Approval of the draft regulation under SB 253 and SB 261
Photo credit: Getty Images / Unsplash+
At a public hearing yesterday afternoon, the members of the California Air Resources Board voted to approve the draft regulation under SB 253 and SB 261 that was proposed in December. SB 253 is the greenhouse gas emissions corporate reporting mandate and SB 261 requires subject companies to make climate-related financial risk disclosures. In this post, we highlight seven take-aways from the hearing.
- The regulation was at a minimum approved largely as proposed. As further discussed below, the CARB approval contemplates further evaluation of the applicability of SB 253 to insurance companies. The regulation proposed in December is available here.
- The regulation:Includes definitions of “doing business in California,” “revenue” and “parent” and “subsidiary.” These definitions track the approaches described by CARB at its November 2025 virtual public workshop, discussed in this Ropes & Gray post.Sets a deadline of August 10, 2026 for the first SB 253 reports on Scope 1 and 2 GHG emissions, and provides a cut-off for determining the applicable reporting year. This also tracks CARB’s November 2025 proposal. At yesterday’s hearing, CARB staff noted they considered and rejected a rolling deadline.Scopes out insurance companies, entities whose only business in California is employee compensation or payroll expenses, non-profits and government entities, among others.Establishes the fee structure. At the hearing, CARB staff estimated fees at $2,000 to $7,000 per in-scope entity, depending upon the program.
- Includes definitions of “doing business in California,” “revenue” and “parent” and “subsidiary.” These definitions track the approaches described by CARB at its November 2025 virtual public workshop, discussed in this Ropes & Gray post.
- Sets a deadline of August 10, 2026 for the first SB 253 reports on Scope 1 and 2 GHG emissions, and provides a cut-off for determining the applicable reporting year. This also tracks CARB’s November 2025 proposal. At yesterday’s hearing, CARB staff noted they considered and rejected a rolling deadline.
- Scopes out insurance companies, entities whose only business in California is employee compensation or payroll expenses, non-profits and government entities, among others.
- Establishes the fee structure. At the hearing, CARB staff estimated fees at $2,000 to $7,000 per in-scope entity, depending upon the program.
- The skinny regulation approved yesterday (seven pages) only addresses a limited number of the compliance items subject companies have been grappling with. In addition to proposing and adopting further implementing regulations required under SB 253, CARB will presumably over time hold additional workshops and publish further FAQs, guidance and reporting templates. Last December, CARB launched a public consultation on proposed regulations, as discussed in this Ropes & Gray post. CARB sought feedback on 29 specific questions, some of which are addressed in the regulation approved yesterday. CARB indicated at the hearing that further SB 253 regulations will be proposed later this year. These will address Scope 3 greenhouse gas emissions reporting, assurance and reporting deadlines in 2027 and beyond.
- CARB reiterated that its enforcement guidance remains in effect. That guidance provides accommodations for the first year of reporting. CARB’s enforcement guidance is discussed in this Ropes & Gray post. In its press release following the hearing, CARB noted that its priority is to focus on supporting compliance through stakeholder engagement and it will use enforcement discretion for good-faith first-year submissions.
- CARB’s action yesterday does not change the status of SB 261 compliance. Enforcement of SB 261 has been enjoined for the time being by the Ninth Circuit, as acknowledged by CARB at the hearing. The injunction does not extend to SB 253. See this Ropes & Gray post for a further discussion. In its hearing press release, CARB noted that more than 120 climate-related financial risk reports have been voluntarily submitted and made publicly available on its SB 261 public docket. Overall, a very small number of companies, with most companies electing not to voluntarily post. CARB's Enforcement Advisory relating to SB 261 and the voluntary docket are discussed in this Ropes & Gray post.
- At yesterday’s hearing, there was a lot of discussion concerning insurance companies and SB 253. In contrast to SB 261, SB 253 does not expressly carve-out insurance companies. However, CARB’s proposed regulation did so. At the hearing, Senator Wiener – the sponsor of SB 253 – criticized the exclusion as inconsistent with the statute. Many others also spoke in favor of including insurance companies. Conversely, many speakers at the hearing advocated for their exclusion. There was a difference of opinion in the room as to whether insurance companies are subject to an equivalent California Department of Insurance reporting requirement. After discussion, as part of approving the regulation, the Board directed the CARB staff to coordinate with the CDI to evaluate CDI emissions reporting requirements and propose future regulatory requirements for insurance companies if they are not otherwise required to submit data to the CDI.
- Yesterday’s action is not final adoption of the regulation, but that is getting closer. In any event, the regulation is at a minimum largely final. If CARB staff determines that additional conforming modifications to the regulation are appropriate, the modified regulatory language will be made available for public comment, with any additional supporting documents and information. In connection with that process, written comments submitted during the public review period will be considered and any further modifications will be made available for public comment for at least 15 days. The staff may present the regulation to the Board for further consideration if warranted and, if not, the staff will take final action to adopt the regulation after addressing all appropriate conforming modifications. If CARB staff determines that additional modifications are not needed, they will take final action to adopt the regulation in the form released to the public last December.
Ropes & Gray has a leading ESG, CSR and business and human rights compliance practice. We offer clients a comprehensive approach in these subject areas through a global team with members in the United States, Europe and Asia. Senior members of the practice have advised on these matters for more than 30 years, enabling us to provide a long-term perspective and depth and breadth of experience that few firms can match.
Published by
Ropes & Gray LLP
Ropes & Gray LLP
