Key Takeaways
New York’s latest bill, signed by Governor Kathy Hochul, taxes energy companies $3 billion per year for 25 years, which will be added to the energy bills of New Yorkers to fund projects politicians want under the guise of climate change mitigation.
New York State has underfunded maintenance and upkeep of infrastructure for decades, preferring to spend money on other programs.
New York is the second state to pass legislation for creating a climate super fund, after Vermont.
Both state laws are expected to be challenged by supporters of affordable energy.
New York Governor Kathy Hochul has signed a new law mandating that the largest fossil fuel companies—deemed responsible for carbon dioxide emissions from 2000 to 2018—contribute $3 billion annually to a climate mitigation fund for the next 25 years. The law targets companies identified by the state as having emitted over a billion tons of greenhouse gases. Modeled after the federal Superfund law, the New York legislation holds companies accountable for hazardous emissions, requiring them to either fund or directly carry out cleanup efforts at contaminated sites.
New York is the second state to introduce such a law, following Vermont, which set up a similar fund earlier this year. Critics argue that the measure will increase energy costs for consumers, as it imposes a punitive fee on fossil fuels that supply roughly 80% of U.S. energy needs. The law is expected to face legal challenges, particularly from the fossil fuel industry, which remains politically supported by President-elect Trump. Despite decades of government incentives and state mandates, alternative energy sources have yet to significantly reduce fossil fuel consumption.
The funds raised will be allocated to various climate-related projects, including the upgrade of water and sewage systems, coastal wetland restoration, improvements to building cooling systems, and the repair and adaptation of transportation infrastructure. However, given the state’s aging infrastructure and its history of underfunded maintenance, some critics view the law as a potential backdoor tax on consumers, rather than a genuine attempt to restructure public spending or stimulate economic growth.
The law’s impact will be significant, with annual fees levied on both domestic and international energy producers. Saudi Aramco is expected to face the largest charge at $640 million per year, followed by Mexico’s Pemex at $193 million annually. Russia’s Lukoil may owe around $100 million yearly. The 38 companies include U.S. giants Exxon and Chevron, European firms like Shell, BP, and Total Energies, as well as international corporations such as Brazil’s Petrobras, Australia’s BHP, Switzerland’s Glencore, Norway’s Equinor, and Italy’s ENI. Some critics are concerned about the state’s ability to collect these fees from foreign companies.
The companies 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. The state must come up with rules on how to identify responsible parties, notify companies of the fines, and create a system to determine which infrastructure projects will be paid for by the fund.
On December 5, more than three dozen energy firms and business advocates sent a letter to Hochul urging her to veto the bill. According to the letter, co-signed by the Business Council, the American Petroleum Institute Northeast Region and National Fuel Gas Company, among others, “this legislation is bad public policy that raises significant implementation questions and constitutional concerns. Moreover, its $75 billion price tag will result in unintended consequences and increased costs for households and businesses.”
According to state Senator Liz Krueger, a co-sponsor of the bill, “too often over the last decade, courts have dismissed lawsuits against the oil and gas industry by saying that the issue of climate culpability should be decided by legislatures. Well, the Legislature of the State of New York — the 10th largest economy in the world — has accepted the invitation, and I hope we have made ourselves very clear: the planet’s largest climate polluters bear a unique responsibility for creating the climate crisis, and they must pay their fair share to help regular New Yorkers deal with the consequences.” Senator Krueger has also proposed that New York secede from the United States and join Canada.
The new law in New York is part of a broader set of initiatives that will have significant financial impacts on commuters and consumers alike. These measures include Governor Kathy Hochul’s congestion pricing plan in New York City and the Environmental Department’s upcoming “cap and invest” rule. Together, these policies are expected to impose billions of dollars in additional costs related to fossil fuel consumption, affecting a wide range of individuals and businesses that rely on energy.
New York City’s congestion pricing plan will impose a $9 toll on most vehicles entering the city. The aim is to generate funds for public transit, alleviate traffic congestion, and cut down on air pollution. Slated to begin in January, this marks the first time a U.S. city will implement such a system. President-elect Donald Trump has been vocal in his opposition to the plan.
Meanwhile, the state’s “cap and invest” program, also known as cap and trade, will set a steadily declining limit on statewide greenhouse gas emissions. Certain entities will be required to buy allowances, essentially paying for the right to emit carbon dioxide in New York. The revenue generated from the sale of these allowances will be directed toward programs aimed at further reducing emissions. Like the new climate fund law, the “cap and invest” system will lead to higher energy costs for consumers, as businesses pass on the expense of purchasing emissions allowances.
Interestingly, while New York’s new laws aim to address climate change by targeting carbon emissions within the state, they do not account for the role of international emitters. China remains the world’s largest emitter of carbon dioxide, and its emissions continue to rise. Despite the global nature of climate change, Governor Hochul’s “super fund” law does not seek to hold China or other foreign nations accountable for their contributions to the problem. This raises a broader question about the global impact of emissions and the fairness of imposing costs on local consumers when the problem is driven by worldwide activities.
Conclusion
New York Governor Hochul signed a bill that will create a climate superfund where large fossil fuel companies will be paying $3 billion a year for 2 and a half decades into a fund to be used for climate mitigation activities. The law will increase energy costs for consumers, who will also likely be seeing increased costs from other N.Y. legislation, including a pending ‘cap and invest’ program. New York is the second state to pass legislation for creating a climate fund, after Vermont. Both state laws are expected to be challenged by supporters of affordable energy.
