Vermont to Require Fossil-Fuel Companies to Pay for Climate Damage

On Thursday, Vermont became the first state in the country to pass a law that will charge fossil fuel companies for damages caused by climate change, opening a new front in the struggle by governments across the world to hold companies accountable for products that emit planet-warming gases.

The groundbreaking law, versions of which are being considered in several other states, will allow Vermont to charge companies according to the share of emissions they produced between 1995 and 2024. The legislation was inspired by the 1980 federal superfund law, under which polluters can be forced to pay for environmental cleanup costs.

Funds generated by the law would go toward climate adaptation and resilience projects in the state. Last year, record rain and floods devastated parts of Vermont in its wettest summer ever recorded.

A veto-proof majority of state lawmakers in both parties passed the measure in recent weeks through the Vermont House and the Senate. In a letter to Vermont Secretary of State John Bloomer, Republican Governor Phil Scott wrote he would allow the law to go into effect without his signature.

“Taking on ‘Big Oil’ should not be taken lightly,” Mr. Scott wrote. “Having said that, I understand the desire to seek funding to mitigate the effects of climate change that has hurt our state in so many ways.”

Environmental groups hailed the passage of the bill. “There isn’t a city, state or nation on Earth that can hide from the effects of the climate crisis, so while we may be the first place to pass a law like this, we certainly shouldn’t be the last,” Ben Edgerly Walsh, climate and energy program director with the Vermont Public Interest Research Group, one of the main backers of the bill, said in a statement.

The law is sure to face legal challenges. The American Petroleum Institute, the industry’s biggest lobbying group, said in an April letter to the Vermont House environment and energy committees that it was “extremely concerned” about several aspects of the legislation. The group argued the measure imposes costs on legal activities that stretch back decades and holds companies responsible for “actions of society at large.”

The law “is bad public policy and may be unconstitutional,” the group wrote. “Singling out fuel extraction and refinement for potentially exorbitant and disproportionate penalties while ignoring the economy-sustaining use of that energy is misguided.”

Vermont officials have until January 2027 to create a methodology to charge fossil fuel companies for damages caused by their products. The companies will be invited to participate in the rule-making process.

“We are at the end of the beginning in getting this law enacted,” said Elena Mihaly, the vice president of Conservation Law Foundation, one of the main nonprofits garnering support for the bill, in Vermont. “The goal is to create a legally defensible program, so we can all feel comfortable with it.”

In his note to Vermont’s Secretary of State, Mr. Scott said he was concerned about the costs of a small state striking out on its own, and that he feared failure could hamper the efforts of other states considering similar bills. The legislature has set aside only $600,000 to complete a methodology that “will need to withstand intense legal scrutiny from a well-funded defense,” Mr. Scott wrote. “We are not positioning ourselves for success.”

The Vermont law was also inspired by a proposal by a group of U.S. senators, including Sen. Bernie Sanders, in 2021. The national bill did not advance, but it spawned several state-level climate superfund measures.

The New York Senate passed a similar bill for the second time earlier this month. An attempt to make the bill law last year had failed because Gov. Kathy Hochul didn’t include it in the budget. Lawmakers in Massachusetts, California and Maryland have also introduced climate superfund bills.

The original superfund law was signed in 1980, two years after a toxic landfill in Love Canal, a neighborhood of Niagara Falls, N.Y., was recognized as a public threat.

The payout from the law for Vermont could be significant. In 2021, a group of U.S. senators calculated a federal climate superfund would raise $500 billion over 10 years, and New York officials said a statewide measure would collect $75 billion. While Vermont’s economy is a fraction of the size of New York’s, some observers said it’s possible that companies could be forced to pay hundreds of millions of dollars.