Corrected 10:11 a.m. | A Senate Democratic proposal to make the biggest polluters in the U.S. pay a tax based on past greenhouse gas emissions is being compared to the polluter-pays principle of the Superfund program that spent billions of dollars cleaning up hazardous waste sites around the country over the past four decades.
The proposal from Sen. Chris Van Hollen, D-Md., and fellow Democrats would task the EPA with determining which companies contributed at least 0.05 percent of total carbon dioxide and methane gas emissions from 2000-2019 and tax them accordingly.
Van Hollen unveiled a draft of the bill on Aug. 4 in a press release, but it hasn't been introduced on the Senate floor. Lawmakers say the plan could raise $500 billion in revenue over 10 years and suggested it could be used to offset infrastructure spending related to climate issues.
The Superfund was established by Congress in 1980 to investigate and clean up tens of thousands of sites contaminated with hazardous substances. The EPA identifies parties responsible for hazardous releases and either compels them to clean up the sites or undertakes the cleanup itself using the Superfund trust fund. The EPA then seeks to recover the costs from the responsible parties through settlements or other legal means.
Most Superfund cleanup activities have historically been paid for by the potentially responsible parties, reflecting the polluter-pays principle. The Van Hollen proposal is comparatively more rigid than the Superfund program and lawmakers could include provisions to more carefully allocate financial responsibility, according to experts.
Brian Montag, an environmental attorney and practice group leader at K&L Gates LLP in Newark, N.J., said in an interview that any climate liability framework established by Congress should “create a level playing field, include due process protections, and fairly allocate responsibility among those at fault.”
“That at least gives you some equitable foundation,” he said.
Montag has worked extensively on Superfund matters and pointed out a couple of crucial distinctions between the 40-year-old program and this new proposal that backers have compared to it.
“One parallel between the bill and Superfund is the ‘polluter pay’ mentality,” he said. “There are certainly a few parallels, but the one dividing line is that this proposal focuses only on the largest emitters.”
Van Hollen said 25 to 30 U.S.-based fossil fuel extractors and oil refiners and foreign-owned companies meeting the emissions threshold would pay into the Polluters Pay Climate Fund.
Superfund also applies a strict liability standard, so there isn't a requirement to prove negligence. However, Superfund is subject to a more equitable process for apportionment of liability, according to Montag. That’s because it contemplated a wider range of potentially liable parties, including generators, transporters, owners and operators, he said, adding that liability could be allocated among “hundreds of potentially responsible parties in a single case."
“The heart of most objections to Superfund liability aren’t necessarily about the underlying concept of polluter pays, but rather to the apportionment of liability,” Montag said. Companies often complain they are being forced to pay “multiple times over for the same liability."
Cliff Rothenstein, a K&L Gates government affairs adviser based in Washington, said Congress should learn from another major drawback within the Superfund framework: its mechanism for allocating the money collected.
Van Hollen’s proposal is just like Superfund in that Congress must appropriate the money, which can tie up the funds in partisan politics, Rothenstein said. Even if it generates the hundreds of billions of dollars over time that its backers expect, “not one dime of it can be spent without an appropriation,” he said.
The money could be misused to offset general spending if lawmakers fail to include further restrictions in the bill.
The proposal's purely retroactive focus on emissions over the past 20 years might also make it less effective than Superfund, which incentivizes changes in behavior with ongoing liability, he said.
“It’s unclear how this proposal alone changes incentives,” Rothenstein said.
Holding polluters accountable
The legislation wouldn’t replace other proposals that have been floated, such as a clean energy standard, a price on carbon, or clean energy accelerators to support new technologies, according to Van Hollen. “But, it’s also essential that we don’t ask taxpayers alone to pay the cost of damage done by big carbon polluters,” he said in an Aug. 4 statement.
The American Petroleum Institute, an oil and gas industry trade association, said it is collaborating with policymakers on both sides of the aisle to reduce emissions and address climate impacts, but that it is opposed to the Democrats’ proposal.
“Targeting a handpicked group of companies with punitive new taxes would undermine the guiding principle of neutrality embedded in our nation’s tax code and would only serve to undermine the nation’s economic recovery,” Frank Macchiarola, API’s senior vice president of policy, said in an emailed statement.
The legislation wouldn’t provide liability protections for companies that pay into the fund and it wouldn’t affect lawsuits brought by jurisdictions in 13 states seeking damages from the largest polluters.
Kathy Mulvey, campaign director for the Union of Concerned Scientists, said state and local governments should have the right to seek additional damages.
“That half a trillion the industry would have to cough up is real money, but this fund must be a floor, not a ceiling, for holding fossil fuel companies accountable,” Mulvey said.
Climate advocates are glad to see progress regardless of whether it comes from Congress, ESG-focused investors, or the court system.
Richard Wiles is the executive director of the Center for Climate Integrity, a Washington, D.C.-based group that supports local municipalities and state attorneys general in lawsuits against polluters.
“There is definitely a trend toward accountability,” Wiles said. Whether it's shareholder activists pressuring boardrooms, local governments suing polluters, or lawmakers proposing legislation “everyone is coalescing around the same facts, and there is a growing call for polluters who caused the problem to pay for the solution.”
Wiles compared the Democrats’ proposal to litigation in that it focused on allocation of financial responsibility for past harm. On the other hand, the ESG movement is forward-looking, insisting that companies account for and take steps to mitigate long-term climate risks.
Even though lawmakers, investors and litigants might be leaning on various approaches to reduce pollution and mitigate climate change, there is a shared desire to impose responsibility, Wiles said.
“It has become obvious that many companies haven’t been truthful about their contributions to pollution or on their progress to curb it,” he said. People have learned that many “net zero” carbon emission commitments, for example, aren’t very substantive when one scrutinizes the details. All the while, these same companies continue to receive untold millions in subsidies and tax breaks, he said.
“Deflection won’t work anymore,” said Wiles, whose group was established in 2017 to educate the public on the impacts of climate change and to hold polluters accountable.
“Big oil and gas companies learned that burning fossil fuels would lead to climate change over 50 years ago," according to the group. “Instead of doing the right thing, they then masterminded a decades-long, multi-million-dollar climate denial, disinformation, and deception campaign that stopped climate policy in its tracks. Now, communities are paying billions to adapt and recover from the growing climate impacts the industry knowingly caused.”
This story has been corrected to accurately describe Rothenstein's position at K&L Gates.
David Jordan contributed to this report.