Climate liability has become the rope in a rapidly intensifying political tug-of-war that has left fossil fuel companies caught in the middle. On the left, Democratic states are pulling aggressively to expand the legal and financial liability facing fossil fuel companies through a multi-faceted approach that includes tort litigation, climate superfund laws, insurance recovery proposals, and more. On the right, Republicans are pulling just as forcefully, challenging the constitutionality of Democratic efforts, advancing shield laws, and steering the fight toward federal courts, where they believe they have an advantage.
How the climate fight gets resolved may depend less on state action and more on whether the Supreme Court believes states can legally hold fossil fuel companies liable for the global consequences of climate change. For energy companies and their investors, the stakes are huge as the outcome could redefine their liability exposure, drive up compliance and litigation costs, and fundamentally reshape the risk calculus across the oil and gas sector.
Over the past several years, Democratic-led states and municipalities have steadily added new hands to their side of the rope. What started out as a set of public nuisance lawsuits – such cases as one filed in 2017 by Oakland and San Francisco that claimed major oil companies should be held responsible for costs those cities incurred in addressing rising sea levels and coastal property hazards – has evolved into a broader legal strategy encompassing consumer protection, racketeering, antitrust, misleading advertising, and wrongful death claims. This new legal strategy is aimed at shifting climate-related costs onto fossil fuel producers. Dozens of states and municipalities have filed lawsuits against major fossil fuel companies, seeking to hold them accountable for allegedly deceiving the public about their role in climate change. While some of these lawsuits have faced dismissals on jurisdictional grounds, others are still progressing through the courts.
But taking oil and gas companies to court is no longer enough for blue states. Lawmakers are increasingly looking to institutionalize climate liability through legislation. In 2024 and 2025, Vermont and New York enacted climate superfund legislation that aims to retroactively impose liability on the biggest greenhouse gas emitters for their portion of climate-related expenses, in proportion to the emissions produced by that company during a set period. New York’s law alone seeks to collect $75 billion over 25 years from energy producers to fund climate resilience and infrastructure projects. In response, Republican state attorneys general challenged the laws, filing a suit in federal district court in Albany, NY, arguing New York is unlawfully trying to regulate interstate and global emissions through state-level penalties.
At the same time, lawmakers in California, New York, Hawaii, and Rhode Island have explored bills that would allow state attorneys general, and in some cases insurance companies, to pursue legal action against major oil and gas companies for their purported contribution to rising insurance premiums and disaster-related losses. While none of these bills advanced this session, we expect them to be reintroduced and continue to drive political debate over who bears the financial responsibility for the impact of climate change.
A challenge for Democratic states is that their efforts are consistently rooted in attribution science. This is a developing field that looks to quantify the extent to which climate change, and by extension greenhouse gas emissions, contributed to specific weather events, economic losses, or long-term environmental harm. Legally, this methodology is largely untested. Courts must wrestle with whether a given company’s contribution to broad global emissions are enough to satisfy standards for causation, how liability should be apportioned given the impacts made by countless other public and private companies, and whether individual companies can reasonably be held financially accountable for inherently worldwide climate impacts.
On the other side, Republicans appear less interested in fighting each policy proposal. Instead, they are trying to cut the rope. Rather than debating climate science or adaptation costs directly, Republican attorneys general and industry groups are focusing on a foundational argument: that climate change is inherently interstate and international in scope and therefore cannot be addressed through a 50-state patchwork of liability systems.
These Republican-led states have begun pursuing a parallel strategy of defensive legislation and constitutional challenges. Utah, Tennessee, Oklahoma, and Iowa have passed shield laws intended to bar or sharply limit climate-related tort claims against fossil fuel companies, much like the protections enacted for gun manufacturers against liability when their products are used in crimes. Eleven other states are considering similar legislation, while other red states have joined lawsuits challenging climate superfund laws as unconstitutional, retroactive, and extraterritorial.
Earlier this year, the US Supreme Court agreed to hear Suncor Energy v. Boulder County, one of the climate lawsuits closely watched by industry. While the case arises from municipal nuisance claims in Boulder, Colorado, its implications extend far beyond that state. We believe that the Supreme Court’s decision to take the case signals its interest in clarifying the boundary between federal authority over greenhouse gas emissions and state-based tort claims. A ruling limiting the ability of states to pursue climate-related claims could severely curtail—or potentially block—emerging state climate superfund programs and other proposals that rely on similar legal theories to recover climate-related costs from fossil fuel producers. Oral arguments are expected in the fall, with a decision likely by mid-2027.
For now, both sides continue pulling. Democratic states are generating headlines and political attention as they unveil increasingly expansive liability theories and cost recovery tools. Republicans are betting that constitutional structure, federal preemption, and judicial skepticism toward extraterritorial state authority will ultimately matter more than near-term political momentum. The rope is getting tighter, but the Supreme Court will soon decide which side gets pulled across the line. Capstone will continue to monitor the underappreciated impact of this emerging legal conflict as it develops.
Read more from Capstone’s energy team:
Water Infrastructure Funding Expected to Stay Afloat Despite Proposed Cuts
How the Iran War Is Reshaping the Case for European Renewable Energy Investment
Winners and Losers in Trump’s 2027 Department of Energy Budget
