Methane Accountability and Reduction Levy

Methane is the second-largest contributor to current-decade warming after CO₂, but it's been priced almost nowhere. Per IPCC AR6, methane has a 20-year global warming potential of approximately 80× CO₂ — meaning a ton of CH₄ leaked or vented today does about 80 tons of CO₂-equivalent damage over the next two decades. The US emits roughly 25–30 million tons of CH₄ per year across three source categories: fossil-fuel venting and pipeline leakage (largest), agricultural enteric fermentation (cattle and dairy), and manure management.

Today's federal architecture prices a narrow oil-and-gas slice (the IRA §136 Methane Emissions Reduction Program) but does not comprehensively price CH₄ across sources. The result is a substantial uncaptured externality that frontline communities (oil-and-gas-region residents, downwind agricultural communities) and the climate system absorb without compensation.

The Methane Accountability and Reduction Levy at $1,200/ton CH₄ in Year 1, escalating $240/year automatically to a $2,880/ton cap (~Year 16). The rate is calibrated to the social cost of methane on a 20-year warming-potential basis, not the 100-year basis that produces an artificially lower number.

Intentional dumping (non-emergency venting, routine flaring beyond regulatory tolerance) faces a 5× multiplier and is non-creditable — operators cannot offset intentional emissions through mitigation credits.

Per-head agricultural anchors apply to enteric fermentation: $103/beef-feedlot, $138/dairy. Operators adopting verified mitigation receive stackable Feedstock Adjustment Credits — 3-NOP (Bovaer), asparagopsis seaweed, rotational grazing, manure digesters — reducing the levy up to 75%.

The custody-transfer rule prevents double-counting against carbon: gas leaked before combustion is a methane event; gas burned at a burner tip is a carbon-fee event. Monthly reconciliation via the Natural Methane Reconciliation protocol ensures no molecule pays both.

Three source categories, one destination: all methane-levy revenue routes to the General Fund (v10.6). Fossil-fuel operators pay on venting and pipeline leakage; agricultural enteric-fermentation operations and manure-management facilities pay on the per-head anchors. The two source categories still differ in transition pathway — fossil-fuel emissions are a wind-down problem; agricultural emissions are a transition-to-mitigation problem — but the transition support is funded as an ordinary General Fund appropriation, not a hypothecated share of the levy.

Practical bite: largest US oil-and-gas operators in the Permian, Marcellus, and Bakken basins; large beef and dairy operations in the Plains and West; and large manure-management facilities at industrial-scale dairies and CAFOs.

Operators adopting verified mitigation receive Feedstock Adjustment Credits stackable up to 75% of levy — a 50% mitigation reduction, plus another 25% from a second mitigation, gets the operator to 75% credit (rate floor of 25%). The architecture explicitly rewards verifiable mitigation rather than punishing unmitigated emissions in absolute terms.

Smallholder agricultural operations below scale thresholds are exempt. Family farms with small herds face no methane-levy exposure. The bite is at the industrial scale where measurable mitigation is technologically feasible.

Pending canonical scoring.

Methane revenue follows a humped trajectory similar to the carbon fee — growing through the early decades as the rate escalates, peaking somewhere before the cap, then declining as mitigation succeeds. All of it flows to the General Fund (v10.6).

Agricultural transition support — research grants, mitigation-credit verification infrastructure, regional cooperatives for the producers paying the levy — is funded as an ordinary General Fund appropriation, sized against the levy's agricultural take. Per canon, only two flows are ring-fenced (the Climate Adaptation Trust and the Financial Stability Reserve); the methane levy is not one of them.

See tax ladder · fiscal scoring

Carbon-vs-methane substitution

Custody-transfer rule prevents double-counting AND single-counting. Each molecule pays one event-type at the correct rate.

Intentional venting

5× multiplier, non-creditable. Operators cannot offset intentional emissions through mitigation credits — only unintentional and ambient emissions qualify for credits.

Routine flaring beyond tolerance

Treated as intentional dumping under the multiplier rule. Operators with persistent flaring patterns face the elevated rate.

Underground-economy avoidance

Source collection at the wellhead/pipeline/feedlot. Distribution-side avoidance is impossible because the levy fires at the production point.

Cross-border-shopping

Imports embedded with un-priced methane face border-adjustment treatment alongside carbon. Aligned jurisdictions in the Alliance Incentive network are credit-treated.

The architecture closes the conversion routes between methane and carbon — and the routes that today let intentional emissions go unpriced.

Carbon fee

Companion architecture for CO₂. Custody-transfer rule (leaked-pre-combustion = methane; burned = carbon) reconciles monthly.

General Fund

Receives 100% of methane-levy revenue (v10.6). The Climate Adaptation Trust is funded by carbon revenue above the rebate cap alone.

Agricultural transition support

Mitigation research, credit verification, and regional cooperatives — funded as an ordinary General Fund appropriation sized against the agricultural take.

Externality Limiter (Engine 6)

Houses the broader climate-policy stack including methane oversight.

Alliance Incentive (Engine 8)

Reciprocal market access for jurisdictions aligning methane pricing. Border-adjustment falls on non-aligned imports.

The methane levy is the carbon fee's CH₄ companion, with the custody-transfer protocol ensuring the two instruments don't double-price a molecule. Its revenue flows entirely to the General Fund; the managed transition for agricultural producers is funded by ordinary appropriation.