(The Center Square) – Last week, California’s emissions regulator told companies to just try their best to report their first, second, and third-order emissions, and that it would not be enforcing a law that levies significant fines against companies that fail to perfectly do so.
Now, the law’s author is demanding the agency enforce the law or face oversight hearings before the legislature next year if it fails to do so.
State. Sen Scott Wiener, D-San Francisco, authored SB 253, a bill signed into law last year that requires companies with more than $1 billion in revenue that do business in California to estimate and inventory their direct and indirect emissions. This includes emissions from their workers’ commutes, and the emissions of their contractors, and their suppliers, or face $500,000 per year fines for errors or noncompliance.
The law empowers the California Air Resources Board to determine a 2026 compliance date for reporting on Scope 1 and Scope 2 emissions; according to the EPA, Scope 1 emissions include direct emissions from the company, such as from company facilities, while Scope 2 emissions include emissions relating to the purchase of electricity, steam, heat, or cooling.
“For the first reporting cycle, CARB will not take enforcement action for incomplete reporting against entities, as long as the companies make a good faith effort,” wrote CARB in a Dec. 5 enforcement notice. “This notice reflects CARB’s discretion in enforcing compliance during the transition period and does not constitute an interpretation of statutory reporting requirements.”
Scope 3 emissions are to be counted and reported starting in 2027. According to the EPA, Scope 3 emissions “are the result of activities from assets not owned or controlled by the reporting organization, but that the organization indirectly affects in its value chain,” which “ “consists of both its upstream and downstream activities,” such as the emissions of its contractors, vendors, suppliers, and retailers.
Because many large companies often do business with other large companies, this means emissions could be counted many times over, which would inflate the state’s emissions count.
“Senate Bill 253 is going to put a much bigger impact on businesses than intended,” said Sen. Roger Niello, R-Fair Oaks, to The Center Square. “While the supporters have emphasized that only about 5,300 U.S. corporations will be required to report, there will be small businesses that work with those corporations that will also be overly burdened to comply.”
In response to CARB’s enforcement notice, Wiener sent a letter to CARB demanding “fast action and marked progress towards implementing the law.”
“We will be closely monitoring CARB’s progress in hiring the staff needed to implement the law, and taking other public steps to promulgate regulations to implement SB 253 according to the timeline established in statute,” wrote Wiener on Dec. 11. “Should we fail to see timely action on these critical steps, we will look to bring CARB leadership before the Legislature for Oversight hearings in 2025.
At the start of 2024, the California Chamber of Commerce filed a lawsuit against SB 253, citing First Amendment violations for compelling companies to make inaccurate statements regarding emissions inventories due to reporting difficulties. In November, a judge denied the Chamber’s request for summary judgement, while giving the Chamber a chance to re-file. According to an analysis from Paul Hastings, one of the largest law firms in the world, it’s likely the Chamber will re-file after more information becomes available and that “litigation is expected to continue for many months or years.”
