Can we widely adopt a methane tax to reduce greenhouse gases?
When it comes to the discussion of greenhouse gas emissions, carbon dioxide is often the most touted. Methane emissions are also classified as a greenhouse gas and deserve as much attention as carbon when discussing climate change mitigation strategies. Here, we look at anthropogenic sources of methane in the atmosphere and whether a methane tax is feasible to reduce this global warming greenhouse gas.
What is methane?
The term greenhouse gas is a generic umbrella term that refers to several different types of emissions, produced naturally or anthropogenic. In short, any type of gas that traps heat in the atmosphere is a greenhouse gas. To break it, in 2020, carbon dioxide accounted for 79% of emissions, methane 11%, nitrous oxide 7% and fluorinated gases 3%. Carbon emissions are created by the combustion of fossil fuels, solid waste and biological materials, while methane is created during the production and transport of fossil fuels, as well as agricultural by-products and organic materials in decomposition. While carbon certainly makes up the majority of emissions, methane has a comparatively shorter lifespan and is 25 times more effective at trapping heat in the atmosphere.
Despite its harmful cumulative effects, methane continues to be equated with carbon as part of broader emissions tax policies, although some steps are being taken to tighten the regulation of methane emissions to international standards. The global methane commitment is an example of an organization of states recognizing the need for better management of methane emissions, formed in November 2021 during COP26. With 111 signatory countries, the pledge encompasses approximately 45% of total global emissions, with the aim of reduce emissions by at least 30% below 2020 levels by 2030. However, the commitment is not binding, members are not assigned individual reduction targets and large emitters such as China, India or Russia have notably not signed up. As such, the pledge is a largely symbolic posture, providing an overall goal to achieve. , but it does not specify any action or step to achieve its objectives.
Can a methane tax be widely adopted?
That said, on an individual basis, there are some countries that are innovating on methane regulation. Prior to the formation of the Global Methane Pledge in 2016, Canada had already announced plans reduce methane emissions from its oil and gas sector by 40-45% below 2012 levels by 2025. Since then, adjustments have been made to the Canadian Environmental Protection Act to reflect these ambitions through provincial regulations and federal investment programs. In December 2021, the Canadian government claimed that it on track to meet their methane reduction targets. However, it is important to note that despite such regulations, Canada’s carbon tax does not apply to methane emissions, due to a lack of robust reference measurement.
Conversely, Norway was one of the first countries in the world to officially introduce a carbon tax in 1991, targeting the fossil fuel industry. Besides carbon, harmful gases regulated by the tax also include methane, among several others. Overall, Norway has been able to encourage energy efficiency measures in fossil fuel-based activities, and through its policy has been able to keep methane emissions consistently low by combining strict regulatory standards with strong fiscal measures.
In the United States, the Biden administration is also engaging in their own action plan, involving several government institutions and new actors to help the country achieve the objectives of the Global Methane Pledge. According to Plan to reduce methane emissions, the U.S. government aims to clean up orphan oil and gas wells, implement a methane reduction infrastructure initiative, reduce methane leaks from pipeline systems, reduce emissions from beef and dairy farms, and to form an interagency working group on greenhouse gas monitoring and measurement to engage with key stakeholders.
However, it is important to consider that despite some degree of regulation, fiscal policies that explicitly prioritize methane emissions do not yet exist in any meaningful way. Since methane has a much shorter lifespan and is more harmful than carbon, policy options must be timely and effective, rather than stopgap measures. Innovation is possible, as the examples of Canada, Norway and the United States show, but there is still much to be done and these three countries have demonstrated that strong methane tax policies can be achieved.
The International Energy Agency maintains a online policy database which lists emission reduction strategies in countries around the world, aimed at reducing the heaviest sources of emissions, with varying degrees of success. Therefore, in countries where methane regulation has shown promising potential, a methane tax would achieve faster and more effective results. In the old days, carbon taxes encouraged the adoption of clean and more energy-efficient technologies, the transition from dependence on fossil fuels and led to income gains. With such a record, taxes focused on methane emissions would likely follow suit.
Specifically, with the examples of Canada, Norway, and the United States, the policy structure on industry-wide emissions regulation already exists, so something like a methane tax wouldn’t be a shock to the system. Of course, domestic politics presents the most important hurdle to overcome. In the United States, a proposed methane tax, as part of a larger climate bill, is still under debate. On a case-by-case basis, from one country to another, the possible implementation of a methane tax will be different, but this does not exclude the fact that existing regulations even before reaching this scale have been effective. In context, a methane tax levied on the heaviest emission sources is not only feasible, but necessary.
The climate crisis is intensifying, not diminishing, so policy responses must be commensurate and proportionate to counter the declining health of the planet. Thus, when it comes to reducing greenhouse gas emissions, priority should be given to methane. With all the calls for action and innovation, all options must be considered, and taxing methane is a step in the right direction.
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