Section 1 Short title
This Act may be cited as the “Methane Border Adjustment Mechanism Act”.
Methane Border Adjustment Mechanism Act
A BILL
To amend the Internal Revenue Code of 1986 to establish a methane border adjustment mechanism.
Sec. 2 Findings
Congress finds the following:
Methane is a powerful greenhouse gas, with about 80 times the warming power of carbon dioxide on a 20-year time horizon.
Rigorous estimates suggest that at least 25 percent of the rise in global temperatures since the industrial revolution is due to methane emissions.
Public health experts believe that methane is a key contributor to the formation of ground level ozone and particulate pollution, which causes a wide range of cardiovascular and lung-related diseases.
These facts suggest that methane is a threat to human, animal, and plant life and health.
The intended purpose of enacting a methane border adjustment mechanism (MBAM) is to conserve exhaustible natural resources by preventing emissions and is made effective in conjunction with regulations and charges on methane emissions from domestic oil and natural gas producers under section 136 of the Clean Air Act (42 U.S.C. 7436).
Highly cost-effective methods of reducing methane emissions—such as MBAMs—have been well-studied and are ready for implementation.
Research suggests that while the impact of an MBAM on the price of fossil fuels would likely be minimal, it could have a significant impact on methane emissions.
By working with countries that are major importers of oil and gas to enact similar MBAMs, in partnership with the European Union, having already enacted its own border measure, the United States Government can both help strengthen the market for exports of clean United States gas and encourage other oil and gas producing countries to reduce their methane emissions.
Sec. 3 Establishment of methane border adjustment mechanism
In general— Chapter 38 of the Internal Revenue Code of 1986 is amended by adding at the end the following new subchapter:
“E Methane border adjustment mechanism
“4691. Methane border adjustment mechanism
“(a) In general—There is hereby imposed a tax on any methane adjustment substance sold or used by the importer thereof.
“(b) Amount of tax
“(1) In general—The amount of tax imposed under subsection (a) with respect to any methane adjustment substance shall be the amount that bears the same ratio to the total methane emissions charge for the country in which such substance was produced or extracted (determined for the second calendar year preceding the calendar year of such sale or use) as—
“(A) the volume of such substance, bears to
“(B) the total volume of such substance produced or extracted in such country (determined for such second preceding calendar year).
“(2) Total methane emissions charge—For purposes of this section, the term “total methane emissions charge” means, with respect to any foreign country, the total amount of charges with respect to facilities located in such country which would be imposed under section 136 of the Clean Air Act (42 U.S.C. 7436) if—
“(A) such facilities were located in the United States, and
“(B) subsection (c) of such section were applied without regard to “that reports more than 25,000 metric tons of carbon dioxide” and all that follows.
“(3) Natural gas measured by energy content—In the case of natural gas, subparagraphs (A) and (B) of paragraph (1) shall each be applied by substituting “energy content” for “volume”.
“(4) Methane adjustment substances produced or extracted in more than 1 country—The Secretary shall provide rules for determining the tax imposed under paragraph (1) with respect to a substance which was produced or extracted in more than 1 country which determines such tax on the basis of the proportion of the production or extraction that occurred in such country.
“(c) Methane adjustment substance
“(1) In general—The term “methane adjustment substance” means petroleum and natural gas.
“(2) Recommendation of additional substances
“(A) In general—Not later than 2 years after the date of the enactment of this Act, and each 2 years thereafter, the Secretary shall submit a written report to Congress regarding whether additional substances that are reliant on oil and natural gas as a feedstock in industrial processes, or otherwise have notable embodied methane emissions, should be added to the list of methane adjustment substances subject to this section.
“(B) Consultation—In assessing substances to recommend for inclusion under this paragraph, the Secretary shall consult with the United States International Trade Commission and International Trade Administration on whether domestic producers, including specific domestic facilities, have lower embodied methane emissions than producers in other countries.
“(C) Analysis—Each report under this paragraph shall be accompanied by an analysis prepared by the Secretary, after consultation with the United States International Trade Commission, of—
“(i) the effect of the proposed expansion of the methane border adjustment mechanism to include additional substances, and
“(ii) the economic, employment, and environmental costs in the United States if the expansion does not include such additional substances.
“(d) Estimates
“(1) In general—The total methane emissions charge, and the amount described in subsection (b)(1)(B), with respect to any foreign country for any calendar year shall be determined by the Secretary on the basis of publicly available information.
“(2) Establishment of international body to collect and report information—The Secretary, in consultation with the governments of countries that are major importers and exporters of methane adjustment substances, shall facilitate the establishment of an international body responsible for providing for international consultations for the establishment of interoperable standards, establishing a multi-stage certification process to track emissions throughout supply chains, and collecting and reporting data related to methane emissions. Standards developed under the preceding sentence shall be updated not less frequently than every 2 years.
“(e) Alternative tax based on supply chain emissions
“(1) In general—In the case of any methane adjustment substance which meets the requirements of paragraph (2), the Secretary shall establish an alternative method (in lieu of subsection (b)) for determining the amount of tax imposed under subsection (a) which takes into account only such substance’s pro rata share of the charges which would be imposed under section 136 of the Clean Air Act (42 U.S.C. 7436) (determined with the adjustments described in subparagraphs (A) and (B) of subsection (b)(2)) with respect to facilities in the supply chain of such methane adjustment substance.
“(2) Requirements—The requirements of this paragraph are met if—
“(A) the importer of the methane adjustment substance provides the Secretary such information as the Secretary may require to determine all of the facilities in the supply chain of such substance, the total production of such facilities, and the relevant methane emissions therefrom, and
“(B) each country in which such facilities are located is a country with which the Customs–Trade Partnership Against Terrorism (C–TPAT) has signed mutual recognition arrangements with the customs administration of such country.”
International cooperation on methane border adjustment mechanisms— The Secretary of the Treasury (or the Secretary’s delegate) shall encourage the 10 countries with the highest oil and gas imports that do not yet have methane border adjustment mechanisms to—
implement equally stringent border adjustment mechanisms, and
participate in the creation of the international body referred to in section 4691(d)(2) of the Internal Revenue Code of 1986, as added by this section.
Clerical amendment— The table of subchapters for chapter 38 of the Internal Revenue Code of 1986 is amended by adding at the end the following new item:
Effective date— The amendments made by this section shall apply to sales and uses after December 31, 2025.