CARB will not penalize reporting entities for incomplete Scope 1 and 2 emissions disclosures under SB 253, irritating lawmakers and raising the specter of oversight hearings.

By Joshua Bledsoe, Nikki Buffa, Betty M. Huber, and Matthew Green

On December 5, 2024, the California Air Resources Board (CARB) issued an Enforcement Notice for Senate Bill 253, the Climate Corporate Data Accountability Act (SB 253),¹ stating that CARB will not penalize in-scope entities for incomplete compliance when the first disclosures under the law are due in 2026. On December 16, 2024, CARB also requested public comment on how to implement both SB 253 and Senate Bill 261, the Greenhouse Gases: Climate-Related Financial Risk Act (SB 261).

Background of SB 253

SB 253 requires public or private US entities doing business in California, with annual revenues of over $1 billion, to annually report their Scope 1 and 2 greenhouse gas (GHG) emissions “starting in 2026 on or by a date to be determined by [CARB].” The law also imposes disclosure requirements for Scope 3 emissions, which do not phase in until 2027 at the earliest.

To effect this mandate, SB 253 initially required CARB to develop and adopt implementing regulations by January 1, 2025. However, SB 219 subsequently amended SB 253, granting CARB a six-month extension until July 1, 2025.² SB 219 did not grant a similar extension for disclosures; each reporting entity must still file their Scope 1 and 2 emissions reports by a date in 2026 to be determined by CARB.

Read this Latham Client Alert for more detail on SB 253.

Read this Latham blog post for more detail on the pending litigation against SB 253.

CARB’s Enforcement Notice

The Enforcement Notice states that CARB will exercise its discretion authorized by the language “on or by a date to be determined by the state board,” and will not administer penalties for incomplete reports when the first disclosures are due in 2026 for Scope 1 and 2 emissions from the prior fiscal year.³ This 2026 non-penalty policy is conditioned on entities demonstrating “good faith” efforts to comply with the law.

Executive agencies like CARB commonly issue such enforcement discretion notices. However, environmental non-governmental organizations (eNGOs) or other groups could challenge CARB’s exercise of discretion; for example, through filing petitions for writs of mandamus against CARB due to perceived non-enforcement of SB 253.

The California Legislature’s Threatening Response Letter

In response, California Senators Scott Wiener and Henry Stern, who were two of the law’s lead authors, issued a letter on December 11, 2024, indicating that they are “beyond frustrated at the lack of progress CARB has made to implement” SB 253 and threatened to “bring CARB leadership before the Legislature for Oversight hearings in 2025” unless they see “fast action and marked progress towards implementing the law.”

What This Means for Reporting Entities

These developments continue the year-long dispute over implementing SB 253.⁴ The Enforcement Notice and the legislature’s threatening response do not change the substance or timeline for actions that reporting entities must take to comply. However, the Enforcement Notice could be CARB’s way of acknowledging the challenging situation reporting entities are now facing — they must still report in 2026, but the regulations are not yet available to guide them on how or what to report.

Although this situation may be frustrating for reporting entities, it could end with a positive outcome: reporting entities can design a reporting program that (1) complies with the requirements they anticipate that CARB will impose; and (2) works best for them, given the flexibility permitted by the lack of discrete guidance — all while taking some comfort that CARB will not penalize them for their 2026 disclosures and 2025 data collection practices (given the 2026 disclosures are based on information from the prior fiscal year).

In addition, CARB announced on December 16, 2024, that it is soliciting public comments on how it should implement SB 253 (as well as SB 261), and specifically requested feedback on a list of topics. The comment period is open for 60 days until February 14, 2025, and comments will be posted publicly. Reporting entities or industry groups can use this opportunity to guide CARB in its rulemaking process.

1. This Enforcement Notice only applies to SB 253, not any of the other two California climate disclosure laws passed in October 2023 (SB 261 and AB 1305). ↩︎
2. In addition to this rulemaking extension, SB 219 also (1) requires the reporting of Scope 3 emissions under SB 253 starting at a date to be determined by CARB, rather than the previous timeline which required the disclosure of Scope 3 emissions in 2027; (2) permits covered entities under SB 253 to consolidate emissions disclosure reports at the parent company level; (3) eliminates filing fee requirements under both SB 253 and SB 261; and (4) permits, but does not require, CARB to contract with a climate reporting organization to develop a program to publicize the required disclosures. ↩︎
3. Some reporting entities may decide to disclose Scope 1 and 2 emissions under SB 261, which was not impacted by this enforcement discretion letter. Under SB 261, reporting entities must disclose their climate-related financial risks which generally include the four pillars of climate governance, strategy, risk management, and metrics and targets, by January 1, 2026. ↩︎
4. This has included California Governor Gavin Newsom calling for a two-year delay and CARB suggesting the elimination of Scope 3 reporting requirements (neither of which was effected). ↩︎