After delaying 2026 SB 253 reporting last month, the California Air Resources Board (CARB) recently hosted a workshop discussing new requirements for 2027 emissions reporting under SB 253. 2027 will mark the first year that SB 253 reports will require Scope 3 data, and CARB is still ironing out the regulatory details. CARB will propose rules later this year containing the concepts and requirements discussed at the workshop. A recent Sullivan & Cromwell memo reviews the core general requirements put forward at the workshop:
- Quantification Methodologies. Companies would be required to disclose the GHG quantification methods and measurement approaches used for the calculation of all emissions in their SB 253 reports, including consolidation approach for organizational boundaries, Global Warming Potential values and assessment report vintage, emission factor sources for all calculations with key attributes, and quantification method (e.g., direct measurement or calculation-based method), including any process-specific tools or models used.
- Measurement Uncertainty. Companies would be required to assess the uncertainty associated with the quantification methodologies used to calculate emissions, including a quantitative explanation where applicable. Where quantitative estimation of uncertainty is not feasible or would impose unreasonable burden or cost, the company must provide an explanation and conduct a qualitative assessment of uncertainty.
- Missing Data Protocols and Substitution Procedure. Companies would be required to identify missing data elements or parameters and document any substitute data sources or estimation methods used to quantify emissions in place of the missing data.
- Reporting Biogenic Emissions. CARB staff previewed draft regulatory language that would require companies to report biogenic CO2 emissions from the combustion, consumption or biodegradation of biomass and biomethane in their SB 253 reports, and for such emissions to be reported separately from Scope 1, 2 and 3 emissions totals.
- Reporting Emissions Reductions or Removals. Companies may report voluntary investments (e.g., carbon credits, offsets), management activities or other activities that result in fossil or biogenic emissions reductions or removals. These voluntary investments or management activities must be reported separately from Scope 1, 2 or 3 emissions.)
- Data Exclusions. Companies would be permitted to exclude GHG emissions sources, activities, Scope 3 categories or other information ‘where the omission, misstatement, or obscuring could not be reasonably expected to influence the decisions, assessments, or understanding of users of the disclosure regarding the reporting entity’s GHG emissions inventory, climate-related risks, opportunities, or impacts.’ CARB is currently planning to propose requiring companies to assess data exclusions using both quantitative and qualitative factors, and to explain and disclose the basis for all data exclusions. For each category, source, facility, operation, or disclosure excluded, the company would also be required to disclose an estimate of the emissions magnitude of exclusions, if quantifiable.
- Notifying CARB of Changes to Methodologies. In annual GHG reports, companies would be required to include disclosures of changes to GHG quantification or accounting methods made from the previous reporting year or during the current reporting period, and the reasons for those changes.
- Recalculation of Previous Year Data. Companies that change their GHG emissions calculation methodologies (including for corporate structuring or accounting reasons) would be required to determine whether the cumulative effect of all structural and methodological changes would result in a change greater than 5% of their total GHG emissions for the base year (i.e., their first reporting year under SB 253). If so, the company must recalculate the reported emissions for all affected previous reporting years, and the updated emissions data for those years must be included in the next annual GHG emissions report along with a description of the changes that led to the recalculation.”
Our members can learn more about GHG disclosures here.
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