CARB Proposes Regulations Implementing California GHG Emissions and Climate-Related Financial Risk Reporting Laws

After hosting a series of workshops and issuing multiple rounds of materials, including enforcement notices, checklists, templates, and other guidance, the California Air Resources Board (CARB) has proposed regulations to implement the Climate Corporate Data Accountability Act (SB 253) and the Climate-Related Financial Risk Act (SB 261) (both as amended by SB 219), which require large U.S.-based businesses operating in California to disclose greenhouse gas (GHG) emissions and climate-related risks. CARB also published a Notice of Public Hearing and an Initial Statement of Reasons along with the proposed regulations. While CARB’s final rules were statutorily required to be promulgated by July 1, 2025, these are still just proposals. CARB’s proposed rules largely track earlier guidance regarding how CARB intends to define compliance obligations, exemptions, and key deadlines, and establish fee programs to fund regulatory operations.

Notably, the proposed regulations do not further flesh out the mechanics of SB 253’s GHG reporting requirements or the substance of SB 261 climate-related financial risk reports. CARB states that it “will undertake a second rulemaking to establish future reporting dates beyond 2026 and to provide additional details for reporting contents and format, data assurance, and more.” In the meantime, prior to proposing these regulations, CARB posted both a reporting template for SB 253 GHG emissions reporting and a checklist for SB 261 climate-related financial risk reports.

Below, we highlight key provisions of the proposal. Please see prior alerts for more in-depth coverage of CARB’s workshops, guidance, initial list of covered entities, and analysis of the Ninth Circuit’s decision to stay implementation of SB 261 and CARB’s response.

Key Proposed Definitions:

Doing business: means actively engaging in any transaction for the purpose of financial or pecuniary gain or profit.

Doing business in California: means doing business and either (1) being organized or commercially domiciled in California; or (2) having sales in California greater than $500,000 or greater than 25% of total sales, whichever is less. Wholesale sales of electricity do not count for purposes of determining sales in California.

Parent: means a business entity that has ownership interest in or control of another business entity by direct corporate association. The indicia determining ownership or control are set forth in the definition of “subsidiary.”

Revenue: CARB proposes to adopt California Revenue and Taxation Code § 25120(f)(2)’s meaning of “gross receipts,” not revenue net of expenses. CARB will determine a covered entity’s revenue to be the lesser of the entity’s two previous fiscal years of revenue. This is a notable departure from the statute, which expressly states that “[a]pplicability shall be determined based on the business entity’s revenue for the prior fiscal year.” CARB’s rationale is that using two years will “help[] mitigate the potential for entities to cycle in and out of the reporting program due to unforeseeable or ‘one-off’ type scenarios.”

Subsidiary: means a business entity that another business entity has ownership interest in or control of by direct corporate association. A subsidiary may operate as a separate legal entity but is under the control of the parent entity due to this direct corporate association, which can influence the subsidiary’s operations, management, or financial decisions. The following indicia of control determine ownership or control:

(A) Greater than 50 percent of ownership of any class of listed shares, the right to acquire such shares, or any option to purchase such shares of the other entity;

(B) Greater than 50 percent of common owners, directors, or officers of the other entity;

(C) Greater than 50 percent of the voting power of the other entity;

(D) In the case of a partnership other than a limited partnership, greater than 50 percent of the interests of the partnership;

(E) In the case of a limited partnership, greater than 50 percent of control over the general partner or greater than 50 percent of the voting rights to select the general partner; and

(F) In the case of a limited liability corporation, greater than 50 percent of ownership in the other entity regardless of how the interest is held.

Proposed Exemptions (from proposed regulatory text):

(1) Non-profit or charitable organizations that are tax-exempt under the Internal Revenue Code;

(2) A business entity that is subject to regulation by the Department of Insurance in this state, or that is in the business of insurance in any other state.

(3) Federal, State and local government entities, and companies that are majority-owned by government entities (>50.00%);

(4) A business entity whose only activity within California consists of wholesale electricity transactions; and

(5) A business entity whose only business in California is employee compensation or payroll expenses, including teleworking employees.

Fees:

CARB is required to collect an administrative fee from covered and reporting entities to defray the implementation cost of these programs. As previously indicated, CARB proposes to assess a flat fee, calculated annually based on program costs and CPI adjustment. CARB will issue annual fee determination notices by September 10, 2026.

Deadlines:

When	What	Who
By Aug 10, 2026	First Scope 1 & 2 GHG report due for the applicable preceding fiscal year (as defined in the proposed regulation)	Reporting entities with revenue > $1B
Sept 10, 2026 and onward	Annual fee determination notices issued	All covered/reporting entities
60 days after invoice	Fee payment due	All covered/reporting entities

CARB plans to establish future reporting deadlines beyond 2026 in future rulemakings. Given that the California rulemaking process generally takes six to nine months to complete, there is a possibility that the proposed deadlines will need to be moved again.

Enforcement:

As previously discussed, enforcement of SB 261 is currently stayed (though CARB has opened a docket for voluntary compliance), and CARB is interpreting its December 2024 enforcement notice as meaning that reporting entities may “submit Scope 1 and Scope 2 emissions for their prior fiscal year based on information they already have or were collecting when that Notice was issued. Entities that were not collecting data or were not planning to collect data, at the time the Enforcement Notice was issued, are not expected to submit Scope 1 and Scope 2 reporting data for this first reporting cycle.”

Covered and reporting entities must maintain records for five years demonstrating that they meet the “revenue” and “doing business in California” thresholds of Health and Safety Code sections 38532 and 38533, and must provide these records to CARB if requested.

With regard to fee enforcement, CARB is authorized to contract and coordinate with external entities—including but not limited to the Board of Equalization or the California Franchise Tax Board—to audit covered and reporting entities and pursue collections of delinquent fees.

Public Participation:

The comment period for this proposal formally opens December 26, 2025, and closes February 9, 2026. Comments may be submitted here. CARB will host a public hearing at 9:00 am PT on February 26, 2026 – the agenda will be posted here by February 16, 2026.

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Crowell & Moring attorneys continue to monitor CARB’s activities and will provide updates and analysis as CARB moves towards implementation of SB 253 and SB 261 should they survive judicial review.

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