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Legal Alert

The California Global Warming Solutions Act, SB 253, Approved October 7, 2023

The California Global Warming Solutions Act, SB 253, Approved October 7, 2023

This article is an expansion of “California Governor Signs Two Groundbreaking Climate-Related Laws" (October 10, 2023).

Senate Bill 253, sponsored by California Senator Scott Wiener, requires certain California companies which have total annual revenues of $1 billion and that do business in California to publicly disclose, starting in 2026, their scope 1 and 2 greenhouse gas emissions, and annually thereafter, their scope 3 greenhouse gas emissions. The bill also requires a payment of an annual fee to be determined.

  • Scope 1 emissions are defined as all direct greenhouse gas emissions that stem from sources that a reporting entity owns or directly controls, regardless of location, including fuel combustion activities.
  • Scope 2 emissions are defined as indirect greenhouse emissions from consumed electricity, steam heating, or cooling purchased or acquired by a reporting entity.
  • Scope 3 emissions means indirect upstream and downstream greenhouse gas emissions other than scope 2 emissions for sources that the reporting entity does not own or directly control, including purchased goods and services, business travel, employee commutes, and processing and use of sold products.

Beginning in 2026, a reporting entity shall measure and report its emissions of greenhouse gases. Reporting must conform with the Greenhouse Gas Protocol standards and guidance. This includes the Greenhouse Gas Protocol Corporate Accounting and Reporting Standard as well as the Greenhouse Gas Protocol Corporate Value Chain (Scope 3) Accounting and Reporting Standard.

The standards, developed by the World Resources Institute and the World Business Council for Sustainable Development, include guidance for scope 3 emissions calculations that detail acceptable use of both primary and secondary data sources—including the use of industry average data, proxy data, and other generic data in its scope 3 emissions calculations.

Reporting entities shall maximize access to greenhouse gas emission data for consumers, investors, and other stakeholders in a manner that is easily understandable and accessible. Reporting entity disclosure shall take into account acquisitions, divestments, mergers, and other structural changes that affect greenhouse gas emissions. A reporting entity may use an independent third-party assurance provider to compile the disclosures.

The State Air Resources Control Board shall periodically review the disclosure process and make changes as necessary.

The reporting entity shall pay an annual fee to the state board for the administration and implementation of the greenhouse gas emissions disclosure process.

Failure to comply with the disclosure requirements of SB 253 shall result in fines for late filing, nonfiling or other failure to meet the requirements of the law. The administrative penalties shall not exceed $500,000 in a reporting year. The penalties shall be imposed through an administrative hearing process by the state board.

Governor Newsom has indicated some reluctance to sign this bill into law and has imposed a strict review process to measure the fiscal impact of the bill on California companies.

For More Information, Please Contact:

Michael Van Zandt
Michael Van Zandt
San Francisco, CA