The California Air Resources Board (CARB) is moving forward with climate disclosure rules under SB 253 (emissions reporting) and SB 261 (climate risk reporting). =
- SB 253: Requires public and private companies doing business in California with over $1 billion in annual revenue to disclose their scope 1 and scope 2 emissions starting in 2026, and scope 3 in 2027
- SB 261: Requires public and private companies doing business in California with over $500 million in annual revenue to prepare biennial reports on climate-related financial risks, and how they are managing those risks. The first reports are due January 1, 2026.
Proposed regulations are expected on October 14, 2025, with final approval anticipated in December 2025. A public session in August delivered key updates, including new reporting deadlines, fee structures, and some clarification on what constitutes “doing business in California.” While litigation continues, companies should prepare now to collect 2025 emissions data and draft climate risk reports.
Rulemaking Timeline
CARB announced its plans to release proposed rules for SB 253 and SB 261 on October 14, 2025. A 45-day public comment period will follow, with final board consideration scheduled for December 11–12, 2025—timed with the next public session.
- SB 253 (Emissions Reporting): Covered companies will need to submit 2025 emissions data in 2026. CARB has proposed extending the first reporting deadline to June 30, 2026 (from the original January 1, 2026), though feedback is still being collected on this change.
- SB 261 (Climate Risk Reports): The first climate-related financial risk reports remain due January 1, 2026. Starting December 1, 2025, CARB will open a public docket, where companies must post the link to their reports. CARB will keep this public docket open until July 1, 2026.
Litigation Update
Earlier this summer, a federal judge in California’s Central District Court denied the U.S. Chamber of Commerce and other business groups’ request for a preliminary injunction. The plaintiffs argued that the laws infringed on First Amendment rights, but the court disagreed. This means SB 253 and SB 261 remain on track for implementation while the case proceeds. Arguments on the merits are not expected until early 2026.
Clarifications on Climate Risk Reports
CARB has emphasized that initial SB 261 climate reports may reasonably cover either fiscal year 2023–2024 or fiscal year 2024–2025, depending on a company’s reporting cycle. This provides some flexibility as businesses align with the Task Force on Climate-Related Financial Disclosures (TCFD) or other established frameworks.
Fees and Covered Entities
CARB also shared updates on compliance fees and the scope of covered entities:
- Annual Fee (SB 253): $3,106
- Annual Fee (SB 261): $1,403
- Companies with >$1B in revenue are subject to both fees
- Fees will be adjusted for inflation and any program deficits in future years.
Importantly, CARB will begin validating the preliminary list of covered entities, and fees will apply to every subsidiary in scope, not just parent companies.
Open Questions
Two significant questions remain unresolved in the information we have now:
- Revenue Thresholds: It is still unclear whether revenue calculations will be based on California-only, U.S.-only, or global revenue.
- Parent vs. Subsidiary Reporting: CARB has not yet finalized how corporate structures will be treated when determining compliance obligations.
CARB’s FAQ (California Corporate Greenhouse Gas Reporting and Climate-Related Financial Risk: FAQ’s) hints that if a company exceeds the revenue threshold—even if most of its business is outside California—it could still fall under the requirements, depending on applicability provisions.
Defining “Doing Business in California”
CARB’s initial thinking is to align with the Franchise Tax Board’s definition of “doing business” in the state. A company meets the standard if it is engaging in financial transactions and meets one of the following conditions in a reporting year:
- Organized or domiciled in California
- Sales in the state exceed $735,019 (including through agents/contractors)
- Property in California exceeds $73,502 or 25% of the entity’s total property
- Compensation paid in California exceeds $73,502 or 25% of total compensation
What This Means for Businesses
With proposed rules due in mid-October, companies should begin preparing for compliance now:
- Assess whether your organization (and subsidiaries) could be considered “doing business in California.”
- Identify whether 2025 data collection processes are sufficient for SB 253 emissions reporting.
- Begin preparing climate risk disclosures aligned with TCFD or equivalent frameworks to meet SB 261’s January 2026 deadline.
The path forward is becoming clearer, but critical details—like revenue definitions and subsidiary treatment—are still to come. We’ll continue tracking developments as CARB’s rulemaking process unfolds.
