In 2009 the United States House of Representatives passed cap-and-trade legislation in the form of the American Clean Energy and Security Act. This legislation may violate certain provisions of the Agreement on Subsidies and Countervailing Measures, to which the United States is a party to. In particular, the legislation may violate the sections of the Agreement prohibiting the allocation of government subsidies to domestic industries. This paper explores the aspects of the legislation that are most likely to violate the Agreement and discusses alternative methods of regulating carbon that are compatible with it.