California Air Resources Board information solicitation for Climate Disclosure Laws implementation

The California Air Resources Board (CARB) is soliciting feedback to inform its work to implement the Climate Corporate Data Accountability Act (SB 253), which requires covered entities to submit annual reports disclosing greenhouse gas (GHG) emissions from all of their activities, and the Climate Related Financial Risk Act (SB 261), which requires covered entities to submit biennial climate-related financial risk reports. Since their passage in 2023, these laws have been the subject of immense scrutiny due to the strictness of their disclosure requirements, far-reaching application, and uncertainty about how they will be implemented and enforced. We previously summarized the key provisions of SB 253 and SB 261 here and SB 219’s amendments to the laws here.

CARB will undertake a rulemaking this year to adopt regulations relevant to implementation of both laws. Before issuing a proposed rule, however, CARB has asked for stakeholder input on topics covering the laws’ general applicability, how to standardize reporting and minimize the burden to covered entities, and existing resources that can be leveraged to assist with compliance. Interested parties can view the full list of questions here and submit comments here. Providing comments to CARB at this early stage may allow potentially regulated entities to ensure that fundamental issues are considered by CARB at the earliest stage of regulatory drafting.

CARB recently extended the information solicitation period from February 14, 2025 to March 21, 2025.

Background on Senate Bills 253 and 261

SB 253 and SB 261 will require thousands of corporate entities to submit reports disclosing GHG emissions and climate-related financial risks beginning in 2026. Both laws apply to public and private companies doing business in California, with SB 253 covering entities earning over $1 billion in annual revenue and SB 261 covering entities earning more than $500 million in annual revenue (neither revenue threshold is limited to in-state earnings).

More specifically, SB 253 requires an annual report disclosing Scope 1 and Scope 2 emissions in 2026 and Scope 3 emissions in 2027 (pursuant to dates to be determined by CARB via rulemaking). As explained in the legislation, reporting will include:

• Scope 1: Direct GHG emissions from sources owned, or directly controlled by, a covered entity (e.g., fuel combustion activities).
• Scope 2: Indirect GHG emissions from consumed electricity, steam, heating, or cooling purchased or acquired by a covered entity.
• Scope 3: Indirect upstream and downstream GHG emissions from sources not owned or directly controlled by a covered entity (e.g., purchased goods and services, business travel, employee commutes, processing and use of sold products).

SB 261 requires a biennial climate-related financial risk report that discloses (i) climate-related financial risks and (ii) measures taken to reduce and adapt to any disclosed financial risks.

The laws also provide for significant administrative penalties for non-compliance: up to $500,000 per year for violations of SB 253 and up to $50,000 per year for violations of SB 261. In addition to the risk of regulatory enforcement for failure to comply with the disclosure requirements, private parties are likely to pursue non-compliance via California’s liberal unfair competition cause of action and other potential legal avenues.

Regulatory process and timeline for Senate Bills 253 and 261

Regulations implementing SB 235 and SB 261 must be promulgated according to California’s notice-and-comment rulemaking procedure. The current solicitation for information does not fulfill these requirements; rather, CARB is conducting informal public engagement in advance of promulgating draft rules. CARB must still undergo the requisite notice-and-comment periods and otherwise adhere to all requirements of the state’s Administrative Procedure Act. 

Importantly, SB 253 is not self-implementing, meaning the required disclosures are not effective until CARB finalizes rules regarding the specified GHG emissions reporting, including deadlines for disclosure. SB 219, passed in late 2024, extended CARB’s deadline to adopt implementing regulations to July 1, 2025. While CARB has expressed concern about meeting this deadline, the California legislature has been reluctant to extend it any further (see August 31, 2024 Senate Floor Analyses for SB 219). It is unclear whether the extension of the current information solicitation will impact CARB’s ability to meet the implementation deadline, compounding uncertainty regarding what, if any, requirements under SB 253 will be effective in 2026.

SB 261, on the other hand, has a compliance deadline of January 1, 2026 (and every two years thereafter). Unlike SB 253, this deadline is not dependent upon CARB’s implementation of rulemaking.

Topics for solicitation

CARB’s solicitation for feedback includes thirteen topics, many of which are aimed at collecting information that will be relevant to address current ambiguities in the laws when a rule is proposed. For example, Topic 1 seeks input about whether CARB should provide clarity regarding what “doing business” in California means by referencing relevant language in the state’s Revenue and Tax Code section 23101.

CARB also seeks input regarding:

• How to align the regulations with the standards cited in the laws;
• Which public databases or datasets CARB should utilize to identify entities subject to the regulations;
• How to minimize duplicative burdens of compliance with the laws and other overlapping mandatory reporting programs (e.g., for entities subject to the EU’s climate reporting obligations);
• Which third-party services can be utilized either by CARB or by covered entities to support compliance with the laws;
• Anticipated costs of compliance with the laws; and
• Details regarding how reporting can be standardized, completed, and submitted.

Comments received to-date, available here, urge CARB to address ambiguities in the laws such as how revenues will be calculated for purposes of determining whether a covered entity meets the statutory threshold for applicability, and to consider covered entities’ other GHGs and climate-related risk reporting requirements.

Key takeaways

Entities that may be covered by SB 253 and/or SB 261 have an opportunity to influence the scope and direction of future regulations by providing perspective and data to CARB now, prior to issuance of draft rules. CARB has signaled awareness of the laws’ ambiguities and an appetite for providing greater certainty to the regulated community. Although there will be an opportunity to comment during the formal rulemaking process, commenting prior to the rule’s issuance provides an early opportunity to participate in the regulatory process, influence CARB before draft rules crystallize the agencies’ perspective, and may assist in heading off confusion about the laws’ applicability and specific reporting requirements by ensuring that the formal rulemaking addresses issues relevant to regulated entities. 

The broad range of expertise at Hogan Lovells US LLP – including the Environment and Natural Resources, Litigation/Consumer Products, Sustainable Finance and Investment, Corporate and Finance, and Infrastructure, Energy, Resources and Projects teams – are available to assist clients with submitting feedback to CARB and complying with GHG emissions disclosures and climate-related financial risk reports pursuant to SB 253, 261, and 219, and can help you understand interactions with other relevant sustainability-related reporting regimes required globally. 

Authored by Tom Boer, Misty Howell, and Olivia Molodanof.