AB 1305: California Introduces New Disclosure Requirements on Carbon Offsets and Net-Zero Related Claims
Insights
This article was last updated in December 2024.
On October 7th 2023, in addition to passing its Climate Accountability package of legislation (SB253 and SB261), the State of California passed the Voluntary Carbon Market Disclosures Act (VCMDA), also known as “AB 1305”. AB 1305 is intended to support the goal of strengthening the integrity of voluntary carbon offsetting and climate goal-related claims.
While AB 1305 became effective on January 1, 2024, the author of the bill seeks to clarify that the intended date for the first disclosure is January 1, 2025. By the end of the legislative session on August 31, 2024, the California legislature did not pass AB 2331, a bill intended to amend AB 1305. AB 2331 was meant to be a “clean-up” bill that would have delayed the enforcement of AB 1305 until July 1, 2025, and clarified several ambiguities in the existing statute. Unless another amending bill is introduced in the January 2025 legislative session, the current disclosure timeline will remain unchanged.
Anthesis will monitor further developments and will update this article accordingly.
Who is affected?
AB 1305 affects public and private companies of any size operated within California which:
- Market and/or sell voluntary carbon offsets in California.
- Purchase and/or use carbon offsets to make climate-related emission claims (such as carbon neutrality and/or net zero emissions) within California.
- Make any climate-related emission claims within California.
It should be noted that AB 1305 does not define “operate within the state.” However, judging by the goal of the law, we can assume that any activities launched by an entity to interact with customers in California or aim to reach the California market should be included, such as transacting business in this state from a branch or other physical location or by other means, soliciting customers or employing residents of this state, or publishing statements on a publicly-accessible website. In other words, although it is a California law, it will impact companies nationwide and even foreign companies that meet the criteria.
What are the key requirements?
From the first due date, and annually thereafter:
- Entities marketing and/or selling offsets in California must provide specified information on their websites regarding the projects related to the offsets.
- Companies that purchase or use carbon offsets to make corporate or product related carbon neutral, net zero and/or emissions reduction claims are required to disclose specific information related to the carbon offsets on their public website. Required information includes the name of the entity selling the offsets, the project identification number(s), and name and type of any protocol used to calculate related emissions benefits.
- Companies making carbon neutral or net zero claims and/or claims that they have achieved significant emissions reductions must disclose information on how their claims were determined to be accurate or accomplished, and how interim progress toward their goal(s) is being measured as well as whether there is independent third-party verification of company data and claims listed.
Failure to comply carries a potential fine of up to $2,500 per day for each day that information is not available or is inaccurate on the company’s website, up to a maximum of $500,000.
How to begin with compliance?
The following steps will help companies comply with AB 1305 requirements:
- Align climate goals and related claims with relevant independently established standards, frameworks, and universally accepted definitions, and reference such sources on the corporate website. Seek third party validation of climate goals where programs exist (e.g., SBTi for Net Zero or Climate Neutral Certification Standard).
- Work with International Carbon Reduction and Offset Alliance (ICROA) accredited organisations to source high integrity offsets and prioritize projects that have been assessed to conform with ICROA endorsed offset project standards.
- Follow the Voluntary Carbon Markets Initiative Claims Code of Practice, which establishes a claims rulebook for purchasers and users of carbon offsets.
- Ensure recordkeeping for voluntary carbon offset purchases or use is adequately detailed and documented to meet the disclosure requirements in AB 1305.
- Expand the scope of independent third-party assurance beyond the annual emissions inventory to include data underlying public claims such as year over year trends, progress against emissions reduction targets, and carbon neutral achievement (i.e., offset purchases relative to emissions).
How Anthesis can help
Through our comprehensive and integrated advisory, digital, and carbon markets services, Anthesis can support you in preparing for these new California disclosure requirements. Areas of support include:
- Helping you to define your best carbon credit investment strategy and source high integrity carbon offset purchases through our high-quality carbon credits portfolio – with decades of experience in carbon markets through Climate Neutral Group, part of Anthesis and an ICROA member, Anthesis applies a strict set of criteria when selecting third-party projects or developing our own carbon projects to ensure their maximum quality.
- Developing credible climate goals and targets, supporting third party validation (e.g., SBTi), providing world class emissions accounting advice, and delivering your assurance-ready emissions inventory through our RouteZero digital platform.
- Certifying your climate effort through our Climate Neutral Certification Standard endorsed by ISEAL, an international non-profit organisation that codifies best practice for the design and implementation of social and environmental standards initiatives. With our Standard, your climate policy will align with globally agreed goals, ensuring that you gradually reduce carbon emissions and climate impact year by year.
- Preparing a timely disclosure for your website, leveraging our unique combination of technical, strategic, and reporting & communications expertise, that meets the ‘credibility’ tests underpinning the AB1305 legislation.
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