Vermont requires oil companies to pay for climate change damages (first state to do so).

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Vermont has made history by enacting a law that mandates fossil fuel companies to contribute to the damages caused by climate change. This decision comes after the state experienced severe summer flooding and other extreme weather incidents, which have caused significant destruction and losses.

Republican Governor Phil Scott allowed the bill to become law without his signature, expressing concerns about the costs and potential legal challenges that Vermont might face in taking on the oil industry. However, he acknowledged the necessity of addressing the impacts of climate change.

In a letter to lawmakers, Scott stated, "I understand the desire to seek funding to mitigate the effects of climate change that has hurt our state in so many ways." The governor, who is running for reelection, has had a contentious relationship with the Democrat-controlled Legislature, which he has criticized for being out of balance.

Last July’s flooding, caused by torrential rains, affected Vermont’s capital city of Montpelier, nearby cities like Barre, several southern Vermont communities, and numerous rural areas. The devastation was compared to the state’s worst natural disaster since a 1927 flood that resulted in numerous casualties and widespread destruction. Businesses and homes have taken months to rebuild, and many are still recovering.

Under the legislation, the Vermont state treasurer, in consultation with the Agency of Natural Resources, will provide a report by January 15, 2026, detailing the total cost to Vermonters and the state from greenhouse gas emissions from January 1, 1995, to December 31, 2024. The assessment will cover public health, natural resources, agriculture, economic development, housing, and other areas.

The state will use federal data to determine the amount of covered greenhouse gas emissions attributed to a fossil fuel company. The funds could be used for various purposes, such as upgrading stormwater drainage systems, improving roads, bridges, and railroads, relocating, elevating, or retrofitting sewage treatment plants, and making energy-efficient weatherization upgrades to public and private buildings.

The legislation is based on a polluter-pays model, affecting companies involved in the extraction or refining of fossil fuels responsible for more than 1 billion metric tons of greenhouse gas emissions during the specified time period.

Paul Burns, executive director of the Vermont Public Interest Research Group, said, "For too long, giant fossil fuel companies have knowingly lit the match of climate disruption without being required to do a thing to put out the fire. Finally, maybe for the first time anywhere, Vermont is going to hold the companies most responsible for climate-driven floods, fires, and heat waves financially accountable for a fair share of the damages they’ve caused."

Similar measures are being considered in Maryland, Massachusetts, and New York. However, the American Petroleum Institute, the top lobbying group for the oil and gas industry, has expressed concern about the legislation, stating it retroactively imposes costs, violates equal protection and due process rights, and is preempted by federal law.

Vermont lawmakers are aware of the potential legal challenges, but Governor Scott worries about the costs and implications for other states if Vermont fails in its legal battles. State Representative Martin LaLonde, a Democrat and an attorney, believes Vermont has a strong legal case, as legislators worked closely with many legal scholars in crafting the bill.

LaLonde stated, "Most importantly, the stakes are too high – and the costs too steep for Vermonters – to release corporations that caused the mess from their obligation to help clean it up."