Key Policies and Carbon Reporting Requirements for Corporations in California
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California has led the United States in implementing a selection of climate-related targets and regulations which can directly impact any business with operations in the state. Current targets are to reduce greenhouse gas (GHG) emissions by 45% by 2030 from a 2020 baseline with a long-term aim to become carbon neutral by 2045. Other targets include and to have 60% of electricity from renewable sources by 2030, increasing to 100% of electricity from carbon-free sources by 2045.
This article reports on recent climate legislation and carbon reporting policies in California and relevant climate programs impacting businesses working within the state.
Previous Achievements
- California has achieved previous emissions targets, reaching the 2020 GHG reduction target to return to 1990 levels 4 years earlier than planned.
- California is a leader in American renewable energy with the Climate Scoping Plan 2017 Update finding 40% of Clean Fuel investments in North America to be located in the state.
- 54% of California’s in-state generators in 2023 were supplied by renewable resources (as reported by the U.S. Energy Information Administration).
National Programs
Securities and Exchange Commission (SEC) Rules
The SEC has released new GHG emissions reporting rules for all listed companies, starting in 2025. These requirements cover all of the United States.
Required information for reporting include scope 1 and 2 emissions, risks from climate and severe weather events, climate related targets, transition plans with relevant expenditures; such as the internal price of carbon, and details of any carbon credits or renewable energy certificates.
Renewables Portfolio Standard
The Renewables Portfolio standard sets targets for renewable energy procurement and generation. It requires energy providers in California to procure 44% renewable energy by the end of this year and 60% by 2030. California is one of 29 states to have implemented a Renewable Portfolio Standard, with 7 others having goals related to renewable energy procurement.
To qualify for certification an energy provider must use at least one renewable energy source recognized by the standard. If more than one source of energy is used, organizations must create an annual report of monthly fuel use to submit to the Energy Commission.
Recent Bills in California
The Voluntary Carbon Market Disclosures Business Regulation Act (Assembly Bill 1305)
The bill outlines voluntary carbon market disclosure requirements. It covers voluntary carbon offsets (VCOs) and emissions reductions claims of organizations operating in California. For VCO projects, sellers must disclose project details, data and calculation methodology and accountability measures, and buyers must disclose project details and their protocol for estimation.
If claiming emissions reductions, neutrality or net-zero, an organization must disclose how the claims were determined to be accurate, alongside how they were accomplished and the measurement of interim targets.
The Climate Corporate Data Accountability Act (Senate Bill 253) Assembly Bill 1305
The bill enforces the reporting of climate data for US businesses working in California with annual revenues over $1 billion. It requires annual reporting of all scope 1 and 2 emissions staring in 2026 and scope 3 from 2027.
Organizations must have limited assurance from 2026 and reasonable assurance from 2030 for scopes 1 and 2, ensure minimization of duplication and meet other reporting standards such as those by the Securities and Exchange Commission (SEC).
The Climate-Related Financial Risk Act (Senate Bill 261)
This bill puts in place requirements to report climate related financial risks for US non-insurance businesses working in California with annual revenues over $500 million. Eligible corporations are required to submit to the California Air Resources Board and put online by the 1st January 2026, with a new report completed every second year thereafter.
State Programs
Climate Change Scoping Plan
The Climate Change Scoping Plan is a government plan reporting on California’s approach to GHG reductions. It includes a roadmap to the most recent target, currently to be carbon neutral by 2045. The plan reports a required reduction of demand for liquid petroleum of 94% by 2045 from 2022 and a removal of all fossil fuels by the same date. It discusses the potential of offsets through land management and carbon removal for residual emissions and considers the role of solar power, requesting a fourfold increase in its scale.
State-wide, the scoping plan recommends a combination of incentives, regulations and carbon pricing. Action is expected from individuals and businesses to meet energy efficiency targets, demand renewable power and consider self-generation such as rooftop solar panels.
Cap and Trade Program
The Cap and Trade Program limits allowed GHG emissions and creates a financial incentive for investment in renewable energy and energy efficiency measures. It covers approximately 80-85% of California’s emissions. There is also a cap and trade program in Québec linked to the one in California through the Western Climate Initiative (WCI).
The program works by putting a cap on the total amount of GHG emission allowances for the state, which reduces 3% per year (2% for the first 2 years) and is distributed among emitting organizations through auction. Prices at auction increase each year to further incentivize emission reductions. The program was adjusted to double its stringency in 2021 to achieve 2030 emissions reduction targets.
Trading and banking of allowances is allowed and compliance is measured as a multi-year average to cover output variations. Adjustments are made if demand is low for a prolonged period of time, for example removing allowances from auction. Offsets can account for up to 7% of compliance if they are for US projects in certain industries; 4% of allowances are kept in reserve to allow for periods of energy crisis.
How NUS can Help
If you have business operations in California, NUS’ Energy and Sustainability Services (ESS) team and US market experts can help your company to work out what these regulations mean for your organisation. For more information contact us online or find your local NUS office.
More: Energy Market Commentary, Decarbonization, Energy Regulation, ESG Reporting, Greenhouse Gas (GHG), Renewable Energy
