Lawmakers Propose Tax Hikes to Combat Climate Change

A recent climate change report backed by the United Nations, says that the world could reach a critical warming threshold in about years — by the early 2030’s. A key takeaway from the report is that, without urgent action, the world is running out of time to effectively mitigate the effects of increasing global warming. Meanwhile, lawmakers in some states and countries are turning to tax hikes to help achieve climate goals. One recurring proposal involves raising property tax rates to fund climate change adaptations. Can tax increases help combat climate change? 

The UN Climate Change Report 

The climate report by the Intergovernmental Panel on Climate Change (IPCC), looks at the current state of climate change and mitigation. The IPCC report found that burning fossil fuels and unsustainable uses of energy and land have caused global warming to be 1.1°C above pre-industrial levels. This is worrisome, climate advocates and scientists say, because the rate of temperature increase and the amount of carbon (CO2) pollution in the atmosphere are already at their highest recorded levels. A goal, which is part of the Paris Agreement on climate change, is to limit global warming to 1.5°C.

The report also points to impacts of global warming that many people who live in storm-affected areas may have already experienced, like more frequent and extreme weather events. People around the world are also likely to see more frequent and intense damage to infrastructure, coastal areas, and key economic sectors. 

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Property Taxes and Climate Change

With those potentially devastating impacts of climate change in mind, some states and countries are looking to property taxes as a way to fund climate change initiatives. For example, in Washington state, the Olympia Finance Committee will reportedly soon consider several tax proposals to generate funds for climate change. Among them is a proposed property tax increase where: 

• a one cent increase per $1,000 of assessed property value could, according to Olympia climate program estimates, generate about $117,000 a year to help fight climate change; 
• a ten cent per $1,000 of assessed property value increase could generate about $1.17 million a year in revenue; and
• a 20 cent per $1,000 of assessed value increase could generate estimated revenue of $2.34 million. 

Olympia has a goal to reduce regional greenhouse gas emissions 45% below 2015 levels, by 2030. By 2050, the city wants to be 85% below 2015 emissions levels. 

In Canada, it has been reported that Hamilton’s city council is set to vote on whether to pass a relatively hefty 6.7% property tax increase, the largest property tax increase in nearly a decade. Proponents say that the proposed increase could help pay for several initiatives, including projects to combat climate change. But opponents of the measure have reportedly expressed concern about the effects large tax increases could have on working families. 

What about carbon taxes? Washington state and Canada use either carbon fees and pricing or carbon taxes to fund climate change initiatives. (Carbon taxes are essentially taxes on fossil fuels designed to discourage harmful CO2 emissions). Canada has also used carbon tax revenue to help fund household rebates, according to data from the Niskanen Center. 

California Wealth Tax for Climate?

The question whether tax increases should be used to fund climate initiatives also came up in California last year when Golden state voters rejected Proposition 30. That tax measure would have required wealthier California residents to pay higher taxes to subsidize energy and climate initiatives, including funding for electric vehicles. 

At the time, Kiplinger reported that proponents of Proposition 30 included ride share company, Lyft, which raised millions of dollars to encourage yes votes on the measure. California Gov. Gavin Newsom however, was among those who opposed what is commonly known as “Prop 30.”

California already employs carbon caps and carbon pollution pricing, and wants to ban the sale of gas-powered vehicles by 2035. According to statewide initiative Energy Upgrade California, climate change contributes to increased intensity of drought, wildfires, and storms in the Golden state. 

2023 Clean Energy Tax Credits  

The IPCC climate report says that if countries around the world take “effective and equitable climate action,” they can help reduce losses and damages — not only to nature, but to people as well. But whether tax hikes to fund climate change adaptations take hold in more areas remains to be seen. 

In the meantime, the federal government (and many states) offer tax incentives designed to help combat climate change. For example, the Inflation Reduction Act, passed last year, contains billions of dollars in climate-related tax incentives. Some of those include an EV tax credit for new and used electric vehicles, a revived federal tax credit for EV charging equipment, and tax incentives for homeowners to undertake so-called “green” home improvements like installation of solar panels.