Vermont Makes a Move to Ease Climate Change Burden on Taxpayers

The Birth of the Climate Superfund Act

On May 30, 2024, Vermont became the first state to pass legislation allowing it to recover billions of dollars from certain companies to cover the costs of climate change impacts. The Climate Superfund Act (S.259), modeled after the U.S. Environmental Protection Agency’s (U.S. EPA) Superfund program, mandates that the largest greenhouse gas (GHG) emitters pay for the costs of recovering from and preparing for extreme weather events linked to climate change. Backed by climate activists led by Vermont’s Public Interest Research Group (VPIRG), the Act will essentially bill these companies for climate damage, dividing the costs based on each company’s market share.

Responding to Climate Disasters

Last July, catastrophic flash flooding and river flooding occurred across much of Vermont. In response, state legislators introduced the Climate Superfund Act to hold certain companies accountable for the damages attributed to the GHG emissions generated by their products. The law aims to address the financial burden that extreme weather events place on taxpayers, shifting some of that responsibility onto those companies responsible. The legislation requires the largest GHG emitting companies to pay for a share of climate change costs proportional to their GHG emissions from 1995-2024. Payments are structured to ensure significant contributions toward Vermont’s climate resilience efforts, with companies starting payments six months after a cost recovery demand is issued, beginning with at least 20% of the total cost, followed by annual payments of up to 10% of the demand. The total cost owed by companies will be determined by January 2026.

The Climate Superfund Act includes specific mechanisms for determining the extent to which extreme weather events are attributable to climate change versus natural weather variations. This process involves:

• Scientific Attribution Studies: The law mandates the use of scientific studies that quantify the influence of climate change on specific weather events. For example, attribution studies would assess the 2023 flooding in Vermont by examining historical weather data, climate models, and the increased frequency and intensity of similar events due to global warming. These studies help determine the likelihood that climate change has exacerbated the flooding.
• Baseline Comparisons: The law distinguishes between the natural occurrence of weather events and their severity as influenced by climate change. For instance, while flooding might occur naturally, the law seeks to identify how much more intense or frequent such flooding has become due to human-induced climate change. This involves comparing current weather patterns with historical baselines and accounting for known natural variations like El Niño and La Niña.
• Incremental Impact Analysis: The approach involves evaluating how climate change has enhanced the event rather than assuming the event would not have happened at all without climate change. In the case of the 2023 flooding, the law would look at factors such as increased rainfall intensity and the frequency of extreme weather events, which are scientifically linked to higher GHG levels, to determine the extent of the event’s amplification by climate change.
• Climate Models and Projections: Advanced climate models are used to simulate the effects of increased GHG concentrations on weather patterns. These models help predict the likelihood and intensity of events under different climate scenarios, providing a basis for attributing specific impacts to climate change.

By employing these methods, the law ensures a rigorous, evidence-based approach to discerning the contributions of climate change to extreme weather events. This helps in accurately attributing costs to specific companies deemed responsible, ensuring that they are held accountable for the portion of damages directly linked to their GHG emissions, while recognizing natural variability in weather patterns.

Allocation of Funds and Anticipated Challenges

Funds collected from large GHG emitting companies will be directed toward modernizing infrastructure, weatherproofing schools and public buildings, cleaning up after storms, and addressing public health costs related to climate change. The Climate Superfund Cost Recovery Program Fund will be administered by the Secretary of Natural Resources and will support climate change adaptation projects outlined in Vermont’s State Hazard Mitigation Plan.

Vermont’s Bold Move

Vermont’s Climate Superfund Act has drawn national attention and may inspire similar legislation in other states, including Massachusetts, Maryland, and New York. Governor Phil Scott’s decision to allow the law to pass without his signature reflects a pragmatic approach, balancing the desire to address climate change with concerns about Vermont’s capacity to lead this effort alone. He emphasized the need for collaboration with other states to share the burden of legal and financial challenges. Despite its progressive aims, the law is expected to face significant legal challenges.

Addressing Immediate and Long-Term Climate Impacts

In addition to the Climate Superfund Act, Governor Phil Scott allowed another significant piece of legislation, the Flood Safety Act (S.213), to become law. This act, which was enacted in early May 2024, establishes a new state permitting system for building in river corridors, sets new standards for wetland protection, and increases dam safety measures. The Flood Safety Act aims to mitigate the impacts of more frequent and intense flooding, which are attributed to climate change.

Broader Implications and Future Outlook

The enactment of the Climate Superfund Act marks a significant shift in environmental policy by emphasizing corporate accountability and proactive adaptation to climate change. This approach sets a precedent that may influence national and global strategies for holding companies with carbon emissions financially responsible. As other states consider adopting similar measures, the success of Vermont’s Climate Superfund Act will be closely watched. Its implementation and the outcomes of anticipated legal challenges will provide valuable insights into the feasibility and effectiveness of such measures nationwide.

How ALL4 Can Help Your Company

Now that Vermont has enacted the Climate Superfund Act, companies may need to actively engage in GHG and co-pollutant mitigation strategies to align with the state’s new requirements. Companies operating in Vermont, and in other states with similar laws, should begin preparing for the financial and regulatory impacts of the law by implementing robust GHG accounting procedures and climate adaptation measures. To support businesses in navigating these new regulations, ALL4 offers a range of services tailored to Vermont’s legislative landscape. These services include:

• Conducting materiality assessments to identify key environmental impacts.
• Implementing GHG accounting procedures to ensure compliance with the Climate Superfund Act, including reporting and third-party verification services.
• Devising environmental, social, and governance (ESG) reporting strategies to enhance transparency and accountability.
• Establishing carbon reduction targets and pursuing net-zero goals.
• Developing and implementing comprehensive climate initiatives.

For inquiries about ALL4’s services or questions regarding how the Climate Superfund Act might affect your operations in Vermont or other relevant states, please contact ALL4’s ESG and Sustainability Managing Consultant, James Giannantonio, at jgiannantonio@all4inc.com.