ABSTRACT
Sparks from private utility infrastructure have ignited some of the deadliest wildfires of the last decade. Climate change and a pattern of building in harm’s way have made the resulting harms catastrophic. Who should pay? This Article evaluates the liability and regulatory rules that answer that question, analyzing two categories of costs and their distributional implications: the damages wildfires impose (compensation) and the precautionary investments they require (infrastructure).
On compensation, the Article shows how the standard law-and-economics preference for strict liability is reversed in favor of negligence due to institutional features of the regulatory regime. Strict liability turns captive ratepayers into insurers for climate change, dulling incentives to address the housing and climate drivers of harm. The resulting electricity price increases undermine the clean energy transition by slowing the electrification – the adoption of electric vehicles, heat pumps, electric water heaters – decarbonization requires. The result is a perverse feedback loop: the legal response to wildfires worsens the climate conditions that make them destructive. And because ratepayers include renters while the beneficiaries are wealthier homeowners in high-risk areas, strict liability distributes burdens regressively.
On infrastructure, the Article argues for financing precaution through state taxpayers rather than ratepayers. Wildfire safety is a public good. Yet, the status quo effectively funds it through a commodity tax on electricity. This implied tax distorts consumption in favor of fossil fuels. It is also regressive, because it falls hardest on lower-income households. Financing wildfire safety through general state revenues would mitigate both these shortcomings.
The Article provides an analytical framework for evaluating the legal reforms that states are actively debating, and demonstrates how the reforms now gaining momentum, which shield utility shareholders and lean harder on ratepayers, point the wrong way.
Chawla, Kiran, Who Pays for Wildfires? (February 1, 2026).
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