New York legislators passed a bill last week that would charge fossil-fuel companies a total of $3 billion a year for 25 years to pay for costs associated with climate change.
The Climate Change Superfund Act is now headed to Gov. Kathy Hochul’s desk for her signature. If enacted, New York will become the second U.S. state with a law requiring fossil-fuel companies to bear some of the financial burden of climate change.
Vermont led the charge last month. Similar bills have been introduced in California, Massachusetts and Maryland.
New York Sen. Liz Krueger, a sponsor of the bill, said $3 billion wouldn’t cover the full annual cost of adaptation and mitigation in New York. “We’re probably spending a lot more than that a year already, and the numbers keep growing when you look at flooding damage, storm damage, rising water tables, fires, pollution, health—all these things being caused by climate change.”
Saudi Aramco, which tops the list of potentially affected companies, could owe New York $644 million a year, according to a memo written by Krueger and her co-sponsor last year. That is about 2% of the company’s first-quarter 2024 profits, which totaled $27.27 billion.
Exxon Mobil, Shell, Pemex, BP, Chevron and Peabody Energy could each owe upward of $150 million annually, according to the memo. None of the companies mentioned in this article responded to requests for comment.
A spokesperson for Krueger emphasized that the numbers in the memo are approximate, and state regulators would perform additional analysis to determine which companies are covered and how much they owe.
Scott Lauermann, a spokesman for the American Petroleum Institute, a trade association representing oil-and-gas companies, said he hopes Gov. Hochul will veto the legislation. “This punitive new fee represents yet another step in a coordinated campaign to undermine America’s energy advantage and the economic and national security benefits it provides.”
If enacted, the New York law is likely to face legal challenges, as is Vermont’s law. Opponents have argued that states don’t have the authority to regulate emissions, that companies shouldn’t be charged retroactively for emissions that were legal at the time, and that it is unfair to focus solely on fossil-fuel companies and not the power plants and car drivers who used the energy they sold.
Krueger said she assumes it will be years before the state collects any money from the covered companies, but expressed confidence the law would hold up in court. “After they lose the lawsuit, we believe they will pay, and we believe that other states will quickly follow in our footsteps,” she said.
Heightened interest in Climate Superfund legislation is driven in part by the slow progress of lawsuits brought by states and cities seeking compensation from fossil-fuel companies, said Michael Gerrard, founder of the Sabin Center for Climate Change Law at Columbia Law School. These cases have been ongoing since 2017.
“It’s an expression of the urgency [state legislators] feel about the climate crisis, and frustration that better methods haven’t happened yet—that Congress hasn’t passed comprehensive legislation, that these lawsuits have dragged on,” he said.
Even if lawsuits or Superfund laws survive in court, state-level action is a piecemeal, sometimes uneven means of tying climate funding to corporate activity. Gerrard pointed out that many believe a more straightforward solution is a federal carbon tax, which would have the advantage of motivating companies to reduce emissions in the future rather than punishing them for past damages.
“Look, would I prefer this all be done at the federal level? Yes,” said Krueger. “But the states have learned over the last few years, we can’t count on the federal government to do these things for us.”
If passed, the New York law will apply to about three dozen companies, according to last year’s memo. These are corporations whose operations released more than one billion metric tons of carbon dioxide-equivalent emissions between 2000 and 2018 and that meet a certain threshold for doing business in the state. The plan is to calculate fees in proportion to emissions, and estimates range from $200,000 for the lowest emitter to $644 million for the highest.
The revenue would be used to pay for climate-related infrastructure upgrades like coastal wetlands restoration or stormwater drainage system projects. It could also go toward installing energy-efficient cooling systems in schools and public housing, according to the bill. At least a third of the revenue would be reserved for initiatives in disadvantaged communities.