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This innovative tax plan is designed to help cities pay for climate action

In Berkeley, California, an increase in the utility tax on wealthy households that use a lot of power would go toward subsidizing lower-income residents in transitioning to clean alternatives.

This innovative tax plan is designed to help cities pay for climate action
[Image: yewkeo/iStock]
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Berkeley, California, is one of hundreds of cities to have declared a climate emergency. More than a decade ago, it also adopted a climate action plan. But the city hasn’t had the funding it needs to actually tackle the problem.

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If voters approve a new ballot measure this fall, that could begin to change. The program, called the Climate Equity Action Fund, would slightly increase taxes on utility bills for most households, while eliminating it for low-income households. Then it would use the extra funding to help citizens pay to transition to cleaner alternatives to some of their lifestyle choices, through incentives such as rebates for electric bikes or electric cars, subsidized transit passes, and insulating homes. It would also help train residents in green jobs.

“Our goal is to use the money to incentivize people to take action,” says Ben Paulos, a member of the Berkeley Energy Commission, a group of citizens that advises the city on energy and climate issues. “People want to take action, but if you give them a little bit of money, they’re more likely to do it.”

Since the city adopted a climate plan in 2009, local emissions have dropped. But that’s largely because of outside forces. “Most of those gains have come from the electric sector,” Paulos says. “Wind and solar power are much cheaper now, so the power system is very quickly switching over. There are state laws that require clean electricity. We also have a community energy provider that has a very clean power supply. But the problem is we haven’t really done anything on transportation and buildings, which are two big problems.”

California’s governor recently announced plans to ban the sale of new gas cars by 2035. But that won’t help cut emissions in the intervening years, and it won’t require residents with older cars to switch. By offering new incentives, the city can help things move faster. The incentives can also fit in with existing programs, such as one from the local air quality management agency that offers residents with older, polluting cars money to buy an electric car or hybrid, or get a prepaid card to start using public transportation instead. “We can piggyback and say, well, here’s another $2,000 to buy an electric car instead of a hybrid car,” Paulos says. A panel of experts will recommend the most effective ways to use the new funding, which is estimated at $2.4 million a year.

A handful of other cities are considering similar programs to fund climate action. A measure in Denver would raise the sales tax by a quarter of a percent to create a $36 million annual fund. The small city of Albany, California, next to Berkeley, also has a proposal to raise the utility tax (while eliminating the tax for low-income residents) and use some of the proceeds to reduce carbon. Long Beach, California, may increase a tax on local oil production to pay for community health, job training, and climate programs. A few other cities have already passed new climate-funding programs, including Seattle, which will tax big employers to pay for a local Green New Deal, and Portland, Oregon, which passed a similar measure in 2018 and is now beginning to accept requests for proposals for climate action.

It’s not clear yet if the measure in Berkeley will pass, though the impact on higher-income households would be minimal (a $100 utility bill would have an extra $2.50 charge, and in a city that’s rarely very hot or cold, utility bills are typically smaller). And residents may be particularly motivated to act now. “This was the summer from hell, with smoky skies for the month of August, and record wildfires on top of the pandemic,” Paulos says. “I think that there’s a real sense that we need to act, and it’s not really enough just to say there’s a climate emergency—we need to act on it.”

About the author

Adele Peters is a staff writer at Fast Company who focuses on solutions to some of the world's largest problems, from climate change to homelessness. Previously, she worked with GOOD, BioLite, and the Sustainable Products and Solutions program at UC Berkeley, and contributed to the second edition of the bestselling book "Worldchanging: A User's Guide for the 21st Century."

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