On March 23, 2026, the California Air Resources Board (“CARB”) held a public, “pre-rulemaking” workshop to introduce regulatory approaches for reporting greenhouse gas (“GHG”) emissions under the Climate Corporate Data Accountability Act (“SB 253”). SB 253 requires U.S.-based entities with more than $1 billion in annual revenue doing business in California to report emissions annually. The workshop focused on reporting in 2027 and beyond and covered three main topics: (1) approaches to Scope 1, 2, and 3 reporting; (2) proposed standards for obtaining limited assurance for Scope 1 and 2 emissions; and (3) GHG emissions accounting.
CARB recently approved regulations (discussed in our blog post here) requiring reporting entities to report Scope 1 and 2 emissions from the most recent fiscal year (i.e., ending before February 1, 2026) by August 10, 2026. In a December 5, 2024 Enforcement Notice, CARB stated that, for this first report, reporting entities may submit Scope 1 and 2 emissions information that can be determined from information the reporting entity already possessed or was already collecting as of December 2024. CARB’s initial regulation that was approved on February 26, 2026 addresses key definitions and scoping concepts, program fees, and the 2026 reporting deadline.
CARB’s recent public workshop focused on regulatory approaches for SB 253 reporting starting in 2027. Its pre-rulemaking proposals indicate that it intends to generally follow the Greenhouse Gas Protocol while potentially affording additional flexibility with respect to certain aspects of GHG accounting, particularly for Scope 3 emissions. CARB is accepting public comments through April 13, 2026.
SB 253 was passed in tandem with the Climate-Related Financial Risk Act (“SB 261”). Enforcement of SB 261 is currently paused pending resolution of a legal challenge now pending before the Ninth Circuit, as described in CARB’s December 1, 2025 enforcement advisory.
Scope 1, 2, and 3 Reporting in 2027 and Beyond
CARB confirmed that beginning in 2027, all reporting entities are required to report Scope 1 and 2 emissions, and that it will publish standard templates to be used for that reporting. (Use of CARB’s template is optional for 2026 reporting).
For Scope 3 emissions, CARB proposed three different regulatory options for reporting in 2027.
- “Broad applicability”: Reporting entities would report on all 15 Scope 3 emissions categories. Entities would have flexibility to not report on categories deemed de minimis, as long as an appropriate explanation was provided.
- “Sectoral phase-in”: Only the transportation and industrial sectors would be required to report on Scope 3 emissions. CARB explained that this option would prioritize sectors responsible for the largest share of California emissions that are subject to the greatest transition risk.
- “Category phase-in”: Reporting entities would share Scope 3 emissions only for the most widely reported categories across all sectors, namely business travel (category 6), purchased goods and services (category 1), fuel and energy related activities (category 3), employee commuting (category 7), and waste generated during operations (category 5). Over time, reporting entities would be required to include the lesser-reported categories in their Scope 3 reports.
CARB invited feedback on several questions, including how CARB should weigh reporting flexibility against alignment with mandatory and voluntary practices in other jurisdictions, whether the appropriate sectors and categories were pinpointed in the “Sectoral phase-in” and “Category phase-in” options, and whether the costs presented are within current company estimates.
Limited Assurance for Scope 1 and 2 Emissions in 2027
Although the statute specifies that reporting entities shall report Scope 1 and 2 emissions at a limited assurance level beginning in 2026, CARB reiterated a statement made in its Frequently Asked Questions that it would apply its enforcement discretion to this requirement. [1] CARB stated that the limited assurance requirement would begin in 2027 and proposed a number of limited assurance standards that could be used by reporting entities.[2]
CARB requested public feedback on questions including whether other assurance standards should be considered and what cost ranges reporting entities are currently experiencing for limited assurance engagements.
GHG Accounting and Related Topics
Finally, CARB solicited stakeholder feedback on a variety of GHG accounting topics. CARB indicated that it may require reporting entities to describe and justify the methodology selected.
- Organizational boundaries: Consistent with the GHG Protocol framework, CARB proposed that entities may use either an equity share approach, where entities account for emissions based on a company’s percentage ownership in an operation, or a control approach, where entities account for 100% of emissions from operations over which it has financial or operational control. CARB requested input on whether other approaches should be considered and how organizations should justify their chosen boundaries.
- Emission factors: Noting several publicly available emission factor datasets, CARB sought public input on how to best ensure that reporting entities use a high-quality dataset and explain their use of an emission factor.[3]
- Accounting methodologies: CARB summarized four widely recognized accounting methods: (1) a spend-based approach, (2) an activity-based approach, (3) a supplier-specific approach, or (4) a hybrid of these approaches. CARB requested insight into which methods organizations currently use for Scope 1, 2, and 3 emissions and whether other accounting methods should be allowed.
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Covington will continue to closely engage with CARB as its rulemaking proceeds and assist clients in assessing applicability and preparing for compliance. Covington’s Carbon Management and Climate Migration practice has extensive experience and capabilities advising on climate mitigation strategies, regulatory frameworks, and agency engagement. Our global team is ready to assist clients as they engage with regulatory agencies and prepare to comply with climate reporting rules in California, the EU, and other jurisdictions.
[1] See CARB, “Frequently Asked Questions,” at 20 (“For 2026 reporting…CARB will exercise enforcement discretion for the first report due in 2026, allowing reporting entities to submit Scope 1 and Scope 2 emissions for their prior fiscal year based on information they already have or were collecting when this Notice was issued, whether or not the data received limited assurance.”).
[2] CARB’s proposed standards included the AA1000 Assurance Standard (AA1000AS v3), AICPA (AT-C Section 210 (review engagement: limited) or AT-C 205 (examination engagement: reasonable), ISAE 3000 (Revised) and ISAE 3410 (until December 2026), ISSA 5000 (effective December 2026), and ISO 14064-3:2019 (ISO 14065 / ISO 14066 – provider qualifications). CARB acknowledged four additional standards recognized by other bodies or jurisdictions.
[3] Public emission factor datasets include the U.S. Environmental Protection Agency’s (“EPA’s”) emissions & generation resource integrated database (“eGRID”), the Intergovernmental Panel on Climate Change (“IPCC”) emissions factor database (“EFDB”), EPA’s emissions factors (“EF”) hub, and the U.S. Environmentally-Extended Input-Output (“USEEIO”).