Delay Proposed for California Climate Laws

Governor Gavin Newsom proposed amendments to California climate laws SB 253 and 261 that would postpone implementation by two years and give the California Air Resources Board (CARB) more flexibility in creating the rules. 

These policies, signed into law last October, are the US's most far-reaching climate disclosure mandates. They require both public and private companies that ‘do business’ in California to report on their Scope 1, 2, and 3 emissions and climate risks.  

SB 253 requires approximately 5,000 companies (> $1 billion annual revenue) to disclose Scope 1 and 2 emissions in 2026 and Scope 3 the year after. SB 261 requires 10,000 companies (> $500 million annual revenue) to report on climate risks beginning in 2026 and every other year after that. 

Governor Newsom signaled his concerns when he signed these bills into law, saying: “The implementation deadlines in this bill are likely infeasible, and the reporting protocol specified could result in inconsistent reporting across businesses subject to the measure. I am directing my Administration to work with the bill's author and the Legislature next year to address these issues… I look forward to working with the Legislature on these modifications to ensure we achieve this bill's goals.”

The proposed amendments would delay Scope 1 and 2 until 2028 and Scope 3 until 2029, giving CARB an additional two years to develop implementing rules. They would also give CARB the option to work with a third-party reporting agency and provide more flexibility to phase in Scope 3 reporting.

Delays were widely expected as the deadline for CARB to finalize the rules was in less than six months (Jan 1st, 2025), and SB 253 and 261 are under litigation.

Senator Scott Weiner, the architect of SB 253, challenged the proposed delay, saying, “The language...does not represent an agreement with the Legislature… The Administration’s proposal significantly delays the implementation of a landmark climate action law that already has a 6-year phase-in.”

The California climate disclosure policies are more stringent than the Securities and Exchange Commission (SEC) climate rule - which is currently on hold while multiple lawsuits challenging the rule are resolved - and added a sense of inevitability to mandatory climate reporting in the US. The proposed amendments introduce uncertainty about when and how companies will have to report and may cause some to pause their preparations. Negotiations on the proposed delays will likely continue up until an August 31st deadline. 

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US Carbon Border Tariff?

The “Providing Reliable, Objective, Verifiable Emissions Intensity and Transparency (PROVE IT)” Act is set to be introduced in the House of Representatives. The bi-partisan bill would create a US version of the EU’s carbon import tariff, the Carbon Border Adjustment Mechanism (CBAM).

A similar version of the bill was approved by the Senate Environment and Public Works (EPW) Committee in January. Both versions would authorize the Department of Energy to study the carbon intensity of nearly two dozen domestic products against global imports. The study is expected to find that US products have much lower emissions than foreign equivalents and that the difference should be taxed at the border.  

Despite a minority of Republicans opposing the bill, calling it a precursor to a carbon tax, it has widespread support from industry associations, including the US Chamber of Commerce, which wrote a letter asking for co-sponsors. Greg Bertelsen, Climate Leadership Council CEO, said, “The…strong bipartisan support [in the Senate] and introduction in the House could make it a candidate for being attached to [a must-pass bill] at the end of the year.”

CSRD Transposition Deadline Comes and Goes

All EU member states were meant to have transposed the EU’s Corporate Sustainability Reporting Directive (CSRD) into national law by July 6th. However, only five of the 27 member states have fully adopted and approved implementation legislation. This helpful tracker gives an overview of each country’s status and their changes to the policy.

James Marlow of Linklaters said the transposition delays will cause “additional challenges” for compliance with regulations “already replete with challenges.” Adding that “Any delay in meeting the transposition deadline has a knock-on impact on practical compliance and means there is scope for uncertainty as to the exact requirements on in-scope companies.”

In related news, the Global Reporting Initiative (GRI) released a new GRI-ESRS Linkage Service to help companies that report using the GRI standards to align with CSRD reporting. 

Making Britain Green Again

Last week’s UK election was a landslide win for the more liberal Labor party, ending 14 years of conservative government. It looks certain that the UK’s new Labor government under Prime Minister Sir Keir Starmer will propose new green policies.

The Brits' appetite for green policies was reflected in the UK Green Party winning a record four seats. Also, the landslide win for Labor was in part due to its climate promises. 

Wasting no time, the new government reversed a de facto ban on onshore wind projects,  established a clean energy task force aiming to deliver clean, cheaper energy by 2030, and released a National Wealth Fund to boost funds for net zero investments.

365 Days of 1.5C+ 

June marked the 13th hottest month in a row, making it 95% likely that 2024 will be the hottest year ever. The average global temperature has exceeded the 1.5°C threshold (above pre-industrial average temperatures) for more than a year now. 

Carlo Buontempo of the Copernicus Climate Change Service said, “At this rate of warming, we will [officially] exceed the 1.5°C threshold in terms of the Paris Agreement in the early 2030s.”

The heat strengthened Hurricane Beryl into a record-breaking category five storm, causing death and destruction across the Caribbean and Texas’ coast, and pushed more than 160 million people in the US under a heat advisory warning.  Buontempo added, “This streak of record-breaking months will sooner or later end, hopefully, sooner rather than later. But this doesn’t mean that the problem is over because, fundamentally, the climate system is warming up.”

The views expressed on this website/weblog are mine alone and do not necessarily reflect the views of my employer. 

Other Notable News:

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• Climate change is driving a surge in US insurance costs, but costs are not always in line with where climate risks are. This article covers the market distortions.

• My company BCG just released a new white paper with insurance company Howden, which looks at the critical role insurance has in de-risking markets and communities in the transition to a net zero economy.

• New research from the London Stock Exchange found that the green economy outperformed the wider economy over the last ten years.

• COP 29 host country Azerbaijan will start a $500 million climate fund using the country’s vast oil wealth. 

• Amazon hits its target of 100% renewable energy sources in its operations seven years ahead of schedule. However, some experts say their calculation methods were not accurate. 

• This article from FT explains how free market capitalism will never beat the climate crisis as it fails to price the future correctly. The political will for government subsidies, carbon taxes, and a reworking of energy markets will have to be found.

• To help offset some of its AI-driven emissions, Microsoft has bought a record-breaking 500,000 tonnes of direct air capture carbon credits from carbon capture company 1point5. 

• Deforestation in Colombia fell to a 23-year low in 2023, with a 36% drop mostly due to environmental protections on the Amazon.

Notable Podcasts: 

• This week’s edition of Outrage and Optimism, the final of this series, summarizes the climate implications of the French and UK elections and looks ahead to the US elections. The hosts focus on the UK elections and what a Labor majority will mean for the future of climate action there. 

• In this week’s episode of the BBC’s The Climate Questions, host Grahiagh Jackson explores one of the regularly overlooked aspects of carbon emissions, black carbon. Black carbon comes from the burning of fossil fuels and biomass. This episode explores how it accelerates glacier thawing, impacts human health, and how we might reduce it.

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