Pricing methane and carbon emissions will help US meet the climate moment

The United States Congress is embroiled in a policy debate that will determine how the country addresses the climate crisis and the massive toll it is taking on economic stability and human prosperity.

As President Biden prepares to attend the UN COP26 climate conference in Glasgow — where the U.S. commitment to climate action will help determine whether the global community can keep the goal of limiting warming to 1.5 degrees Celsius within reach — Congress is negotiating a budget package that could include more than $600 billion in climate investments, based on the provisions in the House’s Build Back Better Act.

While media coverage has focused on the size of the package and the climate crisis demands unprecedented investments in climate action, it is important to look beyond the topline numbers and judge the budget bill that emerges based on what it delivers in terms of emissions reductions that protect our shared future.

Adopting pollution fees that complement federal investments and tax credits would be a powerful way to drive additional emissions reductions while helping to pay for the package as a whole.

Methane is a potent greenhouse gas, second only to carbon dioxide in its overall contribution to climate change. While methane breaks down in the atmosphere (into carbon dioxide and water) over about a decade, its strong heat-trapping capacity means it has an outsized impact on warming. The concentration of methane in the atmosphere has increased twice as fast as carbon dioxide and its total warming effect is almost 60 percent as large even though methane makes up a far smaller share of the atmosphere. Reducing methane emissions from activities such as agriculture and fossil fuel production could avoid 0.3 degrees Celsius of warming by the 2040s.

The importance of slashing methane emissions is increasingly and globally recognized; even beyond climate change, methane contributes to the scourge of air pollution and hundreds of thousands of associated premature deaths worldwide each year. Major economies, including the U.S. and the European Union, recently announced a global pledge to collectively reduce global methane emissions by at least 30 percent from 2020 levels by 2030.

Congress can play a critical role in contributing to this global target by including a methane fee on the oil and gas industry in the reconciliation legislation they are negotiating right now. The Office of Senate Majority Leader Chuck Schumer (D-N.Y.) found that placing a fee on methane emissions would make the third-largest contribution to the 45 percent overall emissions reductions in 2030 resulting from the infrastructure package (consisting of both the bipartisan infrastructure deal and the reconciliation bill), delivering 9.1 percent of the total. 

By holding oil and gas companies accountable for their residual emissions, the methane fee would complement methane emissions limits expected soon from the Environmental Protection Agency (EPA). Given methane’s comparatively short time in the atmosphere, a methane fee can deliver rapid progress toward our climate goals.

While curbing methane emissions is key to reduce climate change in the short term, the impact of carbon dioxide emissions are cumulative, and achieving net-zero emissions is essential to achieving our long-term climate goals. To that end, Congress should also establish a carbon price through the reconciliation bill.

In 2019, carbon dioxide made up 80 percent of U.S. greenhouse gas emissions based on cumulative impacts over 100 years. Congress is considering a range of essential policies to reduce carbon emissions through reconciliation, including foundational levers like clean energy tax credits and crucial investments in electrifying transportation.

However, even if the most ambitious climate-smart bipartisan infrastructure investments and reconciliation climate policies are adopted, these alone won’t be enough to cut overall emissions by at least 50 percent from 2005 levels by 2030, as Biden has committed to do.

By integrating the cost of planet-warming emissions into the cost of associated energy and materials, a carbon price could secure those additional reductions by 2030 and buffer against uncertainty and reduced ambition in other parts of a climate package. Reporting suggests that members of Congress are looking to replace the Clean Electricity Performance Program, an ambitious initiative included in the 45 percent emissions reductions estimate released by Schumer in August. Carbon pricing could do that and more.

Additionally, as a long-lasting revenue-raising policy, a carbon price does not increase the deficit and so does not have to sunset after 10 years if passed through reconciliation (unlike investments and tax credits). A carbon price is the kind of sustained market signal that can put the U.S. on track to our ultimate “net-zero by 2050” goal.

Further, an economywide carbon price could supplement sector-specific spending programs to impact hard-to-reach industries. For example, the diversity of the industrial sector, which contributes 23 percent of U.S. greenhouse gas emissions, makes it harder to address through sector-specific policies. Spending on industrial decarbonization, through incentives for clean hydrogen production, technology demonstration projects, and more, is essential — a carbon price would complement these measures and drive carbon emission reductions across the sector.

Methane and carbon pricing are two important components of a comprehensive whole-of-government climate policy championed by the Biden administration and implemented through a range of federal actions, including regulations. These policies are not a substitute for other elements of a robust climate strategy that centers on an equitable and prosperous transition to a sustainable future; rather, they can amplify the impact of this broader strategy while addressing residual and unaddressed emissions.

The fates of both a methane fee and carbon price in budget reconciliation are unknown, with negotiations ongoing and some senators voicing objections. However, one thing is clear: When all is said and done, Congress will be judged on the overall impact of the legislation it passes and whether it puts the U.S. firmly on track to meet its climate targets. The eyes of the American public, and the global community, are on Capitol Hill this week, wondering if Congress will deliver what’s needed.

Dan Lashof is the director of World Resources Institute, United States. Follow him on Twitter: @DLashof