California, August 26, 2025
News Summary
California is set to enforce groundbreaking climate disclosure regulations announced by CARB, mandating large companies to report their greenhouse gas emissions and financial risks. The regulations, stemming from SB 253 and SB 261, will impact over 6,000 businesses with multi-million dollar costs anticipated. A public feedback period is underway, leading toward the final rule-making discussions in December 2023.
California is set to implement groundbreaking climate disclosure regulations following the announcement by the California Air Resources Board (CARB) regarding a notice of proposed rulemaking. This announcement will come on October 14, 2023, in alignment with significant legislation recently signed into law by Governor Gavin Newsom.
Two major laws, SB 253 (Climate Corporate Data Accountability Act) and SB 261 (Climate-Related Financial Risk Act), were enacted in 2023, targeting large businesses to enhance transparency regarding their climate impact. These laws, which received final approval in 2024, reinforce the original reporting timelines set for 2026 but provide CARB with more flexibility in their implementation.
Under SB 253, companies with annual revenues exceeding $1 billion are mandated to report their Scope 1 (direct emissions) and Scope 2 (indirect emissions from purchased electricity) emissions. Future amendments to this law will also require Scope 3 disclosures—reporting emissions from their supply chains and product use. Meanwhile, SB 261 obliges businesses with at least $500 million in revenues to publish biennial climate-related risk assessments, helping investors and stakeholders understand the financial risks posed by climate change.
CARB previously anticipated drafting the final regulations by July 1, but a revised timeline now places the consideration for these regulations on December 11-12, 2023, following a 45-day public comment period. This modification aims to accommodate feedback and ensure stakeholders have a voice in the regulatory process.
According to CARB estimates, approximately 4,160 companies will be subject to the climate-related risk reporting requirements mandated by SB 261, while around 2,596 firms will have to comply with the emissions reporting obligations of SB 253. The agency is actively working on validating the list of affected businesses to ensure compliance.
Implementing these regulations will incur a projected one-time cost of $20.7 million, with ongoing costs expected to total about $13.9 million. These expenses will initially be financed by the Inflation Reduction Act’s Greenhouse Gas Reduction Fund. Additionally, CARB anticipates annual fees of $3,106 for companies under SB 253 and $1,403 for those under SB 261. Businesses with revenues exceeding $1 billion will incur both sets of fees.
Exemptions from these regulations apply to non-profit organizations, companies hosting only telework opportunities, government entities, and certain wholesale electricity businesses, thereby narrowing the scope of applicability. However, CARB has clarified that there will be no sanctions imposed during the first year for incomplete data, given companies make a genuine effort to collect relevant emissions information.
CARB is currently gathering public feedback through workshops until September 11, 2023. To assist businesses in navigating compliance, a FAQ document addressing common queries regarding the regulations has been released. The laws have faced legal scrutiny but have largely held firm, with the recent court ruling declining to issue a preliminary injunction against their enforcement.
Looking forward, the evolving climate regulatory landscape may be influenced by potential changes in political leadership, especially leading into 2025, which could shift perspectives toward environmental, social, and governance (ESG) investments.
FAQ
What are the new regulations proposed by CARB?
The California Air Resources Board plans to propose climate disclosure regulations that will require large companies to report their greenhouse gas emissions and climate-related financial risks.
When will the proposed regulations be announced?
The announcement is scheduled for October 14, 2023.
What companies will be affected by these laws?
Approximately 4,160 companies will need to report climate-related risks under SB 261, while 2,596 companies are subject to emissions reporting under SB 253.
Are there any exemptions to these regulations?
Yes, non-profits, telework-only companies, government entities, and certain wholesale electricity firms are exempt from compliance with these new laws.
What are the costs associated with implementing these laws?
The estimated one-time cost to implement these regulations is $20.7 million, with ongoing costs around $13.9 million. Companies will incur annual fees based on their revenues.
Key Features of California’s Climate Disclosure Regulations
| Regulation | Applicable Revenue Threshold | Required Reports | Impact | Annual Fee |
|---|---|---|---|---|
| SB 253 | $1 billion+ | Scope 1 and Scope 2 emissions | 2,596 firms | $3,106 |
| SB 261 | $500 million+ | Biennial climate-related risk reports | 4,160 firms | $1,403 |
Deeper Dive: News & Info About This Topic
- ESG Dive: CARB to propose California climate risk disclosure rules
- Wolters Kluwer: California Climate Disclosure Laws
- ESG Today: California releases FAQ for mandatory climate reporting
- Mayer Brown: Navigating California’s Climate Disclosure Laws
- Wikipedia: Climate change and business
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