New Yorkers pay a lot to live in the Empire State. U.S. News and World Report places the state in the bottom 10 for affordability, and New York City commonly ranks among the most expensive cities in the world. Of course, New Yorkers are well aware of this. But they may not know that lawmakers in Albany are contemplating legislation that could raise the cost of living even higher.
The bill in consideration, S8585, would turn natural disaster recovery into a litigation issue by letting the state attorney general and other entities sue energy businesses over any natural disaster for which climate change was a “contributing factor.” Below, we show what the costs of these lawsuits could mean for New York households, then explain how we arrived at the numbers.
Between 2020 and 2024, the National Oceanic and Atmospheric Administration (NOAA) estimates that New York state faced over $20 billion in costs from “billion-dollar” disasters alone. If the state and others had been able to sue energy companies for those damages, and if companies responded by passing the costs on to New Yorkers, we estimate that $20 billion impact could have turned into increased energy costs of nearly $2,500 per household.
Some might argue that thousands of dollars in new energy costs would have been worth it to allow lawsuits against the energy industry, but New York residents may not agree with that assessment.
A Note on Methodology
To arrive at the $20.25 billion cost estimate for 2020-2024, we looked at the midpoint of NOAA’s natural disaster cost estimates for each of those years (so, in a NOAA-given range of $1-$2 billion, we assume $1.5 billion). We then made the conservative assumption that the lawsuits would have sought to recover at least the NOAA-estimated costs of those natural disasters from energy companies if they had been allowed and, given the strict liability standard mentioned in the bill, we also assumed they would succeed in recovering those costs.
We then assumed that these lawsuits would be filed against energy companies doing business in New York, and made the edge-case assumption that those companies would in turn pass on all of those lawsuit costs to households, businesses, and the customers of those businesses—whether via increased electricity costs, higher heating bills, increased gas pump prices, or a combination of those and other factors.
The bill’s supporters will likely claim that imposing uncapped costs on the energy companies serving New Yorkers will not result in increased energy prices, or that the costs would be less than we estimate. We would be skeptical of that claim, though as in all cases when we predict harm to consumers, we hope to be wrong.
Unintended Consequences?
It is also worth noting that the bill drafters may have overlooked a detail or two, given the language this bill contains. Midway through the new proposed § 3463 of New York’s insurance law (lines 39-40 in the current version), the bill would empower the attorney general to sue for “all climate attributable damage,” and would go on to allow the attorney general to seek “restitution or disgorgement of profits obtained through the violation” (emphasis added).
The bill as drafted does not define “violation” or cabin “profits” within any specific length of time. So, given the context, an uncharitable reader might assume that “violation” means “the extraction, production, manufacture, marketing, or sale of fossil fuel products”—the activity targeted by the bill’s other provisions—and that “profits” would refer to all historical profits from engaging in the fossil fuel industry. If taken literally and by some improbable mechanism enforced, this provision would destroy most if not all active companies that ever engaged with the fossil fuel value chain in any significant way, along with a central pillar of America’s and the world’s economy.
We will give the drafters the benefit of the doubt and assume they do not actually mean to do this. Nonetheless, it seems they may not be carefully weighing the costs of their proposed new stream of lawsuits.
