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Vermont is on the verge of becoming the first state to try it.
Dozens of cities and states have tried to sue the oil industry for damages related to climate change over the past several years, and so far, none of these cases has been successful. In fact, not one has even made it to trial.
In the meantime, the price tag for climate-related impacts has climbed ever higher, and states are growing more desperate for help with the bill. Out of that desperation, a new legal strategy was born, one that may have a better chance of getting fossil fuel companies to pay up. And Vermonters may be the first to benefit.
It’s called a climate superfund bill, and versions of it are floating through legislative chambers in New York, Massachusetts, and Maryland, in addition to Vermont. Though each bill is slightly different, the general premise is the same: Similar to the way the federal Superfund law allows the Environmental Protection Agency to seek funds retroactively from polluters to clean up contaminated sites, states will seek to bill fossil fuel companies retroactively for the costs of addressing, avoiding, and adapting to the damages that the emissions from their products have caused.
Though New York was the first state to introduce a climate superfund bill two years ago, Vermont may be the first to get it through a legislature. On Friday, the Vermont Senate voted 21 to five to approve amendments to the bill, and will vote next week on whether to send it to the House. An equivalent bill in the House is cosponsored by nearly two-thirds of state representatives and the policy also won the support of Vermont’s Attorney General.
If it gets past the governor’s desk, the bill will kick off a multiyear process that, in the most optimistic case, could bring money into the state by 2028. The first step is for the state Treasurer to assess the cost to Vermont, specifically, of emissions from the extraction and combustion of fossil fuels from 1995 to 2024, globally. Regulators will then request compensation from responsible parties in proportion to the emissions each company contributed. The state will identify responsible parties by focusing only on the biggest emitters, companies whose products generated at least a billion tons of emissions during that time. The money will go toward implementing a state “resilience and implementation strategy” to be mapped out in the next two years.
The idea of states retroactively billing fossil fuel companies for damages outside the context of a lawsuit might sound a little far-fetched. Or, at least, I thought it was when I first heard about it. How can that be legal?
Anthony Iarrapino, the lead lobbyist supporting the bill for the Conservation Law Foundation, a New England-based environmental law nonprofit, explained it this way. There is established case law that deals with retroactive liability in the context of hazardous waste — again, the Superfund law. “Even if your activities were legal at the time you undertook them, if they result in making a mess, then you can be on the hook for cleaning that mess,” he told me. “The idea here is looking at climate disruption as a polluted site.”
How is that fair? Well, the legal precedents supporting the Superfund law and similar policies turn on a key question. Did the companies understand that their activities were potentially harmful at the time they engaged in them? “If, objectively, you knew or should have known that your conduct, whether it was legal or not, was likely to result in damages that would impose costs on society,” Iarrapino said, “then it's fair, from a lookback perspective, to hold you accountable when those damages begin to manifest in the environment or in impacts to human health.” That’s because, according to precedent, you essentially assumed the risk that at some point in the future, you might be on the hook.
By now there’s a mountain of evidence that fossil fuel companies like Exxon did, in fact, know how damaging their products would be several decades before the period covered by the Vermont bill, based on internal research not shared with the public at the time. But Ben Edgerly Walsh, an advocate at the Vermont Public Interest Research Group, told me that even absent that evidence, they should have recognized the risk based on the scientific consensus that emerged in the 1970s and 1980s. To wit: Vermont chose 1995 as the start year for its bill because that’s when the first United Nations climate change conference was held.
“We shouldn't have to bear the cost of this ourselves,” said Walsh. “These oil companies that are still making hundreds of billions of dollars in profit annually should have to pay their fair share for the cost of the climate crisis they caused.”
Underpinning the bill — as well as many of the related lawsuits — is the advancement of “attribution science,” or the ability to quantify the economic losses that a region has borne due to anthropogenic climate change, as well as future losses that are already baked in, and then attribute them back to particular emitters. In testimony for the Vermont superfund bill, Justin Mankin, an associate professor at Dartmouth, stressed that these are peer reviewed, consensus, scientific methods — and that in general, they are conservative. “It is my opinion that we are systematically underestimating the economic cost of climate change to date,” he told the Vermont Judiciary Committee in February. “And that is because all of these climate damage cost assessment methods are inherently conservative, or limited by data.”
The bill’s sponsors also looked to research from Richard Heede, creator of the famous “Carbon Majors” database, which calculated the emissions of major fossil fuel companies based on the amount of oil, gas, and coal they each extracted and found that some 70% of fossil fuel emissions since 1988 can be attributed to 100 companies. In testimony to the Vermont Senate, Heede estimated that about 68 companies would be captured by the bill’s billion-ton threshold.
Of course, the fossil fuel industry patently disputes the science that Heede and Mankin expounded. The American Petroleum Institute submitted testimony warning of the “difficulties of establishing a conclusive link between anthropogenic climate change and alleged injuries to Vermont” and arguing that the emissions from individual companies over the last several decades cannot “be determined with great accuracy.” The group also called it “unfair” to charge the companies that sold oil and gas, considering they “did not combust fossil fuels but simply extracted or refined them in order to meet the needs and demands of the people.”
That might be where the biggest weak spot in the climate superfund bills — as well as the climate damages lawsuits — lies. There’s an underlying philosophical question, Martin Lockman, a climate law fellow at Columbia University, told me. Who in the supply chain is responsible for the pollution from fossil fuels?
The answer turns on a moral argument that fossil fuel companies have made enormous profits from fossil fuels for decades, all while knowing what the harms would be. “From a moral perspective, I think that these are very justified,” said Lockman, “but that will certainly get opened in litigation.”
If any of the climate superfund bills pass, they will absolutely be challenged in court. One reason they may see more success than the more direct lawsuits, however, is that they flip the burden of proof. If Vermont sued oil companies for damages, the burden would be on Vermont to prove its case, and as the defendants, the oil companies would get a “bag of tricks” to use to stall the case and make it very expensive to pursue, said Iarrapino. For example, many of these lawsuits have been delayed by years-long arguments over whether they should be tried in state or federal court, or whether the oil companies have to release certain documents.
“Even though it’s the same harms and the same contexts,” Iarrapino told me, “you’ve got a balance of power where they can win the case by losing slowly.” But if oil companies sue Vermont, for example, by calling its law unconstitutional, the burden of proof will be on them, and the state will have no incentive to delay the case.
I should note here that the federal Superfund law is not exactly the ideal model for this policy. Much of the time, the EPA can’t track down a company to ascribe blame for the contamination, and taxpayers end up footing the bill of the cleanup. Even when it does find a responsible party, said party often ends up litigating the amount owed for years. The Passaic River in New Jersey was declared a Superfund site 40 years ago, and the EPA is still fighting with Occidental over how much it should pay for the cleanup.
Iarrapino thinks there’s one key difference in the proposed climate superfund program. At contaminated sites, there can be a lot of potential polluters and so it’s difficult to assign blame. The Vermont bill attaches liability directly to the act of extracting and refining fossil fuels for combustion. “You either did that or you didn't do that,” he said. When it comes to companies like Exxon and BP, “that is their whole reason for existing.” That doesn’t mean companies won’t use all the firepower they have to dispute the amount they owe, however.
It may seem unfair for a single state, especially one as small as Vermont, to win compensation first when the damages are global and unequally distributed. But Lockman of Columbia said if these bills are successful, fossil fuel companies may stop fighting liability entirely and instead push the federal government to take action so they can be held to a more consistent standard across the country.
When I first reached Iarrapino, he told me that just downstairs from his office, someone was sawing and hammering the walls because the first floor had been entirely underwater when Montpelier flooded last summer. Three businesses that were in the building are gone. A recent estimate puts the cost of state-wide damages from the storm at $600 million.
“At this point,” he said, “what else does a state like Vermont have to lose?”
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Two former Department of Energy staffers argue from experience that severe foreign entity restrictions aren’t the way to reshore America’s clean energy supply chain.
The latest version of Congress’s “One Big, Beautiful Bill” claims to be tough on China. Instead, it penalizes American energy developers and hands China the keys to dominate 21st century energy supply chains and energy-intensive industries like AI.
Republicans are on the verge of enacting a convoluted maze of “foreign entity” restrictions and penalties on U.S. manufacturers and energy companies in the name of excising China from U.S. energy supply chains. We share this goal to end U.S. reliance on Chinese minerals and manufacturing. While at the U.S. Department of Energy and the White House, we worked on numerous efforts to combat China’s grip on energy supply chains. That included developing tough, nuanced and, importantly, workable rules to restrict tax credit eligibility for electric vehicles made using materials from China or Chinese entities — rules that quickly began to shift supply chains away from China and toward the U.S. and our allies.
That experience tells us that the rules in the Republican bill will have the opposite effect. In reality, they will make it much more difficult for U.S. companies to move supply chains away from Chinese control. The GOP’s proposed restrictions require every developer of a critical minerals project, advanced manufacturing facility, or clean energy power plant to sift through their supply chains and contracts for any relationship with a Chinese (or Russian, Iranian, or North Korean) entity. Using a Chinese technology license, or too many subcomponents, or materials produced in China — even if there are few or no alternatives — would be enough to render a company ineligible for the very incentives they need to finance and build new U.S. energy production or manufacturing facilities.
This would put companies in the position of having to prove the absence of Chinese entanglements (and guarantee that there will be none in the future) to qualify for tax credits, an all but impossible task, particularly given the untested set of new rules. Huge portions of the supply chain have flowed through China for decades, including 65% of global lithium processing and 97% of solar wafer manufacturing. American companies are already working to distance themselves from Chinese expertise and components, but the complex, commingled nature of global supply chains and corporate business structures make it infeasible to flip the switch overnight.
On top of that, the latest version of the bill would impose a brand new tax on any new solar and wind projects that have too much foreign entity “assistance,” while providing the Treasury Secretary carte blanche for determining what that might be. The result: An impossible bind, whereby the very sectors that need the most support to disentangle from China are now the ones most penalized by the new Republican “foreign entity” restrictions.
The fact is that China is ahead, not behind, in many energy sectors, and America desperately needs help playing catch-up. Ford’s CEO has called Chinese battery and electric vehicle technologies “an existential threat” to U.S. automaking. In energy supply chains for nuclear, solar, batteries, and critical minerals, China is not merely producing cheap knockoffs of American inventions, it is churning outcutting-edge battery chemistries, advancedmanufacturing processes, and high-speedcharging systems, all at lower cost. And at least until the Inflation Reduction Act enacted incentives for U.S. manufacturing and deployment, the gap between the U.S. and China waswidening.
These untested foreign entity rules will widen that gap once more. Since the start of the year, developers have abandoned more than $14 billion in domestic clean energy deployment and manufacturing projects, citing the uncertain tariff and tax policy environment, and that was before the new tax on solar and wind. New analysis from Energy Innovation finds that the latest version of the bill would reduce U.S. generation capacity by 300 gigawatts over the next decade — multiple times what we will need to power new data centers for artificial intelligence. Stopping clean energy projects in their tracks is also likely to trigger an energy price shock by constraining the very energy technologies that can be built most quickly. In the end we will cede not only our supply chains to China, but also our competitive edge in the race for AI and manufacturing dominance.
Fortunately, we have all the ingredients in this country already to achieve energy leadership. The U.S. boasts deep capital markets, a highly skilled manufacturing and construction workforce, a strong consumer economy driving demand, and, in spite of recent attacks, the world’s greatest universities and national labs. We simply need policy to provide a workable path for companies to invest with certainty, bring factories back to the United States, hire American workers, and learn to produce these technologies at scale.
With the Inflation Reduction Act’s domestic production incentives and supply chain restrictions, hundreds of companies stepped up over the past few years and made that bet, pouring billions of dollars into American supply chains. Should they be enacted, the reconciliation bill’s foreign entity rules would slam the brakes on all that activity, playing right into China’s hands.
There is a way to apply a set of carefully crafted restrictions to wean us off Chinese supply chains, but we cannot afford to saddle American energy with new taxes and red tape. If we scatter rakes across the floor for companies to step on, they will just throw up their hands and send their investments overseas, leaving us more reliant on China than before.
On taxing renewables, climate finance, and Europe’s heat wave
Current conditions: Parts of Northern California are under red flag warnings as warm air meets whipping winds • China’s southwestern Guizhou province is flooded for the second time in a week • A potential bomb cyclone is taking aim at Australia’s east coast.
Late on Friday Senate Republicans added a new tax on solar and wind projects to the budget reconciliation megabill that sent many in the industry into full-blown crisis mode. The proposal would levy a first-of-its-kind penalty on all solar and wind projects tied to the quantity of materials they source from companies with ties to China or other countries designated as adversaries by the U.S. government. “Taken together with other factors both in the bill and not, including permitting timelines and Trump’s tariffs, this tax could indefinitely undermine renewables development in America,” wrote Heatmap’s Jael Holzman. Here are a few reactions from politicians and industry insiders:
The Senate began debating the GOP’s megabill yesterday. Republican Senator Thom Tillis of North Carolina was one of two from the majority party who voted on Saturday against debating the bill. Shortly thereafter, he announced he wouldn’t run for re-election next year after President Trump threatened to back his primary challenger. On Sunday evening, Tillis took to the Senate floor to give an impassioned speech denouncing the bill’s Medicaid cuts and defending wind and solar tax credits. The Senate will resume work on the bill today with what’s known as a “vote-a-rama,” during which senators will offer and vote on amendments that could yet introduce significant changes. A final vote from the Senate on the bill is expected sometime today.
The fourth International Conference on Financing for Development kicks off today in Spain, offering world leaders an opportunity to reform the world’s financial aid systems. The conference happens once per decade. This year’s delegates have already adopted the “Sevilla Commitment,” which commits to closing the $4 trillion financing gap for global goals such as ensuring everyone has affordable and reliable energy, making cities sustainable, and mobilizing $100 billion in climate mitigation funding each year toward developing countries. As Reuters explained, the text focuses on helping poor nations pay for adaptation through debt swaps, potential pollution taxes, and other creative funding mechanisms. More than 70 world leaders will be there, as will World Bank President Ajay Banga and representatives from the Gates Foundation. The U.S. government will not have a representative at the talks. The Trump administration withdrew after trying and failing to remove any mention of “climate” and “sustainability” from the conference’s draft text. Some sources told Reuters the event could be more successful without the U.S. there to “water down objectives.”
The European Union is considering changing its climate law to allow countries to lean on international carbon credits to reach emissions targets. The original goal was to cut direct emissions by 90% by 2040 compared to 1990 levels, but some countries have pushed back on that ambition, citing costs. A draft of the proposed change shows that the European Commission would allow high-quality carbon credits to account for 3% of the emissions cut starting in 2036. As Politico explains: “Such credits will allow the EU to pay for emissions-slashing projects in other, usually poorer countries, and count the resulting greenhouse gas reductions toward its own 2040 target, rather than the climate goals of the country hosting the project.” Accounting for 6% of global greenhouse gas emissions, the EU ranks fourth on the list of highest polluters, behind China, the U.S., and India.
Meanwhile, Europe is facing a punishing early-summer heat wave that is already smashing records and triggering weather alerts. A few numbers:
Nearly a third of the citizens of the Pacific island nation of Tuvalu have applied for the world’s first climate visa, which would allow them to permanently migrate to Australia.
As bad as previous drafts of the reconciliation bill have been, this one is worse.
Senate Republicans are in the final stages of passing their budget reconciliation megabill — which suddenly includes a new tax on solar and wind projects that has sent many in the industry into full-blown crisis mode.
The proposed tax was tucked inside the latest text of the Senate reconciliation bill, released late Friday night, and would levy a first-of-its-kind penalty on all solar and wind projects tied to the quantity of materials they source from companies with ties to China or other countries designated as adversaries by the U.S. government. Industry representatives are still processing the legislative language, but some fear it would kick in for certain developers as soon as the date of its enactment. Taken together with other factors both in the bill and not, including permitting timelines and Trump’s tariffs, this tax could indefinitely undermine renewables development in America.
On Saturday, as legislators began to digest the new text, Senator Brian Schatz declared on X not once, not twice, but three times that with the new penalty, this bill would on its own “kill” the U.S. solar energy industry, leading to energy shortages and raising costs across the board. "I promise you,” he wrote, “this bill is worse than you think.”
Senator Sheldon Whitehouse of Rhode Island, a staunch advocate for climate policy, said in a statement to Heatmap that the tax will help China and hurt American families, “all so Republican oil and gas donors can make even bigger profits. This isn’t policy; it’s pay-off.”
Without this new tax, energy companies might’ve quietly swallowed the bitter pill of losing the incentives established in the Inflation Reduction Act. In the weeks since the first version of this legislation was introduced in the House, I’ve interviewed numerous renewables developers, tax attorneys, and cleantech investors, who have emphasized the resilience of the industry given rising energy demand and explained that there would still be many ways for projects currently under development to qualify for the credits before they’d be phased out. The history of renewable energy tax credits in the U.S. is full of of phase-outs and restarts. The industry’s been at least somewhere like this before.
But the withdrawal of incentives is one thing. A targeted federal tax that could increase development costs by up to 20% that is levied over longstanding supply chain relationships that will take not years but rather decades to rebuild is another.
The American Council on Renewable Energy said in a statement that the latest iteration of the bill “effectively takes both wind and solar electric supply off the table, at a time when there is $300 billion of investments underway, and this generation is among the only source of electricity that will help to reduce costs and keep the lights on through the early 2030s.” The North America’s Building Trades Unions issued a statement after the text’s release calling it the “biggest job-killing bill in the history of this county” and adding that that “simply put, it is the equivalent of terminating more than 1,000 Keystone XL pipeline projects.”
“I think it’s impossible to overstate how this new version of the bill makes the House bill look moderate by comparison,” Andrew Reagan, president of Clean Energy 4 America, told me in an exasperated tone over the phone Saturday afternoon. “The hope as I see it is that as the full impact of how devastating this proposal would be for every state in the country comes into play, as this comes to the floor, Senate Republicans who claim to care about this issue come to [Majority Leader John] Thune and ask to amend this.”
The tax would apply to new solar and wind construction and be calculated based on the degree to which a project exceeds statutory limits for materials sourced from “foreign entities of concern,” i.e. Russia, North Korea, Iran, and most especially China. Solar projects would have to pay a 50% tax on the value of the overage, and wind projects would pay 30%.
Here’s a simplified example to illustrate how it would work: Say you are developing a solar project that will begin operating in 2028, and the total cost of all of your material inputs is $100,000. The new law would require that at least 50% of the value of all of your materials come from entities disconnected from Chinese companies and investment (the statutory limit for 2028), but your project is only able to achieve 40%. The extra $10,000 dollars you paid to companies with ties to China would be subject to the 50% solar tax, adding $5,000 to the total cost of your project. And this doesn’t even touch the new expense of capturing and reporting all of this supply chain data for the federal government.
The rules for how developers would actually calculate the value of their various material inputs will be subject to the Treasury’s interpretation and guidance, so it is impossible to determine how harshly this tax would fall on any individual solar or wind energy facility. Even so, Rhodium Group has estimated that it would increase project costs overall by 10% to 20% — a whopping total to eat on top of losing key tax credits.
This penalty for sourcing linked to China dates back to the IRA’s consumer electric vehicle tax credit. As I was first to report years ago for E&E News, Senator Joe Manchin successfully limited the credit’s scope by requiring qualifying cars to be made with an increasing percentage of materials from the U.S. or a country with a free trade agreement and mandating that materials could not come from a foreign entity of concern. This tactic mostly failed to reshore mineral supply chains as quickly Manchin had hoped it would, but it did ensure that relatively few vehicles qualified.
This anti-foreigner approach to energy policy has now been taken up by Republicans in Congress to erode the IRA overall. As my colleagues Emily Pontecorvo and Matthew Zeitlin have explained, the Senate legislation would deny tax credits to companies that have supply chains with any ties to China, which many say would effectively stop them from qualifying for the credits.
This specific policy approach is something I’ve previously dubbed the GOP’s “anti-China trap” for renewable energy. Now, on top of cutting off companies from tax credits, this trap will catch them for failing to reinvent their supply chains overnight with little if any warning. Of course, reshoring these supply chains will also be more difficult because of other provisions in the bill that would erode and eliminate advanced manufacturing tax incentives originally designed to encourage companies to make more of these components at home.
The only silver lining here is that the fight isn’t over. It wouldn’t surprise me to see a senator try to get rid of this tax as the bill moves through the amendment process on the Senate floor.
I expect some sort of intervention here because there appears to be momentum from powerful entities outside of Congress to get rid of this tax. Reviews of this piece of the bill are so bad, it has put the American Clean Power and the U.S. Chamber of Commerce on the same side as pro-fossil “philosopher” Alex Epstein, who is also calling on senators to oppose the tax.
“I just learned about the excise tax and it’s definitely not something I would support,” he posted to X yesterday, adding he’d rather they focus on removing the tax credits instead of creating a new cost. “I stand for energy freedom, always, in every situation,” he added in a separate post defending his opposition.
Elsewhere on X yesterday, Elon Musk spent hours (on his birthday, no less) going after the Senate bill, reposting energy wonks’ rants about the bill and its tax on renewables, including from Jesse Jenkins, the host of Heatmap’s very own Shift Key podcast.
So, okay, but will Musk, Epstein or any of these other critics convince at least one senator to force a successful vote on getting rid of the tax? That’s really the only way it can go away, because it’s very likely the Senate will force the House to pass whatever it passes.
I talked to Jenkins hours after Musk reposted him and filled up his replies. Like the iconoclastic billionaire, he told me he thinks this legislation is worse than anything congressional Republicans had released before it. A big reason for that is indeed the excise tax, a completely new idea that hadn’t been in any other previous draft of the bill or debated in committee, which he sees as a “obviously, deliberatively punitive attack on the wind and solar industry for what appears to be purely ideological reasons.”
“It’s going to kill hundreds of billions of dollars in investment and hundreds of gigawatts of new supply that would otherwise help us meet rapidly growing electricity demand. So, yeah, higher energy prices, less jobs, less investment in American energy production, and less confidence in the American business environment,” Jenkins said. “No one is asking for this.”
Debate on the bill is expected to begin later today, and the amendment process will stretch into Monday morning at least.
Additional reporting by Emily Pontecorvo
Editor’s note: This story has been updated to include a statement from Senator Sheldon Whitehouse.