Vermont has become the first state to pass a law requiring fossil fuel companies to pay a portion of the damage caused by climate change after the state was hit by catastrophic flooding and other damage from extreme weather this summer.
Republican Gov. Phil Scott allowed the bill to go into effect behind schedule Thursday night without his signature, saying he was very concerned about the costs and consequences the tiny state would face if it had to face the “big oil companies” alone in what would likely be a grueling legal battle. But he acknowledged that he understood that something needed to be done to combat the effects of climate change.
“I understand the desire to seek means to mitigate the effects of climate change, which has harmed our state in so many ways,” Scott, a moderate Republican from the predominantly blue state of Vermont, wrote in a letter to lawmakers.
The popular governor, who recently announced he is seeking re-election to a fifth two-year term, has clashed with the Democratic-controlled legislature, which he has described as unbalanced. Environmentalists had expected him to veto the bill, but he let it pass. Scott wrote to lawmakers that he was reassured that the Natural Resources Department would have to report to the legislature on the feasibility of the measure.
Flooding in July last year inundated Vermont’s capital city of Montpelier, the nearby town of Barre and several southern Vermont communities, destroying homes and washing away roads across the rural state. Some called it the state’s worst natural disaster since the 1927 flood, which killed dozens of people and caused widespread destruction. It took months for businesses – from restaurants to shops – to rebuild, losing their summer and even fall seasons. Some have only recently reopened, while dozens of homeowners have had to enter the cool season with flood-damaged homes.
Under the bill, the Vermont State Treasurer, in consultation with the Natural Resources Agency, would submit a report by January 15, 2026, on the total costs to Vermonters and the state of emitting greenhouse gases from January 1, 1995, through December 31, 2024. The assessment would examine impacts on public health, natural resources, agriculture, economic development, housing, and other areas. The state would employ federal data to determine the amount of covered greenhouse gas emissions attributed to a fossil fuel company.
It is a polluter-pays model that affects companies that extract fossil fuels or refine crude oil in trade or business and are responsible for more than one billion tons of greenhouse gas emissions during the period in question. The funds could be used by the state to do things like upgrade stormwater drainage systems; upgrade roads, bridges and railroads; relocate, raise or upgrade wastewater treatment plants; and insulate public and private buildings to be more energy competent. The model is modeled after the federal Superfund pollution cleanup program.
“For too long, giant fossil fuel companies have knowingly fanned the flames of climate change without taking action to put it out,” Paul Burns, executive director of the Vermont Public Interest Research Group, said in a statement. “Finally, perhaps for the first time ever, Vermont will hold the companies most responsible for climate-related floods, fires and heat waves financially accountable for a fair share of the damage they cause.”
Maryland, Massachusetts and New York are considering similar measures.
The American Petroleum Institute, the oil and gas industry’s main lobbying organization, expressed sedate concern that the legislation “retroactively imposes costs and liability for past activities that were legal, violates equal protection and due process rights by making corporations responsible for the actions of society as a whole, and is overridden by federal law.”
“This new penalty represents another step in a coordinated campaign aimed at undermining America’s energy leadership and the economic and security benefits that come with it,” spokesman Scott Lauermann said in a statement on Friday.
Vermont lawmakers are aware that the state faces legal challenges, but the governor worries about the costs and what a Vermont failure would mean for other states.
Democratic state Rep. Martin LaLonde, an attorney, believes Vermont has good legal arguments. Lawmakers worked closely with many legal scholars to draft the bill, he said in a statement.
“The bottom line is that the stakes are too high for the citizens of Vermont – and the costs are too high – to absolve the companies that caused the mess from their obligation to help clean up the damage,” he said.
