Climate superfunds are cumbersome, violate due process, and do not help in the fight against climate change.

Some states are pushing unrealistic and misguided climate superfund laws that threaten to turn support away from more effective common-sense solutions to protect the environment while preserving the economy.

The laws in two states aim to tax fossil fuel-based energy companies that have some nexus with the taxing state as compensation for extreme weather-related damages. Yet these laws are rife with vague and probably unconstitutional provisions that will be the basis of costly and time-consuming litigation and inevitably lead to higher energy prices for consumers while making no real progress in fighting climate change. Our federal and state policymakers should instead focus on common-sense solutions, such as the clean energy provisions of the Federal Inflation Reduction Act and the Environmental Protection Agency’s Greenhouse Gas Reduction Fund, not punitive measures against American energy that get us nowhere.

In 2024, Vermont and New York became the first two states to enact climate superfund laws. Similar bills are now pending in other states. New York’s law in particular mandates that energy companies must pay the state $75 billion over the next twenty-five years for emissions from 2000 to 2018, even though state officials oversaw a record increase in pipeline and gas drilling activity between 2004 and 2010. Not to mention the fact that New York’s residents depend on electricity generated from fossil fuels and gasoline for their cars, and that the state and its various agencies, including highway patrol and emergency responders, were, during the designated time frame, themselves customers of the energy that legislators are now targeting.

Predictably, this complete policy reversal has led to a flurry of lawsuits against the state, including one by a coalition of twenty-two state attorneys general and one led by the US Chamber of Commerce, which highlighted the law’s economic penalties that would lead to higher energy costs for businesses and consumers.

New York’s law imposes payment requirements on fossil fuel entities that have sufficient contacts with the state to satisfy the due process requirement of the US Constitution. That vague provision alone will require a court-fashioned definition, potentially for each and every entity against which the state seeks to impose payment obligations. Since New York can neither trace its damages back to the actual emitter nor measure how individual energy producers have impacted the state, the law sends a signal that businesses everywhere could be targeted. The resulting uncertainty will raise energy prices for consumers and clog court dockets.

Moreover, there is a strong argument that the Federal Clean Air Act, with its designation of the Environmental Protection Agency as the nation’s air emissions regulator, has preempted state efforts to regulate pollution, whether through taxing measures like the law in question or through litigation targeting the same emitters for the same harms. As the Chamber argues in its lawsuit, New York has inserted “itself into an area of law that is and has historically been controlled only by federal law, upsetting the careful regulatory balance the Clean Air Act establishes, violating the extraterritorial restraints of our federal system, and transgressing the bounds of due process and other constitutional protections.” 

The passage of state climate superfund legislation, with its attendant disincentive for energy production and high litigation costs, will weaken America’s energy security, ceding the global advantage to greenhouse gas emitters that have no obvious contacts with the taxing states, including foreign-based energy companies like Saudi Aramco, Gazprom, and Rosneft. These companies, situated in countries that are hostile to America’s national interests, would eagerly replace overall production if domestic production is diminished because of state-mandated climate change superfund taxes.

State and federal lawmakers must respect the historic balance between state and federal authority and focus their climate change control efforts on regulations through the Environmental Protection Agency, the provisions of the Clean Air Act, and especially the EPA’s Greenhouse Gas Reduction Fund, which stands out as a way to use private capital to help communities and advocate for energy independence. Additionally, clean tax credits under the Inflation Reduction Act are constitutional and innovative measures that make it economically attractive for energy companies and businesses to fight climate change while protecting local economies and industries. This is the constructive path to fighting climate change that can produce solid results.

To truly combat climate change, we must work with energy producers to encourage lower-carbon solutions, not punish them. As one of the cleanest natural gas-producing countries in the world, the United States must lead the world with this approach and find smart responses to climate that prioritize innovation and technological advancement in the years to come.

About the Author: Rick Boucher

Rick Boucher is a Democrat who represented Virginia’s 9th Congressional District from 1983 to 2011 and was former chairman of the U.S. House Energy and Commerce Committee’s Subcommittee on Energy and Air Quality. He is a former member of the Law and Justice Committee of the National Conference of State Legislatures, the Board of Directors of the First Virginia Bank of Damascus, Virginia, and the Board of Directors of Client Centered Legal Services of Southwest Virginia. He provides policy counsel to information technology and energy companies. He earned his BA from Roanoke College. He received his J.D. degree from the University of Virginia School of Law.

Image: Shutterstock/dee karen

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