FAQs
1. The Measure
What does the measure do?
This measure is a special carbon tax on emissions from the City’s largest methane polluters (owners of buildings 15,000 square feet or larger). It would create an estimated $26.7 million per year Just Transition Fund to help all residents fight climate change and improve their quality of life.
The tax would only be applied to the owners of the largest Berkeley buildings who use methane gas. The tax accounts for the societal damages from burning and leaking methane gas.
The tax accomplishes two key things:
- Incentivizes the largest building owners to reduce or eliminate methane use and emissions; and
- Pays for climate-friendly appliances and voluntary upgrades for homeowners, renters, restaurants and other businesses. Upgrades include heat pumps, all-electric appliances, solar, battery storage, panel upgrades, wiring, EV and mobility charging, insulation, and more!
How will the proceeds of the tax be spent?
90% to subsidize voluntary retrofits of harmful natural gas with clean all-electric appliances and home upgrades for all Berkeleyans.
10% to support, staff, and administer the climate and retrofit programs outlined above. The City’s current climate division consists of only a few staff and is severely underfunded. This new funding will help stand up a robust climate division tasked with administering this new program to help residents and businesses electrify their buildings.
How much money would the measure raise for Berkeley?
The City estimates this will raise $26.7 million / year, which over the lifetime of the measure would provide a substantial chunk of the estimated $1 billion needed to electrify all low-rise buildings in Berkeley.
Who is eligible for funds and grants?
All Berkeley residents and buildings, even those subject to the tax!
Retrofit funding would also be prioritized in South and West Berkeley (as identified in the state’s Enviroscreen database documenting various forms of environmental injustice and racism).
Building upon a recent City pilot, work funded by the measure will be prioritized for organized labor, part of a historic “blue-green alliance” between unions and environmentalists. The measure would also expand the City’s climate department.
I’m a renter. How will I be affected?
To begin with, only buildings greater than 15,000 square feet are subject to the tax, and even then, the tax is paid by the owner of the building and not the tenants. The measure also explicitly prohibits the owner from passing the tax through to residents in the form of an additional line item or rent increase. Inclusion of such charges shall be a complete defense to any action for eviction for failure to pay rent.
Funds may be used for initiatives to prevent the displacement of residents in relation to the tax and its purposes.
Since the tax is applied to the owner, we also believe the tax will create an incentive for the owner to provide building improvements to improve its energy efficiency and eliminate climate polluting and unhealthy methane. This will help lower energy bills, saving you money.
I’m a homeowner. How will I be affected?
You will almost certainly not be affected. As long as you own a home with fewer than four units OR less than 15,000 square feet, you will owe no tax!
Even better, when the City programs are up and running, you can be eligible for subsidies, financing, or other assistance installing climate friendly equipment and appliances (e.g. heat pumps, solar, batteries, EV charging) that you can stack on top of existing federal/state/regional incentives such as those provided through the Inflation Reduction Act and BayREN!
I’m a restaurant owner in a very large building. Are you taking away my gas stove?
Absolutely not! You are welcome to use your gas cooking appliances – there are no mandates or prohibitions against doing so. It was important to us in this measure to provide the flexibility to accommodate all the varying needs of the community.
2. Why We Need This
What’s the deal with Methane?
Not only does methane gas combustion generate emissions, but it is constantly leaking from the point of extraction, across pipelines, and even within distribution and building pipes. Leaked methane heats the planet 80 times more than carbon dioxide over 20 years.
When burned, it can cause asthma, cancer, and other health issues. City data suggests that Berkeley buildings greater than 15,000 square feet (1.5% of Berkeley’s buildings) are causing nearly a quarter of Berkeley climate emissions from methane gas.
Didn’t the City already do this? Why another measure?
In 2019, Berkeley passed an ordinance banning methane gas infrastructure in new construction. At the time, it was world-leading, and it quickly led to similar laws across California, the United States, and even the world.
Unfortunately, in 2023, after fossil fuel industry-backed litigation via the California Restaurant Association, the Ninth Circuit Court of Appeals struck down the measure based on an extremely questionable reading of federal law.
As of today, there is nothing preventing the continued expansion of methane gas infrastructure against our climate goals and against the health and safety of our community. Moreover, the prior law only addressed the question of new construction, not the existing buildings in Berkeley that are responsible for about a third of the city’s emissions. Our measure fills both of these gaps.
Is it legal?
Yes! Cities are allowed to assess taxes approved by voters.
As part of the Ninth Circuit decision, a judge noted “local governments are likely free to impose carbon taxes designed to discourage such [gas] consumption.”
Practically speaking, the main public concern voiced by the Restaurant Association and Downtown Business Association, the chief opponents of the gas ban, was that the ban limited choice. They were supportive of the climate goals of electrification, but they wanted the latitude to be able to choose whether or not to use methane gas in their buildings. Our measure provides choice, but requires the building owner to pay for the climate and social damages caused by that gas use.
Why the Urgency?
The climate crisis worsens by the day. Homes in the hills go without insurance, residents choke on wildfire smoke, and sea level rises unchecked. Meanwhile, our pace of emissions reductions is far below what is needed to meet our own City’s 2030 targets. In fact, Berkeley needs to reduce its emissions by an additional 50% relative to 2023 levels in order to achieve our “fair share” of global emissions reductions.
Additionally, the Bay Area Air Quality Management District (BAAQMD) recently passed regulations that will prohibit the sale and installation of methane gas furnaces beginning in 2027. Cities in the Bay Area need to urgently prepare for these regulations to take effect, providing both funding and technical assistance to ensure that the transition is equitable. Our measure provides just that, with funding first accessible beginning in 2026.
3. The Tax
Why Buildings 15,000 square feet or larger?
The City has existing laws that subject 15,000 square feet or larger buildings to annual energy benchmarking requirements, but they have yet to have any requirement or incentive to decarbonize.
How much will this cost large building owners?
On average, we estimate that the tax will amount to 1-3% of revenues from the building (e.g. rent, commercial uses, etc).
Who is exempt from the tax?
- Single family homes and residential buildings between 1 to 4 residential units, regardless of size;
- Buildings smaller than 15,000 square feet;
- Buildings with more than 50 percent of the units of which are deed-restricted to be affordable to households making less than 80 percent of the Area Median Income;
- Any federal or state owned building;
The Council may also choose to exempt nonprofit building owners with less than $1 million in annual revenue.
Can the Council amend the tax?
Yes, the Council may amend the tax by a two-thirds vote of the entire City Council to further its purposes, but would be prohibited from increasing the amount of the tax.
Who will oversee the tax?
The Environment and Climate Commission will serve as the oversight committee and will make recommendations to the Council on funding and administration.
The City’s Transportation and Infrastructure Commission, the Labor Commission, and the Council Facilities, Infrastructure, Transportation, Environment and Sustainability Policy Committee will also make recommendations to the Council to ensure the Fund is administered consistently with its purpose.
What is the social cost of emissions and how is it calculated?
The ‘social cost of emissions’ is the estimated economic damage to society of each additional ton of greenhouse gas emissions.
According to Stanford News: “[w]hen calculating the social cost of carbon, the main components are what happens to the climate and how these changes affect economic outcomes, including changes in agricultural productivity, damages caused by sea level rise, and decline in human health and labor productivity.”
A recent study published in Nature estimates that the social cost of carbon has been greatly underestimated. Studies show similar results for the social cost of methane. Since costs will accumulate overtime, economists apply ‘discount rates’ to determine a present value of climate costs that will increase as the Earth continues to warm.
Historically, the federal government’s social cost of carbon calculation has arguably erred in using higher discount rates, effectively shifting the cost burden of emissions to future generations. The Obama and Biden Administrations use a 3% discount rate, whereas the Trump Administration used 7-10%. This tax uses the 1.5% discount rate presented in the 2022 Nature study.
We know that climate change is unfolding much faster than anticipated, and that future warming will likely include tipping points and non-linear changes. It is in the public interest and reasonable to discount future damages to a lesser degree to avoid future costs to society now.
