Polluter Pays Strategies

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Polluter Pays Strategies

Polluter Pays strategies present one pathway for financing climate change planning, preparation, mitigation, response, and recovery without raising taxes or relying on other regressive solutions.

IMPACT AREAClimate mitigation, environment, public health, affordability
TOPICAir quality, greenhouse gas emissions, water, remediation
REGIONState, Local
AFFORDABILITY PATHWAYFunding/Financing
OVERSIGHTState revenue and/or environmental regulatory agencies
POLICY MECHANISMLegislation, litigation

Policy OVERVIEW

Challenge

States and local governments face growing costs to infrastructure, public health, and basic services resulting from climate change.1 Resources to address these rising costs, however, are limited. States are generally required to have balanced budgets.2 The combination of cost-shifting that is now underway at the federal level,3 combined with costs associated with climate change, demand that states identify new revenue streams to address the needs of their residents.

Policy Solution

“Polluter Pays” strategies are based on the principle that the entity causing harm should be the one that pays for the costs associated with damage resulting from its actions.4 Such strategies, which can include legislation or litigation, present one pathway for states to finance climate change planning, preparation, mitigation, response, and recovery without raising taxes or relying on other regressive solutions.

Model Policy Features

Key policy components that make Polluter Pay policies effective include:

  • Compensatory damages for past greenhouse gas emissions from fossil fuel companies based on strict liability standards.
  • Revenue that is directed towards a broad range of activities related to climate change adaptation, mitigation, response, and recovery, or other priority community needs. 
  • Designation of at least 35 percent of funds to projects benefiting disadvantaged communities.

Potential Policy Drawbacks and Pitfalls

  • The Trump Administration is taking action to quash momentum behind “Polluter Pay” efforts through legal action. In May 2025, the U.S. Department of Justice sued both Vermont and New York to block their Climate Superfund laws while also filing suit against Michigan and Hawai’i for liability lawsuits those states intended to file.5

Complementary Policies

Complementary policies that offer other means of funding or financing affordability pathways include state progressive residential energy tax credits, green banks, state and local taxes for clean energy funding, and cap and invest. 

Additional Information:6 Vermont passed the first Climate Superfund Act in May 2024, followed by New York in December 2024. Similar legislation has been proposed in 11 states,7 including California,8 Maine,9 Maryland,10 Massachusetts,11 New Jersey,12 and Oregon.13 The City and County of Honolulu also brought a lawsuit against several major oil companies in 2020 seeking compensation for climate change-related damages resulting from the activities of the fossil fuel companies.14 In January 2025, the U.S. Supreme Court denied a request from the fossil fuel companies challenging a lower court decision, thereby moving Honolulu’s case closer to trial.15 

EXAMPLES

1. New York, Climate Change Superfund Act16

Details:

  • Establishes a climate change adaptation cost recovery program to fund infrastructure and energy efficiency upgrades to improve climate resilience and adaptation.
  • Modeled on the state’s Superfund program and oil spill fund.
  • Directs at least 35 percent of resulting expenditures on projects benefiting disadvantaged communities.
  • Develops a process for measuring fossil fuel-based emissions in the state for the period of 2000-2018 in order to determine compensatory payments for past climate-related damage.  
  • Assesses cumulative damages of $3 billion per year over the next 25 years.
  • Each polluter’s share in excess of one billion metric tons is prorated relative to aggregate greenhouse gas emissions.
  • No finding of wrongdoing is required.

Challenges:

  • A lawsuit was filed by 22 states against New York’s Climate Superfund Act in February 2025.17 
  • An Executive Order entitled “Protecting American Energy from State Overreach” was issued on April 8, 2025, targeting the Climate Superfund Act, among other state actions.18

2. City of Richmond, Chevron Corporation Settlement Agreement

Details:

  • Settlement was agreed to in August 2024 in lieu of a ballot measure proposed by the City of Richmond to place a $1 per barrel tax on the Chevron Corporation’s production at its Richmond facility for the next 50 years.
  • Requires Chevron to pay the City $550 million over 10 years in return for the City dropping the proposed ballot measure.19 
  • Serves as a potential model for future local action.20

Challenges:

  • The settlement agreement specifies that the funds be deposited to the General Fund, to subsequently be allocated through the City’s budget process.21

  1. See, for example, Wesseler, S. (2022). Stuck with the bill:  Local governments deluged with rising climate damage costs. Yale Climate Connections and R. Jacobson. (2025). States Should Address Climate Change and Revenue Needs Together for Maximum Impact. Center on Budget and Policy Priorities. ↩︎
  2. Tax Policy Center. (2025). What are state balanced budget requirements and how do they work? Accessed: August 5, 2025. ↩︎
  3. Zmuda, T., Reed, I., Davidson, A., and Nakintu, S. (2025). The Big Shift: An Analysis of the Local Cost of Federal Cuts. National Association of Counties. ↩︎
  4. London School of Economics and Political Science, Grantham Research Institute on Climate Change and the Environment. (2022). What is the polluter pays principle? ↩︎
  5. Sablan, N. (2025). Trump Joins the Opposition to Vermont’s Climate Superfund Act, Calling it ‘Burdensome’ and ‘Ideologically Motivated. Inside Climate News. ↩︎
  6. For a discussion of successful polluter pays strategies, see also Just Solutions. (2025). Analysis of Innovative Environmental and Climate Policy Achievements: Shining a light on the just path forward. ↩︎
  7. Hu, A. (2025). Despite backlash, more states are considering laws to make Big Oil pay for climate change. Grist. ↩︎
  8. California State Legislature, Polluters Pay Climate Superfund Act of 2025, SB 684/AB 1243, 2025-2026. ↩︎
  9. Maine Legislature, An Act to Enact the Maine Climate Superfund Act, HP1209, 2025. ↩︎
  10. Maryland General Assembly, Responding to Emergency Needs From Extreme Weather (RENEW) Act of 2024, HB1438, 2024 Regular Session. ↩︎
  11. Commonwealth of Massachusetts, An Act establishing a climate change superfund and promoting polluter responsibility, HB872, 2023-2024. ↩︎
  12. New Jersey Legislature, Climate Superfund Act, A4696, 2024-2025. ↩︎
  13. Oregon State Legislature, Establishes the Climate Superfund Cost Recovery Program within the Department of Environmental Quality, SB682, 2025 Regular Session. ↩︎
  14. First Circuit Court of the State of Hawaii. City and County of Honolulu vs. Sunoco LP; Aloha Petroleum, Ltc.; Aloha Petroleum LLC; Exxon Mobil Corp.; ExxonMobil Oil Corporation; Royal Dutch Shell PLC; Shell Oil Company; Shell Oil Products Company LLC; Chevron Corp; Chevron USA Inc; BHP Group Limited; BHP Group PLC; BHP, filed March 9, 2020. ↩︎
  15. Center for Climate Integrity. (2025). Supreme Court denies Big Oil’s attempts to escape accountability in Hawai`i. ↩︎
  16. New York State Assembly, An Act to amend the environmental conservation law, in relation to establishing the climate change adaptation cost recovery program; and to amend the state finance law, in relation to establishing the climate change adaptation fund, SO 2129, 2023-2024. ↩︎
  17. Associated Press. (2025). 22 states sue New York, alleging environmental fund is unconstitutional. ↩︎
  18. The White House. (2025). Protecting American Energy from State Overreach. ↩︎
  19. City of Richmond. (2024). “Resolution of the City Council of the City of Richmond, California, Approving a Settlement Agreement with Chevron,” Resolution No. 98-24 ↩︎
  20. McCarthy, W. (2024). California city’s $550m deal with Chevron could be a national model for environmentalists. Politico.
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  21. City of Richmond. (2024). “Resolution of the City Council of the City of Richmond, California, Approving a Settlement Agreement with Chevron,” Resolution No. 98-24, ↩︎