California, August 26, 2025
News Summary
The California Air Resources Board (CARB) will propose climate disclosure regulations on October 14, 2023. These new laws, signed by Governor Newsom, require large corporations to disclose greenhouse gas emissions and climate-related financial risks. SB 253 mandates annual reporting on Scope 1 and Scope 2 emissions for companies with over $1 billion in revenue, while SB 261 requires firms with a minimum of $500 million to report climate risks. The regulations are set to impact over 4,000 companies, with implementation costs estimated at $20.7 million.
California — The California Air Resources Board (CARB) is set to propose new climate disclosure regulations on October 14, 2023, following the enactment of significant laws aimed at enhancing corporate accountability for climate-related data. Governor Gavin Newsom, in 2023, signed two pivotal bills: SB 253 (the Climate Corporate Data Accountability Act) and SB 261 (the Climate-Related Financial Risk Act). These laws establish comprehensive frameworks for large corporations to disclose their greenhouse gas emissions and climate-related financial risks.
The upcoming proposal is part of the regulatory development process initiated by these new laws, which impose specific reporting requirements on companies exceeding certain revenue thresholds. Under SB 253, companies generating over $1 billion in annual revenue will be obligated to report on their Scope 1 and Scope 2 emissions. Future revisions of this law are expected to include Scope 3 emissions as well, which pertain to indirect emissions throughout the value chain. Meanwhile, SB 261 mandates that firms with a minimum of $500 million in revenues must compile and present biennial reports on their climate-related risks.
Initially, CARB aimed to finalize these regulations by July 1, 2023, but has since adjusted its timeline, scheduling board consideration for December 11-12, 2023. This change allows for a 45-day public comment period after the proposed rules are issued. The agency anticipates that these regulations will impact approximately 4,160 companies for SB 261 and 2,596 companies for SB 253.
The estimated cost of implementing these disclosure laws amounts to around $20.7 million in one-time expenses, with ongoing costs projected at $13.9 million annually. The funding will be temporarily sourced from the Inflation Reduction Act’s Greenhouse Gas Reduction Fund. Companies will be expected to pay annual fees as part of compliance, calculated at $3,106 for large companies under SB 253 and $1,403 for those under SB 261. Companies with revenues exceeding $1 billion will incur both fees.
It is significant to note that certain entities will not be subject to these regulations, including non-profits, telecommuting-only companies, government agencies, and specific wholesale electricity businesses. In an effort to ease the transition for businesses, CARB has indicated that it will not impose penalties during the first year for incomplete reporting, provided that companies demonstrate a good-faith effort in collecting emissions data.
Despite facing legal challenges, the regulations have emerged resilient, with a recent federal ruling declining to impose a preliminary injunction against them. As part of the regulatory process, CARB has been gathering input through public workshops and has made available a FAQ document to assist businesses in understanding compliance requirements.
The proposed regulations come at a time when the political landscape surrounding environmental, social, and governance (ESG) issues is shifting. Speculations indicate that with potential changes in leadership by 2025, there could be a less favorable environment for ESG investments.
In summary, the forthcoming climate disclosure regulations from CARB represent a significant step in California’s efforts to enhance corporate accountability regarding climate change. As businesses prepare for compliance, the upcoming announcement is expected to garner widespread attention amongst stakeholders and investors alike.
FAQ
What are the key regulations proposed by CARB?
The California Air Resources Board proposes climate disclosure regulations requiring large corporations to report greenhouse gas emissions and climate-related risks.
When will the proposed regulations be announced?
The notice for the proposed regulations is set to be released on October 14, 2023.
What companies are affected by these regulations?
Companies with over $1 billion in revenue will report emissions under SB 253, while those with at least $500 million in revenue will provide climate risk reports under SB 261.
What are the expected costs associated with compliance?
The implementation cost is estimated at $20.7 million one-time and $13.9 million per year ongoing, with annual fees expected for companies based on their revenue.
Will there be penalties for incomplete data reports?
In the first year, CARB will not impose penalties as long as companies are making a good faith effort to collect the required data.
| Regulation | Threshold Revenue | Reporting Requirement | Initial Cost | Annual Fee | Enforcement Policy |
|---|---|---|---|---|---|
| SB 253 | $1 billion+ | Scope 1 & 2 Emissions | $20.7 million | $3,106 | No penalties if good faith effort |
| SB 261 | $500 million+ | Climate-related Risk Reports | N/A (ongoing costs only) | $1,403 | No penalties if good faith effort |
Deeper Dive: News & Info About This Topic
- ESG Dive: CARB to Propose California Climate Risk Disclosure Rules
- Wikipedia: Climate Disclosure
- Wolters Kluwer: California Climate Disclosure Laws
- ESG Today: California Releases FAQ on Mandatory Climate Reporting
- Mayer Brown: Navigating California’s Climate Disclosure Laws
- Encyclopedia Britannica: Climate Change
Author: STAFF HERE HUNTINGTON BEACH
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