The California Air Resources Board (CARB) has published seven pages of FAQs on California’s corporate greenhouse gas reporting and climate-related financial risk disclosure programs. These disclosure requirements are contained in California Health and Safety Code Sections 38532 and 38533, which are still more commonly referred to by their bill numbers, SB 253 and SB 261.

The FAQs address CARB’s regulatory development for these requirements and the submission of initial reports. And they respond to questions and feedback CARB received from stakeholders during its May 29 Virtual Public Workshop and from its December 2024 information solicitation. The FAQs also provide additional guidance about reporting emissions and climate-related financial risk. Although the FAQs in large part cover the same ground as the published materials from the Virtual Public Workshop, they also provide important incremental information, as discussed in this post. 

For a discussion of takeaways from the Virtual Public Workshop, see our article Complying with California’s new climate disclosure laws. The December 2024 information solicitation is discussed in more detail in our article California Launches Public Consultation on Climate Disclosure Laws, and Other Recent Developments.

One

There will be more opportunities for input

Next steps in the regulatory development process will include additional opportunities for public input over the summer. See Regulatory Development FAQs 1, 3, 4 and 5 and Initial Reports FAQ 3.

Companies interested in trying to help shape CARB’s second-level regulations and further guidance should consider whether to engage with CARB directly or via their trade associations. Some of the important topics on which companies and trade associations are providing feedback include, for example, doing business in California, calculation of revenues, timing of greenhouse gas emissions reporting and application of the Greenhouse Gas Protocol. 

Two

CARB may consider exempting companies in some circumstances

In the FAQs discussing the revenue thresholds and doing business in California, CARB explicitly asks whether it should consider exemptions for certain circumstances. CARB indicates that it is seeking input on the rationale that should be used to consider exemptions. See Regulatory Development FAQs 4 and 5.

In addition to providing feedback generally on the definitions of “total annual revenue” and “doing business in California” included in CARB’s initial staff concept, companies and trade associations should consider whether as part of their engagement to advocate for more targeted exclusions of particular types of transactions or activities. There currently are blanket exceptions for subsidiaries that are included in parent-level reports and, from climate risk reporting, for entities that are subject to regulation by the California Department of Insurance or that are in the business of insurance in another state.

Three

The FAQs address the period to be covered in initial climate risk reports

The first disclosures under Section 38533 (SB 261) are required by the beginning of 2026. In the FAQs, CARB acknowledges that it has heard from stakeholders that climate risk-related data is often collected on a fiscal year basis and that it takes time to process climate information into a report. The FAQs indicate that, as a result, it is reasonable to expect that initial climate-related financial risk reports submitted by January 1, 2026 may cover fiscal years 2023/2024 or 2024/2025, depending on the organization. See Regulatory Development FAQ 5.

The FAQs note that future regulations may establish additional or alternative requirements for future report submittals.

Four

CARB will establish a public docket for posting climate-related financial risk reports

On December 1, CARB will post a public docket for covered entities to post the location of the public link to their first climate-related financial risk report under Section 38533. The public docket will be kept open until July 1, 2026. The intent of the public docket is to help support transparency by providing one location for the public to be able to review all climate risk reports. The FAQs note that future regulations may establish additional or alternative requirements. See Initial Reports FAQ 4. 

The statute requires a reporting entity to make available to the public, on its own website, a copy of its climate risk report. The FAQ does not indicate whether posting of the link on the public docket will be mandatory or voluntary (for example by analogy, the UK government has a voluntary registry for posting modern slavery statements that the UK Modern Slavery Act requires companies to include on their website). 

By its terms, Section 38533 does not require CARB to put in place a public reporting mechanism. However, this mechanism presumably will be used to support CARB’s work under other parts of Section 38533. Covered entities are required to pay a fee for the administration and implementation of Section 38533.

In addition, Section 38533 authorizes CARB to contract with a climate reporting organization to biennially prepare a public report that reviews a subset of publicly available climate-related financial risk reports by industry, analyzes systemic and sector-wide climate-related financial risks facing California and identifies inadequate or insufficient reports.

Five

The FAQs provide additional enforcement guidance

Section 38533 indicates that, if a covered entity does not complete a report consistent with all required disclosures, it must provide the recommended disclosures to the best of its ability, provide a detailed explanation for any reporting gap, and describe steps it will take to prepare complete disclosures. Under Section 38533, potential penalties against entities for violations are tied to several factors, including whether the violator took good faith measures to comply and when those measures were taken. 

In the FAQs, CARB notes that this good faith consideration is part of its enforcement discretion in considering penalties for reporting violations. The FAQs indicate that, to provide a phase-in period for reporting, initial climate-related financial risk disclosures may be based on the best available information, including information from fiscal years 2023/2024 or 2024/2025.

The FAQs also indicate that CARB recognizes that data quality and data sources may change over the course of the year if additional data collection methods were put in place later. See Initial Reports FAQ 6.