A new tax on natural gaz production is hidden in the House of Representatives’ “Build Back better” plan. This will most likely lead to higher heating costs for American homeowners.
A new tax was introduced to reduce methane emissions. It will charge companies that store, produce, process or transmit oil and natural gas, and it will take effect in 2023. The fees charged will be determined by where natural gas was produced. They will also vary depending upon how much methane has been released into the environment. According to the Congressional Budget Office, this new fee for methane will produce about $8 billion in the next ten years.
According to the natural gas industry, money will eventually come out of customers’ pockets.
In September, a group of energy industry representatives wrote to Congress saying that new fees and taxes on energy companies would increase customer costs. This burden will be most severe for those with lower incomes. These major new expenses will most likely result in higher natural gas bills, for both small and large businesses as well as families.
According to these industry groups, the new fee will cause a 17% increase in home energy prices for those homes that heat with natural gas. Americans for Tax Reform (a conservative nonprofit that supports lower taxes) claims that the natural gas tax is “a clear breach” President Joe Biden’s pledge that his “Build back Better” plan will not raise taxes for American families making less than $400,000 per year.
The proposed methane fee is based on legislation introduced earlier this year by Sen. Sheldon Whitehouse (D–R.I.). Whitehouse stated that the proposed methane fee would reduce climate change and increase air quality in a statement made at the time the bill was presented.
However, the tax will not have any significant impact on methane emission levels. According to data received from the World Bank in the latest information, approximately 620,000 metric tons methane was emitted by the United States in 2018. This is about 7.5 per cent of global methane emission during the year.
Only about 30% of American methane emissions result from oil and natural gas production. According to the Environmental Protection Agency, most of this methane comes from cattle, sheep and other agricultural sectors.
However, methane is a major driver of climate change caused by man-made causes. This may be a reason to make tradeoffs with higher energy prices. When it comes to trapping heat on the Earth’s surface, methane has a much greater effect than carbon dioxide. This is why more than 100 countries including the United States agreed to reduce their methane emissions last week. It is important to note that Russia and China did not sign this agreement, despite them being the two largest methane emitting nations in the world.
The debate about the tradeoffs between methane, other greenhouse gases and methane isn’t going anywhere soon. A methane fee under the Plan to Build Back Better amounts to a policy decision that states higher heating bills are acceptable for Americans who want to reduce future greenhouse gas emissions. Voters may be already confronted with increasing heating bills from a variety of fronts.
Last month, the Department of Energy stated that American homeowners who use natural gas heat will likely face increases of 30 to 50 percent in their heating costs. According to department estimates, this means that the average American family who relies on natural gases for warmth will spend $746 in October-March, an increase of approximately $570 compared with last year. The inflation effect and lower than average prices last year are partly responsible for these increases.
The public cost of polluting the climate by raising costs in industries could be addressed through carbon taxes or other methods. But those proposals will always come with tradeoffs for consumers—since taxes are ultimately paid by people, not businesses.