- A US federal court has ruled that New York cannot enforce legislation requiring major fossil fuel companies to pay $75bn towards climate adaptation.
- The judgment finds that the federal Clean Air Act and US foreign affairs powers pre-empt New York’s retrospective emissions liability scheme.
- The decision threatens similar state initiatives and exposes a widening gap between the cost of climate adaptation and governments’ ability to recover it from producers.
A federal judge has invalidated New York’s Climate Change Superfund Act, dealing a major setback to efforts by US states to make fossil fuel producers pay for the physical consequences of historical emissions.
The 2024 law required qualifying oil, gas and coal companies to contribute a combined $75bn over 25 years. Payments of $3bn a year were due to begin in 2028 and would have financed roads, drainage, water systems and other infrastructure exposed to flooding, extreme heat and coastal damage.
Liability was to be allocated according to emissions associated with companies’ fossil fuel production between 2000 and 2018. The scheme applied to businesses judged responsible for at least 1bn tonnes of greenhouse gas emissions during that period.
Chief US District Judge Brenda Sannes ruled that the measure was pre-empted by federal law. She concluded that the Clean Air Act gives the federal Environmental Protection Agency authority over carbon emissions but does not authorise individual states to create their own compensation regimes.
The law also conflicted with the need for uniform national rules affecting energy, environmental and foreign policy, according to the 31 August judgment, first reported by Reuters.
Over 20 Republican state attorneys-general, the US Chamber of Commerce and other industry groups had challenged the Act. The Trump administration’s Department of Justice supported the plaintiffs, describing the case as part of its effort to “protect American energy from state overreach”.
The department said the court had also accepted its foreign affairs pre-emption argument.
Setback for the polluter-pays model
New York governor Kathy Hochul’s office is reviewing the ruling and has not ruled out further action. A spokesperson said taxpayers should not have to pay for damage caused by polluters.
An appeal would place the issue before the Second US Circuit Court of Appeals. Until then, New York cannot collect the revenue or rely upon it in adaptation planning.
The judgment gives opponents a clear argument: even when a state describes a payment as compensation for climate damage rather than emissions regulation, courts may treat it as an attempt to govern activity that takes place nationally and internationally.
It also creates an unresolved policy contradiction. The Trump administration has argued that the Clean Air Act prevents state-level compensation schemes while weakening federal greenhouse gas regulation, including rescinding the EPA’s endangerment finding earlier in 2026. Environmental advocates say that combination leaves neither federal regulation nor state recovery available.
The decision does not extinguish all climate litigation. Claims based on consumer protection, misleading disclosures, nuisance or damage to specific assets may raise different legal questions. It does, however, weaken one of the most ambitious attempts to convert corporate emissions attribution into a predictable public funding stream.
Climate liability is developing through courts, disclosure rules and legislation in multiple jurisdictions. A producer can comply with current operating law and still face later claims tied to historical emissions.
New York’s defeat shows how difficult it is to turn the polluter-pays principle into an enforceable cross-border levy. Climate adaptation costs will continue to rise, but in New York they will, for now, remain with taxpayers, public budgets and asset owners rather than the companies targeted by the act.
