California Climate Laws Update: CARB Workshop and SB 261 Pause

CARB’s November 18 workshop reviewed SB 253 and SB 261, outlining updates on deadlines, definitions, and exemptions. SB compliance is paused pending a January 9 Ninth Circuit Court hearing. Companies may still benefit from proactive disclosure preparation.

The California Air Resources Board (CARB) hosted its public workshop on November 18, 2025, to discuss the California Climate Accountability Package (CCAP). This was the third workshop hosted by CARB this year. For summaries of the first two workshops on May 29 and August 21 see ISS-Corporate’s coverage here (Workshop 1) and here (Workshop 2).

The CCAP consists of two laws – collectively referred to as “the 200s” – that apply to companies doing business in California:

• • SB 253: Requires annual disclosure of Scope 1, 2, and 3 greenhouse gas emissions.
  • SB 261: Requires biennial reporting on climate-related financial risks.

Also on November 18, the Ninth Circuit Court of Appeals issued an order temporarily pausing SB 261, effectively putting the statutory deadline of January 1, 2026, on hold. A hearing scheduled for January 9, 2026.

Key Updates to California Climate Laws

• • SB 261 Paused: The Ninth Circuit has temporarily halted SB 261 following an emergency application by business groups, rescinding the January 1 reporting deadline. A hearing is scheduled for January 9.
  • SB 253 Updates: CARB announced that companies not collecting emissions data as of December 2024 are not required to report in 2026. Limited assurance is no longer required for 2026, and the tentative reporting deadline is now August 10, 2026.
  • Definitions: Draft definitions of “doing business in California”, “revenue”, and “parent-subsidiary” relationships have been provided and will be finalized in Q1 2026.
  • Exemptions and Exclusions: Proposed exemptions include tax-exempt non-profit and charitable organizations, and entities whose only business in California is teleworking employees. Government entities and insurance companies are statutorily excluded.
  • Fees: CARB continues to pursue a flat fee structure but has postponed rulemaking until Q1 2026.

SB 261 Paused

The most significant development during the workshop was unrelated to CARB’s agenda: the Ninth Circuit Court of Appeals temporarily halted implementation of SB 261. This decision came one week after the U.S. Chamber of Commerce and other business groups filed an emergency application with the U.S. Supreme Court.

Previously, the Ninth Circuit had denied a request for a preliminary injunction to pause both laws and indicated that the case would be heard next year. The new injunction therefore came as a surprise.

SB 261 will remain on hold at least until the Ninth Circuit’s scheduled hearing on January 9, 2025. Compliance requirements could resume quickly after that date, depending on the outcome.

Outside of the actions taken by the Ninth Circuit, CARB reiterated the below requirements for SB 261 disclosures:

• • Entities may use the TCFD, IFRS, or related standards as a framework for the report
  • Each submitted report must include a statement on:

• • • • The reporting framework applied (TCFD, IFRS S2, or other related standards)
      • Which recommendations and disclosures from the framework have been compiled and which have not
      • For the recommendations that have not been compiled, an explanation as to why the disclosures are not included and plans for future disclosures

SB 253 Updates

The Ninth Circuit injunction on SB 261 does not affect SB 253, so companies should continue to prepare for compliance. CARB shared several important updates during the November 18 workshop:

2026 Reporting Requirements: Companies that were not collecting or planning to collect emissions data when CARB issued its December 2024 Enforcement Notice are not required to report Scope 1 and 2 emissions in 2026. These companies must submit a written statement on company letterhead confirming this status. Limited assurance will also not be required for the first reporting year. CARB noted that if a company has already obtained assurance, it should include it in its reporting, but such reporting is optional for 2026.

2026 Reporting Deadline: CARB proposed a tentative deadline of August 10, 2026, for SB 253 submissions. Reports should cover emissions their previous fiscal year. To ensure companies have at least six months to prepare, CARB outlined the following guidelines:

• • Fiscal year ends January 1 – February 1, 2026: Report data from the fiscal year ending in 2026 (e.g., February 1, 2025 to January 31, 2026).
  • Fiscal year ends February 2 – December 21, 2026: Report data from the fiscal year ending in 2025 (e.g., March 1, 2024 to February 28, 2025).

Companies confident in their GHG accounting may submit data from the latest fiscal year, even if it ends after February 1.

Reporting Template: CARB has provided a voluntary reporting template for 2026. Companies may also submit their existing emissions reports.

Proposed Definitions & Covered Entities

CARB acknowledged that its Preliminary List of Reporting/Covered Entities published in September 2025 contained “major holes.” Stakeholders raised concerns about imprecise revenue estimates and outdated information. In response, CARB indicated that tax filing data from the Franchise Tax Board (FTB) offers the most accurate and verifiable source and may be used to address gaps in revenue data and entity details.

Importantly, CARB has proposed the following clarifications on definitions for in-scope entities:

• “Doing Business in California”: CARB proposed this term be defined using Revenue and Tax Code’s (RTC) § 23101, which includes entities actively engaging in transactions for financial gain and meeting specific sales thresholds in California. For 2026 reporting, the criteria apply if sales exceed the inflation-adjusted thresholds of $735,019 for 2024. Sales include those made directly by the company or through its agents or independent contractors in California. Additionally, any entity organized or commercially domiciled in California meets these criteria.
• “Revenue”: CARB proposed using the California RTC’s § 25120(f)(2) definition of “gross receipts” to define revenue. Gross receipts are verifiable through FTB tax filings and include the gross amounts realized from:
• • Sale or exchange of property;
  • Performance of services; or
  • Use of property or capital (e.g., rents, royalties, interest, dividends).
• “Parent-Subsidiary”: CARB proposed defining a subsidiary as any business entity in which “another entity has ownership interest or control […] by direct corporate association,” as outlined in Title 17 of the California Code of Regulations, § 95833.

Both parent and subsidiary entities must independently assess compliance obligations based on revenue thresholds and the “doing business in California” criteria. While a parent company may report on behalf of its subsidiaries, the existence of a parent-subsidiary relationship does not determine which entities are subject to regulation. Each entity is responsible for assessing its own compliance.

Proposed Exemptions and Exclusions

CARB updated its approach to exemptions and exclusions in response to stakeholder feedback following the August workshop. These updates would apply to both SB 261 and SB 253 reporting.

Proposed exemptions include:

• • Non-profit or charitable organizations, defined as tax-exempt under the Internal Revenue Code.
  • Entities whose only business in California is the presence of teleworking employees.

Statutory exclusions (already exempt by law) include:

• • Federal, state, and local government entities, and companies that are majority-owned by government entities (>50%).
  • Business entities regulated by the California Department of Insurance or engaged in the business of insurance in any state.

Fee Structure

CARB is still pursuing a flat annual fee structure to cover the administration costs of SB 253 and SB 261, estimated at $13.9 million. Entities with annual revenue between $500 million and $1 billion will pay only the SB 261 fee, while entities with revenue exceeding $1 billion will pay fees for both SB 253 and SB 261. Each subsidiary is assessed individually, although parent companies may submit a single combined payment for all subsidiaries. The fee structure and amounts are scheduled to be finalized in Q1 2026.

Key Considerations for Companies

While compliance may be delayed, the outcome of the January hearing could determine whether requirements resume soon after. Legal uncertainty may persist, and deadlines may return with limited notice. Delaying preparation could lead to compressed timelines and higher costs.

Even with SB 261 on pause, disclosures on climate-related financial risk and emissions offer benefits beyond compliance, including:

• • Demonstrating strategic foresight and resilience planning
  • Enhancing investor confidence through alignment with TCFD/IFRS S2 principles

For SB 253, companies that do not report in 2026 will still be required to disclose Scope 1 and 2 emissions with limited assurance, as well as Scope 3 emissions, in 2027. For first-time reporters, this can be a significant undertaking, and early preparation can help build internal expertise.

DOWNLOAD: Carbon Accounting Playbook: A Guide to Corporate Emissions

While full regulatory guidance is still pending on SB 253 and SB 261 and the Ninth Circuit injunction regarding SB 261 raises more uncertainly, companies may still benefit from being well-prepared to disclose in accordance with these regulations. Waiting for final details may leave insufficient time to meet deadlines once confirmed.

Regulatory Summary: SB 253 & SB 261

Please see a summary table of the laws below, with updates from the November 18 workshop highlighted in footnotes:

Footnotes

^[1] CARB has proposed a deadline of August 10, 2026, but this has yet to be finalized.
^[2] On November 18, 2025, CARB publicized that if a company was not collecting data or planning to collect data for emissions disclosures when CARB issued its Enforcement Notice in December 2024, it is not required to report emissions in 2026 and must provide a written statement on company letterhead stating this fact.
^[3] The Ninth Circuit Court of Appeals paused SB 261 on November 18, 2026. A hearing is currently scheduled for January 9, 2026.
^[4] Final definitions of “revenue” and “doing business in California” are yet to be determined by CARB.
^[5] Reports may be consolidated at the parent company level. If a subsidiary of a parent company meets the outlined criteria, they are not required to prepare a separate report.
^[6] On November 18, 2025, CARB proposed the following entities be exempt: (1) tax-exempt non-profit or charitable organizations, (2) A company whose only business in California is the presence of teleworking employees.
^[7] This may be affected but the current Ninth Circuit injunction, but CARB has yet to make a statement.
^[8] As of November 18, 2026, CARB has stated that limited assurance is not required for 2026 reporting.