80R5450 JTS-D

By: Hernandez H.B. No. 2362

A BILL TO BE ENTITLED

AN ACT

relating to a greenhouse gas "cap and trade" program.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

SECTION 1. Subtitle C, Title 5, Health and Safety Code, is amended by adding Chapter 391 to read as follows: CHAPTER 391. "CAP AND TRADE" PROGRAM FOR GREENHOUSE GAS EMISSIONS

Sec. 391.001. DEFINITIONS. In this chapter:

(1) "Allowance" means an authorization to emit a certain amount of carbon dioxide.

(2) "Commission" means the Texas Commission on Environmental Quality.

(3) "Regional Greenhouse Gas Initiative" means a memorandum of understanding dated December 20, 2005, as may be amended, and the corresponding model rule, as may be amended, that establishes a "cap and trade" program in the northeast region of the United States.

Sec. 391.002. "CAP AND TRADE" PROGRAM. (a) The commission in consultation with the Public Utility Commission of Texas by rule shall establish a carbon dioxide "cap and trade" program that will limit and then reduce the total carbon dioxide emissions released by electric generating facilities in this state. The program must establish for a group of carbon dioxide emissions sources an aggregate cap on emissions from all regulated sources for each specified compliance period. The commission shall issue an appropriate number of authorizations to emit carbon dioxide in the form of emissions allowances. The emissions allowances must be made available and issued to various persons, companies, organizations, or other entities through a sale by auction or by direct allocation. The total number of allowances made available in any specified compliance period may not exceed the cap. A regulated source shall completely and accurately measure and report all emissions subject to the allowance and acquire and submit to the commission the number of allowances that equals the source's emissions at the end of the compliance period.

(b) The commission's rules establishing the carbon dioxide "cap and trade" program shall be designed to:

(1) fully comply with the Regional Greenhouse Gas Initiative or with another similar initiative as the commission determines is best suited for the state; and

(2) permit the holders of carbon dioxide allowances to trade them in a market to be established through the Regional Greenhouse Gas Initiative or other entity as determined by the commission.

(c) The commission and any other relevant state agency or official shall take the steps necessary to allow electric generating facilities in this state to participate in a market to trade carbon dioxide allowances allocated under the program.

Sec. 391.003. AUCTION OF ALLOWANCES. (a) Rules adopted under the "cap and trade" program must require that in 2009 at least 50 percent of all allowances issued under the program be sold through an auction open to any person in this state who wishes to participate. In the years after 2009, the percentage of allowances sold through auction shall be as follows:

(1) in 2010, at least 60 percent;

(2) in 2011, at least 70 percent;

(3) in 2012, at least 80 percent;

(4) in 2013, at least 90 percent; and

(5) in 2014 and all following years, 100 percent.

(b) The proceeds recovered from the allowance auction must be used to benefit consumers, balancing short-term and long-term benefits. The proceeds may be used only for the following purposes, in a proportion to be determined by the commission:

(1) to promote energy efficiency and conservation;

(2) to directly mitigate the effects of the program on consumers of electricity; and

(3) to promote renewable energy technologies that do not produce carbon dioxide emissions.

(c) The commission shall determine and specify details for implementing the auction of carbon dioxide emission allowances, including:

(1) the auction's design;

(2) the person to conduct and manage the auction; and

(3) the timing of the auction in any year relative to the dates of the compliance period in the Regional Greenhouse Gas Initiative or other market.

Sec. 391.004. AUCTION MANAGER. (a) The commission shall:

(1) engage a person to serve as auction manager that is experienced in auction design and management; or

(2) contract with a person to serve as auction manager that is determined by the commission to be qualified to design, manage, and conduct the auction in a manner that assures the efficiency of the auction.

(b) The selection process for choosing an auction manager to design, manage, and conduct the auction shall include an open and public request for proposals. Proposals submitted in response to a request under this subsection must include a summary of qualifications and experience relevant to designing, managing, and conducting the auction.

(c) An auction manager selected by the commission may be reimbursed only for reasonable costs of administering the auction, as determined by the commission.

Sec. 391.005. ALLOWANCES HELD BY AUCTION MANAGER; DISTRIBUTION OF AUCTION PROCEEDS. (a) The auction manager selected under Section 391.004 shall be authorized to receive, hold, and sell carbon dioxide emission allowances.

(b) The commission shall convey all allowances to the auction manager who shall collect the auction proceeds and, without further appropriation, distribute the proceeds in accordance with Section 391.003(b) under commission oversight.

(c) The auction manager annually shall submit to the commission a draft proposal on how to allocate the proceeds from the allowances. The commission shall hold a public hearing, accept public comment, and approve, modify, or reject the draft proposal. If the commission rejects the proposal, the commission shall work with the auction manager to draft an acceptable proposal.

(d) The office shall require an annual report from the auction manager describing the auction and its results. The commission shall make the report public and shall submit the report to the appropriate legislative committees.

Sec. 391.006. OTHER COMMISSION POWERS AND DUTIES RELATED TO CLIMATE-CHANGING SUBSTANCES. The responsibilities created by establishing a carbon dioxide "cap and trade" program are in addition to all other responsibilities imposed by any other law or rule and do not reduce any authority of the commission, including the authority to adopt standards and regulations necessary for this state to join and participate in a multistate program, at any stage in the development and implementation of the program, intended to control emissions of carbon dioxide or other substances that are determined by the commission to be damaging or altering the climate.

SECTION 2. Subchapter Z, Chapter 39, Utilities Code, is amended by adding Section 39.911 to read as follows:

Sec. 39.911. GREENHOUSE GAS "CAP AND TRADE" PROGRAM. The commission, in consultation with the Texas Commission on Environmental Quality and the attorney general, through the commission's authority under this chapter, including the authority to review rates, prices, and schedules, shall adopt rules that fully implement the greenhouse gas "cap and trade" program prescribed by Chapter 391, Health and Safety Code. The commission may adopt rules and enter any orders that ensure that the carbon dioxide emissions associated with the generation of electric power serving the customer load of this state are treated on a commercially comparable basis regardless of the location of the power stations operating to serve that load.

SECTION 3. Not later than January 1, 2008, the Texas Commission on Environmental Quality and the Public Utility Commission of Texas shall adopt rules to implement Chapter 391, Health and Safety Code, as added by this Act.

SECTION 4. This Act takes effect September 1, 2007.