Democrats Might Give Up on a Methane Tax, and Maybe That’s Okay

Yet another climate provision may be out of the Democrats’ signature spending bill. On Monday, The New York Times and Reuters reported that Senator Joe Manchin of West Virginia, one of two pivotal Democratic votes, wants to remove the bill’s tax on methane leaks from oil and gas operations. (A spokesperson for Senator Tom Carper, a Democrat from Delaware whose committee oversees that proposal, denied the reports on Twitter.)

Such a cut would cost the bill about 10 percent of its total emissions reductions, according to an analysis from researchers at Princeton. But at least so far, the reaction to its loss has not been as apocalyptic as what greeted the demise of the so-called Clean Electricity Program, one of the few parts of the bill that actually mandated carbon-pollution reductions.

The apathy might seem weird because methane is this year’s “it” climate pollutant. Later this week, the Environmental Protection Agency will propose sweeping new rules to limit methane leaks from oil and gas drilling nationwide. The upcoming United Nations climate conference in Glasgow, Scotland, could see the world’s largest economies adopt a pact to reduce methane pollution by 30 percent by 2030.

Regulators are mounting this emergency effort because methane has a distinctive MO as a greenhouse gas: It is both more powerful and more fickle than carbon dioxide. Unlike carbon dioxide, which can persist in the atmosphere for centuries, methane falls out after only a decade or so. But methane is at least 25 times more effective than carbon dioxide at trapping heat in the atmosphere. Even a comparative smidgen of methane can despoil the climate.

That’s bad enough, but since 2013, annual global methane emissions have accelerated by 50 percent. Last year saw the biggest jump in methane concentrations on record. At least some of this spike seems to have come from fossil-fuel operations—especially oil and natural-gas infrastructure. That’s partially because the fossil-fuel concoction that we call “natural gas” is about 94 percent methane. (If you turn on a burner on your gas stove, methane comes out.) As North America and Europe have shifted their energy mix to favor natural gas over the past decade, the potential for large methane leaks has increased.

So a methane fee sounds great, right? It would charge fossil-fuel companies for each ton of methane that they leak into the atmosphere, punishing them for environmental destruction while generating revenue to fund the rest of the Democrats’ agenda. But beyond that, it would serve as a test case for the sort of pollution pricing that experts eventually hope to deploy on carbon dioxide. Economists have long hoped that passing even a limited, inexpensive carbon tax could clear the way for something bigger: Once governments taste the revenue that such a tax could unleash, they wouldn’t be able to stop themselves from increasing its price or enlarging its scope into other sectors. Perhaps the same thing would happen with a methane tax, which could clear the way for a carbon tax itself.

But instead of mourning the potential loss of the methane fee, some policy scholars, economists, and even some of my most ardently pro-carbon-tax sources have shrugged it off, murmuring that the new EPA rules will likely be superior to the fee.

Their argument has two parts. The first is technical: The necessary investment in monitoring, reporting, and verifying methane pollution is likely to be high enough that there probably won’t be a big difference between the amount of pollution that the EPA rules could prohibit and what a fee could discourage. Because the tax would be levied on fossil fuels that result in methane leaks, its goal is to create a price difference between “leaky” and “non-leaky” oil and gas. But unlike a carbon tax, which would beset the entire fossil-fuel market, the methane fee likely wouldn’t be expensive enough to change the performance of leaky gas compared with its non-leaky counterpart. That makes it a less useful policy.

The second, broader concern is conceptual. Traditionally, a carbon tax treats climate change as an enormous cost-benefit problem. By making it cost money to emit carbon, a carbon tax forces consumers to decide when a pollution-generating activity is worth it. Everyone’s choice will be different, but inherent to the policy is a recognition that, in some cases—an intercontinental flight to see family, perhaps, or a certain form of steelmaking—people and businesses will determine that carbon pollution is worth its social cost.

But when methane leaks from oil and gas operations, what’s the worthwhile trade-off? There isn’t one, really; the leaked methane isn’t serving a higher cause like international travel or high-tech manufacturing. It’s just waste. The correct amount of methane leaks from oil and gas operations is zero. That makes it a better candidate for regulation than taxation.

Taxation has backfired before in such instances. In the 1970s and ’80s, the European Union decided to discourage the use of leaded gasoline by taxing it, while Canada and the United States chose instead to phase it out. Lead is a deadly poison: It causes diseases of the kidney, heart, and brain; it obstructs children’s healthy development; its prevalence in blood may be linked to higher crime rates. But by taxing leaded gasoline, the EU turned it into a funding source, making politicians loath to fully abolish it. Canada and the U.S. wound up eliminating leaded gasoline years before the EU did.

Should any of this influence Democrats’s decision making? I’m not sure. Perhaps passing climate policy through Congress is so difficult that Democrats should take any opportunity that presents itself, whether or not it’s the most correct one. Or perhaps Democrats should heed the lessons of history and make do with the EPA rules. Either way, this saga shows that passing climate policy isn’t easy even when people agree that something should be done. Larger political, economic, and ethical questions still remain.