Introducing Polluters Pay Laws—a New Tool for Climate Adaptation

These laws are not punitive. They instead seek to correct an imbalance where taxpayers and local governments too often end up paying for the financial consequences of climate pollution caused by fossil fuel companies.

Once collected, the money goes into a state-managed fund to be used for climate adaptation initiatives. Given the wide-ranging impacts of climate change, such projects could include restoring stormwater and drainage treatment systems that help control runoff or adding green spaces to urban areas that are prone to the heat island effect. They could protect coastal wetlands or elevate and retrofit older buildings. The idea is to proactively invest in community protection measures before the next disaster strikes, and thus, fend off some of the worst damage.    

They don’t. Polluters pay laws do not change, limit, or regulate how much climate pollution companies can emit. The current climate superfund laws address only costs for local adaptation efforts.

So far, only Vermont and New York have put these laws on the books, but 11 other states are working on similar legislation: California, Connecticut, Hawai'i, Maine, Maryland, Massachusetts, New Jersey, Oregon, Rhode Island, Tennessee, and Virginia.  

Vermont became the first state to pass its version of the law, called the Climate Superfund Act, last year. The law applies to fossil fuel companies that are responsible for more than a billion metric tons of greenhouse gases, based on extraction and refining activities between 1995 and 2024, and that have sufficient connections with the state of Vermont (for example, selling their products there). 

The program would require the state treasurer and Vermont’s Agency of Natural Resources to figure out what those emissions cost the state. The agency would also determine the amount of emissions attributable to each fossil fuel company and calculate what it would owe to the recovery program fund.    

Governor Kathy Hochul signed New York's version into law just a few months later. While the laws of the two states are similar, New York, unlike Vermont, has already specified how much it plans to recoup from fossil fuel companies: a total of $75 billion—a fraction of the costs to the state. Just like Vermont’s program, New York’s law only concerns companies that had sufficient contacts with the state and that can be attributed with more than a billion tons of greenhouse gas emissions between 2000 and 2024. The first set of payments is scheduled to begin in 2028.   

Anyone who has ever had to pick up their lives after a climate disaster—be it from fire, water, or wind—knows just how arduous such recovery processes are. The high costs of improving infrastructure in order to lessen future damage can be a huge, and often unsurmountable, financial hurdle for local governments and residents.   

Making matters worse, when communities are hit hard, businesses can be ruined, jobs are lost, and economic growth is stalled. One report found that the 2023 northeastern floods, a series of flash floods that hit New York and Vermont the hardest, caused $2.2 billion in damages. More than 800 businesses reported damage in Montpelier, Vermont, and the small capital city was still struggling to recover a year later. Overcoming from economic tolls like these, on top of the emotional trauma, can take communities years, if not longer.     

States have a direct interest in working to protect the health, safety, and general welfare of their residents from climate disasters. A 2024 study from the U.S. Chamber of Commerce, the U.S. Chamber of Commerce Foundation, and Allstate calculated that every dollar spent on resilience-building and preparedness can save communities $13 in post-disaster cleanup costs and economic impacts. This could add up to billions of dollars saved per climate disaster. Looking at 25 models of different disaster scenarios, the researchers found that early investments can significantly decrease cleanup and recovery costs—no matter the type of weather event, its size, or the size of the city. 

Mainly lawsuits. Vermont is involved in two legal challenges: one from the U.S. government, the other from the U.S. Chamber of Commerce and the American Petroleum Institute, in which 24 Republican-led states have intervened. Meanwhile, New York faces three separate cases: one from the U.S. government; another from the Chamber of Commerce and American Petroleum Institute; and a third from a group of 24 Republican-led states. 

One argument that the lawsuits share is a claim that the polluters pay laws intrude into federal affairs. Yet, as stated before, these state laws do not, in fact, regulate emissions; they only allocate some of the costs of funding local infrastructure to large fossil fuel producers and do not conflict with federal air pollution laws. The courts have long recognized the traditional power of states to enact laws that protect the health, safety, and financial well-being of their citizens.     

The fossil fuel industry is also lobbying against polluters pay bills by pushing the narrative that they would raise the cost of living. “The fossil fuel industry is working really hard in every state to perpetuate this story when that’s just not how the market works,” says Kimberly Ong, a senior attorney at NRDC. The oil and gas market is largely dictated by global supply and demand, neither of which the legislation would influence. There are also antitrust laws in place to help regulate pricing and prevent companies from manipulating the market.   

Advocacy groups are working to defend both states’ polluters pay laws in court. Earlier this month, NRDC lawyers representing the Northeast Organic Farming Association of Vermont and the Conservation Law Foundation intervened to help Vermont defend against the challenges to the law. NRDC is also representing local groups seeking to intervene in the New York cases. Finally, NRDC is working to help other states pass similar laws.     

On the national front, representatives Jerry Nadler, from New York, and Judy Chu, from California, introduced a federal version of the polluters pay bill in the House of Representatives in February. The bill would require the largest U.S.-based fossil fuel extractors and refiners to proportionately pay into a $1 trillion fund. While the odds of this legislation passing in the current political climate are slim, state-level progress may eventually lead to nationwide action addressing the growing costs of climate change. As it stands, the most recent National Climate Assessment found that extreme weather events cost the country at least $150 billion each year in direct damages—and that doesn’t account for climate adaptation and public health costs, the destruction of ecosystem services, or the loss of life.    

For now, NRDC’s Ong likens the polluters pay movement to a bamboo plant: “In the first four years after you plant it, it doesn’t look like it’s doing anything, but in the fifth year, it shoots up to 9 feet tall.” Before reaching for the sky, the giant bamboo must set down roots to support itself. “We are in that rooting phase right now,” she says. “So this will be something really exciting to see unfold.”