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.