What’s Next for California Climate Reporting: New Laws Explained

Companies covered under California’s first-in-the-nation emissions reporting law have until 2026 to begin filing their disclosures, but are looking to state regulators to finalize key details of the program by the end of the year.

The California Air Resources Board (CARB) is tasked with setting deadlines for filing, establishing fees and clarifying the scope of the law. The body also will roll out rules for a separate law requiring many large companies to disclose their climate-related financial risks by the start of 2026.

The measures put CARB in a position to lead the US on climate disclosures. The Securities and Exchange Commission continues to craft rules that are expected to require similar reporting, but only for publicly traded companies.

The next steps for California’s new laws remain unclear. Amid California government’s revenue shortfall, Gov. Gavin Newsom (D) has left funding for implementing the laws out of his initial budget proposal. Observers warn that companies will need clarity soon to prepare for filing deadlines.

“We believe the schedule in the legislation is feasible, but it’s important the work of regulations start soon so companies have an idea. If a company has to file in 2026, that means they have to be doing certain things in 2024 to prepare for their financials in 2025,” said Steven Rothstein, managing director of the Accelerator for Sustainable Capital Markets at Ceres, a sustainable investing group which backed the law.

What are the climate disclosure laws?

The state’s new climate risk reporting law (S.B 261) requires companies with more than $500 million in annual revenue and doing business in California to prepare a report on climate-related financial risks using a framework recommended by the Task Force on Climate-related Financial Disclosures—an industry-led body created by the Financial Stability Board.

(Michael Bloomberg, founder of Bloomberg LP, was the chairman of the TCFD. Bloomberg Law is operated by entities controlled by Michael Bloomberg.)

The first reports will be due on or before Jan. 1, 2026, with further reports required every two years.

A separate emissions reporting law (S.B. 253) requires companies with more than $1 billion in revenue and doing business in California to disclose emissions annually using standards set out by the Greenhouse Gas Protocol—a widely recognized framework—starting sometime in 2026.

The laws apply to both public and private companies as well as to companies headquartered in California and those outside the state but do business in the Golden State.

What is CARB’s role?

CARB will be responsible for finalizing deadlines and setting up the system for submitting reports.

The board will have discretion in several key areas, said state Sen. Henry Stern (D), who authored the climate risk disclosure law and sits on the board as a non-voting member.

The law doesn’t set out a “materiality threshold” to guide companies in determining what information must be disclosed, he noted—a point of contention over the course of the SEC’s rulemaking, too.

“There will be some discretionary decisions,” he said.

The rulemaking process could stretch into 2025. The emissions reporting law expressly tasks the board with getting input from a wide range of groups, including investors, climate experts, and representatives from consumer and environmental advocacy groups.

Who are the decision-makers?

The two climate disclosure programs would be relatively minor additions to the budget of a state agency that’s responsible for a range of environmental issues, from vehicle emission standards to the state’s cap-and-trade program.

The governor wields enormous influence over the 16-member body, selecting its chair—the only full-time member—and filling 12 of the board’s seats.

The state laws set aside seats for particular constituencies and areas of expertise. Six of the 12 members appointed by the governor must come from local air quality districts, for example. Four seats are set aside for experts in fields such as health, transportation, and agriculture. Two seats are for members of the public.

Legislators choose two board members from the environmental community and two lawmakers also serve as non-voting members.

The current chair, Liane Randolph, was appointed in 2020 to a term that will run through the first year of the emissions reporting program. Randolph, an attorney, previously served as a commissioner on the state’s utility regulator, the Public Utilities Commission.

What’s in Dispute?

Newsom says the implementation timeline of the emissions reporting law is “infeasible.” CARB’s request for about $9 million to roll out the measures has raised eyebrows, appearing to some to be inflated or impractical.

Backers could sue the state if the measure is not implemented on schedule, however.

Stern said the request—while small in the scheme of the governor’s proposed $207.8 billion budget—suggests the agency is interested in investing deeply in the programs. The new laws attracted interest among delegates at the most recent United Nations climate summit, which was attended by a delegation from the Newsom administration.

What about other protocols?

Canada, UK, and the EU have adopted similar reporting requirements, with slight differences. Backers of California’s laws say they’re aiming to avoid duplicative reporting.

Supporters say using existing protocols means regulators won’t need to start from scratch.

“The beauty of it is the Greenhouse Gas Protocol is the underpinning framework,” said Kentaro Kawamori, CEO and co-founder of Persefoni, a carbon accounting company.

Rothstein said CARB will need to finalize the details of how California’s laws will align with those of other countries and jurisdictions.

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