Does the US Have a Carbon Tax? State Programs and RGGI

No, the United States does not have a carbon tax. No federal fee or tax is charged on carbon dioxide emissions across the economy, and the one narrow federal carbon-related charge Congress ever enacted — a methane waste emissions charge on oil and gas facilities — was repealed in March 2025 before any payments were collected.1United States Environmental Protection Agency. Waste Emissions Charge What exists instead is a mix of state-level cap-and-invest programs that price carbon within their borders and federal tax credits that pay companies to capture it.2Congressional Budget Office. Impose a Tax on Emissions of Greenhouse Gases

The Federal Picture

Congress has debated carbon tax proposals from both parties for years. None have become law. The federal government regulates certain greenhouse gas emissions and offers financial incentives to reduce them, but it does not put a direct price on carbon.2Congressional Budget Office. Impose a Tax on Emissions of Greenhouse Gases

The methane waste emissions charge was the closest the country came. The Inflation Reduction Act of 2022 added Section 136 to the Clean Air Act, codified at 42 U.S.C. § 7436, creating a fee on oil and gas facilities whose methane emissions exceeded set intensity thresholds.3Office of the Law Revision Counsel. 42 USC 7436 Methane Emissions and Waste Reduction Incentive Program for Petroleum and Natural Gas Systems Rates were set to climb from $900 per metric ton in 2024 to $1,500 in 2026 and beyond.4Federal Register. Waste Emissions Charge for Petroleum and Natural Gas Systems – Section: B. Executive Summary Congress passed a joint resolution of disapproval under the Congressional Review Act, President Trump signed it on March 14, 2025, and the implementing regulation was removed from the Code of Federal Regulations by May 2025. The underlying statute remains on the books, and the EPA has said it is evaluating its options for the remaining subsections, but no federal entity is collecting any carbon-related fee as of 2026.1United States Environmental Protection Agency. Waste Emissions Charge

Credits Instead of Taxes

The main federal financial lever on carbon works in reverse: rather than taxing emissions, it pays companies to capture and store carbon dioxide. That is the Section 45Q tax credit, and the Inflation Reduction Act sharply raised its value for equipment placed in service after 2022. The credit has two tiers depending on whether a project meets prevailing wage and apprenticeship requirements during construction and its first twelve years of operation.

Projects meeting the labor requirements earn the enhanced rates: $85 per metric ton for carbon dioxide permanently stored in saline formations or oil and gas fields, and $180 per metric ton for direct air capture facilities that pull carbon dioxide out of the atmosphere. Projects that don’t meet those requirements receive $17 per metric ton for geological storage and $36 per metric ton for direct air capture in 2026, with inflation adjustments starting in 2027.5Office of the Law Revision Counsel. 26 USC 45Q Credit for Carbon Oxide Sequestration The credit runs for twelve years per facility and applies to equipment where construction begins before January 1, 2033. Tax-exempt entities such as municipalities and cooperatives can elect to receive 45Q as a direct payment.6Internal Revenue Service. Elective Pay and Transferability

Where Carbon Actually Gets Priced: The States

The real carbon pricing in the U.S. happens at the state level. Several states run cap-and-invest programs that set a ceiling on total emissions from covered sources, require companies to buy allowances for every metric ton they emit, and lower that ceiling over time. Programs differ in scope and price, but the mechanics are similar across all of them.

California

California runs the largest and longest-standing program, originally authorized by the Global Warming Solutions Act of 2006 (Assembly Bill 32). It covers power plants, natural gas utilities, large industrial facilities, and fuel distributors.7California Air Resources Board. AB 32 Global Warming Solutions Act of 2006 Companies must hold an allowance for every metric ton of carbon dioxide equivalent released, and the California Air Resources Board conducts quarterly auctions.8California Public Utilities Commission. Greenhouse Gas Cap-and-Invest Program California links its market with Quebec. The most recent joint auction, in early 2026, cleared at $27.94 per allowance.9California Air Resources Board. California and Quebec Release Summary Results From 46th Joint Cap-and-Invest Allowance Auction

Washington

Washington’s cap-and-invest program operates under the Climate Commitment Act, codified as RCW 70A.65. Voters affirmed it in November 2024 by rejecting Initiative 2117, which would have repealed the program. It covers electricity generators, fuel suppliers, and natural gas utilities, reaching roughly three-quarters of the state’s total emissions. Allowance prices have run well above California’s; the September 2025 auction cleared at $64.30 per allowance.10Washington Department of Ecology. September Cap-and-Invest Auction Results Announced Revenue funds clean energy projects, public transit, and infrastructure.

Oregon

Oregon’s Climate Protection Program was struck down by a court in December 2023 over rulemaking procedural violations. The state’s Environmental Quality Commission reinstated and revised the program in November 2024, and the updated version took effect in January 2025. The first compliance period runs through the end of 2026, and rulemaking continues into 2026.

The Regional Greenhouse Gas Initiative

Ten northeastern states — Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Rhode Island, and Vermont — run a shared carbon market focused on the power sector, called the Regional Greenhouse Gas Initiative.11RGGI. Program Overview and Design Elements Active since 2009, it is the country’s oldest mandatory cap-and-trade program. RGGI covers fossil fuel power plants with 25 megawatts or more of generating capacity. Each plant must hold one allowance per metric ton of carbon dioxide emitted, and the states run joint quarterly auctions. The December 2025 auction cleared at $26.73 per allowance.12RGGI. Allowance Prices and Volumes

What Allowances Cost

Allowance prices vary sharply from one program to the next, and those prices feed into energy costs for businesses and consumers in covered states:

For a facility emitting 100,000 metric tons a year, the difference between a $28 allowance and a $64 allowance is roughly $3.6 million annually. States with these programs also require covered facilities to comply independently, so a fuel supplier active in both California and Washington faces both sets of obligations.

Reporting Obligations Exist Even Without a Tax

Federal law still requires emissions reporting. The EPA’s Greenhouse Gas Reporting Program mandates annual reports from any facility emitting 25,000 metric tons or more of carbon dioxide equivalent per year, covering power plants, refineries, cement manufacturers, and other heavy emitters.13Environmental Protection Agency. Fact Sheet: Greenhouse Gas Reporting Program (GHGRP) Implementation Most small businesses sit well below this threshold. Reports are filed electronically and self-certified under penalty of law; the EPA does not require third-party verification but conducts its own reviews and audits.14eCFR. 40 CFR Part 98 – Mandatory Greenhouse Gas Reporting

For the 2025 reporting year, the EPA extended the filing deadline from March 31, 2026 to October 30, 2026.15Federal Register. Extending the Reporting Deadline Under the Greenhouse Gas Reporting Rule for 2025 This is a one-year change. Missing the deadline can trigger civil penalties of up to $124,426 per day under the Clean Air Act’s general enforcement provisions.16eCFR. 40 CFR 19.4 – Statutory Civil Monetary Penalties, as Adjusted for Inflation, and Tables

Agriculture is broadly exempt. Enteric fermentation from livestock, rice cultivation, field burning of crop residues, and emissions from agricultural soils are all excluded. Only livestock facilities with manure management systems that emit 25,000 metric tons or more of carbon dioxide equivalent must report.17Environmental Protection Agency. Guide for the Agriculture and Livestock Sectors – Mandatory Reporting of Greenhouse Gases State cap-and-invest programs use the same 25,000 metric ton benchmark to trigger participation, with reporting that spans carbon dioxide, methane, nitrous oxide, and fluorinated gases converted to a carbon dioxide equivalent figure. Penalties for missing an allowance obligation are set above the market price of carbon by design, so noncompliance costs more than compliance.

What About Carbon Border Fees?

Congress has been debating whether to charge fees on carbon-intensive imports, though none have passed. The PROVE IT Act, introduced by a bipartisan Senate group in 2023, would not create a border fee itself. It would direct federal agencies to measure and publish the carbon intensity of heavy industrial materials produced in the U.S. and abroad, building the data foundation any fee would need. It passed committee with bipartisan support.18U.S. Congress Joint Economic Committee. What Is a Carbon Border Adjustment Mechanism (CBAM) and What Are Some Legislative Proposals to Make One

The Foreign Pollution Fee Act, introduced later in 2023, would go further and impose a fee on imports of steel, aluminum, cement, and similar goods that are more carbon-intensive than their American-made counterparts. The fee would grow as the pollution gap widened and would drop to zero for products within 50 percent of the carbon intensity of comparable U.S. products. Neither bill has become law, and the answer to whether the U.S. has a carbon tax stays no.