California’s new AB1305 – the Voluntary Carbon Market Disclosures Act may not have captured as much attention as the state’s other new climate disclosure requirements, but it is still broadly applicable. Although the first part of the legislative language concerns only businesses that are “marketing or selling voluntary carbon offsets within the state”, the rest of the law covers many more companies – and becomes effective in less than two months (January 1, 2024).
The law is very short – the text that applies to users of offsets is below:
An entity that purchases or uses voluntary carbon offsets that makes claims regarding the achievement of net zero emissions, claims that the entity, related entity, or a product is “carbon neutral,” or makes other claims implying the entity, related entity, or a product does not add net carbon dioxide or greenhouse gases to the climate or has made significant reductions to its carbon dioxide or greenhouse gas emissions shall disclose on the entity’s internet website all of the following information pertaining to each project or program:
(a) The name of the business entity selling the offset and the offset registry or program.
(b) The project identification number, if applicable.
(c) The project name as listed in the registry or program, if applicable.
(d) The offset project type, including whether the offsets purchased were derived from a carbon removal, an avoided emission, or a combination of both, and site location.
(e) The specific protocol used to estimate emissions reductions or removal benefits.
(f) Whether there is independent third-party verification of company data and claims listed.
(g) This section does not apply to entities that do not operate within the state or do not purchase or use voluntary carbon offsets sold within the state.
The law continues with regard to claims of Net-zero and carbon neutrality made by any company:
An entity that makes claims regarding the achievement of net zero emissions, claims that the entity, a related or affiliated entity, or a product is “carbon neutral,” or makes other claims implying the entity, related or affiliated entity, or a product does not add net carbon dioxide or greenhouse gases … to the climate or has made significant reductions to its carbon dioxide or greenhouse gas emissions … shall disclose on the entity’s internet website all of the following information pertaining to all greenhouse gas emissions associated with its claims:
(a) All information documenting how, if at all, a “carbon neutral,” “net zero emission,” or other similar claim was determined to be accurate or actually accomplished, and how interim progress toward that goal is being measured. This information may include, but not be limited to, disclosure of independent third-party verification of all of the entity’s greenhouse gas emissions, identification of the entity’s science-based targets for its emissions reduction pathway, and disclosure of the relevant sector methodology and third-party verification used for the entity’s science-based targets and emissions reduction pathway.
(b) Whether there is independent third-party verification of the company data and claims listed.
(c) This section does not apply to entities that either do not operate within the state, or that do not make claims within the state.
As in the other new California climate laws, there is ambiguity with the phrase “operate within the state” which could be interpreted very broadly – capturing a wider range of companies than might be initially thought. There is also the question of how “significant reductions” will be defined – the latest question posed and answered in our Q&A Forum.
Is your company’s offset due diligence process robust enough to ensure you know if any purchased offsets originate from California, triggering reporting? It won’t be too difficult for media, AI bots and NGOs to make these determinations – creating regulatory risk for companies that don’t investigate and report.
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