Yves here. If Gavin Newsom winds up running for president, he is very likely to tout this emissions legislation as part of his accomplishments. So it is useful to have a look at it before the discussion of it becomes even more politicized. This article describes in some detail how this rule is evolutionary as opposed to revolutionary, that other jurisdictions have implemented similar rules.
In addition, while disclosure is important, what is needed are more stringent policies. So this is a step, but only a step, in the right direction.
By Lily Hsueh, Associate Professor of Economics and Public Policy, Arizona State University. Originally published at The Conversation
Many of the world’s largest public and private companies will soon be required to track and report almost all of their greenhouse gas emissions if they do business in California – including emissions from their supply chains, business travel, employees’ commutes and the way customers use their products.
That means oil and gas companies like Chevron will likely have to account for emissions from vehicles that use their gasoline, and Apple will have to account for materials that go into iPhones.
It’s a huge leap from current federal and state reporting requirements, which require reporting of only certain emissions from companies’ direct operations. And it will have global ramifications.
California Gov. Gavin Newsom signed two new rules into law on Oct. 7, 2023. Under the new Climate Corporate Data Accountability Act, U.S.- companies with annual revenues of US$1 billion or more will have to report both their direct and indirect greenhouse gas emissions starting in 2026 and 2027. The California Chamber of Commerce opposed the regulation, arguing it would increase companies’ costs. But more than a dozen major corporations endorsed the rule, including Microsoft, Apple, Salesforce and Patagonia.
The second law, the Climate-Related Financial Risk Act, requires companies generating $500 million or more to report their financial risks related to climate change and their plans for risk mitigation.
As a professor of economics and public policy, I study corporate environmental behavior and public policy, including whether disclosure laws like these work to reduce emissions. I believe California’s new rules represent a significant step toward mainstreaming corporate climate disclosures and potentially meaningful corporate climate actions.
Many Big Corporations Are Already Reporting
Most of the companies covered by California’s climate disclosure rules are multinational corporations. They include technology companies such as Apple, Google and Microsoft; giant retailers like Walmart and Costco; and oil and gas companies such as ExxonMobil and Chevron.
Many of these large corporations have been preparing for mandatory disclosure rules for several years.
Close to two-thirds of the companies listed in the S&P 500 index voluntarily report to CDP, formerly called the Carbon Disclosure Project. CDP is a nonprofit that surveys companies on behalf of institutional investors about their carbon management and plans to reduce carbon emissions.
Many of them also face reporting requirements elsewhere, including in the European Union, the United Kingdom, New Zealand, Singapore and cities like Hong Kong.
Moreover, some of the same U.S. companies, notably banks and asset managers that operate or sell products in Europe, have already started to comply with the EU’s Sustainable Finance Disclosure Regulation. Those regulations require companies to report how sustainability risks are integrated into investment decision-making.
While California isn’t the first place to mandate climate disclosures, it is the fifth-largest economy in the world. So, the state’s new laws are poised to have substantial influence worldwide. Subsidiaries of companies that didn’t have to report their emissions before will now be subject to disclosure requirements. California is in effect exercising its immense market leverage to establish climate disclosures as standard practice in the U.S. and beyond.
California also has a history of being a test bed for future federal U.S. policies. The U.S. government is considering broader emissions reporting requirements. But California’s new rules go further than either the U.S. Securities and Exchange Commission’s proposed corporate climate disclosure rules or President Joe Biden’s proposed disclosure rules for federal contractors.
The most controversial part of the new disclosure rules involves scope 3 emissions. These are emissions from a company’s suppliers and its consumers’ use of its products, and they are notoriously difficult to track accurately.
California’s new emissions reporting law directs the California Air Resources Board, which will develop the regulations and administer them, to allow some leeway in scope 3 reporting as long as the reports are made with a reasonable basis and disclosed in good faith. It’s also important to note that at this point the disclosure laws don’t require companies to cut these emissions, only to report them. But tracking scope 3 emissions does highlight where companies could pressure suppliers to make changes.
What Can Disclosures Achieve?
The plethora of climate disclosure mandates globally suggest that policymakers and investors around the world perceive climate disclosures as driving actions that protect the environment. The big question is: Do disclosure rules actually work to reduce emissions?
My research shows that voluntary carbon disclosure systems like CDP’s that focus on reporting corporate sustainability outputs, such as having science-based emissions targets, tend not to be as effective as those that focus on outcomes, such as a company’s actual carbon emissions.
For example, a company could earn an A or B grade from CDP and still increase its entitywide carbon emissions, notably when it does not face regulatory pressure.
In contrast, a recent study of the U.K.’s 2013 disclosure mandate for U.K.-incorporated listed firms found that companies reduced their operational emissions by about 8% relative to a control group, with no significant changes to their profitability. When companies report their emissions, they can gain important knowledge about inefficiencies in their operations and supply chains that weren’t evident before.
Ultimately, a well-designed disclosure program, whether voluntary or mandatory, needs to focus on consistency, comparability and accountability. Those traits allow companies to demonstrate that their climate pledges and actions are real and not just a front for greenwashing.
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With today’s technology it would seem like a no-brainer to put chips that can measure emissions in every manufacturing plant, airplane, truck etc. Put them in private jets too. They could transmit back to a centralized database.
The first paragraph is absolutely frightening:
“Many of the world’s largest public and private companies will soon be required to track and report almost all of their greenhouse gas emissions if they do business in California – including emissions from their supply chains, business travel, employees’ commutes and the way customers use their products.
Report to who exactly? We the people? Or a bevy of technocrats and “experts” dependent on funding from god knows where – though when we are able to trace it it inevitably ends up benefiting the funders themselves at the expense of the we the people.
The whole thing is incestuous to the core, just like the pharma-government nightmare.
This will lead to more people decrying environmental overshoot and saying the entire global warming theme is contrived in order to constantly monitor them, restrict their freedom of movement and stifle their initiative, and to generally take away their rights and liberty.
Who can blame them.
I made a methane emission during this morning’s bicycle ride. And I admit it: Too much fiber in yesterday’s diet.
To whom must I report this?
California already requires companies to report on employee commutes, based on zip code of residence. It requires minimal effort to comply, as opposed to, say, Sarbanes Oxley. My firm encouraged carpooling, and allowed staff to work from home when feasible (long before Covid).
I can tell you from personal experience facing off with insurance regulators, some things that appear easy to do are not, and the reverse is true. Not easy to tell until you dig into details or have relevant technical expertise.
What are the additional greenhouse emissions created in order to comply with the law?
The GHG modeling is very sketchy. Read Steven Koonin’s (Obama DOE appointee, physics prof, president of Caltech) “Unsettled” to see how bad this modeling is in reality.
Carbon management is a scheme to yoke the world to a tax regime managed by unelected persons for unknown benefits.
We can encourage cleaner technologies and waste reduction without GHG taxation schemes like this.
Weird to see not a peep in the opening remarks about Privacy and Individual Freedom – unlike with almost every post on Digital IDs!
How else do you think this going to go, but down the lines of
Digital ID
+ Bigger Govt
+ Richer Bazillionaires
+ “You’re going to own nothing and be happy!” ?
It’s the extension also of the “Empire”. Meaning California’s Laws extending to those who don’t have a vote in California or live within the US even.
It’s quite astonishing that Modern Americans, Europeans are not opposing this extra-territorial Aggression or “Manifest Destiny”.
(Or that this post isn’t framed under “Dubious Statistics” or “Empire” or
“Surveillance State” or “Banana Republic”)
The relentless push of Western Elite and Rich to control and con the World is exactly the kind of thing people should be warned about. Repeatedly.
Sorry, I do not accept that companies are people. They exist only via laws limiting liability, which means the public has a right to be interested in and check their actions
You analogizing corporate disclosure of extremely large companies to increase accountable to personal privacy is all wet.
Companies can decide not to do business in California.
From the main article:
“Many of the world’s largest public and private companies will soon be required to track and report almost all of their greenhouse gas emissions if they do business in California – including emissions from their supply chains, business travel, employees’ commutes and the way customers use their products.”
Customers and Employees are People (or are you arguing they are not?). The OP clearly was referring to that when they referred to “Extra-Territorial”.
Clearly the OP isn’t the only one that noticed this – other commenters have as well.
One doesn’t see the OP above talking about
– that is a strawman that you’ve built and destroyed yourself, for which congratulations maybe due, but that’s beside the point.
Coming to your facile remark about “
” – No one gave California the right to decide what Consumers in ASEAN, China, India, rest of Asia, Africa, Latin America do with their Apple or Google devices.
No one died and made California the World Govt.
California doesn’t even house 0.5% of the World Humanity.
To equate it wanting to decide how a poor man in Africa or China or India or Latin America or Thailand uses his Cellphone or Email is nothing short of Digital Imperialism and Digital Colonialism.
To attempt to counter Concerns about a new form of Digital Colonialism with strawman arguments or facile nonsense is either
1. An attempt at Whitewashing Contemporary Digital Colonialism, and endorsing Californians – by extension – USA – as Rulers over all humans.
Or
2. Being extremely naive, to put it mildly.
In all my readings on this site, it is hard to see the author as being extremely naive or stupid – in fact, quite the opposite.
The proper response when someone asks what your (personal or corporate) CO2 emissions is, is to respond (accurately) that on a net basis, less than zero. The atmosphere is 0.04% CO2, and 21% O2. That is a 525:1 ratio between them. We live in an ocean of plants gasping for (and seriously short of) CO2, with
CO2—>O2 conversion capability far beyond what the amount of CO2 we and other animals provide them. Atmospheric CO2 has been close to 10x its current levels for much of the time there has been major quantities of photosynthetic life on this planet. A reasonable response to some non-STEM-degreed busybody (with no significant life of his own to concern him) who asks “How much greenhouse gas CO2 do you emit” is to answer “None. We produce a small amount of needed gaseous plant food/glacial period return retarder that is consumed as soon as we feed it to the plants, and you should be grateful for our doing so. We look forward to your cashier’s check to show your gratitude in next week’s mail.”
Agreed with Yves about companies not really being people (legally). If they were, they could be conscripted into the military in time of war, jailed (or even executed) in their entirety on a single act of crime (instead of a usually-nominal fine at most). I would frankly like to see those. The Chicoms do lots of stuff of which I greatly disapprove, but find their annually sending multiple corrupt businessmen to the firing squad to be efficacious. “Pour encourager les autres”, and all that.