At its February 26, 2026 meeting, the California Air Resources Board (“CARB”) approved a key step in implementing California’s landmark climate disclosure laws. CARB adopted the long-awaited California Corporate Greenhouse Gas Reporting and Climate Related Financial Risk Disclosure Initial Regulation (“Initial Regulation”) implementing the Climate Corporate Data Accountability Act (SB 253) and the Climate-Related Financial Risk Act (SB 261). The Initial Regulation establishes the administration and implementation fee structure for SB 253 and SB 261 and sets the first emissions reporting deadline under SB 253: August 10, 2026. Notably, compliance with SB 261 remains voluntary after the U.S. Court of Appeals for the Ninth Circuit enjoined enforcement of that law.

Our previous, in-depth analysis of these two laws can be found here. In general, SB 253 and SB 261 require large companies doing business in California to disclose climate-related information, including Scope 1, 2, and 3 greenhouse gas (“GHG”) emissions and climate-related financial risks. SB 253 applies to companies with more than $1 billion in annual revenue, while SB 261 applies to companies with more than $500 million in annual revenue. As clarified in the Initial Regulation, these revenue thresholds are tied to entities’ gross receipts as reported to the California Franchise Tax Board.

The Initial Regulation does three important things:

  1. Fee Structure. The Initial Regulation establishes how the state will fund the administration of these programs by creating a flat-rate fee structure, calculated annually, that will be assessed on entities subject to each law. These fees will support CARB’s costs for administration, including reviewing corporate submissions, maintaining reporting systems, and conducting oversight and enforcement.
  2. Reporting Deadline.  As for SB 253, the Initial Regulation sets August 10, 2026, as the deadline by which covered companies must submit disclosures of Scope 1 and Scope 2 GHG emissions for the initial reporting cycle. CARB maintained the August 2026 deadline for SB 253 despite requests from some stakeholders to delay implementation. However, CARB has indicated it will prioritize compliance assistance and exercise enforcement discretion for companies making “good-faith first-year submissions.” Certain entities, such as non-profits, charities, and majority government owned entities, are exempt from reporting.

    As for SB 261, covered companies were required to meet a January 2026 deadline to submit a biennial report of their climate-related financial risk and measures taken to reduce and adapt to those risks. However, enforcement of SB 261 is paused pending ongoing litigation in the Ninth Circuit. The Court held oral argument on January 9, 2026, but has not issued a decision that has altered the previously-issued injunction. CARB has indicated it will set a new deadline once the litigation concludes.
  3. Key Definitions.  The Initial Regulation defines and clarifies several details, including the revenue thresholds noted above. CARB also clarified that the term “doing business in California” will be interpreted to apply to any entity engaging in any transaction for the purpose of financial or pecuniary gain or profit in California that either “(1) is organized or commercially domiciled in California or (2) has sales in California exceeding either an inflation adjusted amount (i.e., $757,070 for 2025) or 25% of the entity’s total sales.”

    Finally, because the laws apply to U.S. entities—including U.S. subsidiaries of non-U.S. parent entities—the definition of “subsidiary” and how subsidiaries report is critical. The Initial Regulation clarifies that an entity is deemed a “subsidiary” if it is “a business entity that another business entity has ownership interest in or control of by direct corporate association as set forth in section 95833 of Title 17 of the California Code of Regulations.” The Initial Regulation also contains a list of six specific indicia of control. Parents can report on behalf of their subsidiaries; a subsidiary that is included in a parent entity’s report does not have to submit its own report under either law. Note, however, that CARB will assess fees on each individual entity that meets the revenue threshold under the applicable law, regardless of whether such entity submitted a separate report or was included in a parent’s consolidated report. We also note that nothing in the Initial Regulation imposes reporting obligations on parents based on the combined revenues of their subsidiaries.

Next Steps

Companies subject to these laws—SB 253 in particular—likely have already begun preparing emissions inventories and compliance strategies. If not, the time is now. And all stakeholders should anticipate further rulemakings later in 2026 addressing scope 3 GHG emissions reporting as well as additional compliance timelines and requirements. Our climate disclosure team will continue to track developments in this area and is available to assist with comments on these rulemakings as well as compliance strategies and submissions.