U.S. policymaking has long been a balancing act between legislation, administration and court action. Over time, depending on the issue at hand and the political landscape, experts and interest groups have emphasized one approach over another. But as legislation has become increasingly difficult to navigate and the regulatory landscape more crowded and complex, litigation has emerged as a central policy tool — often substituting for democratic compromise rather than complementing it. This shift has elevated the role of the courts not only in shaping U.S. policy but also in influencing economic and regulatory outcomes globally.
The rising reliance on litigation to “address corporate malfeasance” is evident in both the volume of lawsuits and the scale of financial demands they impose. The energy sector, particularly fossil fuel producers, has become a frequent target for lawsuits seeking to advance public policy goals through the courts. A recent example involves Washington state residents suing major oil companies, alleging that climate change has contributed to higher homeowner insurance premiums. While extreme weather is often cited in such claims, rising material costs and skilled labor shortages are also significant drivers of insurance price increases.
Litigation is a fundamental tool for resolving disputes, but concerns are growing about whether it is increasingly being used as a profit-driven policy mechanism. The rapid expansion of the litigation finance sector — which channels investor capital to fund lawsuits — underscores this shift. Estimates suggest the global litigation funding market could grow from roughly $20 billion in the mid-2020s to nearly $50 billion by the mid-2030s, reinforcing the perception of litigation as a growing industry in its own right.
Another indicator is the number of cases related to one specific issue, climate change. The 2025 annual climate litigation report of Columbia Law School and the UN Environment Program shows that, as of June 2025, the cumulative number of climate change cases included 1,936 cases in the U.S. and 1,113 cases in all other jurisdictions, highlighting the prevalence of such cases in the U.S.
One of the frequently mentioned goals of these cases is to accelerate the adoption of mitigation and adaptation strategies. But it is important to recognize the negative impacts of these lawsuits on company values and ultimately on the capital investments needed to improve efficiency and thereby reduce environmental impacts.
According to 2024 research conducted by the London School of Economics, based on climate change lawsuits against U.S. and European listed firms between 2005 and 2021, “firms experience on average a 0.41 percent fall in stock returns following a climate related filing or an unfavorable court decision.” According to the same study, the world’s largest fossil fuel producers experienced an even larger negative impact on their stock returns: between 0.57 and 1.50 percent. When the impact of the litigation is evaluated based on bank loans, another study shows that “firms targeted by climate lawsuits pay significantly higher spreads on their bank loans.”
These specific examples raise an important question: How do we encourage the much-needed investment by energy companies if we want to address climate issues? Every expert recognizes that, with ever-increasing energy demand, the fossil fuel industry will remain an integral part of the energy mix. However, the potential shift of funds needed for investment to defend against litigation is creating more uncertainty and will no doubt affect current production. This is particularly the case when litigation targets the past production of these companies.
For example, in Louisiana, there is ongoing litigation against Big Oil for activities dating back to the 1940s, many of which were conducted under federal permits, contracts, or wartime directives. Such cases could give pause to any potential energy investor. Ultimately, President Trump can create the friendliest ecosystem for energy investment, but ongoing lawfare could still hinder further development.
Many of these lawsuits attempt to resolve complex public policy questions that would be better addressed through thoughtful, forward-looking legislation. Expanding lawfare risks restricting productive investment, reducing competitiveness, and imposing higher energy costs on American consumers without delivering durable solutions. If we want to impose a carbon tax on energy, that should be debated openly by lawmakers, not imposed retroactively by courts.
Litigation has a rightful place in enforcing the law and holding bad actors accountable. But when courts are used as a substitute for policymaking, the result is not meaningful progress — it is uncertainty, higher costs, and diminished investment in the very industries society depends on. If the goal is to address climate and public health challenges while maintaining economic competitiveness and energy security, solutions must come from transparent, democratically accountable legislative action, not retroactive punishment through the courts.
Pinar Cebi Wilber, Ph.D., is chief economist and executive vice president of the American Council for Capital Formation.
