Liability for Climate Change: An Inequitable Economic Disaster
5 hours ago Guest Blogger
By Jason Scott Johnston
Recently, the Trump Administration filed lawsuits seeking to halt efforts by some states to impose liability on fossil fuel companies for their past greenhouse gas emissions. It will likely take some years for these lawsuits to be resolved. What is already clear are the serious and senseless economic consequences that will follow if states are allowed to punish fossil fuel companies for their lawful past production.
States are meting out such punishment in two ways. The first is through common law tort suits. Some of these suits allege that past greenhouse gas emissions from oil and gas production constitute a public nuisance. In others, states allege that fossil fuel companies lied to consumers about the potentially harmful consequences of such emissions. The second way that states are trying to punish fossil fuel companies is through what are called “Climate Superfund” laws. Such laws, already enacted by New York and Vermont and on the road to passage in states such as Maryland and California, hold fossil fuel companies jointly liable for the supposed costs of past greenhouse gas emissions. New York’s law simply sets out an arbitrary $75 billion that fossil fuel companies must pay, with each company paying a share equal to its share of industry GHG emissions over the 2000-2018 period. Under Vermont’s law, producers are liable, again according to their share of emissions, for a virtually limitless set of expenditures – including everything from new roads and bridges to “preventive health care” — that Vermont incurs to address the harms of climate change caused by fossil fuel producer emissions over the period 1995-2004.
Were a large number of states to enact laws similar to those enacted in New York and Vermont, fossil fuel companies could be facing trillions of dollars in liability for past production. These laws impose a new form of liability, one previously virtually unknown in the law, liability for cumulative past emissions. As I show in a recently published peer-reviewed analysis, such cumulative liability – de facto fines for past emissions – will severely cut present and future fossil fuel production. The supply shrinkage comes about through two channels. The first pathway is that cumulative liability will cause some currently producing fields to be shut down. Cumulative liability will cause producers to shut some (generally older) wells because the longer an oil or gas field is in production, the bigger its cumulative production and therefore liability but the lower the present value of oil and gas that remains in the ground. Eventually, liability for cumulative past production (and emissions) must be bigger than the present value of remaining, unproduced oil and gas, meaning that a field becomes a negative net value asset and should be closed. This is true even if the price per barrel is higher than the per barrel damages. By my rough calculations, imposing cumulative liability at even a relatively low per barrel damage level could cause a substantial fraction of Permian Basin fields to become such negative value assets.
https://wattsupwiththat.com/2025/05/15/liability-for-climate-change-an-inequitable-economic-disaster/
