New York is poised to charge large fossil fuel companies a massive $75 billion over the next 25 years in an effort to curb the effects of climate change under a new law.
Gov. Kathy Hochul (D-NY) signed the controversial climate law Thursday, several months after the state Legislature the bill in the spring.
The law looks to establish and support a state fund for infrastructure projects aimed at combating, repairing, or adapting to the effects of climate change — putting the onus on fossil fuel companies to supply the funds rather than the taxpayers.
Specifically, it calls on all companies “that have contributed significantly to the build of climate-warming greenhouse gases in the atmosphere to bear a share of the costs needed” for the state fund.
The money put into the fund is expected to then be used on projects such as adapting water and sewage systems, restoring coastal wetlands, upgrading cooling systems in various buildings, as well as repairing and adapting roads and transit systems.
“With nearly every record rainfall, heatwave, and coastal storm, New Yorkers are increasingly burdened with billions of dollars in health, safety, and environmental consequences due to polluters that have historically harmed our environment,” Hochul said in a statement.
“Establishing the Climate Superfund is the latest example of my administration taking action to hold polluters responsible for the damage done to our environment and requiring major investments in infrastructure and other projects critical to protecting our communities and economy,” she added.
In signing the bill, New York became the second state to hold large polluters responsible for possible environmental damage caused by high emissions. Vermont was the first state to establish such a climate fund in May.
It remains to be seen if New York will be successful in issuing its fines to the oil and gas giants.
The law is largely expected to be challenged in court, with industry groups such as the American Petroleum Institute indicating that legal discussions are already underway.
“This type of legislation represents nothing more than a punitive new fee on American energy, and we are evaluating our options moving forward,” API said in a statement.
Scott Segal, a Bracewell partner who advises energy-related companies on the implications of climate legislation, also indicated that there are a number of concerns surrounding the law regarding its downstream effects on the local economy and costs for consumers.
“If we want to effectively address climate change, we should focus on forward-looking policies that incentivize innovation and clean energy adoption rather than retroactive penalties that may divert resources from investments in cleaner technologies and infrastructure,” said Segal.
“Rather than adopting a punitive approach that will likely face significant legal challenges and create economic uncertainty, we could achieve better outcomes through collaborative policies that partner with industry to accelerate the clean energy transition,” Segal continued.
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Not all fossil fuel companies will face the new fines from New York, with only the largest emitters from 2000 to 2018 expected to pay up. This specifically applies to any company that the state determines is responsible for releasing more than a billion tons of greenhouse gas emissions.
As the industry weighs legal challenges, these companies won’t be forced to cough up the cash immediately. They are expected to begin putting money into the climate fund starting in 2028, giving state officials time to establish how to identify and notify responsible companies.