legs, heat exchangers, and main step-up transformers. See Section 1111(a).

International climate change assistance and monitoring. Section 5001 establishes programs and organizations aimed at building capacity and providing assistance for developing countries in reducing greenhouse gas emissions. These APA initiatives are based on U.S. policy that recognizes how global climate change especially affects developing countries and also has national security and global security implications.

The bill creates a Strategic Interagency Board on International Climate Investment to evaluate U.S. government financial support for international climate change activities. See Section 5003. The bill also establishes a program to reduce greenhouse gas emissions from deforestation in developing countries. This effort may involve the exclusion of illegally harvested timber from the United States See Section 5004(c).

The bill establishes an International Climate Change Adaptation and Global Security Program, which provides bilateral assistance, or through international organizations, to developing countries. The assistance would fund the development of climate change plans and capacity-building to reduce the vulnerability of developing countries to climate change. See Section 5005(f). The bill provides that funding may be especially appropriate where climate change has a particularly harmful effect on U.S. national security interests. See Section 5005(f)(4).

Finally, the bill commissions an annual report on the five highest greenhouse gas emitting countries that are not members of the Organization for Economic Cooperation and Development (OECD). The purpose of the report is to assess whether those countries are taking significant steps to reduce greenhouse gas emissions and how the U.S. can help achieve a reduction in those countries' emissions. See Section 5007.

Subtitle B—Clean Energy Technology and Jobs

Clean energy curriculum development grants. Section 4101 authorizes the Secretary of Education to award grants, on a competitive basis, to eligible partnerships to develop programs of study focused on emerging careers and jobs in the fields of clean energy, renewable energy, energy efficiency, climate change mitigation, and climate change adaptation. Eligible participants in this program include local educational agencies, postsecondary institutions, and community representatives, including businesses and labor organizations. In awarding grants, the Secretary is required to give priority to applications that use online learning or other innovative means to deliver the educational program, and applications that focus on low-performing students and special populations. A peer review committee is to be established to provide recommendations to the Secretary.

Information clearinghouse for vocational education and job training in renewable energy. Section 4102 requires the Secretary of Labor, in collaboration with the Secretary of Energy and the Secretary of Education, to develop an internet-based information and resources clearinghouse to aid career and technical education and job training programs for the renewable energy sectors. The Secretary is directed to collect and provide information that addresses the consequences of rapid changes in technology, place an emphasis on facilities collaboration between renewable energy industry and job training programs, and place an emphasis on assisting programs that cater to high-demand middle-skill, trades, manufacturing, contracting, and consulting careers.

Clean energy construction careers demonstration project. Section 4103 requires the Secretary of Labor, in consultation with the Secretary of Energy, to establish a Green Construction Careers demonstration project to promote careers and quality employment practices in the green construction sector and to advance efficiency and performance on construction projects related to the Act. Included in each eligible project is the requirement to provide apprenticeship and other training programs.