Berkeley’s gas ban was blocked in court. Now a new plan has emerged.

After the courts squashed its first-in-the-nation natural gas ban, the city of Berkeley, California, has emerged with a new strategy to curb the planet-warming fossil fuel: taxing large buildings that use it.

On November 5, residents of the Bay Area city will vote on a ballot measure that proposes taxing the owners of buildings of 15,000 square feet or larger based on the amount of natural gas consumed each year. If passed, legal experts say this would be the first tax in the country to target the use of a specific fuel source for buildings.

City officials estimate that the tax would apply to over 600 buildings in Berkeley and generate $26.7 million during its first year, an amount larger than the city’s annual sales tax revenue. Of those funds, 90 percent would go toward retrofitting homes and buildings in the city with electric HVAC and appliances, and 10 percent would go toward city administrative costs.

In order to meet its climate goals, the U.S. needs to figure out how to shift all buildings from oil and gas to heat pumps and electric stoves, water heaters, and dryers. Governments around the country are exploring different ways to accelerate that switch — and while the tax proposal is Berkeley’s latest attempt, it’s not the progressive coastal city’s first.

Five years ago, Berkeley introduced the nation’s first ban on hooking up gas in new construction. Praised as an innovative way to cut carbon emissions and reduce air pollution by environmental advocates, Berkeley’s gas ban inspired similar laws in dozens of California cities and kicked off a surge of building electrification policies in more than 100 local governments nationwide.

But last year, the policy was struck down by the U.S. Court of Appeals for the Ninth Circuit following a lawsuit from the California restaurant industry. In January, the same court declined to revisit its decision, dealing a final blow to the city’s effort.

Despite those legal woes, climate organizers say the city remains undeterred.

“People look to Berkeley as a bellwether for progressive climate action as well as an incubator of ideas,” said Daniel Tahara, one of the lead organizers for Fossil Free Berkeley, the local group behind the ballot measure. ​“Someone needs to be putting ideas out there, and we think that has been and can continue to be Berkeley.”

Tahara and others from Fossil Free Berkeley say that this year’s ballot measure was in part motivated by the defeat of the city’s gas ban, which was finally repealed in March. ​“A lot of momentum was lost statewide,” he said, as cities across California and other Western states rolled back their own gas bans in response.

Community members gathered more than 4,500 signatures to get the proposed gas tax on the ballot, which officially qualified at the end of May. The tax would charge large building owners $2.96 for every 100 cubic feet or 100,000 BTUs of natural gas used, a value based on the social cost of carbon, which estimates the damages caused to society by excess greenhouse gas emissions.

Residents in low-income communities would be among the first to receive funding from the taxes to upgrade and electrify older buildings, and union labor would be prioritized for building retrofit work funded by the tax. If approved, the policy would take effect January 1, 2025, and expire at the end of 2050.

Amy Turner, director of the Cities Climate Law Initiative at Columbia University’s Sabin Center for Climate Change Law, said that Berkeley’s proposed tax is a novel approach. Existing policies, such as building performance standards in New York City, Boston, and Seattle, require buildings to lower emissions over time and can fine property owners for failing to comply. But they tend to be ​“fuel neutral,” meaning they don’t explicitly target a specific energy source like fossil gas. ​“We haven’t seen a fee or a payment of any kind be connected directly to the kind of fuel that a building is using,” she said.

Some trade groups, like the county’s building and construction trades council, have criticized the measure for levying additional costs on local businesses in an area with already higher-than-average taxes. And while the measure’s text explicitly prohibits property owners from passing on costs to renters, a city report expressed concerns that the tax could still result in higher rental costs ​“either at the time of lease renewal or, for price-controlled units, adjustments during times of vacancy.” The report also stated the initiative would likely increase job opportunities for contractors and incentivize all-electric new construction of large buildings in Berkeley.

Berkeley’s proposed tax requires a simple majority to pass. But that’s not the only hurdle: The measure will also have to withstand the same legal scrutiny faced by the city’s previous gas ban. In April 2023, the Ninth Circuit Court ruled that the federal Energy Policy and Conservation Act, a law that sets national energy-efficiency standards, preempted Berkeley’s ban, stating that the policy would in effect prevent the use of gas appliances that meet those national standards.

Fossil Free Berkeley organizers point out that the court’s decision explicitly allowed for the possibility of a carbon tax similar to the one on the November ballot, making the new measure safe from legal challenges based on the Energy Policy and Conservation Act. Turner likewise noted that the city’s new approach — a tax rather than a ban — is substantially different from the one tossed out by courts.

“Certainly there are incentives of all kinds for buildings to be built or be operated in certain ways, and those are not subject to EPCA preemption,” she said.

Beyond reducing fossil gas use, which accounts for roughly one-third of Berkeley’s greenhouse gas emissions, the proposed tax would also help prepare the city for an energy transition that’s already underway, Tahara said.

In March of last year, California’s Bay Area Air Quality Management District, which governs air pollution in Berkeley and other nearby cities, passed regulations to phase out the sale of gas-powered appliances by 2027. But the regulation ​“left a lot of the thorny implementation issues to local municipalities,” such as how to make it affordable for homes and businesses to make the switch, Tahara said. Revenue from the tax, which would roll in as early as 2026, would help provide the funding needed for electric and building upgrades to ​“prepare for those regulations, so that they can be rolled out equitably,” he said.