“Time Marches On”: CARB Adopts Initial Regulation as Implementation of Climate Reporting Program Continues

PDF

Tracy Lawrence knew it back in 1996 and we know it too:  “Time marches on” and the California Air Resources Board (“CARB”) is proceeding with the implementation of California’s climate reporting laws.  After hosting three public workshops on Senate Bill 253 (The Climate Corporate Data Accountability Act) and Senate Bill 261 (The Climate-related Financial Risk Act), issuing related guidance in various forms, and conducting stakeholder meetings, CARB issued a proposed regulation implementing certain aspects of the California climate reporting program in December 2025.  Following a presentation by CARB staff members on the proposed regulation and hours of public commentary, CARB unanimously approved the proposed regulation during a public hearing on February 26, 2026. 

If time has been marching on without you and you need a refresher, please click here for our initial summary of California’s climate reporting laws, and summaries of each of CARB’s three public workshops are available here, here and here.

Summary of the Initial Regulation

A. Fees. The regulation contains a “flat fee” structure that requires subject companies to pay annual fees under both SB 253 and SB 261, even though SB 261 reports are due only every other year.  CARB will determine the fees by dividing the total annual program implementation costs by the total number of subject entities, and parent companies that choose to submit consolidated reports covering all of their subject entities must pay a fee for each entity.  On or before September 10, 2026, and each year thereafter, CARB will provide a written fee determination notice to each subject entity, and the entity has 60 days to pay the fee before being subject to a late fee and a regulatory penalty assessed on a daily basis.

B. Initial Deadline for SB 253 Reporting. The regulation establishes August 10, 2026 as the deadline for companies’ first reports under SB 253.  If a company’s fiscal year ends between January 1 and February 1, 2026, the company must report data from its fiscal year ending in 2026 by the August 10, 2026 deadline.  If a company’s fiscal year ends between February 2 and December 31, 2026, the company must report data from its fiscal year ending in 2025 by the August 10, 2026 deadline.  This timeline is meant to give companies at least six months after the end of their fiscal year to submit their initial SB 253 report, although a number of public commenters expressed a preference for a rolling deadline during the February 26, 2026 public hearing.

Consistent with CARB’s enforcement notice issued on December 5, 2024, the reports due in 2026 are only required to contain Scopes 1 and 2 emissions, and no reports are required if the company was not collecting such data or planning to collect such data as of the date of the enforcement notice.  During its presentation on February 26, 2026, CARB staff reiterated that its priority is to support compliance through engagement, and CARB will use enforcement discretion when evaluating companies’ initial submissions.  In response to a number of public comments expressing concern regarding the August 10, 2026 deadline, CARB stated that it may provide case-by-case relief from the initial reporting deadline where appropriate.

C. Definitions. In order to determine whether a company is subject to the California climate laws, the company must look to its revenue, which is defined as “gross receipts” as reported to the California Franchise Tax Board.  Companies are permitted to look at the lesser of their two most recently completed fiscal years of revenue in order to determine whether they are subject to the laws.  In order to be subject, a company must also be “doing business” in California, meaning the company is “actively engaging in any transaction for the purpose of financial or pecuniary gain or profit” (Section 23101(a) of the Tax Code) and, during any part of a reporting year, the company either (i) is organized or commercially domiciled in California or (ii) has sales in California exceeding the lesser of an inflation-adjusted threshold ($757,070 for 2025) or 25% of the company’s sales. 

D. Exemptions. The regulation exempts certain non-profit entities, government-owned entities and entities whose only business in the state entails employee compensation or payroll expenses, among others, from both SB 253 and SB 261.  However, the most contentious exemption appears to be for business entities subject to regulation by the California Department of Insurance (“CDI”) or conducting insurance business in any other state.  The text of SB 261 expressly exempts insurance companies, but SB 253 does not do so, causing many public commenters, as well as authoring lawmaker Senator Scott Wiener, to question whether CARB has the statutory authority to exempt insurance companies from SB 253. 

Next Steps and Open Issues

During the February 26, 2026 hearing, CARB adopted a resolution instructing CARB staff to coordinate with the California Department of Insurance to evaluate whether insurance companies should in fact be subject to SB 253’s emissions reporting requirements given the CDI’s disclosure requirements, keeping in mind CARB’s goal of minimizing duplicative reporting.  If CARB modifies the initial regulations, it must allow for public comment, after which CARB will submit the final regulatory package to the California Office of Administrative Law.  The initial regulation will then become final, which is expected to occur in the coming months.

Both SB 253 and SB 261 remain subject to ongoing litigation, but currently only SB 261 is enjoined.  In November 2025, the U.S. Court of Appeals for the Ninth Circuit temporarily enjoined CARB’s enforcement of SB 261 pending consideration of an appeal of a lower court’s denial of a motion to enjoin both laws.  The Ninth Circuit heard oral arguments on January 6, 2026, but has not issued a decision.  If the Ninth Circuit upholds the lower court’s decision and the injunction is lifted, it is unclear whether initial SB 261 reports would be due when the injunction is lifted, and how CARB would approach enforcement related to a new deadline.  At this time, however, CARB is not enforcing SB 261 and reporting is voluntary.  Given that the Ninth Circuit declined to enjoin SB 253, the August 10, 2026 deadline for companies’ initial reports remains in effect. 

During the February 26, 2026 hearing, CARB stated that it will issue a separate rulemaking “later this year” on emissions reporting requirements under SB 253 for 2027 and beyond, including the related assurance requirements.  We will continue to closely monitor developments in litigation, rulemaking and guidance related to California’s climate reporting laws, keeping in mind that “The only thing that stays the same is, everything changes, everything changes.”