Is it Time for Climate Resilience Taxes?

New York City's Chief Climate Officer says he wants a "dedicated revenue stream for resilience." What could this look like, and what are the obstacles in the way?

Author

Louie Woodall
October 17, 2024

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TL;DR

  • Rohit Aggarwala, the Chief Climate Officer for New York City, said on Tuesday he would like to see “a dedicated revenue stream” for climate resilience in the Big Apple

  • New taxes could help bridge the adaptation finance gap in urban areas. In 2021/22, just US$10bn of adaptation finance flowed into the worlds’ cities

  • However, introducing new taxes doesn’t make sense in metropolises that lack robust revenue bases

  • Even where taxation is an option, winning popular and political backing for climate resilience levies could be a struggle

  • Framing these taxes as investments that protect households and businesses, thereby raising their value, could be one way to build support

“Nothing can be said to be certain, except death and taxes.”

Benjamin Franklin’s 18th century aphorism, if made today, would surely add “climate change impacts” to the list. Right now, a burning question among policymakers is whether taxes should be raised to mitigate these impacts. Another, no less pressing, question is whether taxpayers would stomach them.

Officials on the frontlines of climate risk appear to be in favor. Speaking at the Financial Times Moral Money Summit on Tuesday, Rohit Aggarwala — the Chief Climate Officer for New York City — made the case for a dedicated climate resilience levy.

“We don’t have infinite money. For example, we do not have a dedicated revenue stream for resilience. I also manage the water utility here in New York City and I have US$4.2 billion a year in water rates, but legally, I’m not allowed to invest that in coastal resilience, because it’s only for the water system. And I personally think at some point we actually need a dedicated revenue stream for this kind of coastal resilience [because] over the next 30, 40, 50 years we’re going to be spending somewhere between US$50 and US$100bn to protect New York City from coastal storms.”

It’s an intriguing idea, and one with some track record in the US, at least. For example, Denver, Colorado voted in 2020 to raise the sales tax by 0.25% and use the proceeds to seed a Climate Protection Fund. This raises US$40mn a year to finance local climate jobs programs, water conservation, and other adaptation and decarbonization activities. And in 2022, Ann Arbor, Michigan voted for a Community Climate Action Millage — or property tax — that raises around US$7mn a year to support energy efficiency, weatherization, neighborhood and community resilience, and more.

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