By Sean Barry, NJPI Junior Energy Policy Fellow
For the past several months, New Jersey lawmakers have been considering Assembly Bill A-4696, commonly referred to as the Climate Superfund Act. The bill is modeled after traditional “polluter pays” environmental frameworks and would require certain fossil fuel companies to financially compensate the state for costs associated with climate change impacts, including flooding, storm damage, infrastructure adaptation, and public health effects.
Under the proposal, the New Jersey Department of Environmental Protection (DEP) would calculate climate-related damages and assess payments on qualifying fossil fuel producers. The funds collected would then be distributed as grants for climate resilience and adaptation projects throughout the state.
At first glance, the goal of the Climate Superfund Act is straightforward: shift the financial burden of climate impacts away from taxpayers and onto companies deemed responsible for greenhouse gas emissions. While this framing may be politically appealing, it oversimplifies the economic reality of how such policies operate in practice.
Supporters argue that New Jersey is already paying the price of climate change through rising disaster recovery costs, infrastructure damage, and increasing strain on public resources. From this perspective, the bill is framed as a matter of fairness and accountability. However, fairness in theory does not always translate to affordability in reality.
One of the most serious concerns with the Climate Superfund Act is cost pass-through. Large financial penalties imposed on fossil fuel companies are unlikely to be absorbed entirely by those firms. Instead, those costs are almost certain to be passed on to consumers in the form of higher gasoline prices, increased home heating and electricity bills, and higher transportation and goods prices across the broader economy.
This concern is especially significant in New Jersey, where residents already face energy prices well above the national average. At a time when the state is grappling with an ongoing energy affordability crisis, policies that risk further increasing costs for households and small businesses should be approached with caution. Even modest price increases can have a huge impact on working families, seniors, and small employers already operating on thin margins.
Beyond consumer costs, the bill is also likely to trigger lengthy and expensive legal challenges. Similar climate Superfund-style laws have already been challenged on several constitutional and statutory grounds, including retroactive liability for emissions that were legal at the time, federal preemption under the Clean Air Act, and interstate commerce concerns, given that emissions frequently originate outside state borders. Defending such litigation could take years, delaying implementation while diverting public resources away from more immediate policy priorities, including lowering energy costs and improving grid reliability.
There is also the broader economic question of investment and competitiveness. Imposing large, uncertain liabilities on energy companies sends a clear signal to investors that New Jersey is a high-risk regulatory environment. Companies making long-term infrastructure or supply-chain decisions may think twice before investing or expanding operations in the state. This concern is compounded by the fact that New Jersey already has the highest top corporate tax rate in the country, at 11.5 percent, which has long been cited as a barrier to business investment.
New Jersey is not alone in pursuing this approach, and the experiences of other states offer important lessons. Vermont, the first state to pass a Climate Superfund Act in 2024, faced immediate legal challenges from industry groups and federal entities. As a result, implementation has stalled, and the state has yet to collect meaningful funds. The law remains tied up in litigation as courts consider constitutional and federal preemption arguments.
New York followed with a more expansive version of the policy, aiming to collect tens of billions of dollars over multiple decades. While the law is officially on the books, it is not yet operational. Ongoing rulemaking, implementation delays, and legal challenges mean that actual revenue collection remains years away and far from guaranteed. In both states, passage did not translate into immediate climate funding or policy certainty; instead, it led to prolonged legal battles and unresolved questions about enforceability.
Taken together, these examples highlight a critical issue with the Climate Superfund approach: passing the law is the easy part; implementing it is far more complex and uncertain. For New Jersey, the potential consequences of A-4696 are clear. The bill risks years of costly litigation, higher energy and transportation costs for residents, and reduced business investment due to regulatory uncertainty. While the intent to address climate impacts is understandable, policies that ultimately raise costs for consumers and discourage investment undermine the state’s broader goals of affordability and economic competitiveness.
As lawmakers consider the Climate Superfund Act, the central question is not simply whether climate accountability is justified, but who ultimately pays. If companies pass costs on to consumers and courts delay implementation for years, New Jersey households and businesses may bear the burden long before any promised climate funding materializes—if it ever does.
Given New Jersey’s already high cost of living and ongoing energy affordability challenges, NJPI urges policymakers to carefully weigh the economic impacts, legal risks, and long-term competitiveness implications of A-4696 before moving forward.
