Repealing the Waste Emissions Charge

Hi there,

Today’s Keep Cool focuses on a topic we covered previously, namely the Waste Emission Charge, which could have been one of the closest things to a tax on greenhouse gas emissions at the federal level in the United States.

As was the case the first time we covered it, I co-authored this piece with Lauren Singer for The Overview, a fantastic newsletter focused on methane and other super pollutant mitigation (carbon dioxide is ‘only’ about half the picture when it comes to which greenhouse gasses have driven global warming since the Industrial Revolution).

After a slightly weird period of limbo between when Congress repealed the EPA rule implementing the Waste Emission Charge (which is its own ‘thing’ that was originally written into the Inflation Reduction Act), Trump signed the measure into law last Friday (perhaps his pen ran out of ink for a bit). Now we clarity that, at minimum, oil and gas companies won’t be paying fees on excess methane emissions from their operations for some time.

So, where does that leave us?

DEEP DIVE

The EPA rule implementing the Waste Emissions Charge (WEC), a fee introduced as part of the Inflation Reduction Act of 2022, was recently repealed by the U.S. House and then the Senate by way of the Congressional Review Act (CRA). The WEC, which set a ‘penalty’ price of $900 per metric ton of methane in 2024, $1,200 by 2025, and $1,500 by 2026, was intended to incentivize the adoption and commercialization of technologies, systems, and practices that reduce fugitive methane emissions from oil and gas operations.

To be sure, the WEC, as written into the IRA, still technically exists, and a future administration could ‘pick it up’ again. For now, however, Trump signed off on the Congressionally passed measures on Friday, effectively killing implementation and enforcement of WEC fee collection, at minimum, for the time being at least.

What’s next?

The EPA estimates the fee would have helped reduce 1.2 million metric tons of methane emissions by 2035—equivalent to removing 8 million cars from the road for a year. That in and of itself is not what’s most essential here. More importantly, new proactive climate policies often spread from one jurisdiction to others; it helps when one country, state, county, or even municipality takes the proverbial ‘plunge’ first. Take, for instance, California’s target to phase out sales of new internal combustion engines by 2035. Seventeen other states have adopted California’s vehicle emission standards (which they’re now protecting against incursions from the Trump administration and other political bodies whose predominant interest seems to be undoing anything and everything related to progressive climate and environmental policy.

It’s also worth noting that the WEC was never some wonderchild to which many, even those in the relatively niche world of climate mitigation and policy, paid a ‘ton’ of attention. Even as ardent climate policymakers, practitioners, and scientists have long viewed direct taxes or other mechanisms to ‘price’ warming drivers as a sort of holy grail for climate policy and climate action in general, when the WEC went into effect under the Biden administration, it didn’t receive a massive amount of attention. The same story echoes across the methane mitigation landscape. Methane reductions could slow global warming quickly and can often be relatively economical. But they don’t get funded. Despite the sizable chunk of global warming methane has driven to-date (in the 20-30% range), it receives less than 2% of all climate finance.

That’s no note to end on, though.

At what cost?

Ironically, the Congressional Budget Office estimated that not collecting fees from the WEC will cost the U.S. up to ~$7.2 billion in lost revenue over the next decade, even as the new administration postures as overwhelmingly concerned with balancing the U.S.’s federal budget, which hasn’t been balanced since 2001. The U.S. abnegating leadership on methane reduction policy is not economically rational. Methane is the largest fuel source for electricity generation in the U.S., including in relatively progressive states like California. In 2025, natural gas consumption in the lower 48 states is on track for another record year, and methane—while not a clean energy resource when combusted—is instrumental and hugely valuable on Earth for other processes as well, such as producing heat for industrial applications, and natural gas power plants are both more efficient and considerably cleaner than coal plants.

Beyond that, what other implications does the WEC’s likely repeal have for the oil and gas industry and the landscape of methane mitigation efforts at large? Let’s explore.

Now, emboldened by the new administration's policy agenda, U.S. natural gas producers and exporters are preparing to take advantage of this demand. Recently, Venture Global LNG announced it will expand its existing Plaquemines export facility in Louisiana with a roughly $18 billion (yes, with a B) investment. That's a massive infrastructure investment that underscores the centrality of natural gas to global energy production (and on Monday, it announced it could cost even more).

It’s also more financing than all methane mitigation efforts across sectors received in 2022. 63% more (~$11 billion for all methane mitigation efforts worldwide). Mind-boggling when you think about it!

The investment would raise the facility’s production capacity by over 18 million tons of annual liquefied natural gas production to over 45 million annual tons of production capacity, which could make it one of North America's largest LNG facilities (if not by pipeline, natural gas is typically liquefied to ‘LNG’ plant or maritime shipping or storage). There are many eager customers for U.S. natural gas; recently, the U.S. became the world’s largest LNG exporter, surpassing Qatar. Highly economically developed countries like Japan and South Korea import a lot of LNG, as does Europe.

Germany is the largest customer for the Plaquemines plant at present. There’s no indication the Federal Government will get in Venture Global LNG’s way, even if—or especially because—the Biden admin had previously placed a moratorium on new LNG export facility construction. The new head of the DOE, Chris Wright, and Interior Secretary, Doug Burgum, are on board so far. In fact, today, the Department of Energy approved Venture Global’s export permit request for another proposed LNG project in Louisiana, only the fifth LNG-related approval from the DOE since Trump took office.

There’s also no indication LNG demand is going anywhere. Quite the opposite, in fact; countries like Germany—while investing in their decarbonization efforts—are heavily reliant on natural gas and are willing to pay premiums for it to wean off Russian gas (which, their financing of Ukraine’s war resistance effort notwithstanding, they have still been purchasing too, in a classic energy catch-22).

Germany even built its first LNG import terminal in record time (<10 months) when Russia invaded Ukraine more deeply in 2022. Again, European LNG demand isn’t going anywhere anytime soon; Europe’s leaders will tell you that themselves (and do). And many Asian countries, like Japan and South Korea, are significant LNG importers as well.

All of this hammers home the utility and value of methane (again, it’s the main component of natural gas). It should be intuitive that oil and gas operators across the value chain as well as their customers prioritize keeping methane in pipes and storage tanks and out of the atmosphere, where its value is entirely wasted AND it warms the planet rapidly.

Every molecule of methane that leaks represents lost revenue for producers. With leak rates observed at over 10% in the New Mexican Permian, there's economic value to be captured with better containment and infrastructure monitoring and maintenance practices. A Stanford-led study published in Nature last year found that methane emissions from U.S. oil and gas operations cost the industry about $10 billion annually in lost commercial value.

Suffice it to say, even if you ignore environmental externalities, of which there are many when it comes to methane, entirely, there’s ample imperative for methane emissions reduction work in the oil and gas industry and in all other sectors, plus natural emissions sources, to forge ahead.

It’s not all about the U.S. (or policy)

Back on the policy side, while the U.S. is the world’s largest producer of both oil and gas, it’s far from the only significant source of methane emissions from the oil and gas sector or the only significant exporter of those products. Besides its intercontinental ballistic missiles, the main reason Russia has the geopolitical heft that it does is that it, like the U.S., also has a lot of oil and gas.

Hence, if we cast our gaze around the rest of the world, there are green shoots of policy that can accelerate methane mitigation efforts, whether confined to the oil and gas sector or not. For one, the European Union has implemented a regulation to reduce methane emissions from its energy sector, including imports, aiming for a 30% reduction by 2030 compared to 2020 levels. That’s a pact many companies have committed to, known as the Global Methane Pledge. The EU's approach is stricter than this voluntary target; it features requirements for emission-intensity standards for imported fossil fuels, which incentivizes producers globally to produce oil and gas in a lower-emission fashion. And to prove it. 

Other examples of momentum for methane-focused policy include:

1. Denmark: Starting in 2030, Danish farmers will be charged 300 Danish kroner (~$27) per ton of carbon dioxide equivalent gas their livestock emits into the atmosphere. While forward-looking, that’s perhaps one of the best, most concrete examples of tax-adjacent methane-focused emission regulations globally.

2. Canada: Canada has proposed regulations to reduce methane emissions from landfills by about 50% by 2030 from 2019 levels. The regulations include limits on methane concentrations and venting as well as leak detection and repair requirements.

3. Brazil: Brazil is working on a National Strategy for Organic Waste Management, which includes incentives (sticks, not carrots) for biomethane production from waste treatment, i.e., focusing on using waste to generate energy.

Learning rates and scaling laws

Beyond economics and politics, technologies to measure, monitor, and mitigate methane emissions are constantly improving and benefit from the exponential learning rates in other industries, like the precipitous declines in the cost of space launches and Earth imaging via satellite. While satellites are far from the only useful tool with which to measure and monitor methane emissions, the proliferation of methane-detecting satellites is a good example of how much technological progress has been made in a short amount of time. Last year, the EDF launched its methane-monitoring satellite, MethaneSAT. Zooming out decades, MethaneSAT practically represents a quantum leap in terms of mankind’s ability to track methane emissions and “name and shame” major emitters. The technical specs are impressive; it can: 

• Detect methane down to 3 parts per billion (basically the equivalent of actually finding the needle in a cosmic haystack).

• Scan swaths 260 km wide with remarkable spatial resolution.

• Provide global coverage, revisiting major oil and gas extraction regions every few days. Its primary focus areas account for over 80% of global oil and gas production.

To boot, MethaneSAT open-sources its data, meaning the combination of its advanced hardware, spectroscopy, and sophisticated algorithms that can differentiate between human-made emissions from natural sources and pinpoint their origins across global oil and gas operations is all freely available. We're entering an era where invisible (methane is invisible to the naked eye) pollution becomes visible, which makes mitigation considerably more tenable.

Beyond monitoring technologies, mitigative solutions to reduce methane emissions, such as by repairing leaks in oil and gas infrastructure, are coming down the cost curve, too. For instance, new EPA-approved tools for leak detection and repair (LDAR) from companies like Xplorobot and Bridger Photonics make achieving regulatory compliance (which matters, WEC or not) easier, more efficient, and cheaper while also reducing methane emissions. As these technologies scale, the economic case for methane mitigation grows stronger, regardless of regulations.

In the absence of ambitious methane mitigation policy, private sector work and development of better tools and systems for methane measurement, monitoring, and mitigation, whether in more accurate and cost-efficient detection and quantification technologies (both ground-based, aerial, as in drones and planes, or by satellite), repair solutions, continuous monitoring systems, data analytics platforms to help prioritize mitigation efforts, and more robotic and autonomous (even if not entirely) solutions is all the more critical as regulatory vacuums open up.

Market drivers for lower methane emission oil and gas

Finally, there are also some market demands for lower methane emission oil and gas. Yes, there is overlap here with the regulatory category. Still, it’s also a feature of where the global energy market is headed, albeit perhaps more slowly now considering U.S. political shifts. The EU is still actively implementing methane regulations for imported fossil fuels; regardless of stateside policies, U.S. exporters will need to meet their standards to maintain market access. That requires the same types of monitoring, reporting, and verification of methane emissions that policies like the WEC would. Considering our earlier discussion around countries like Germany being prime customers of U.S. LNG, well-capitalized oil and gas companies understand that producing lower-methane emission oil and gas is favorable, not just because it means there’s more gas to sell, but because it makes their product more attractive in some markets and for some buyers. This creates market-based incentives that will persist if not grow, regardless of four-year U.S. election cycles.

Hence, we expect many oil and gas companies, especially the best-capitalized oil majors to continue emphasizing methane reduction efforts. Some of this can also be driven by investor pressure and customer demands for more "responsibly sourced gas," as well as internal company recognition and admission that methane emissions represent both a climate risk and a wasted, valuable product, but those are likely tertiary concerns.

The prospective lack of enforcement of the Waste Emissions Charge is a significant setback for U.S. climate policy, U.S. leadership on climate and methane mitigation work in general, and the global climate policy environment. That said, there are other economic, technological, market, and regulatory forces in other jurisdictions that will continue to make methane emissions reductions more of an imperative (not to mention the rate at which the world is warming, which is surprising many climate scientists). To an extent, homing in on methane emission reduction and even more R&D for methane emissions removal feels like an “inevitable and obvious” conclusion.

Still, being early to a conclusion isn’t always fun, the same way being early to a party isn’t. That said, it’s important that there are good people in the room to set the mood, if you will. It’s wholly unclear whether and when sufficient attention and resources will coalesce around methane mitigation to stave off the worst of climate change or critical climate tipping points. Hence, it’ll also be worth exploiting other incentives, strategies, business models, and even communication frameworks rather than blaring the same old horn about why methane matters. We live in times of radical change, whether climactically, technologically, socially, politically, or otherwise. Which is often a good time to experiment with change oneself. 

What’s our take? Ultimately, we’re still optimistic. The financial case for reducing methane emissions remains strong, monitoring capabilities continue to improve, and global market pressures for cleaner energy aren't disappearing. The question is how quickly the industry will adapt and whether other policy approaches—at the state, local, or international level—can fill the void left by not enforcing the WEC.

Thanks for reading. For additional analysis, see here from the EDF.

Please feel free to respond to this directly with comments, additional thoughts, and/or questions. And don’t forget to subscribe to The Overview for more of this type of content in the future. Subscribe here or click below:

Our best, 

— Lauren Singer and Nick van Osdol