The Nickel Report

The past year saw the California Air Resources Board (CARB) grapple with implementation of California’s climate disclosure laws, SB 253 (Climate Corporate Data Accountability Act) and SB 261 (Climate-Related Financial Risk), both of which were enacted in 2023 with first compliance deadlines in 2026.

What Happened in 2025

CARB’s efforts in 2025 reflected the challenges of implementing California’s sweeping, first-of-their-kind disclosure mandates in light of the practical considerations for any regulatory program, including identifying who the requirements apply to. We chronicled the key developments of the past year, including CARB’s issuance of:

• An SB 253 enforcement discretion notice and information solicitation to guide the rulemaking process (discussed here).
• A “preliminary” list of entities potentially subject to reporting requirements (discussed here).
• A draft template for reporting Scope 1 and 2 greenhouse gas (GHG) emissions under SB 253 (discussed here).
• Updated implementation guidance, including FAQs and an SB 261 Reporting Checklist.

CARB also held a public workshop in November to discuss regulatory concepts for SB 253 and 261 compliance and implementation, on the same day that the U.S. Court of Appeals for the Ninth Circuit issued an order enjoining CARB from enforcing SB 261 (discussed here). As a result, CARB issued another enforcement advisory, explaining that it will not enforce SB 261 against covered entities for failing to post and submit climate-related risk reports by the January 1, 2026, statutory deadline but noting that CARB has nonetheless opened up a docket (available here) to accept submittals from any entities “that may choose to report voluntarily” under SB 261.  

To close out the year, CARB kicked off its rulemaking process, posting an initial proposed regulation for public comment on December 23, 2025. The proposal sets forth key definitions for determining SB 253/261 applicability, an August 10, 2026, deadline for submitting initial SB 253 reports, a formula for CARB to calculate program administration fees, and a process for CARB to issue written fee determinations for each reporting entity.

Written comments on the proposal are due on February 9, 2026. CARB also noticed a public hearing for February 26, 2026, where the CARB Board will consider adopting the proposed regulation.

What to Expect in 2026

A number of developments are expected in 2026, which will almost certainly impact the scope and substance of companies’ obligations under SB 253 and 261:

• Ninth Circuit Decision on Injunction Scope and Duration. Oral argument is scheduled for January 9, 2026, before a merits panel of the Ninth Circuit in an appeal filed by industry seeking to enjoin the enforcement of SB 253 and 261 pending resolution of their claims that the laws are unconstitutional. The merits panel will consider whether or not the lower court properly denied the industry plaintiffs’ requested injunction, which in part will require the Ninth Circuit panel to determine how likely the plaintiffs are to succeed on the merits of their claims that SB 253 and SB 261 are unconstitutional. A decision from the Ninth Circuit after the January 9, 2026, argument will likely take time—thus, it could be weeks or months before entities subject to these laws will know whether the SB 261 injunction will remain in place or be lifted, or whether SB 253 will also be enjoined.
• Conclusion of CARB “Initial” Rulemaking Process. As noted above, CARB is currently taking comments on its proposed “initial” regulation. The rulemaking package is scheduled to be presented to the Board for adoption at a public hearing scheduled for February 26, 2026. While the proposed initial regulations are fairly straightforward, they present a number of potentially thorny legal and compliance issues almost certain to be raised by commenters—and potentially subject to judicial challenge once the initial regulation is finalized—including:
• CARB’s implementation fee proposal, such as the inclusion of CARB’s “legal defense costs” in the overall program costs that CARB will assess to regulated entities, as well as the assessment of SB 261 implementation fees on an annual basis where the compliance obligation is every other year.
• Tensions between (1) CARB’s guidance stating that—for applicability purposes—it will attribute subsidiary revenue to a parent company where related corporate entities file California tax returns as a unitary business and (2) CARB’s proposed regulatory definition of “revenue,” which contains no such concept for unitary filers.
• Implications of attributing subsidiary revenue to a parent company where the parent would not otherwise have its own reporting obligation, including potential expansion of SB 253 reporting scope in light of GHG Protocol provisions concerning organizational boundaries.
• CARB’s ability to codify regulatory exemptions that are not authorized by statute, or applicability provisions that contradict the authorizing statute.
• Confusion about CARB’s proposals to define annual “revenue” and “doing business in California” by reference to specific provisions in the California Revenue & Taxation Code, especially for companies with income that is not reported as “sales” in the tax return fields that CARB has identified as relevant to determining applicability.
• First SB 261 Reports (Potentially) Due. While enforcement of SB 261—and its initial January 1, 2026, reporting deadline—is enjoined for the time being, it remains to be seen whether this injunction will be lifted or remain in place. Reporting entities must therefore determine whether to proceed with completion of their SB 261 reports (in case the injunction is lifted and reports must be submitted in short order) or to “wait and see” what happens with CARB’s implementation and enforcement of the law.
• First SB 253 Reports (Potentially) Due. Similar to the uncertainty with respect to SB 261, it is uncertain whether the enforcement of SB 253 will be enjoined after the January 2026 oral argument. If the law is not enjoined, in-scope entities must continue their efforts to prepare Scope 1 and 2 inventories for public disclosure by August 10, 2026. The November updates to CARB’s FAQs include additional leniency, stating that (1) entities who were not collecting emissions data (or were not planning to collect data) at the time of the December 2024 enforcement notice “are not expected to submit Scope 1 and 2 reporting data” for the first reporting cycle, but rather any reporting entity not submitting emissions data in 2026 may submit a statement to CARB on company letterhead invoking the 2024 enforcement notice and indicating that it has not collected emissions data for reporting; and (2) entities who were collecting emissions data are not required to adhere to the limited assurance requirement, which is otherwise mandated under SB 253.
• CARB Additional SB 253 Rulemaking Process. CARB has stated that it will undertake an additional rulemaking process to further develop its SB 253 regulatory program. This subsequent rulemaking is expected to address SB 253’s data assurance requirements, enforcement, recurring reporting deadlines beyond 2026, templates for emissions reporting, and reporting categories for Scope 3 emissions. This additional rulemaking will provide an opportunity for stakeholders to provide input on the these key aspects of SB 253 reporting.

It has been a privilege supporting our clients in analyzing and addressing the developments of the past year. We will continue to monitor developments and provide updates. Happy new year!