The first federal tax on greenhouse gas emissions will be imposed on oil and gas corporations by the US Environmental Protection Agency (EPA) for their excess methane emissions.
Enter the EPA's Waste Emissions Charge, which is a component of the Methane Emissions Reduction Program, which is a component of the Inflation Reduction Act, when US gas and oil output reaches historic levels.
The goal of the Waste Emissions Charge is to incentivize fossil fuel firms to minimize their emissions of methane and other hazardous air pollutants as soon as possible by utilizing best practices and available technology.
This is due to methane's greater potency than carbon dioxide as a "super pollutant" of the climate. Approximately one-third of global warming is caused by it.
One of the best things that can be done right now to combat climate change is to reduce methane emissions, as this is the greatest industrial source of methane emissions in the US and the oil and gas industry.
The Waste Emissions Charge will rise to $1,200 in 2025 and $1,500 in 2026 and beyond, starting in 2024 at $900 per metric ton of wasted emissions. It only applies to emissions over the threshold set forth by statute.
These are the EPA's carrots; that's its stick. Over $1 billion in funds from the Inflation Reduction Act will be made available by the US Department of Energy (DOE) to expedite the switch to "no- and low-emitting oil and gas technologies." This covers the cost of monitoring methane emissions, reducing them, and locating and sealing well and pipe leaks.
In order to enhance the Greenhouse Gas Reporting Program and raise the accuracy of reported methane emissions, the EPA is also collaborating with the fossil fuel sector. Furthermore, since it's an honor system and the EPA doesn't confirm the reports, accuracy may be a problem. Oil and gas firms self-report exceeding the methane emissions limits imposed by Congress.
It should come as no surprise that the fossil fuel industry is protesting the new methane penalty; the American Petroleum Institute quickly called for their repeal. The plan made today will "support a complementary set of technology standards and historic resources from the Inflation Reduction Act to incentivize industry innovation and prompt action," according to EPA administrator Michael S. Regan.
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