In September 2023, California’s legislature passed two bills that require public and private companies that meet monetary thresholds to disclose their greenhouse gas (GHG) emissions and their climate-related financial risks. That same month, the legislature passed a related third bill that requires companies to disclose their voluntary carbon offsets and provide evidence supporting their net-zero emissions claims. On October 7, 2023, Governor Newsom signed all three bills into law. The California Air Resources Board (CARB) is now tasked with developing regulations to implement the GHG emissions and financial risk disclosure laws. The offset and net-zero disclosure law takes effect without implementing regulations as it gives state prosecutors civil enforcement authority. With these disclosure laws, the state aims to inform investors and empower consumers, but many factors will determine how well they accomplish these goals
In this analysis, I explain what California’s three laws require and describe implementation questions and litigation risks; explain federal preemption risks related to the Security and Exchange Commission’s (SEC) climate-risk disclosure proposal; and evaluate legal criticisms of the laws, including arguments related to the dormant Commerce Clause doctrine.
On January 30, 2024, business associations filed a suit challenging the emissions disclosure and climate-related financial risk laws, arguing that the laws violate the First Amendment, the dormant Commerce Clause doctrine, and broader federalism principles. California has strong arguments against all of industries’ claims. We explain some of these legal claims in this piece and will be tracking the litigation follow-up analyses.