Carbon Offset Disclosure Requirement Enacted

Governor Gavin Newsom signed into law AB 1305, which requires businesses selling voluntary carbon offsets (VCOs) within California to disclose specified information on their internet website about the applicable carbon offset project.

Individuals and corporations can purchase carbon offsets to compensate for their greenhouse gas (GHG) emissions. With a carbon offset, an individual or business pays another entity to reduce or remove emissions rather than to reduce their emissions themselves. Nonetheless, there is growing concern about the validity of emission reductions from offsets and the potential for fraud.

• Offset Details: The law requires businesses to report details regarding the project generating the offset. These include the location, timeline, dates, quantities of offset GHG emissions, total project emissions, type of project, durability of the project, compliance with voluntary standards, and whether there is independent validation or verification of the project.

• Accountability Measures: The law also requires offset sellers to report details on accountability measures if a project is not completed or does not meet the projected emission reductions or removal benefits.

• Calculation Methods: Businesses are also required to report pertinent data and calculation methods that are needed to independently reproduce and verify the number of offsets issued.

• Net Zero Claims: The bill also requires an entity that purchases or uses voluntary carbon offsets that makes claims regarding the achievement of net zero emissions or similar claims to disclose on the entity’s internet website specified information. This includes information on how a claim was determined to be accurate or actually accomplished, how interim progress toward that goal is being measured, and whether there is independent third-party verification of the company data and claims listed.

• Penalties: The bill also makes a person who violates these provisions subject to a civil penalty of not more than $2,500 per day for each violation up to a total of $500,000.

• Annual Updates: The bill requires disclosures to be updated no less than annually.

Veto of Other Carbon Offset Legislation

On the day he signed AB 1305, Newsom vetoed SB 390, which would have added certain claims about voluntary carbon offsets to the False Advertising Law for offsets that are known or should be known to not be quantifiable, real, and additional. In his veto message, Newsom said the bill “could inadvertently capture well-intentioned sellers and verifiers of voluntary offsets, and risks creating significant turmoil in the market for carbon offsets, potentially even beyond California.”