September 26, 2022

Volume XII, Number 269

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September 26, 2022

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California Greenhouse Gas Emissions Bill Moves Forward

As the current California legislative biennium enters its closing weeks, SB 260 (Wiener & Stern) is moving forward despite strong opposition from business groups.  As has been previously noted in this space, the bill would require any U.S.-based business with annual revenues in excess of $1 billion and that does business in California to annually report the full range of greenhouse gas (GHG) emissions attributable to the business, including direct emissions, electricity use, and indirect emissions from the business’s supply chain and other sources.  Although the bill appears to be limited to very large businesses, its costs will be felt by all businesses in their supply chain.

One headwind for the bill is the opposition of the Department of Finance.  The DOF does not like the bill because it results in significant General Fund costs not included in the 2022 Budget Act, creates future General Fund cost pressures, and may create significant implementation challenges.   The DOF is the Governor's chief fiscal policy advisor.  Yesterday, the authors amended the bill in attempt to this concern by making implementation contingent upon an appropriation by the Legislature in the annual Budget Act or another statute for its purposes.

If enacted, SB 260 may face constitutional challenges, as I have previously observed:

By mandating disclosure, SB 260 constitutes "compelled speech" in violation of the First Amendment of the United States Constitution.  Notably, SB 260 does not involve voluntary commercial advertising.  Rumsfeld v. Forum for Academic and Institutional Rights, Inc., 547 U.S. 47, 61 (2006) ("Some of this Court's leading First Amendment precedents have established the principle that freedom of speech prohibits the government from telling people what they must say.").

SB 260 will also violate the "Dormant Commerce Clause" of the United States Constitution.  It will impose significant burdens on large companies and their shareholders.  More importantly, the bill will impose enormous burdens on smaller companies, including those with no contacts with California, because of the requirement that companies disclose Scope 3 emissions.  

© 2010-2022 Allen Matkins Leck Gamble Mallory & Natsis LLP National Law Review, Volume XII, Number 228
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About this Author

Keith Paul Bishop, Corporate Transactions Lawyer, finance securities attorney, Allen Matkins Law Firm
Partner

Keith Bishop works with privately held and publicly traded companies on federal and state corporate and securities transactions, compliance, and governance matters. He is highly-regarded for his in-depth knowledge of the distinctive corporate and regulatory requirements faced by corporations in the state of California.

While many law firms have a great deal of expertise in federal or Delaware corporate law, Keith’s specific focus on California corporate and securities law is uncommon. A former California state regulator of securities and financial institutions, Keith has decades of...

949-851-5428
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