Special Report: Economic and Consumer Impacts of SB 982

California is already facing significant affordability challenges, driven by high housing costs, rising energy prices, and increasing insurance premiums. SB 982 would add a new and substantial layer of cost and uncertainty to this environment. While framed as a mechanism to recover climate-related damages, the proposal would operate in practice as a broad, litigation driven cost increase that would be passed through to consumers, businesses, and households across the state.

The measure would authorize large-scale financial claims tied to climate-attributed damages, including those related to wildfire losses and insurance costs. However, because the bill establishes a relatively low threshold for causation—requiring only that climate change be a “substantial factor” in an event—it creates expansive and unpredictable liability exposure. This uncertainty would be reflected quickly in higher costs, as markets adjust to the increased financial and legal risks associated with operating in California.

• Significant cost increases for consumers:
  • SB 982 will increase fuel costs by an estimated 40–61 cents per gallon for gasoline and even more for diesel, driving up prices across the economy.

• Higher household cost of living:
  • California households will pay an average of about $480 more per year, with impacts felt across fuel, goods, services, and government costs.

• Compounding effect on already rising energy costs:
  • When combined with existing state policies, gasoline prices could rise from about $4.63 per gallon in 2025 to over $6 by 2029 and $8+ by 2038.

• Increased uncertainty in the insurance market:
  • SB 982 introduces significant ambiguity around future liabilities, making it more difficult for insurers to accurately price risk and plan for long-term exposure.

• Challenges to rate adequacy:
  • Existing rate structures may not fully account for the scale and timing of potential liabilities, particularly given retroactive claims and extended legal timelines.

• Delayed resolution of claims:
  • Litigation and appeals processes could take years, forcing insurers to operate under prolonged uncertainty while still being required to set rates and maintain solvency.

• Upward pressure on premiums:
  • Higher uncertainty and risk exposure would be reflected in higher insurance costs for consumers, even before any claims are resolved.

• Economic and job impacts:
  • The proposed language is estimated to reduce employment by over 30,000 jobs annually and lower statewide economic output, reflecting the broader cost burden on businesses and consumers.

• Reduced state and local tax revenue:
• • SB 982 would reduce the state GDP by $4.6 billion annually, and reduce government revenue by $1.16 billion annually.

• Billions in potential claims:
  • In current dollars, potential claims are estimated at $31 billion for the retroactive period of 5 years and an additional $29 billion annually in the 10 years after.

• Hidden “tax” structure with broad impacts:
  • The costs created by SB 982 will function like a never-ending statewide tax on energy and economic activity, but one determined through litigation rather than public policy decisions.

The primary effect of SB 982 would be to increase the cost of living for California households. Energy costs are a foundational input across the economy, and increases in fuel prices do not remain isolated. Instead, they cascade through supply chains, raising the cost of food, housing, transportation, utilities, and everyday goods and services.

The analysis finds that households would experience both direct and indirect cost increases. Directly, families would pay more for gasoline and other fuels. Indirectly, they would face higher prices as businesses pass through increased transportation, litigation, and production costs. These effects are broad-based and ongoing, rather than temporary.

On average, households are estimated to pay approximately $480 more per year as a result of these combined effects. While higher-income households would see larger absolute increases, lower- and middle-income families would bear a disproportionate burden relative to their income, as energy-related costs make up a larger share of their budgets.

These impacts would compound existing affordability challenges. California already has some of the highest energy costs in the nation, and SB 982 would add to a growing set of cost drivers, further reducing disposable income and forcing households to cut back on other spending.

SB 982 would function as a sustained cost increase on energy—effectively operating like a new tax determined through litigation rather than legislation. The report estimates that gasoline prices would increase by approximately 40 cents per gallon initially, rising to more than 60 cents per gallon over time. Diesel prices, which are critical to goods movement and supply chains, would increase even more.

These increases would not occur in isolation. When combined with other state policies, gasoline prices could rise from an average of $4.63 per gallon in 2025 to more than $6 per gallon by 2029 and exceed $8 per gallon by 2038. Similar pressures would apply to diesel and jet fuel, amplifying cost increases across freight, travel, and logistics sectors.

California’s fuel market structure magnifies these impacts. The state operates as a relatively isolated market, with limited pipeline connections and unique fuel standards that constrain supply flexibility. At the same time, in-state refining capacity is declining and reliance on imports is increasing. In this environment, additional costs imposed through SB 982 are unlikely to be absorbed by producers and instead would be passed through directly to consumers.

The policy also introduces additional legal and financial risks that could further discourage investment in fuel production and distribution. Over time, this could tighten supply conditions and increase price volatility, exposing consumers to both higher average prices and greater fluctuations during periods of disruption.

However, SB 982 would not exist in isolation. It would exist amid state policies and regulations that have already created the highest gasoline prices in the nation, led to refinery closures, reduced in-state refining capacity, increased reliance on oil imports, and made California uniquely vulnerable to international and domestic market instability.

Not only would these compounding factors further drive up the cost of gasoline, SB 982 would add additional pressure on in-state fuels production, potentially leading to additional refinery closures, further increasing our reliance on oil imports, and bring more instability and higher costs to California’s gasoline and diesel markets.

SB 982 would intersect with California’s insurance market at a particularly fragile moment, introducing a new layer of uncertainty that could further destabilize an already strained system. Rather than providing clarity or predictability, the proposal would create significant ambiguity around future costs, liability exposure, and how those costs would ultimately be recovered— factors that are central to how insurance markets function.

At the core of the issue is timing and uncertainty. Claims pursued under SB 982 would likely take years to resolve through the legal system, including extended litigation and appeals. During this period, insurers and reinsurers would be required to price risk without knowing the ultimate scale, timing, or allocation of potential liabilities. This creates a fundamental challenge for rate setting, which depends on the ability to reasonably estimate future losses.

In this environment, the adequacy of current rate structures becomes a central concern. If insurers are unable to fully account for the potential exposure created by SB 982—particularly given the open-ended nature of claims and the possibility of retroactive liability—rates approved under existing regulatory frameworks may no longer be sufficient to cover expected losses. This mismatch between regulated rates and emerging risk exposure would place additional financial strain on insurers operating in the state.

The likely market response to this uncertainty is not limited to higher premiums. Insurers may also respond by tightening underwriting standards, reducing the number of policies written, or further limiting coverage in higher-risk areas. In some cases, companies may determine that the level of uncertainty and potential exposure makes continued participation in certain markets untenable.

These dynamics would place additional pressure on the California FAIR Plan, which is already expanding as traditional coverage options become less available. As more policies migrate to the FAIR Plan, its exposure to large-scale losses increases, raising the risk of additional assessments, higher premiums, and greater financial volatility within the system. SB 982 would amplify these pressures by linking FAIR Plan losses and policyholder costs to large-scale and uncertain litigation outcomes.

For consumers, the result is likely to be a combination of higher premiums, reduced availability of coverage, and greater reliance on the FAIR Plan. Importantly, these effects would occur well before any litigation is resolved, as insurers adjust to the uncertainty created by the proposal.

Over time, this could further erode the availability and affordability of property insurance in California, particularly in higher-risk regions.

The cost increases associated with SB 982 would extend beyond households into the broader economy. As businesses face higher fuel and operating costs, they are likely to adjust by raising prices, reducing costs, or scaling back operations.

The analysis estimates that these pressures would result in the loss of approximately 30,400 jobs annually, along with a reduction in labor income of about $2.4 billion. These impacts are driven largely by reduced household spending, as higher costs of living leave less income available for other goods and services.

Energy-intensive and trade-exposed industries—including manufacturing, agriculture, logistics, and tourism—would be particularly affected. These sectors already face higher operating costs in California compared to other states, and additional cost pressures would further reduce their competitiveness, potentially leading to reduced investment or relocation of economic activity.

The broader economic effects include an estimated reduction in state GDP of $4.6 billion and a decline in total economic output of more than $7 billion annually. These impacts would also reduce government revenues by more than $1 billion per year, creating additional fiscal pressures at the state and local level.

SB 982 would introduce a significant new cost driver into California’s economy at a time when affordability is already a major concern. By increasing energy prices, amplifying pressures on the insurance market, and raising costs for businesses and households, the proposal would make it more expensive to live and work in the state.

These impacts would not be isolated or temporary. They would be ongoing, broad-based, and compounded by existing policies, affecting household budgets, economic growth, and the availability of essential services like insurance.

In this context, SB 982 risks accelerating existing challenges rather than addressing them— placing additional strain on consumers, weakening economic competitiveness, and further destabilizing critical systems such as the state’s insurance market.