State and Local Taxes for Clean Energy and Climate Resilience Funding

Targeted state or local taxes provide a non-rate funding source for clean energy investments, building decarbonization, and climate resilience.

Table Of Contents
  1. Why This Matters
  2. Policy Solution
  3. Model Policy Features
  4. Potential Limitations & Pitfalls
  5. Complementary Policies
  6. Examples
  7. Resources
COMMUNITY BENEFITAffordability, Decarbonization, Resilience
KEYWORDSClean energy, Funding, Decarbonization
REGIONState, Local
AFFORDABILITY STRATEGYFunding/Financing
OVERSIGHTEnergy offices, city councils, etc.
POLICY MECHANISMLegislation

Why This Matters

Across society, we face an urgent need to rapidly adopt efficient, clean energy resources, shift away from fossil fuels, decarbonize across all sectors, and build climate resilience. These efforts will bring broad environmental, public health, economic, and other societal benefits. However, this transition will also require significant upfront investments, including to decarbonize buildings, expand renewable energy generation, electrify cars, build out public transportation, and increase the resilience of homes, businesses, and infrastructure, among many other efforts. Some of these energy and climate investments can be paid for through fees for existing services, such as incorporating the costs of renewable electricity generation into utility rates. However, additional funding will be needed to rapidly and equitably transition to a clean energy future. This funding may be directed to a diverse range of measures, including but not limited to: equitable workforce development, weatherization and electrification for low-income households and renters, community solar projects, solar+storage resilience hubs, electric vehicle charging infrastructure, tree planting to mitigate urban heat islands, and electrified public transit.

Policy Solution

One source of funding for clean energy transition and climate resilience projects are earmarked state or local taxes, including but not limited to income taxes, property taxes, and sales taxes. Such taxes can be enacted by state legislatures, city councils, or ballot measures, and should be designed to minimize any regressive impacts (e.g. excluding essential food and medicine from a sales tax).

Model Policy Features

Implementation of state and local taxes for clean energy and climate resilience investments include:

  • A tax on income, sales, or property earmarked specifically for a fund for clean energy, climate resilience, fossil fuel remediation, greenhouse gas mitigation, or other climate and energy measures.
  • Consideration may be given to designing a tax targeted at individuals or corporations with high greenhouse gas footprints, even if the tax is not directly proportional to that footprint.
  • Design and evaluation of the tax to limit any regressive impacts (e.g., exclude essential groceries from a sales tax, include property tax exemptions for lower-income households). 
  • Early and frequent community and stakeholder engagement to guide investment strategy.
  • Transparent and accountable governance.
  • Disbursement of the fund to support grants for clean energy and climate mitigation and resilience measures, with targeted outreach and allocation to historically disinvested and underserved populations. Special consideration should be given to those (e.g. renters, low-income households, communities of color) with limited access to capital to adopt clean energy resources or neighborhoods that have been historically underinvested and face the highest burdens from existing fossil fuel infrastructure and risks from climate impacts.
  • Includes provisions for regular data reporting and public transparency (e.g., public-facing data dashboards, program evaluation, audits to ensure meaningful benefits reach intended populations).”

Potential Limitations & Pitfalls

  • All taxes may have some adverse impacts that need to be weighed against the benefits. For example: sales taxes risk being regressive and may hurt small businesses, revenue from income taxes can fluctuate significantly from year to year, and property taxes can contribute to high housing costs burdens. The design of the tax can help mitigate some of these impacts.

Complementary Policies

Policies that complement state and local taxes for clean energy funding include:

Examples

1. Portland Clean Energy Fund – Portland, Oregon, Measure 26-201, Renewable Energy Initiative (November 2018)

Details:

  • A coalition of Black, Indigenous, and People of Color (BIPOC) organizations and environmental/climate justice groups in Portland, Oregon, introduced a ballot measure, which passed in 2018, to use local taxes to create a fund to support clean energy investments and job training.1  
  • The Portland Clean Energy Fund is capitalized by a 1% surcharge on gross revenue from city retail sales from retailers with a total annual revenue of over $1 billion and Portland annual revenue over $500,000; this design ensures small, local retailers are not impacted by the surcharge.
  • The balloted measure directs funding to support clean energy and climate resilience measures, such as renewable energy, energy efficiency, tree canopy, and green buildings; and workforce development prioritizing “traditionally underemployed, economically disadvantaged workers” such as women, communities of color, people with disabilities, and the chronically underemployed; among other initiatives. 
  • The Fund’s investments are guided by a five-year Climate Investment Plan, shaped by community engagement, climate research, and outreach to a broad range of stakeholders, leading to a range of efforts such as Community Grants targeted to reduce greenhouse gas emission and increase climate resilience while advancing social justice; and initiative across transportation, agriculture, workforce development, climate justice, building decarbonization, and other measures.2
  • The Fund ended up with significantly more funding than expected: original estimates expected $40–90 million per year, but actual funding has resulted in approximately $200 million per year, enabling a total of $1.7 billion in grants by late 2025.3

LIMITATIONS:

  • There have been efforts to divert some of the Portland Clean Energy Fund’s money, in some cases to fill the city’s budget holes on climate-related programs, but more recently including a proposal to fund the police department.4

    Resources

    Written: December 2025

    1. Just Solutions Collective. (2022). Portland Clean Energy Fund: From Campaign to Implementation An Interview with Khanh Pham. ↩︎
    2. City of Portland, Oregon. Climate Investment Plan: PCEF’s five-year funding road map to climate action. Accessed: December 6, 2025. ↩︎
    3. Griggs, T. (2025). Amid Grim Outlook for National Climate Investments, Portland’s Clean Energy Fund Doles Out Nearly $64 Million. Portland Mercury. ↩︎
    4. Griggs, T. (2025). Amid Grim Outlook for National Climate Investments, Portland’s Clean Energy Fund Doles Out Nearly $64 Million. Portland Mercury.
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