Sec. 3. Establishment of methane border adjustment mechanism
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Chapter 38 of the Internal Revenue Code of 1986 is amended by adding at the end the following new subchapter: Sec. 4691. Methane border adjustment mechanism. There is hereby imposed a tax on any methane adjustment substance sold or used by the importer thereof. 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— the volume of such substance, bears to the total volume of such substance produced or extracted in such country (determined for such second preceding calendar year). 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— such facilities were located in the United States, and 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. Except as otherwise provided by the Secretary in paragraph (4), the total methane emissions charge with respect to any foreign country shall be determined separately with respect to each methane adjustment substance. In the case of natural gas, subparagraphs
(A)and
(B)of paragraph
(1)shall each be applied by substituting energy content for volume . 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. The term methane adjustment substance means petroleum and natural gas. 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. 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. 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— the effect of the proposed expansion of the methane border adjustment mechanism to include additional substances, and the economic, employment, and environmental costs in the United States if the expansion does not include such additional substances. 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. 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. 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. The requirements of this paragraph are met if— 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 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. . 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. 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: Subchapter E—Methane border adjustment mechanism . The amendments made by this section shall apply to sales and uses after December 31, 2025.
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Sec. 3
Establishment of methane border adjustment mechanism
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