Inflation Reduction Act Methane Emissions Charge: Overview and Developments

On August 16, 2022, President Biden signed H.R. 5376 (P.L. 117-169), a budget reconciliation measure commonly referred to as the “Inflation Reduction Act of 2022” (IRA). Among other provisions, IRA amended the Clean Air Act (CAA) by adding Section 136. Section 136 directs EPA to impose and collect a “waste emissions charge” (WEC) for methane emissions from specific types of facilities that are required to report their greenhouse gas (GHG) emissions to the EPA’s Greenhouse Gas Emissions Reporting Program (GHGRP). The charge starts at $900 per metric ton of methane, increasing to $1,500 after two years. These values equate to $36 and $60 per metric ton of carbon dioxide equivalent, respectively. This charge is the first time the federal government has directly imposed a charge, fee, or tax on GHG emissions. Since its inception, the methane charge has received considerable attention from some Members of Congress and a range of stakeholders. Some groups have raised concerns about economic impacts resulting from the methane charge, including impacts on natural gas prices. Some policymakers are concerned about the charge in the context of EPA regulations to address methane emissions from the same categories of new and existing facilities. Others point out that methane mitigation should be a key component of U.S. climate policy due to methane’s shorter-term climate impacts compared to other GHGs. On November 18, 2024, EPA issued a final rulemaking to implement the WEC. EPA’s WEC rulemaking received attention under the Congressional Review Act. In February 2025, both the House and the Senate passed a joint resolution (H.J.Res. 35) disapproving of EPA’s WEC rule. President Trump signed the measure on March 14, 2025, enacting the resolution (P.L. 119-2). It is uncertain what effect the enacted joint resolution will have on the implementation of the WEC, which is required by statute. In the 118th Congress, several Members introduced a number of proposals that would have repealed particular IRA provisions, including the methane emissions charge. Two such bills—H.R. 1 and H.R. 1023—passed the House. In the 119th Congress, some Members have introduced bills that would repeal CAA Section 136 (e.g., S. 143 and H.R. 313). In addition, a number of Members have expressed an interest in repealing the WEC through a budget reconciliation process. For example, a February 2025 press release from the Chairman of the Senate Committee on the Budget (Senator Graham) regarding a framework for a FY2025 budget reconciliation bill stated one of the goals of the bill would be “stopping” the WEC. Clean Air Act Section 136 includes several provisions that narrow the scope of facilities and methane emissions that would be subject to the WEC. In 2022, 2,112 petroleum and natural gas facilities reported methane emissions under EPA’s GHGRP. After applying the applicability provisions in Section 136, EPA estimated that 364 of these facilities would be subject to the WEC. Based on this analysis, EPA estimated that the WEC would apply to approximately 20 million metric tons of carbon dioxide equivalent (MMTCO2e) of methane emissions, which represents 0.3% of total U.S. GHG emissions in 2022. In addition, Section 136 allows for an exemption from the WEC if future, final EPA regulations addressing methane emissions (1) are “in effect in all states,” and (2) will “result in equivalent or greater emissions reductions as would be achieved” by a November 2021 proposed rule for methane emissions from the oil and natural gas sector. On March 8, 2024, EPA finalized this rulemaking, establishing new source performance standards and emissions guidelines for facilities in the oil and gas sector. EPA estimated this rule would likely be in effect in 2029. Therefore, the conditional WEC exemption would not be applicable until that time. EPA’s 2024 regulatory analysis included a range of estimated effects from the WEC. For example, EPA estimated WEC would result in annual average methane emissions reductions of about 6 MMTCO2e between 2024 and 2027. EPA estimated revenue from the WEC payments would average about $525 million between 2024 and 2027 (in nominal dollars). EPA estimated that the WEC would increase the price of natural gas by 0.01% in 2024 and 2025, and by 0.04% in 2026 and 2027. A range of factors could play a role in determining the scope of emissions subject to the methane charge and its ultimate effects on GHG emissions levels and economic metrics, including the timing of the conditional exemption, facility changes to equipment or operations, funding for technological improvements, and related IRA climate and energy provisions. IRA includes a range of climate and energy-related provisions that will likely affect the portfolio of fuels and sources of energy used in various economic sectors.