First global carbon tax is coming into view

The first worldwide carbon tax appears to be steaming into view. In late March the United Nations agency that regulates the shipping industry essentially committed to requiring shipping companies to pay a fee for every ton of carbon they emit by burning fuel. 

“I’m very confident that there is going to be an economic pricing mechanism by this time next year,” Arsenio Dominguez, the secretary general of the International Maritime Organization, said. “What form it is going to have and what the name is going to be, I don’t know.”

This step is “potentially world-changing,” Manuela Andreoni and Max Bearak wrote in The New York Times. They reported that there are at least 50,000 cargo ships like the ill-fated Dali, which crashed into Baltimore’s Francis Scott Key Bridge, constantly on the move, transporting the vast majority of the world’s goods. Shipping accounts for roughly 3 percent of global greenhouse gas emissions, slightly more than aviation. 

About 70 countries and states around the world have put a price on carbon, either through taxes or trading mechanisms. But if the IMO finalizes this proposal, it would be the first carbon fee to apply around the globe.

The IMO has been considering carbon pricing and other market-based measures for more than 10 years. The organization said that by adopting the proposal it was simply living up to its pledge, made last year, to decarbonize the entire shipping industry by 2050. Its member countries have agreed that they need to start charging the shipping industry for emissions of heat-trapping gases in 2027.

The organization still must make many decisions about pricing carbon, The Times’ reporters noted. “How would a price be calculated? Would it be a flat fee or part of a trading mechanism between companies? Who would collect the money and distribute it? And which fuels are considered low-carbon?

“Countries are looking at seven different proposals, in which prices range from $20 to $250 per ton of carbon emissions... They hope to decide on all that by next year.”

Such a fee would very likely raise tens of billions of dollars a year. That revenue could accomplish a lot. "The Pacific is pushing for a majority of the revenue to support the most climate vulnerable in responding to climate change," the Marshall Islands' envoy Albon Ishoda said in a Reuters dispatch last summer. 

Economist DominikEnglert and his colleagues from the World Bank suggested in a study that countries should use the money to decarbonize the shipping industry, invest in efficiency measures that could reduce shipping costs for poorer countries and deploy it for broader climate action.

Many of the world’s biggest shipping companies are pushing for a more ambitious carbon price because that would mean they wouldn’t need to pay for the same tax in Europe, The Times explained. Companies ideally want to avoid paying carbon taxes in multiple jurisdictions, which would result in a lot of complex and expensive accounting.

“If I think back three years ago, the IMO was just about the most conservative organization I have ever encountered,” the European Commission's Green Deal chief Frans Timmermans told a side event at last June’s Paris climate finance summit. “And now the atmosphere has completely changed.” 

Efforts to track and reduce methane emissions are taking shape

Oil and gas producers in major oil fields across the United States may be emitting three times as much methane as official estimates, according to research published March 13 in the journal, Nature. It was the latest study to suggest that emissions from the fossil fuel sector may be grossly undercounted.

Methane, a colorless and odorless gas, is the main ingredient in natural gas, which is burned in power plants and factories around the world, as well as in homes. ‘It’s notoriously leaky,’ Hiroko Tabuchi reported in The New York Times. “It seeps from oil and gas drill sites. It escapes from pipelines that carry the gas where it needs to go. And some operators simply release it into the air instead of investing in the infrastructure to capture all of it.”

Methane can warm the planet more than 80 times as much as the same amount of carbon dioxide over a 20-year period, and scientists estimate that human-caused methane emissions are responsible for up to 30 percent of the global warming being experienced today.

In a separate analysis released the same day, the International Energy Agency (IEA) said that methane emissions from the energy sector remained near record highs in 2023. But it also struck a hopeful tone, saying new steps announced in recent months could soon put those emissions in decline. For now, global methane emissions remain “far too high” to meet international climate targets, the IEA said.

The study published in Nature found that methane emission rates varied widely across regions, from 0.75 percent in Pennsylvania to more than 9 percent in parts of New Mexico.

One takeaway from this and previous studies was “just how concentrated emissions are in a very small fraction of sites,” said Evan D. Sherwin, who led the research at Stanford and now works at the Lawrence Berkeley National Laboratory. “That’s the silver lining,” he told The Times. “If we can figure out what’s happening at these small fraction of sites, we’re halfway toward solving the methane problem in oil and gas,” he said. Axios noted that only 0.05 to 1.66% of well sites contribute the majority of well site emissions.

Nearly 200 governments agreed at last year’s global climate talks in Dubai to “substantially” reduce methane emissions by 2030. Major oil and gas companies have also signed onto the Global Methane Pledge to rein in their emissions. Meantime, the Biden administration is moving ahead with rules that require oil and gas producers to detect and fix leaks of methane.

All of the pledges made by countries and companies, implemented in full and on time, would cut methane emissions from fossil fuels by 50 percent by 2030, the IEA’s new analysis found. However, the agency pointed out that most pledges were not yet backed by concrete plans.

Moreover, it’s been hard to track companies’ progress. As Nicolas Rivero wrote in The Washington Post, there are thousands of oil and gas facilities around the world with countless pieces of equipment that can leak or malfunction and release methane. Companies and regulators can measure some emissions by installing methane detectors or using planes or drones to fly sensors over a facility, but the data is incomplete and hard to compare between companies.

Now, a new generation of satellites, led by MethaneSAT, produced by researchers at the Environmental Defense Fund (EDF) and Harvard University, promises to give a more complete picture of the oil and gas industry’s global methane emissions. The satellite launched March 4 on a SpaceX rocket and will begin transmitting data later this year.

MethaneSAT aims to “see” about 80 to 90 percent of global oil and gas production as it does its daily 15 rotations around the Earth. That should cover a significant chunk of human-caused methane emissions. (Other big sources of methane release are landfills and cow burps.)

Another satellite, designed by NASA, a satellite maker called Planet and a greenhouse gas tracking nonprofit called Carbon Mapper, is set to launch this year. Japan will send another emissions-tracking satellite into space this year, and the European Space Agency plans to launch two more in 2026.

“Soon, there will be no place to hide,” Ben Cahill, a climate expert at the Center for Strategic and International Studies, told Rivero. “There’s going to be a lot of public data on methane emissions, so companies will have very strong incentives to figure out the problem and fix it.”

Pausing proposed LNG export projects makes sense

The United States is in the midst of a false debate. It supposedly is a choice between national security and fighting climate change. The debate has intensified with President Joe Biden’s decision to “pause” federal approval of a dozen or more liquified natural gas (LNG) projects that are pending or in various stages of planning.

U.S. LNG capacity has doubled in recent years and is set to double again under projects already approved, the White House has said. Seven LNG terminals are currently operating in the U.S., mostly in Louisiana and Texas, with up to five more expected to come online in the next few years, AP’s Matthew Daly reported. Biden's action would not affect those projects.

LNG from our country has been vital to European countries that had been heavily dependent on Russian gas before President Vladimir Putin invaded Ukraine. At this point, there is more than enough LNG supply projected in the global marketplace to meet demand from Europe without adding more projects to the pipeline. “To be clear,” wrote The New York Times’ Stanley Reed, “in making this move, the Biden administration seems unlikely to jeopardize supplies to customers outside the United States this year or anytime soon.” 

In fact, the International Agency (IEA) concluded that there is a risk of a gas glut. Bloomberg News reported: "The upshot is the world looks set to get through its second winter since Russia’s invasion of Ukraine curbed pipeline supplies without any major drama, even in the event of record-breaking cold blasts.”

Meantime, the U.S. and most other countries are failing to hit greenhouse gas emissions (GHG) targets, thus increasing the damage that climate change is causing and will cause. Natural gas has helped reduce global emissions because it mostly has displaced coal, the dirtiest fossil fuel. But gas is not harmless; it emits both carbon dioxide and methane, which is even more potent.

It has been a valuable “bridge” fuel, but the projects that have been paused would have created infrastructure locking in the production of gas far into the future. As Biden put it, the pause on approvals “sees the climate crisis for what it is: the existential threat of our time.”

Wall Street Journal reporter Benoit Morenne noted the growth of our nation’s LNG export capacity. When the U.S. Department of Energy (DOE) conducted its last analysis into the impact of gas exports in 2018, U.S. LNG export capacity was less than 4 billion cubic feet a day, according to Energy Secretary Jennifer Granholm. It has already more than tripled, and is set to nearly double again by 2030, she said. We need to be wary of creating a runaway train.

It would be far better to price GHG emissions and let the marketplace decide which energy projects make long-term sense. Indeed, if we removed the subsidy on natural gas, it might become clear to those proposing new LNG export terminals that they won’t find a market for the product once the price of gas reflects its true cost.

Federal fee on methane emissions is in sight

For the first time, the U.S. is about to impose a fee on greenhouse gas emissions. Finally!

The Methane Emissions Reduction Program, an enforcement provision in the 2022 climate law, imposes fees on excess methane emissions, and those fees will increase over the rest of the decade. The fee will initially kick in at $900 per metric ton this year, rise to $1,200 next year, and increase to $1,500 from 2026 on.

The Environmental Protection Agency (EPA), which drafted the rule, projects that it will reduce emissions from methane by about 80 percent. It will become final after a 45-day public comment period.

“The proposed rule represents one of the biggest sticks in a White House climate strategy that has so far dangled carrots,” wrote The Washington Post’s Maxine Joselow. “President Biden’s signature climate law, the Inflation Reduction Act, offers generous financial rewards for businesses that reduce their emissions, but it provides few punishments for companies that fail to do so.”

Methane is responsible for more than a quarter of the warming the planet is currently experiencing. It is the second-most-abundant greenhouse gas after carbon dioxide, but is 80 times as powerful in the short run in terms of heating the atmosphere.

Scientists say that quickly reducing methane emissions is one of the most effective steps nations can take to put a brake on fast-rising global temperatures.

Methane wafts into the atmosphere from pipelines, drill sites and storage facilities. Some producers burn excess gas at the production site, a process known as flaring, which releases carbon dioxide and also, sometimes, methane.

The oil and gas industry, whose production in this country has reached record levels, accounts for about 14 percent of the world’s annual methane emissions, according to the International Energy Agency (IEA). Other large methane sources include livestock, landfills and coal mines.

In addition to reducing methane emissions, the EPA proposal could slash emissions of hazardous air pollutants, including smog-forming volatile organic compounds and cancer-causing benzene, an EPA official noted.

The fee is the second part of methane restrictions the Biden administration is imposing on the oil and gas industry. Last month, EPA announced that it would require companies to detect and fix leaks of methane from wells, pipelines and storage facilities and that it would mostly ban the practice of flaring, except in emergencies.

As Lisa Friedman wrote in The New York Times, the new proposal relies on large energy producers to self-report if their methane emissions exceed levels set by Congress, with no provision for the government to verify that data. Environmental groups and others believe that relying on these producers to report their own emissions is a worrisome loophole. Last year, a House committee issued a report that found methane leaks were most likely significantly higher than data that companies reported to the federal government. Today satellite-based sensors are far more accurate at detecting methane leaks. 

Some in the industry aren’t happy about the new fee. Dustin Meyer, senior vice president for policy at the American Petroleum Institute, said that his organization supports “smart” methane regulations but said the fee “creates an incoherent, confusing regulatory regime that will only stifle innovation and undermine our ability to meet rising energy demand.” 

Meyer seems confused; a fee approach is not a regulatory approach and is what industry leaders have long asked for instead of a regulatory approach. All a fee does is harness free market economics and innovation to find ways to lower emissions and, thus, avoid the fee.

Apparently, after fighting a regulatory approach and gaining the fee approach, the industry now thinks it would be cheaper to be regulated! Perhaps the fee hits too close to home. We applaud the fee approach because it removes the subsidy that weaker performers receive and encourages all to eliminate stray emissions or pay for the costs they impose on the rest of us.

API is urging Congress to pass legislation to repeal the EPA proposal. Rep. August Pfluger (R-TX) has “proudly introduced” a bill to scrap what he calls the “natural gas tax.” Apparently, he prefers that the industry continue to be subsidized by the rest of us.

COP28: There was progress, but was it enough?

In an ideal world, negotiators at the recent COP28 in Dubai would have agreed that all 197 nations that were on hand would tax greenhouse gas emissions. That was not on the table, of course. But the absence of such action does not mean that the gathering was a failure.

On the bright side, the final document called on countries to transition "away from fossil fuels in energy systems, in a just, orderly and equitable manner, accelerating action in this critical decade, so as to achieve net zero by 2050 in keeping with the science." 

As Somini Sengupta noted in The New York Times, “It took 28 years of climate negotiations for world leaders to agree to wean the global economy from the principal source of climate change: the burning of fossil fuels.” Mohamed Adow, a climate campaigner from Kenya, said, “We’re finally naming the elephant in the room.” 

And, as Andrew Freedman of Axios put it, the agreement “sent a signal to the markets and lawmakers to work harder and faster to expand renewables like wind and solar power and meet the new global goal of tripling such energy capacity by 2030.”

But many commentators and reporters, including Freedman, prescribed doses of reality in sizing up COP28. “Let’s be real,” urged Auden Schendler, senior vice president of sustainability at Aspen One. “The summit’s proposals for voluntary commitments — on methane, on renewables, on phasing out fossil fuels — were theater,” he wrote in a New York Times op-ed. “Imagine if in the 1960s Americans had responded to the civil rights movement not with legislation but with calls to please treat one another nicely.”

Veteran climate journalist Elizabeth Kolbert, writing in The New Yorker, observed: “Certainly, everyone should hope that the outcome of the negotiations in Dubai represents, as (COP28 President Sultan Ahmed) Al Jaber put it, a ‘paradigm shift.’ But, after twenty-eight COPs, and twenty-eight years of rising emissions, skepticism is clearly justified. Perhaps by next year’s COP, the significance of the U.A.E. Consensus will be clear.”

TIME’s Aryn Baker concluded that the 21-page “Global Stocktake,” as it’s called, “is noteworthy for finally acknowledging that countries need to ‘transition away’ from fossil fuels. Nonetheless, it is riddled with loopholes and lacks clear goals and fixed timelines. Boiled down into three words, it says, essentially, ‘We will try.’”

One encouraging sign was a greater focus on climate change’s toll on our health. “In the health community this was a movement-building COP,” said Elizabeth Willetts, the planetary health policy director at the Harvard T.H. Chan School of Public Health. “We can feel pessimistic about limited progress on meaningful agreement to strengthen mitigation, but it is worth being optimistic that COP28 was a watershed moment for engaging the health sector as a stakeholder group in climate negotiations. After several years of organic organizing, hundreds of health professionals from around the world joined together in Dubai to track and advocate within the negotiation process.”

COP28 also made progress on curbing methane emissions, which have tended to be overlooked because of the concern about carbon dioxide. Under the Oil and Gas Decarbonization Charter, 50 companies accounting for 40 percent of global oil production committed to eliminating their methane emissions by 2050. They also committed to ending flaring by 2030. But, as Umair Irfan pointed out in Vox, “Few of the announced actions, however, include the largest driver of methane pollution: the food we eat.”

The bottom line on COP28? “A key test for national governments,” wrote The Times’ Sengupta, “will come in 2025, when every country is expected to set its next round of climate targets, known as nationally determined contributions.” She then quoted former Vice President Al Gore: “Whether this is a turning point that truly marks the beginning of the end of the fossil fuel era depends on the actions that come next.”