The California Legislature passed several bills in 2023 that will take effect January 1, 2024. The new year will bring new California Air Resources Board (CARB) rulemaking proceedings aimed at greenhouse gas (GHG) emissions reporting, and new disclosure obligations for businesses marketing or selling voluntary carbon offsets in California.
SB 253 Climate Corporate Data Accountability Act
Senate Bill 253 (SB 253), the Climate Corporate Data Accountability Act, requires CARB to develop and adopt regulations to take effect no later than January 1, 2025 that will require identified reporting entities to publicly disclose GHG emissions. Specifically:
- Reporting entities will include partnerships, corporations, limited liability companies, and other business entities with total annual revenues in excess of $1 billion that do business in California
- The disclosure will take into account acquisitions, divestments, mergers, and other changes that can affect GHG emissions
- Reporting will include attestation by a qualified independent third-party “assurance provider”
- CARB will contract with a nonprofit emissions reporting organization to develop a reporting program to receive and make publicly available the GHG emissions disclosures
The compliance obligations covered by the SB 253 regulation will be phased in, with reporting of Scope 1 and 2 emissions (direct and indirect emissions from reporting entity’s production or consumption activities) starting in 2026 (or by a date established by CARB), and Scope 3 emissions (upstream and downstream) starting in 2027. Reporting will conform to the globally recognized GHG Protocol accounting and reporting framework developed and updated by the World Resources Institute and the World Business Council for Sustainable Development.
Look for rulemaking activity to begin in 2024, following CARB consultation with the Attorney General, government entities, and various stakeholders.
SB 261 Climate-Related Financial Risk Reporting
Senate Bill 261 (SB 261) requires, by January 1, 2026, all “covered entities” to biennially issue a public report that discloses any material climate-related risk of harm to immediate and long-term financial outcomes due to physical and transition risks, including risks to operations, provision of goods and services, supply chains, employee health and safety, capital and financial investments, institutional investments, financial standing of load recipients and borrowers, shareholder value, consumer demand, and financial markets and economic health.
A “covered entity” is defined as a corporation, partnership, limited liability company, or other business entity (except for insurance companies) with total annual revenues in excess of $500 million that does business in California.
CARB will adopt regulations authorizing penalties for noncompliant covered entities, and CARB will contract with a nonprofit climate reporting organization to biennially prepare a public report addressing climate-related risks facing the state.
AB 1305 Voluntary Carbon Market Disclosures
Assembly Bill 1305 (AB 1305) requires a business entity that is marketing or selling voluntary carbon offsets within California to disclose on its internet website specified information about the applicable carbon offset project and details regarding accountability measures if a project is not completed or does not meet the projected emissions reductions or removal benefits.
Reporting details include all of the following:
- Protocol used to estimate emissions reductions or removal benefits
- Project location
- Project timeline and start date
- Dates/quantities of emissions reductions or removals
- Type of project and breakdown if project has multiple functions
- Whether project meets established standards
- Duration of time over which the operator commits to maintain project operations
- Whether there is independent expert or third-party validation or verification of project attributes
- Emissions reduced or carbon removed on annual basis
- Accountability measures if project is reversed or reductions do not materialize
A “voluntary carbon offset” covered by AB 1305 includes any product sold or marketed in the state that claims to be a “GHG emissions offset,” a “voluntary emissions reduction,” a “retail offset,” or any like term, that connotes that the product represents or corresponds to a reduction in the amount of GHGs present in the atmosphere or that prevents the emission of GHGs into the atmosphere that would have otherwise been emitted. However, products that represent or correspond to legal or regulatory mandates are not included.
In addition, AB 1305 also requires entities that purchase or use voluntary carbon offsets and make claims regarding the achievement of net-zero emissions, or other similar claims, to disclose on their website certain information including:
if at all, a claim was determined to be accurate or actually accomplished;
- How interim progress toward that goal is being measured; and
- Whether there is independent third-party verification of the company data and claims listed.
For more information, contact ESHD. We will be following implementation of these new statutes.
Contact: Brian Biering, Lynn Haug