What you need to know:  The California Air Resources Board (CARB) approved an item at its February meeting to establish the administration and implementation fees for the Climate Corporate Data Accountability Act and the Climate-Related Financial Risk Act, and the first-year reporting deadline under the Climate Corporate Data Accountability Act. This initial regulation was developed to satisfy the requirements of Senate Bills (SB) 253 (https://ww2.arb.ca.gov/2023-senate-bill-253-wiener-scott-climate-corporate-data-accountability-act-chaptered) and 261 (https://ww2.arb.ca.gov/2023-senate-bill-261-stern-henry-greenhouse-gases-climate-related-financial-risk-chaptered), as amended by Senate Bill 219. 

 
SACRAMENTO — The California Air Resources Board (CARB) today approved the adoption of the California Greenhouse Gas Reporting and Climate Financial Risk Disclosure Initial Regulation, an initial step in meeting the regulatory requirements of SB 253 and 261.  

The regulation establishes how fees will be assessed to cover the cost of program administration, specifies key definitions necessary for fee assessment and program application, and establishes a first-year reporting deadline. Adoption of the regulation will enable CARB to administer and fund the statutory reporting programs under the two bills. 

“By establishing clear and consistent disclosure requirements, California is ensuring that the state’s investors and consumers have access to reliable information to inform their decisions and is joining other jurisdictions around the world in requiring climate data transparency. Many business leaders are already choosing to engage early, a clear indication they recognize the importance of climate-related risk transparency to inform business and consumer decisions,” said CARB Chair Lauren Sanchez.  
 
The regulation covers large corporations doing business in the state with revenue over $500 million or $1 billion depending on the statute. It identifies a flat-rate fee structure and establishes Aug. 10, 2026, as SB 253’s first-year reporting deadline based on stakeholder feedback. Reporting for SB 253 for the first year will include only Scope 1 and Scope 2 emissions. Scope 1 emissions are direct greenhouse gas (GHG) emissions from sources that are controlled or owned by an organization. Scope 2 emissions are indirect GHG emissions from the purchase of electricity, steam, heat or cooling. The regulation also clarifies that the revenue threshold would be tied to entities’ gross receipts as reported to the California Franchise Tax Board to streamline implementation and verification. 

Through a voluntary public docket maintained by CARB, companies have begun submitting climate-related financial risk reports. Currently, more than 120 climate-related financial risk reports have been voluntarily submitted and made publicly available (https://gcc02.safelinks.protection.outlook.com/?url=https%3A//ww2.arb.ca.gov/approved-comments%3Fentity_id%3D47456&data=05%7C02%7CLynda.Lambert%40arb.ca.gov%7Ccc61188adc634817df6c08de6f4a2cff%7C9de5aaee778840b1a438c0ccc98c87cc%7C0%7C0%7C639070561567422819%7CUnknown%7CTWFpbGZsb3d8eyJFbXB0eU1hcGkiOnRydWUsIlYiOiIwLjAuMDAwMCIsIlAiOiJXaW4zMiIsIkFOIjoiTWFpbCIsIldUIjoyfQ%3D%3D%7C0%7C%7C%7C&sdata=HFLnedcHeWWIdiLrqYfsARM970mEwBajkqQp7CuemGY%3D&reserved=0). The reports come from both private and public entities spanning a range of industries, including manufacturing, technology, healthcare, energy, transportation, finance and consumer services. 

CARB’s priority is to focus on supporting compliance through stakeholder engagement and will use enforcement discretion for good-faith first-year submissions.  

Entities exempt from reporting include tax exempt non-profits and charities, government or majority-owned government entities, and California businesses regulated by the Department of Insurance or insurance businesses in any other state, among a few other exemptions.  

The regulation was developed through a robust public process including stakeholder meetings, workshops and consideration of public feedback.  

Pursuant to a court order, CARB is not enforcing SB 261, and reporting is voluntary. 

 
Why it matters 

GHGs pose environmental and health issues and are a leading factor in climate change. The regulation will provide the funding necessary to administer programs that will provide accurate, comparable, and decision-useful information to California investors, lenders, insurers, and consumers about the risks climate change poses to businesses, including the emission associated with certain business activities. 

How we got here  

In 2023, Governor Newsom signed into law the Climate Corporate Data Accountability Act (SB 253) and the Climate-Related Financial Risk Act (SB 261), which were amended in 2024 (SB 219). SB 253 requires U.S.-based entities with more than $1 billion in annual revenue that do business in California to annually report Scope 1 and Scope 2 GHG emissions beginning in 2026, and Scope 3 GHG emissions beginning in 2027. For U.S.-based entities with more than $500 million in annual revenue that do business in California, SB 261 requires a biennial report of their climate-related financial risk and measures adopted to reduce and adapt to those risks.