backOn February 26, 2026, the California Air Resources Board (“CARB”) approved final regulations implementing Senate Bills 253 (the “Climate Corporate Data Accountability Act”) and 261 (the “Climate-Related Financial Risk Act”)—California’s landmark climate disclosure laws. As expected, the final regulations closely track the draft proposal CARB released in December 2025 following a November 2025 public workshop. New provisions establish administration and fee mechanisms for the climate reporting program and set an August 10, 2026 deadline for companies to provide first-year Scope 1 and Scope 2 emissions data under SB 253.
As discussed in our prior Client Alert, the Ninth Circuit Court of Appeals enjoined enforcement of SB 261 pending its review of a challenge to both laws brought by the U.S. Chamber of Commerce. That injunction remains in place even with CARB’s approval of the new regulations.
The California Climate Disclosure Laws
SB 253 and SB 261 were enacted in October 2023 (and amended by SB 219) in 2024. SB 253 requires U.S.-based entities doing business in California with annual revenues above $1 billion to annually report greenhouse gas emissions across three scopes: Scope 1 (direct emissions), Scope 2 (indirect emissions from energy use), and Scope 3 (indirect emissions from supply chains). SB 261 requires companies with revenues over $500 million to biennially report climate-related financial risks and mitigation strategies. These laws build on California’s climate regulations and complement existing policies aimed at achieving statewide carbon neutrality by 2045.
Overview of Regulatory Provisions
CARB’s new regulations address a number of important issues to implement the statutes:
- Applicability Definitions. The regulation defines “doing business in California” by reference to California Revenue and Taxation Code section 23101, aligning with existing state tax law to provide an objective and verifiable standard. Entities must meet the applicable revenue threshold for two consecutive fiscal years to become subject to the fee and reporting requirements.
- Exemptions. The regulation exempts federal, state, and local government entities; nonprofit and charitable organizations that are tax-exempt; entities whose only California presence is teleworking employees; entities whose only California business consists of wholesale electricity transactions; and entities regulated by the Department of Insurance.
- Fee Structure. CARB adopted a flat fee structure assessed equally across all regulated entities, rather than a variable fee based on emissions or revenues. CARB determined that a flat fee reduces administrative burden, provides cost predictability, and avoids creating disincentives for full disclosure. Expected program costs will be approximately $14 million annually by FY 2026-27.
- Enforcement Discretion. CARB indicated it will exercise enforcement discretion for the first report due in 2026, allowing entities to submit Scope 1 and Scope 2 emissions based on information they were already collecting when CARB issued its December 2024 Enforcement Notice. Entities that were not collecting such data at that time are not expected to submit that information for this first reporting cycle.
The full text of the new regulations are at this link. The regulations will be submitted to the Office of Administrative Law for processing and are expected to become effective on July 1, 2026.
Remaining Issues
For SB 253, CARB’s new regulations only address the initial phase of implementation. Rulemaking for Scope 3 emissions reporting—the most complex element covering supply chain emissions—remains under development and is one of the most controversial aspects of the law. To facilitate initial compliance, CARB will allow companies to submit emissions data already reported to the European Union if they are covered by those requirements.
Several questions remain unresolved, including how California-connected subsidiaries of out-of-state parent companies should report data and whether those entities may separate their emissions from consolidated reporting. The Scope 3 requirements will also create a “trickle-down effect,” as covered companies will need suppliers and partners to provide emissions data.
Recommendations for Covered Companies
- Prepare for August compliance under SB 253. Companies subject to SB 253 should assess their ability to collect and report Scope 1 and 2 emissions data by the August 10 deadline, even as litigation continues.
- Leverage existing reporting. Multinational companies already reporting to the EU or other jurisdictions can utilize that data to satisfy their first-year reporting requirements.
- Monitor both regulatory and litigation developments. Regulated parties should track both CARB’s ongoing rulemaking on Scope 3 requirements and the Ninth Circuit’s decision and injunction status, which could materially reshape their compliance obligations.
- Whether to submit SB 261 reports now. With the current injunction in place, climate-related financial risk disclosures are not required, though companies should be prepared for this to change if the injunction is lifted.
We will continue to monitor developments and provide updates as they occur.