Overview
Title
To amend the Internal Revenue Code of 1986 to establish a carbon fee to reduce greenhouse gas emissions, and for other purposes.
ELI5 AI
The "America's Clean Future Fund Act" is a plan to make companies pay a fee for the pollution they create, and use that money to help people and the Earth become cleaner and healthier with special projects, rewards, and support for everyone to join in the fight against climate change.
Summary AI
The bill, titled the "America's Clean Future Fund Act," aims to amend the Internal Revenue Code of 1986 to establish a carbon fee that will help reduce greenhouse gas emissions. It proposes creating an independent agency called the Climate Change Finance Corporation to finance clean energy initiatives and support climate change resilience activities. The bill also includes provisions for the distribution of rebates to individuals, support for agricultural decarbonization, and transition assistance for communities impacted by the shift away from carbon-intensive industries. Additionally, it outlines plans for evaluating the carbon fee's effectiveness and sets targets for carbon sequestration in land and water.
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AnalysisAI
The bill under consideration aims to amend the Internal Revenue Code of 1986 to establish a carbon fee as a strategy to reduce greenhouse gas emissions. It also outlines the establishment of a new entity, the Climate Change Finance Corporation (C2FC), and introduces various financial mechanisms to support the transition to cleaner energy sources and increased climate resilience. This comprehensive legislative effort seeks to address climate change by imposing financial penalties on carbon emissions, promoting sustainable practices in industries and agriculture, and supporting communities transitioning away from carbon-intensive economies.
General Summary
The legislation introduces a carbon fee to financially incentivize the reduction of greenhouse gas emissions. The fee is applied to entities that produce carbon emissions, with the goal of decreasing emissions by 45% by 2030 and achieving net-zero emissions by 2050. A portion of the revenue generated is allocated to the newly established Climate Change Finance Corporation (C2FC), which is tasked with funding clean energy projects and supporting communities and industries affected by climate change. Additionally, the bill facilitates carbon fee rebates to individuals, supports agricultural producers in implementing sustainable practices, and provides transition assistance to communities impacted by economic shifts in carbon-heavy industries.
Significant Issues
One of the primary challenges identified is the potential for arbitrary decision-making due to the broad discretion granted to the C2FC, especially concerning definitions of terms like "eligible borrower" and "eligible lender." This ambiguity may result in inequities in fund allocation, favoring certain groups or regions.
The bill's carbon fee mechanisms necessitate third-party verification of emissions, which could impose significant compliance costs, potentially disadvantaging smaller businesses and rural communities with fewer resources. Furthermore, adjustments to the carbon fee rate lack explicit provisions for responding to significant economic changes, possibly creating unpredictability for businesses in planning longer-term investments.
Public Impact
The broad implementation of a carbon fee is likely to influence the market by disincentivizing high carbon emissions and encouraging investment in clean energy alternatives. This will likely drive innovation in green technologies, benefiting consumers with more sustainable product options over time.
However, the financial burden of compliance and fee payments could be passed on to consumers in the form of higher prices for goods and services. This impact might disproportionately affect lower-income households, highlighting the need for effective rebate systems to mitigate this burden.
Stakeholder Impact
The legislation presents both opportunities and challenges for various stakeholders. Businesses in the fossil fuel and carbon-intensive sectors may face financial and operational pressures due to increased costs associated with emissions fees. This pressure could lead to reduced profitability and potential job losses in these industries, necessitating robust transition assistance for workers.
Conversely, companies specializing in renewable energy and green technologies stand to benefit from increased funding and investment opportunities, potentially leading to job creation and economic growth in these sectors. Communities historically reliant on carbon-intensive industries may benefit from focused investments in economic diversification and infrastructure resilience projects, although this depends significantly on the effectiveness of program implementation and fund administration.
Overall, the bill represents an ambitious effort to address environmental challenges through fiscal measures. Its potential effectiveness hinges on the execution of its financial mechanisms, equity in fund distribution, and the capacity to adapt to economic variations while supporting impacted stakeholders during the transition. As such, its success will likely require robust oversight and engagement with a diverse array of interests to ensure balanced outcomes.
Financial Assessment
The "America's Clean Future Fund Act" introduces several financial allocations and mechanisms aimed at addressing climate change through various initiatives. This commentary will explore the financial elements of the bill, their intended purpose, and their potential challenges as highlighted in the issues section.
Financial Allocations and Spending
The bill proposes a substantial annual allocation of $7.5 billion for the Climate Change Finance Corporation (C2FC) for fiscal years 2025 and 2026. The C2FC is intended to finance clean energy projects and improve climate resilience, prioritizing communities impacted by climate change. However, without explicit accountability mechanisms, this large sum raises concerns about potential inefficiencies and the precise allocation of funds.
Additionally, the establishment of the America's Clean Future Fund is backed by fees collected under sections concerning carbon emissions and border adjustments. These fees are earmarked for various expenditures, such as carbon fee rebates, agricultural decarbonization transition payments, and transition assistance for communities affected by the shift from carbon-intensive industries.
Carbon Fee and Related Mechanisms
Significant focus is placed on the carbon fee, starting at $65 per ton of greenhouse gases in 2026 and increasing annually. The fee is subject to inflation adjustments and potential increases if emissions targets are not met. This structured approach aims to reduce emissions but could impose heavy compliance burdens on entities, particularly smaller ones, due to third-party verification requirements. This might create unequal challenges across industries, as smaller entities might struggle with these additional costs.
Carbon Fee Rebates and Transition Payments
The bill outlines substantial rebate payments, with an initial appropriation of $37.5 billion each for fiscal years 2025 and 2026 for carbon fee rebates. These rebates are designed as financial incentives to offset carbon fees for eligible individuals. However, the broad discretion in verifying eligibility raises questions about equity and consistency, potentially leading to misuse or unfair distribution of funds.
For agricultural decarbonization, the bill sets out transition payments to encourage practices that reduce greenhouse gas emissions. There's a concern that the unclear definition of eligible "climate-smart practices" could lead to varied interpretations and inconsistent application of the funds.
Border Adjustments
The bill includes funding mechanisms related to international trade through carbon border fee adjustments. This area is potentially contentious, as discrepancies with international trade agreements could spark disputes, highlighting the need for transparency and alignment with global standards.
Overall Financial Implications
The bill's ambitious financial measures reflect a commitment to combatting climate change through substantial investment in green technologies, community support, and emission reductions. However, issues of accountability, definition clarity, and equitable distribution are inherent challenges. The bill's success will heavily depend on how effectively these funds are managed and how consistently they align with the intended goals of reducing emissions and supporting vulnerable communities.
Issues
The broad discretion granted to the Climate Change Finance Corporation (C2FC) in developing investment tools and definitions (e.g., 'eligible borrower', 'eligible lender') under Section 2 could lead to arbitrary decision-making and inequities. The ambiguity in these definitions and lack of specific guidelines (Section 2) might result in a lack of accountability in fund allocation, potentially favoring certain groups or regions over others, undermining the fairness of the financial assistance process.
The carbon fee and related mechanisms outlined in Section 3 could impose significant compliance costs, particularly the requirement for third-party verification of emissions. This requirement might disadvantage smaller entities which lack resources to manage these costs, creating an uneven playing field for different industries.
The provision requiring third-party verification of emissions as described in Section 4692 could create additional costs for compliance and might disadvantage smaller entities that may lack resources, which is a significant concern for the equitable application of the fee.
The section on carbon fee adjustments (Sections 4692 and 4695) lacks explicit examples of how the 'carbon fee rate' will adjust for significant economic changes aside from inflation, potentially creating unpredictability for businesses in planning long-term investments.
The stipulation under Section 5 providing a substantial carbon fee rebate payment without clear guidelines on eligibility verification could lead to inconsistent application and potential misuse of funds. The broad discretion allowed here might introduce inequities in recipient allocation.
The large budget allocation to the Climate Finance Corporation ($7.5 billion annually as indicated in Section 2) without clear accountability mechanisms could lead to wasteful spending or inefficient utilization of resources. The lack of specific checks or balances in fund allocation might prevent achieving desired climate objectives efficiently.
The potential for trade disputes due to the border adjustments outlined in Section 4695, if not properly aligned with international agreements, could have significant political and economic repercussions, particularly if fees imposed internationally are not transparent or consistent.
There is ambiguity regarding the definition of 'community of color' and other prioritized communities in Section 2, potentially leading to inconsistencies in how benefits and investments are distributed among different communities, which might not align with the intended equitable distribution goals.
The complexity and cross-referencing required throughout multiple sections (e.g., Section 4691 for definitions and Section 3 for the carbon fee) can create comprehension barriers for laypersons, which could hinder participation from smaller entities or individuals seeking to understand their obligations or benefits.
The section on agricultural decarbonization transition payments (Section 6) lacks a clear definition of 'climate-smart practice', which could lead to varied interpretations and applications, potentially causing disputes over what qualifies for payments, affecting the success of agricultural adaptation efforts.
Sections
Sections are presented as they are annotated in the original legislative text. Any missing headers, numbers, or non-consecutive order is due to the original text.
1. Short title Read Opens in new tab
Summary AI
The section allows the Act to be officially referred to as the "America's Clean Future Fund Act."
2. Climate Change Finance Corporation Read Opens in new tab
Summary AI
The Climate Change Finance Corporation (C2FC) is a newly established independent agency set to combat climate change by financing clean energy and climate resiliency projects. It aims to reduce dependence on fossil fuels, lower greenhouse gas emissions, and foster resilience against climate impacts, with a focus on prioritized communities disproportionately affected by climate change.
Money References
- BORROWER CHARGES.—A guarantee fee described in subclause (I) charged to an eligible borrower shall not— (aa) exceed 2 percent of the deferred participation share of a total loan amount that is equal to or less than $150,000; (bb) exceed 3 percent of the deferred participation share of a total loan amount that is greater than $150,000 but less than $700,000; or (cc) exceed 3.5 percent of the deferred participation share of a total loan amount that is equal to or greater than $700,000. (C) OTHER INVESTMENT TOOLS AND PRODUCTS.— (i) IN GENERAL.—The
- (B) WAIVER.—The Board may waive the requirement in subparagraph (A) if the Board finds that— (i) enforcing the requirement would be inconsistent with the public interest; (ii) the iron, steel, and manufactured goods produced in the United States are not produced in a sufficient and reasonably available amount or are not of a satisfactory quality; or (iii) enforcing the requirement will increase the overall cost of the project by more than 25 percent. (f) Program review and report.—Not later than 2 years after the date of enactment of this Act, and every 2 years thereafter, the Board shall— (1) conduct a review of the activities of the C2FC and identify projects and funding opportunities that were a part of the current investment plan; and (2) submit to Congress and make publicly available a report that— (A) describes the projects and funding opportunities that have been most successful in progressing towards the mission described in subsection (a)(2) during the time period covered by the report; (B) includes recommendations on the clean energy and resiliency projects that should be prioritized in forthcoming years to achieve that mission; (C) quantifies the total amount and percentage of funding given to prioritized communities described in subsection (e)(2); and (D) identifies barriers for disadvantaged groups to receive C2FC funding and provides recommendations to address those barriers. (g) Initial capitalization.—There is appropriated to carry out this section (including for administrative costs of the C2FC), out of any funds in the Treasury not otherwise appropriated, $7,500,000,000 for each of fiscal years 2025 and 2026, to remain available until expended. ---
3. Carbon fee Read Opens in new tab
Summary AI
The proposed bill section introduces a carbon fee aimed at reducing greenhouse gas emissions by charging fees on fuels and products that emit carbon, adjusting rates based on emissions targets, and implementing refunds and border adjustments related to carbon use. It outlines definitions, fee mechanisms, administrative guidelines, and rules for refunds for carbon capture, as well as equivalency fees for imports and exports to encourage compliance with environmental standards.
Money References
- (d) Carbon fee rate.—The carbon fee rate shall be determined in accordance with the following: “(1) IN GENERAL.—The carbon fee rate, with respect to any use, sale, or transfer during a calendar year, shall be— “(A) in the case of calendar year 2026, $65, and “(B) except as provided in paragraphs (2) and (3), in the case of any calendar year after 2026, the amount equal to the sum of— “(i) the amount under subparagraph (A), plus “(ii)(I) in the case of calendar year 2027, $10, and “(II) in the case of any calendar year after 2027, the amount in effect under this clause for the preceding calendar year, plus $10. “(2) INFLATION ADJUSTMENT.
- “(A) IN GENERAL.—In the case of any calendar year after 2026, the amount determined under paragraph (1)(B) shall be increased by an amount equal to— “(i) that dollar amount, multiplied by “(ii) the cost-of-living adjustment determined under section 1(f)(3) for that calendar year, determined by substituting ‘2025’ for ‘2016’ in subparagraph (A)(ii) thereof. “(B) ROUNDING.—If any increase determined under subparagraph (A) is not a multiple of $1, such increase shall be rounded up to the next whole dollar amount. “(3) ADJUSTMENT OF CARBON FEE RATE.— “(A) INCREASE IN RATE FOLLOWING MISSED CUMULATIVE EMISSIONS TARGET.—In the case of any calendar year following a determination by the Secretary pursuant to subsection (e)(3) that the cumulative emissions for the preceding calendar year exceeded the cumulative emissions target for such year, paragraph (1)(B)(ii)(II) shall be applied— “(i) in the case of calendar years 2029 through 2033, by substituting ‘$15’ for ‘$10’, “(ii) in the case of calendar years 2034 through 2043, by substituting ‘$20’ for ‘$10’, and “(iii) in the case of any calendar year beginning after 2043, by substituting ‘$25’ for ‘$10’. “(B) CESSATION OF RATE INCREASE FOLLOWING ACHIEVEMENT OF CUMULATIVE EMISSIONS TARGET.—In the case of any year following a determination by the Secretary pursuant to subsection (e)(3) that— “(i) the average annual emissions of greenhouse gases from covered entities over the preceding 3-year period are not more than 10 percent of the greenhouse gas emissions during the year 2018, and “(ii) the cumulative emissions did not exceed the cumulative emissions target, paragraph (1)(B)(ii)(II) shall be applied by substituting ‘$0’ for ‘$10’. “(C) METHODOLOGY.—With respect to any year, the annual greenhouse gas emissions and cumulative emissions described in subparagraph (A) or (B) shall be determined using the methodology required under subsection (e)(4).
4691. Definitions Read Opens in new tab
Summary AI
This section provides definitions for various terms used in the bill related to environmental regulations, including key terms like "Administrator," which refers to the head of the Environmental Protection Agency, "carbon dioxide equivalent" which measures greenhouse gases in terms of their global warming potential, and "covered entity," which refers to businesses or entities subject to regulation based on their greenhouse gas emissions. It also defines "covered fuel" as fossil fuels like coal and natural gas that release greenhouse gases, and "greenhouse gas content" as the amount of greenhouse gases that a given fuel would emit.
4692. Carbon fee Read Opens in new tab
Summary AI
In this section, a carbon fee is introduced for certain entities using, selling, or transferring fossil fuels after 2025. The fee amount is based on the greenhouse gas content of the fuels and will increase annually, with adjustments for inflation and potential extra increases if emissions targets are not met; rules for reporting and compliance are also outlined.
Money References
- (c) Amount of the carbon fee.—The carbon fee imposed by this section is an amount equal to— (1) the greenhouse gas content of the covered fuel, multiplied by (2) the carbon fee rate, as determined under subsection (d). (d) Carbon fee rate.—The carbon fee rate shall be determined in accordance with the following: (1) IN GENERAL.—The carbon fee rate, with respect to any use, sale, or transfer during a calendar year, shall be— (A) in the case of calendar year 2026, $65, and (B) except as provided in paragraphs (2) and (3), in the case of any calendar year after 2026, the amount equal to the sum of— (i) the amount under subparagraph (A), plus (ii)(I) in the case of calendar year 2027, $10, and (II) in the case of any calendar year after 2027, the amount in effect under this clause for the preceding calendar year, plus $10. (2) INFLATION ADJUSTMENT.
- — (A) IN GENERAL.—In the case of any calendar year after 2026, the amount determined under paragraph (1)(B) shall be increased by an amount equal to— (i) that dollar amount, multiplied by (ii) the cost-of-living adjustment determined under section 1(f)(3) for that calendar year, determined by substituting “2025” for “2016” in subparagraph (A)(ii) thereof. (B) ROUNDING.—If any increase determined under subparagraph (A) is not a multiple of $1, such increase shall be rounded up to the next whole dollar amount. (3) ADJUSTMENT OF CARBON FEE RATE.
- — (A) INCREASE IN RATE FOLLOWING MISSED CUMULATIVE EMISSIONS TARGET.—In the case of any calendar year following a determination by the Secretary pursuant to subsection (e)(3) that the cumulative emissions for the preceding calendar year exceeded the cumulative emissions target for such year, paragraph (1)(B)(ii)(II) shall be applied— (i) in the case of calendar years 2029 through 2033, by substituting “$15” for “$10”, (ii) in the case of calendar years 2034 through 2043, by substituting “$20” for “$10”, and (iii) in the case of any calendar year beginning after 2043, by substituting “$25” for “$10”. (B) CESSATION OF RATE INCREASE FOLLOWING ACHIEVEMENT OF CUMULATIVE EMISSIONS TARGET.—In the case of any year following a determination by the Secretary pursuant to subsection (e)(3) that— (i) the average annual emissions of greenhouse gases from covered entities over the preceding 3-year period are not more than 10 percent of the greenhouse gas emissions during the year 2018, and (ii) the cumulative emissions did not exceed the cumulative emissions target, paragraph (1)(B)(ii)(II) shall be applied by substituting ‘$0’ for ‘$10’.
4693. Fee on noncovered fuel emissions Read Opens in new tab
Summary AI
During any year after 2027, a fee will be charged to companies for emissions from fuels that are not covered by existing rules. The fee is based on the amount of greenhouse gases emitted, measured in metric tons of CO2 equivalents, and the carbon fee rate set for that year. The Secretary, working with the Administrator, will create rules to calculate and collect these fees, including details on quarterly payments.
4694. Refunds for carbon capture, sequestration, and utilization Read Opens in new tab
Summary AI
The section outlines regulations for providing payments to those who capture and safely store or use qualified carbon oxide, excluding its use in enhanced oil or natural gas recovery. Payments act like refunds for overpaid carbon fees and are based on the amount of carbon oxide managed. Facilities violating environmental regulations or harming communities are not eligible for payments.
4695. Border adjustments Read Opens in new tab
Summary AI
The section explains the carbon border fee adjustment, which includes refunds for carbon-related costs on exported products and fuels from the U.S., and imposes fees on similar imported items; these fees can be reduced based on carbon fees already paid in the export country. Additionally, it outlines the regulatory authority and international agreement considerations for adjusting these fees.
4. America's Clean Future Fund Read Opens in new tab
Summary AI
The America's Clean Future Fund is a trust fund established by the U.S. Treasury to support clean energy initiatives. This fund, fueled by fees from specific sections of the Internal Revenue Code, is to be allocated for purposes including carbon fee rebates, agricultural decarbonization, climate change finance, and transition assistance for impacted communities, with specific percentages designated for different purposes over various fiscal years.
Money References
- “(a) Establishment and funding.—There is established in the Treasury of the United States a trust fund to be known as the ‘America's Clean Future Fund’ (referred to in this section as the ‘Trust Fund’), consisting of such amounts as are appropriated to the Trust Fund under subsection (b). “(b) Transfers to America's Clean Future Fund.—There is appropriated to the Trust Fund, out of any funds in the Treasury not otherwise appropriated, amounts equal to the fees received into the Treasury under sections 4692, 4693, and 4695, less— “(1) any amounts refunded or paid under sections 4692(d), 4694, and 4695(b), and “(2) for each of the first 18 fiscal years beginning after September 30, 2026, an amount equal to the quotient of— “(A) $100,000,000,000, and “(B) 18. “(c) Expenditures.—For each fiscal year, amounts in the Trust Fund shall be apportioned as follows: “(1) CARBON FEE REBATE AND AGRICULTURAL DECARBONIZATION TRANSITION PAYMENTS.
9512. America's Clean Future Fund Read Opens in new tab
Summary AI
The section establishes the "America's Clean Future Fund" in the U.S. Treasury to support various environmental initiatives. It outlines the funds' sources, including fees and specific yearly allocations, and details how the money will be used for carbon fee rebates, agricultural decarbonization, climate finance, and community transition assistance.
Money References
- (a) Establishment and funding.—There is established in the Treasury of the United States a trust fund to be known as the “America's Clean Future Fund” (referred to in this section as the “Trust Fund”), consisting of such amounts as are appropriated to the Trust Fund under subsection (b). (b) Transfers to America's Clean Future Fund.—There is appropriated to the Trust Fund, out of any funds in the Treasury not otherwise appropriated, amounts equal to the fees received into the Treasury under sections 4692, 4693, and 4695, less— (1) any amounts refunded or paid under sections 4692(d), 4694, and 4695(b), and (2) for each of the first 18 fiscal years beginning after September 30, 2026, an amount equal to the quotient of— (A) $100,000,000,000, and (B) 18.
5. America's Clean Future Fund Stimulus Read Opens in new tab
Summary AI
The section outlines a program for distributing "America's Clean Future Fund Stimulus" payments to eligible individuals starting after September 30, 2026. These payments are funded by the America's Clean Future Fund and are designed to be distributed quarterly, with eligibility determined by criteria like having a Social Security number, being over 18, and living in the U.S. for more than half of the tax year, but payments are reduced if a taxpayer's income exceeds certain thresholds.
Money References
- (C) THRESHOLD AMOUNT.—The term “threshold amount” means— (i) $150,000 in the case of a taxpayer filing a joint return, and (ii) $75,000 in the case of a taxpayer not filing a joint return.
- the case of any taxpayer whose modified adjusted gross income for the most recent taxable year for which a return has been filed exceeds the threshold amount, the amount of the carbon fee rebate payment otherwise payable to any household member of the taxpayer under this section shall be reduced (but not below zero) by a dollar amount equal to 5 percent of such payment (as determined before application of this paragraph) for each $1,000 (or fraction thereof) by which the modified adjusted gross income of the taxpayer exceeds the threshold amount.
- (j) Initial appropriation.—For purposes of subsection (c)(2), there is appropriated, out of any funds in the Treasury not otherwise appropriated, to remain available until expended— (1) for the fiscal year ending September 30, 2025, $37,500,000,000, and (2) for the fiscal year ending September 30, 2026, $37,500,000,000. (k) Termination.—This section shall not apply to any calendar quarter beginning after— (1) a determination by the Secretary under section 4692(d)(3)(B) of the Internal Revenue Code of 1986; or (2) any period of 8 consecutive calendar quarters for which the amount of carbon fee rebate payment (without application of subsection (d)) during each such quarter is less than $20. ---
6. Agricultural decarbonization transition payments Read Opens in new tab
Summary AI
The section establishes a program to support farmers with transitioning to practices that reduce greenhouse gas emissions by providing payments to eligible producers. It defines important terms, outlines eligibility criteria, describes the program's implementation, and includes provisions for data collection, privacy, and reporting, as well as guidelines for measuring and verifying reductions in emissions.
7. Transition assistance for impacted communities Read Opens in new tab
Summary AI
The section outlines a program where the Secretary of Commerce, in coordination with the Secretary of Labor, will provide grants to organizations in communities affected by economic changes from carbon-heavy industries or climate events. These grants aim to support job creation, worker transition, infrastructure resilience, environmental cleanup, and related activities, while ensuring fair labor wages and the use of U.S.-produced goods, unless specific waivers apply.
Money References
- — (1) INITIAL FUNDING.—There is appropriated to the Secretary, out of any funds in the Treasury not otherwise appropriated, $5,000,000,000 for each of fiscal years 2025 and 2026 to carry out this section, to remain available until expended.
8. Study on carbon pricing Read Opens in new tab
Summary AI
The section requires the head of the Environmental Protection Agency to work with the National Academy of Sciences to study the impact of certain fees on reducing greenhouse gas emissions in the U.S., aiming for a 45% reduction by 2030 and a complete reduction by 2050. The study must include evaluations of emission trends, impacts of the fees on local air pollution, potential reductions by other policies, and compare U.S. efforts with other countries, with results reported to the Administrator, Congress, and the Climate Change Finance Corporation.
9. Establishment of targets for carbon sequestration by land and water Read Opens in new tab
Summary AI
The bill requires the Chair of the Council on Environmental Quality, along with other officials, to set a target for increasing carbon storage in nature and create plans to meet that goal by protecting ecosystems. A report on these targets and any additional resources needed must be submitted to Congress.