AB 1305: Company websites must disclose carbon and climate impact

One of the main challenges in the voluntary carbon markets is the lack of standardization, integrity and transparency. Without clear standards for carbon credits, it can be difficult for companies to know whether they are truly reducing their emissions. There are no specific regulations governing voluntary market participation. As compared to carbon credits that are bought and sold via a cap-and-trade system, use of voluntary carbon offsets has always carried the risk of giving the misimpression that they’re making a larger impact than they actually are. Or worse, organizations can use carbon offset programs in a manner that misleads consumers and makes themselves appear sustainable when they aren’t.

This uncertainty is about to create significantly increased litigation risk for companies that market, sell, buy and use these voluntary credits, as well as companies that merely make claims about reducing their Greenhouse Gas (GHG) emissions, or achieving carbon reduction goals.

AB 1305 requires all companies that operate within California and that market, sell, buy or use voluntary carbon credits within the state, as well as all companies that make claims or imply that they are carbon neutral or that they are reducing their greenhouse gas emissions, or their products do not add GHGs to the climate, among other similar claims, must post disclosures of very detailed information substantiating those claims on their websites.

The type of information that must be posted includes identification of methodologies, emissions reduction pathways, data on carbon reduction math, durability of the reductions, project locations, and registry numbers, and whether there is third party verification of the same.

The law creating this new website disclosure requirement is AB 1305, and it is an orphan in the sense that there is no regulatory agency that has been designated to develop implementing regulations or provide guidance. Companies must read the statute and determine their own compliance obligations.

Enforcement of AB 1305’s website disclosures will be made by public prosecutors, such as County District Attorneys, City Attorneys and the Attorney General, and the ultimate arbiter of whether a company made accurate disclosures will be these prosecutors and if litigated, the judicial branch.

While the language of AB 1305 states that the requirements commence on Jan. 1, 2024, the author has indicated his intent that the online disclosures commence on Jan. 1, 2025, and we expect to see clarifying legislation on the start date soon. Penalties for failing to post the disclosures on the company website are $2,500 per day, up to a maximum of $500,000 for each civil action brought.