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.” 

Climate change's economic toll continues to mount

Every three weeks, the U.S. experiences an extreme weather event in which damages and costs top $1 billion.

That compares with every four months in the 1980s, when adjusted for inflation, according to the latest installment of the U.S. National Climate Assessment released November 14.

Created in 1990, the national climate assessment is mandated by law and is produced every four years, though it sometimes gets delayed. This latest version—the fifth—expands on findings from the last assessment in 2018 and was written by more than 750 experts and reviewed by 14 federal agencies. 

For the first time, the assessment includes a separate chapter on the economic impacts associated with climate action, noted Amrith Ramkumar of The Wall Street Journal. The chapter “really paints a much broader picture of the ways in which climate change is affecting daily life,” said Delavane Diaz, a principal team lead at the Electric Power Research Institute and a co-author of the report. To enable people to see the impacts of climate change in their city and state, the Biden administration has created an online tool.

Due to global warming, average temperatures in the United States are rising about 60 percent faster than they are in the world as a whole. Every part of the country is feeling the effects of the warming planet, the report finds. Rising fatalities from extreme heat in the Southwest. Earlier and longer pollen seasons in Texas. Northward expansion of crop pests in the Corn Belt. More damaging hail storms in Wyoming and Nebraska. Stronger hurricanes in Puerto Rico and the Virgin Islands. Shifting ranges for disease-spreading ticks and mosquitoes in many regions.

For every 1 degree Fahrenheit that the planet warms, the U.S. economy’s growth each year is 0.13 percentage points slower than it would be otherwise, according to the report. As The New York Times’ Raymond Zhong pointed out, that seemingly small effect can add up, over decades, to a sizable amount of forgone prosperity.

The report concludes that Americans’ efforts have mostly been “incremental” instead of “transformative”: installing air-conditioners rather than redesigning buildings, increasing irrigation rather than reimagining how and where crops are grown, elevating homes rather than directing new development away from floodplains. About 40 percent of the U.S. population lives in coastal communities exposed to sea level rise, and millions of homeowners could be displaced by the end of the century, according to the assessment.

Switching to zero-carbon energy could reduce air pollution enough to prevent 200,000 to 2 million deaths by 2050, the report says. 

The National Climate Assessment is extremely influential in legal and policy circles, and affects everything from court cases about who should foot the bill for wildfire damage, to local decisions about how tall to build coastal flood barriers, NPR reported. "It really shapes the way that people understand, and therefore act, in relation to climate change," says Michael Burger, the director of the Sabin Center for Climate Change Law at Columbia University.

Progress toward putting an honest price on carbon

If you’re on this page, you probably fully understand that the prices of products containing carbon do not include all the costs they impose on society. The list includes medical costs related to polluted air, wildfire and hurricane damage due in part to climate change, and more.

So we applaud the Biden administration’s September 21 decision to determine an honest carbon price and use it in federal government purchasing choices. As The New York Times’ Coral Davenport wrote, “The idea is to take into account the greenhouse gases generated by goods and projects, how they contribute to global warming, and the cost of that to the economy.”

As she pointed out, “the potential impact is significant. The federal government is the world’s largest consumer of goods and services, spending roughly $600 billion each year. The changes could shift purchases for the federal government’s fleet of roughly 600,000 cars and trucks from gasoline-powered to all-electric vehicles, redirect the flow of billions of dollars of government grants and reshape or kill some major construction projects.”

A White House fact sheet cited a recent federal finding that climate-related disasters could increase federal spending by more than $100 billion annually and decrease annual federal revenue by up to $2 trillion by the end of the century. 

“It will be the first time this ‘whole of government approach’ is used to evaluate the climate consequences of government actions,” said Richard Revesz, the president’s regulatory chief.

“This is a very big deal,” said U.S. Senator Sheldon Whitehouse, the leading advocate in Congress for a strong, governmentwide social cost of carbon. This action, he noted, “will put the full weight of federal government decisions into fighting climate change – a solution I’ve been encouraging for many years. The International Monetary Fund has calculated the American government subsidy for Big Oil at $760 billion per year, none of which reflects the harm and damage the industry’s products do to the planet.  

“Under President Biden’s leadership, America is fighting back on behalf of taxpayers and will begin factoring the true costs of carbon pollution into a wide array of government actions, cutting back on taxpayers’ bills for climate-related disasters over the long term.  The biggest private sector companies have been doing this for years because it makes good economic sense.  By incorporating the social cost of carbon into procurement calculations, today’s action will result in economies of scale for clean energy and low-emission products, bringing down prices for consumers.”

As PoliticoPro’s Alex Guillen explained, the social cost of carbon was first calculated by the Obama administration and included only carbon dioxide. It was expanded to include other climate pollutants, notably methane and nitrous oxide. The price was determined to be $42. Under President Donald Trump, that figure was lowered to less than $5.

Biden ordered that cost restored to roughly the same level established under Obama (an inflation-adjusted $51) and directed an interagency working group to overhaul the metric. In November 2022, EPA issued a proposal with three possible levels for the social cost of carbon, including $120. That proposal will be finalized after EPA has reviewed public comments.

Coming up this fall is a U.S. Supreme Court decision on whether to hear an appeal by Missouri and other Republican-held states that challenges the use of the social cost metric. That case failed in a federal district court and in the 8th U.S. Circuit Court of Appeals. Both courts ruled the states lacked standing to bring their lawsuit because they failed to show they had been actually harmed by the metric.

We strongly advocate enactment of a fee on carbon to incorporate the costs of carbon in all prices throughout the nation’s economy.

Seventy percent of Americans would "make money" on carbon tax & dividend

The political consensus is that a carbon fee (a/k/a carbon tax) is a loser. Any new tax is a long shot, and when you’re talking about one that will increase the cost of filling your gas tank, it’s an even longer shot.

But a recent blog post by Frank Lysy, an economist who was formerly with the World Bank, takes issue with that conventional wisdom. He drives home the point that if all the tax revenue goes back to the American people, as many of us in the climate community have proposed, AND if supporters do a better job of explaining this proposal, the votes may well materialize.

Lysy emphasizes that 70 percent of Americans would receive more in the form of a “dividend” than they pay in a carbon tax. As he explains it:

“The US Treasury published a study of this scheme in January 2017, and estimated that such a tax would generate $194 billion of revenues in its initial year (which was assumed to be 2019).  This would allow for a distribution of $583 to every American (man, woman, and child – not just adults).  Furthermore, the authors …concluded that…the bottom 70%, as ranked by income, would enjoy a net benefit, while only the richest 30% would pay a net cost.”

Critics often argue that a tax on consumption is unfair to those with low incomes. But, Lysy points out, “[t]hose in the poorest 10% of households would receive an estimated $535 net benefit per person from such a scheme. The cost of the goods they consume would go up by $48 per person over the course of a year, but they would receive back $583.” The reality is that the well-to-do consume a lot more energy and thus would pay much more in carbon taxes.

Lysy compared this carbon tax proposal to what used to be called the food stamps program (formally now called SNAP, for Supplemental Nutrition Assistance Program). It is the largest cash income transfer program in the U.S. designed specifically to assist the poor. “The carbon tax scheme would be of greater benefit than food stamps are, on average, for lower middle-class households (those in the 3rd decile and above),” he calculated.

And it’s not as if high-income Americans would suffer. “In dollar terms,” Lysy wrote, “the richest 10% would pay in a net $1,166 per person in this scheme… But this would be just 1.0% of their per-person incomes. The 9th decile (families in the 80 to 90th percentile) would pay in a net of 0.7% of their incomes, and the 8th decile would pay in a net of 0.3%.”

Lysy compares this free market approach to the alternative: a regulatory solution to climate change. “Such systems are not good, by their nature, at handling innovations, as by definition innovations are not foreseen,” he explains. “Yet innovations are precisely what one should want to encourage… A carbon tax program would similarly encourage innovations, while regulatory schemes can not handle them well.”

What about imports? “There would also be a border-tax adjustment on goods imported, which would create the incentive for other countries to join in such a scheme (as the US would charge the same carbon tax on such goods when the source country hadn’t, but with those revenues then distributed to Americans).”

To help win over skeptics, Lysy suggests sending initial rebate checks before the carbon taxes are to go into effect, an idea termed a “prebate.” That would help overcome the fear that somehow the revenue would go into government coffers and never come back.

Please encourage your U.S. senators and House member to take a fresh look at the numbers–and vote for this common-sense solution. Let’s not wait for more hurricanes, floods, droughts and wildfires.