(a) In general

Chapter 38 of the Internal Revenue Code of 1986 is amended by adding at the end the following new subchapter:

E Carbon intensity charge

4691. Calculation of carbon intensity

(a) Domestic reporting requirements

Not later than June 30, 2026, and annually thereafter, any covered entity shall, for each eligible facility operated by such entity, report to the Secretary, the Administrator, and the Secretary of Energy with respect to the following:

(1)

Any information required to be reported to the Administrator under the Greenhouse Gas Reporting Program (as 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 relevant quantity of each covered primary good produced at such facility during the preceding calendar year.

(4)

Any other information determined necessary by the Secretary for purposes of the administration of subsection (b).

(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 relevant quantity of covered primary goods produced at such facility during the preceding calendar year.

(B) Covered national industry

(i) In general

For purposes of this subchapter, the carbon intensity with respect to any covered national industry shall be an amount (as determined by the Secretary) 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 covered national industry for the calendar year, divided by

(II)

the total relevant quantity of covered primary goods within such covered national industry which are produced at all such eligible facilities during such year.

(ii) Covered primary goods determination

For purposes of this subchapter—

(I)

a covered primary good shall initially be included within the covered national industry with which it is associated under the most recent concordance table published by the Bureau of the Census comparing classifications under the Harmonized Tariff System and the North American Industry Classification System, and

(II)

the Secretary (in coordination with the relevant parties) may subsequently determine which types of eligible facilities or processes within facilities (and any related covered primary goods) are included or excluded within a covered national industry, provided that such determination—

(aa)

facilitates a fair comparison of carbon intensities across similar eligible facilities (based on a comparison of the energy-intensive processes and the material outputs of such facilities),

(bb)

does not meaningfully reduce the scope of greenhouse gas emissions covered by this subchapter, and

(cc)

ensures that each covered primary good is only included within a single covered national industry.

(iii) Excluded facilities

In the case of any eligible facility which, pursuant to clause (ii), is excluded from a covered national industry and is not included in any other covered national industry, such facility shall be deemed to not be included in any covered national industry.

(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—

(I)

remove 1 or more covered primary goods from inclusion under any covered national industry,

(II)

establish a new covered national industry for purposes of the goods described in subclause (I),

(III)

determine the carbon intensity with respect to the covered national industry established under subclause (II), and

(IV)

determine a classification for defining such covered national industry for purposes of this subchapter, such as—

(aa)

the applicable 6-digit subheading (or subheadings) of the Harmonized Tariff Schedule of the United States of the goods described in subclause (I),

(bb)

the relevant production process,

(cc)

a set of material characteristics, or

(dd)

any combination of the methods for classification described in items (aa) through (cc).

(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 or goods are substantially different as compared to other covered primary goods produced within the same covered national industry,

(II)

the properties of such good or goods are distinct such that its uses cannot be easily replaced by other covered primary goods produced within the same covered national industry, and

(III)

the carbon intensity determined with respect to such good or goods 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, as well as the baseline carbon intensity, with respect to the covered national industry or industries which previously included production of the covered primary good or goods which are the subject of such petition by excluding any covered emissions associated with the production of such good or goods for purposes of the determination made under subparagraph (B) for such industry.

(iv) Goods-level data

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 use a methodology for determining the carbon intensity of the covered primary good or subset of primary goods (as determined using the eligible facility information reported under subsection (a)), and shall publish the methodology and the results of such determination, in a manner which—

(I)

is compatible with existing Federal carbon accounting rules and standards,

(II)

includes the related chemical, physical, or mechanical production processes responsible for differences in carbon intensity and covered emissions, and

(III)

prioritizes ease of administration and compliance.

(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.

(E) Relevant quantity

For purposes of this subchapter, the relevant quantity of a covered primary good shall be determined based on—

(i)

the weight (expressed in metric tons) of such good, or

(ii)

if the Secretary, in coordination with the Administrator and the Secretary of Energy, determines that using an alternate physical unit of measurement (such as volume at a specific pressure or energy content) would better facilitate a fair comparison of carbon intensities across the covered primary goods in the covered national industry, an alternate physical unit of measurement.

(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 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.

(B) Emissions for electricity used

(i) In general

For purposes of subparagraph (A)(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 (or its foreign equivalent) which guarantees that any electricity provided under such agreement is generated within the same hour as it is used by such facility and within the same regional transmission zone (or its foreign equivalent) as such facility—

(I)

clause (i) shall not apply with respect to the amount of electricity provided under such agreement, 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 as follows:

(i) Economy-wide default

Subject to clauses (ii), (iii), and (iv), the carbon intensity with respect to the 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 of the country of origin of such good, divided by

(bb)

the carbon intensity of the general economy of the United States, multiplied by

(II)

the carbon intensity of the covered national industry in the United States for such good for the preceding calendar year.

(ii) Industry data

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 the covered primary good and that such country of origin is a transparent market economy, the carbon intensity with respect to the covered primary good shall be equal to the relevant covered national industry carbon intensity of the country of origin of such good.

(iii) Manufacturer data

If a petition under subparagraph (C) has been approved, the carbon intensity with respect to the covered primary good shall be equal to the average carbon intensity with respect to the production of such good by the manufacturer within the country of origin.

(iv) Estimates for significant imports

If the Secretary (in coordination with the relevant parties) determines that—

(I)

(aa)

greater than 10 percent of the value of imports of covered primary goods in a covered national industry come from a single country of origin, or

(bb)

when applied to imports of covered primary goods in a covered national industry from a country of origin, the carbon intensity determined under clause (i) fails to maintain the integrity and efficacy of this subchapter, and

(II)

(aa)

transparent, verifiable, and reliable information is not available to determine the carbon intensity of the covered national industry in such country of origin, or

(bb)

such country of origin is not a transparent market economy,

the Secretary (in coordination with the relevant parties) shall estimate the carbon intensity of the covered national industry in the country of origin using best available data (such as the production processes used by the facilities in the country).

(B) Carbon intensity of the general economy

For purposes of this subchapter, 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 greenhouse gas emissions of such country for the most recent year for which the Secretary determines there is reliable information, divided by

(ii)

the gross domestic product of such country for the year described in clause (i).

(C) Petition for foreign manufacturer data

(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) from a country of origin where there is no evidence of inter-firm resource shuffling, 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) 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—

(I)

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, and

(II)

any other information which is necessary (as determined by the Secretary, in coordination with the relevant parties) to calculate the carbon intensity of the covered primary good in accordance with any relevant methodologies for allocating the carbon intensity of the covered primary good under paragraph (1)(C)(iv).

(iv) Data standards

The Secretary shall only grant such a petition if the information provided pursuant to clause (iii) meets the quality, verification, and completeness requirements of the equivalent Federal carbon accounting rules and standards that would apply if the covered primary good were produced domestically.

(D) 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, coal, or any waste or scrap product) from other covered national industries were used as inputs in the production of the imported covered primary good, the quantity of such inputs used in the production of the imported covered primary good shall be treated as separate covered primary goods that, without double-counting emissions, shall be considered to be imported for purposes of this subchapter.

(E) Exclusion

(i) In general

Subject to clause (ii), in the case of any covered primary good (including any covered primary good which is an input of a 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.

(ii) Exception

Clause (i) shall not apply if the country described in such clause produces at least 3 percent of total global exports by value of the covered primary good.

(F) 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.

(G) Trading partners

For countries with which the United States has agreements that facilitate trade, commit the parties to refrain from imposing new trade barriers, and establish high standards for labor and environmental protection and human rights, the Secretary (working with the relevant parties) shall make best efforts to work with the government of such country to improve data sharing, accuracy, and transparency such that imports of covered primary goods from such country have their carbon intensity determined under subparagraph (A)(ii).

(c) Publication

The Secretary (in coordination with the relevant parties) shall—

(1)

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 (including the physical unit of measurement which serves as the relevant quantity with respect to any covered primary good),

(2)

publish (and update, as appropriate) a list of each covered primary good, as categorized by the covered national industry in which such good is included, and

(3)

publish (and update, as appropriate) a list of each good that qualifies as a finished good, as determined by the Secretary pursuant to section 4695(9).

4692. Imposition of carbon intensity charge

(a) In general

(1) Importation of goods

(A) In general

(i) Covered primary goods

Subject to section 4694, in the case of any covered primary good imported into the United States during any calendar year beginning after December 31, 2025, there is hereby imposed a charge in an amount (rounded to the nearest dollar) equal to the product of—

(I)

the amount (if any) by which the carbon intensity determined under section 4691(b)(3) with respect to such good exceeds an amount equal to the applicable percentage of the baseline carbon intensity of the covered national industry which includes such good, multiplied by

(II)

the total relevant quantity of the good imported into the United States, multiplied by

(III)

the cost of pollution (as determined under subsection (c)).

(ii) Finished goods

(I) In general

Subject to section 4694, in the case of any finished good which is imported into the United States during any calendar year beginning after December 31, 2027, 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 an input of such finished good.

(II) Components

The amount determined under this subclause with respect to any covered primary good which is an input of a 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 relevant quantity of the covered primary good, multiplied by

(cc)

the cost of pollution (as determined under subsection (c)).

(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

(i) In general

Subject to clause (ii), in the case of any covered primary good (including any covered primary good which is an input of a 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.

(ii) Exception

Clause (i) shall not apply if the country described in such clause produces at least 3 percent of total global exports by value of the covered primary good.

(D) Foreign carbon prices

If the Secretary (in coordination with the relevant parties) determines that a foreign country has implemented policies which impose explicit and verifiable fees, costs, or penalties on the emission of greenhouse gases which—

(i)

are economically similar to the charges imposed pursuant to the provisions of this subchapter, and

(ii)

have not been rebated by such foreign country,

the charge (or a portion of the charge which is equivalent to the fees or costs imposed by the foreign country) which would otherwise be imposed under this section with respect to covered primary goods produced in such foreign country may be waived.

(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, 2025, there is hereby imposed a charge in an amount (rounded to the nearest dollar) equal to the product of—

(i)

the amount (if any) by which the carbon intensity of such facility (as determined under section 4691(b)(1)(A)) exceeds an amount equal to the applicable percentage of the baseline carbon intensity for the covered national industry (as determined under section 4691(b)) which includes any covered primary good produced by such facility, multiplied by

(ii)

the total relevant quantity of any covered primary goods produced by such facility during such calendar year, multiplied by

(iii)

the cost of pollution (as determined under subsection (c)).

(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 2026, 100 percent,

(2)

for calendar years 2027 through 2030, the applicable percentage for the preceding calendar year, reduced by 2.5 percentage points,

(3)

for calendar years 2031 through 2047, the applicable percentage for the preceding calendar year, reduced by 5 percentage points, and

(4)

for any calendars years subsequent to calendar year 2047, 0 percent.

(c) Cost of pollution

(1) In general

For purposes of paragraphs (1)(A) and (2)(A) of subsection (a), the cost of pollution shall be—

(A)

for calendar year 2026, $60, and

(B)

for each calendar year subsequent to the calendar year described in subparagraph (A), an amount equal to the sum of—

(i)

the cost of pollution 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 6 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 this subsection which is not a multiple of $1 shall be rounded to the nearest dollar.

(d) Carbon removal

(1) In general

With respect to the amount of any charges imposed under subsection (a) during a calendar year, such amount shall be reduced by an amount (rounded to the nearest dollar) equal to the product of—

(A)

the total amount (as measured in metric tons) of greenhouse gas emissions which are captured directly from the ambient air during such calendar year pursuant to the requirements under paragraphs (2) and (3), and

(B)

the cost of pollution (as determined under subsection (c)).

(2) Removal requirements

The requirements described under this paragraph with respect to captured greenhouse gas emissions are that such emissions are captured during the preceding calendar year and—

(A)

disposed of in secure geological storage (in compliance with the regulations established under section 45Q(f)(2)), or

(B)

utilized in a manner (other than for enhanced oil or gas recovery and in compliance with the regulations established under section 45Q(f)(5)) whereby such emissions are not combusted or otherwise emitted into the atmosphere.

(3) Direct air capture

For purposes of this subsection, with respect to any greenhouse gas emissions which are captured directly from the ambient air, the operator of the facility which captured such emissions may—

(A)

apportion such emissions removal amongst any eligible facilities which are under common control of such operator, or

(B)

enter into binding and exclusive agreements (which meet such requirements as determined necessary by the Secretary to ensure fair and accurate emissions accounting) with—

(i)

any operator of an eligible facility, for the purpose of permitting such operator to reduce the charge imposed under subsection (a) with respect to any eligible facilities which are under common control of such operator, or

(ii)

any importer of covered primary goods, for the purpose of permitting such operator to reduce the charge imposed under subsection (a) with respect to any of their imported covered primary goods.

(4) Limitation

For purposes of this subsection, in the case of any covered primary good imported or produced at an eligible facility, the amount of any reduction of the charge imposed under subsection (a) with respect to such covered primary good or production of such good shall not exceed the lesser of—

(A)

the amount of the charge imposed under such subsection, or

(B)

an amount equal to the product of—

(i)

the first quartile in terms of carbon intensity with respect to facilities operating in the United States which produce covered primary goods which are included within the same covered national industry, as determined by the Secretary (in coordination with the relevant parties), multiplied by

(ii)

the relevant quantity of such covered primary good, multiplied by

(iii)

the cost of pollution (as determined under subsection (c)).

(5) Ensuring integrity

The Secretary, in coordination with the Administrator and the Secretary of Energy, shall issue such regulations as may be necessary to prevent double-counting and to ensure the additionality and permanence of captured emissions.

(e) Regulations and trade actions

The Secretary shall issue such regulations as may be necessary to carry out this subchapter and shall work closely with the relevant parties to pursue such trade actions as may be necessary to maintain the integrity and efficacy of this subchapter.

4693. Rebate

(a) Exportation of covered primary good

Subject to subsections (c) and (d), 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 charge that would be imposed under subsection (a)(1)(A)(i) of such section with respect to such good.

(b) Exportation of finished good

Subject to subsection (c), in the case of a person who exports any finished good from the United States for which a charge has been imposed under section 4692 on such finished good or any of its components, 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 charge that would otherwise be imposed under such section with respect to such finished good (as determined pursuant to subsection (a)(1)(A)(ii) of such section).

(c) Exception for certain foreign policies

In the case of any exports from the United States for which a charge has been imposed under section 4692, if—

(1)

the covered primary good or finished good is imported by a country with policies that impose tariffs, fees, or penalties on the emission of greenhouse gases associated with imports, and

(2)

the country described in paragraph (1) would credit the charge imposed under section 4692 against such tariffs, fees, or penalties,

any portion of a rebate otherwise allowable under this section shall not be allowed to the extent that it would reduce the amount credited by such country against such tariffs, fees, or penalties.

(d) Preventing domestic resource shuffling

For purposes of determining the amount of any refund pursuant to subsection (a), the carbon intensity with respect to the eligible facility shall be determined by applying section 4691(b)(1)(A) by substituting all eligible facilities by the covered entity which produced the covered primary good described in section 4693(a)(1) for such facility each place it appears in such section.

4694. Carbon clubs

(a) In general

To accelerate the pace of global decarbonization and expand markets for goods with lower carbon intensities, the President may, in coordination with the Secretary and the relevant parties—

(1)

enter into negotiations with 1 or more foreign countries to establish or expand a carbon club agreement under this section,

(2)

perform any enforcement activities necessary to uphold the requirements under such agreement, and

(3)

remove any foreign country from a carbon club agreement if such country is determined to have failed to comply with the requirements described in subsection (b) or any additional requirements established under such agreement.

(b) Requirements

Any foreign country which has entered into a carbon club agreement under this section shall be subject to the following requirements:

(1)

Ensure its methodologies for the measurement, reporting, and verification of the carbon intensity of covered national industries match, or are interoperable with, those used to determine the carbon intensity of covered national industries in the United States.

(2)

Permit any other country which is a party to such agreement to regularly validate the measurement, reporting, and verification of the carbon intensity of their covered national industries.

(3)

Ensure, in law and in practice, that all workers in the territory of the country are guaranteed the following internationally recognized rights and freedoms, including those guaranteed in the Declaration on Fundamental Principles and Rights at Work of the International Labour Organization and its Follow-up:

(A)

Freedom of association and the effective recognition of the right to collective bargaining.

(B)

Elimination of all forms of forced or compulsory labor.

(C)

Effective abolition of child labor, a prohibition on the worst forms of child labor, and other labor protections for children and minors.

(D)

Elimination of discrimination in respect of employment and occupation.

(E)

Acceptable conditions of work with respect to minimum wages, hours of work, and occupational safety and health.

(4)

Create or maintain, as well as implement and verifiably enforce—

(A)

domestic policies (including any investments made possible by assistance provided under section 2(d) of the Clean Competition Act) which reduce the carbon intensity of its covered national industries in a magnitude greater than that which would feasibly be induced as a result of—

(i)

the charges imposed under section 4692(a)(1), or

(ii)

similar fees on the emissions of greenhouse gasses associated with the production of imports levied by other countries which are parties to such agreement,

(B)

trade policies, such as the charge imposed under section 4692(a)(1), which give preference to goods with lower carbon intensities,

(C)

domestic policies which reduce pollutants other than greenhouse gases, and

(D)

policies that prevent such country from facilitating transshipment from other countries.

(c) Prioritization

In negotiations with respect to any carbon club agreement under this section, the President shall seek to reach an agreement with foreign countries which prioritizes the following goals in the following order of importance:

(1)

Reduction of global greenhouse gas emissions.

(2)

Securing access for the United States to materials and inputs necessary to manufacture products with lower carbon intensity, particularly those that are not feasibly produced domestically.

(3)

Strengthening the global market competitiveness of lower carbon intensity goods.

(4)

Advancing the national security and diplomatic interests of the United States.

(d) Benefits

With respect to any country which has entered into a carbon club agreement under this section, if such country—

(1)

is not contributing to global industrial overcapacity (as determined by the United States Trade Representative, in coordination with other relevant parties), the charge which would otherwise be imposed under section 4692(a)(1) with respect to covered primary goods produced in a foreign country, as well as any similar fees on the emissions of greenhouse gasses associated with the production of imports levied by other countries which are parties to such agreement, may be waived, provided that such country establishes or maintains policies that reduce the emission of greenhouse gases from its covered national industries with commensurate effect as the carbon intensity charges imposed under section 4692(a)(2), and

(2)

has a low-income economy, lower-middle-income economy, or upper-middle-income economy (as determined based on classification of the economy of such country by the World Bank), such country shall receive preference for assistance provided under section 2(d) of the Clean Competition Act.

(e) Phase-In

(1) In general

Subject to paragraph (2), for purposes of any carbon club agreement under this section, a country may limit application of such agreement to certain covered national industries, in which case any requirements or benefits provided pursuant to such agreement shall be limited to such industries and any covered products produced by such industries.

(2) Limitation

Not later than 10 years after the date on which any country enters into a carbon club agreement under this section, all covered national industries of such country shall be subject to the requirements of such agreement.

4695. Definitions

For purposes of this subchapter—

(1) Administrator

The term Administrator means the Administrator of the Environmental Protection Agency.

(2) Baseline carbon intensity

The term baseline carbon intensity means, with respect to a covered national industry, the carbon intensity of the covered national industry in the United States for calendar year 2025.

(3) CO2-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 in accordance with the findings of the most recent Assessment Report of the Intergovernmental Panel on Climate Change as of the date of enactment of this subchapter.

(4) 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).

(5) Covered national industry

(A) In general

Except as provided under section 4691(b)(1)(B)(ii), 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)

212114 or 212115 (coal mining).

(iv)

322110 (pulp mills).

(v)

322120 (paper mills).

(vi)

322130 (paperboard mills).

(vii)

324110 (petroleum refineries).

(viii)

324121 (asphalt paving mixture and block manufacturing).

(ix)

324122 (asphalt shingle and coating materials manufacturing).

(x)

324199 (all other petroleum and coal products manufacturing).

(xi)

325110 (petrochemical manufacturing).

(xii)

325120 (industrial gas manufacturing).

(xiii)

325193 (ethyl alcohol manufacturing).

(xiv)

325199 (other basic organic chemical manufacturing).

(xv)

325311 (nitrogenous fertilizer manufacturing).

(xvi)

327211, 327212, 327213, or 327215 (glass).

(xvii)

327310 (cement).

(xviii)

327410 or 327420 (lime and gypsum product manufacturing).

(xix)

331110 (iron and steel).

(xx)

331313 or 331314 (aluminum).

(B) Exceptions

(i) Industrial gas manufacturing

Subparagraph (A)(xii) shall apply only with respect to the production of hydrogen.

(ii) Other basic organic chemical manufacturing

Subparagraph (A)(xiv) shall apply only with respect to the production of adipic acid.

(6) Country of origin

The term country of origin means, with respect to a covered primary good, the country where an energy-intensive or emissions-intensive process occurred that transformed the inputs of the good into the covered primary good.

(7) 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—

(A)

including (except as otherwise provided under subparagraphs (B)(ii) and (C) of section 4691(b)(1)) any good classifiable under the same 6-digit subheading of the Harmonized Tariff Schedule of the United States, and

(B)

excluding any waste or scrap byproducts which are not sold.

(8) 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.

(9) Finished good

(A) In general

The term finished good means any good (as determined pursuant to a 6-digit subheading of the Harmonized Tariff Schedule of the United States) which is not a covered primary good and which, as determined by the Secretary—

(i)

for calendar years 2028 and 2029—

(I)

typically contains greater than 1,000 pounds of any combination of any covered primary goods, or

(II)

is typically produced from inputs of any combination of covered primary goods, the combined value of which comprise more than 90 percent of the total value of the material inputs involved in the production of such good,

(ii)

for calendar years 2030 and 2031—

(I)

typically contains greater than 500 pounds of any combination of any covered primary goods, or

(II)

is typically produced from inputs of any combination of covered primary goods, the value of which comprise more than 75 percent of the total value of the material inputs involved in the production of such good, and

(iii)

for any calendar year after calendar year 2031—

(I)

typically contains greater than such amount as is determined by the Secretary (as determined in coordination with the relevant parties, and which shall not be greater than 500 pounds) of any combination of any covered primary goods, or

(II)

is typically produced from inputs of any combination of covered primary goods, the value of which comprise more than such percentage as is determined by the Secretary (as determined in coordination with the relevant parties, and which shall not be greater than 75 percent) of the total value of the material inputs involved in the production of such good.

(B) Exception

The term finished good shall not include any waste or scrap product which is imported or exported.

(10) 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.

(11) 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.

(12) 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, as in effect on January 1, 2025.

(13) Market economy

The term market economy means any country which is not designated as a nonmarket economy country pursuant to section 771(18) of the Tariff Act of 1930 (19 U.S.C. 1677(18)).

(14) NAICS

The term NAICS means the North American Industrial Classification System.

(15) Regional grid

The term regional grid means the smallest defined region of interconnected power grid (including power generation assets) from which a facility draws power that accounts for the total power supplied to the facility by the grid and for which there is reliable data.

(16) Relevant parties

The term relevant parties means—

(A)

the Administrator,

(B)

the Secretary of Energy,

(C)

the Secretary of Commerce,

(D)

the Secretary of Homeland Security,

(E)

the United States Trade Representative, and

(F)

the Chair and Vice Chair of the United States International Trade Commission.

(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:

(c) Investing in industrial competitiveness

(d) Economic Support Fund of Department of State