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California asks US court to toss challenge to state climate disclosure laws

Autor: Clark Mindock

Aerial view of highway 101 and San Francisco's skyline in California

Aerial view of highway 101 and San Francisco’s skyline in San Francisco, California, U.S., October 28, 2021. Picture taken October 28, 2021. REUTERS/Carlos Barriaof Purchase Licensing Rights, opens new tab

  • Summary
  • Companies
  • Law Firms
  • California laws require emissions and climate-risk disclosures
  • State says lawsuit is too early, not preempted by federal law

March 28 (Reuters) – California has asked a federal judge to dismiss most of a lawsuit filed by major U.S. business groups seeking to overturn the state’s new sweeping climate disclosure laws that require companies to publicly report their greenhouse gas emissions and climate-related risks.

The state told a Los Angeles federal court in a filing on Wednesday that the January lawsuit by the U.S. Chamber of Commerce, American Farm Bureau Federation and others was brought too early and alleges speculative harms to businesses.

The two laws at issue, signed by Democratic Governor Gavin Newsom last year, require extensive climate risk and emissions disclosures in order to help the public and investors evaluate climate-related claims by major companies.

While the business groups had argued the laws, which were the first of their kind, would impose massive compliance costs on companies, the state said those harms are speculative at this point. Since the California Air Resources Board has not yet proposed specific regulations to enforce the laws, the state said the lawsuit was filed too early.

California also refuted the business groups’ claim that the laws are preempted by federal laws, including the Clean Air Act. That law regulates emissions, but the state laws only regulate information about emissions so there is no conflict, the state said.

A spokesperson for the American Farm Bureau Federation said in a statement that farmers are working to address their climate impacts but can’t afford to hire compliance officers to meet the disclosure requirements, and that small farms will be hit especially hard.

Spokespeople for the other business groups didn’t immediately respond to requests for comment on Thursday.

The laws, which were endorsed by some major companies like Apple

(AAPL.O), opens new tab

, Ikea and Microsoft

(MSFT.O), opens new tab

, are considered to be more aggressive than similar disclosure rules adopted earlier this month by the U.S. Securities and Exchange Commission. The federal rules are facing their own legal challenges.

One of the challenged California laws requires public and private companies that are active in the state and generate revenue of more than $1 billion annually to publish an extensive account of their carbon emissions starting in 2026. The law requires the disclosure of both companies’ own emissions and indirect emissions by their suppliers and customers, also known as Scope 3 emissions.

For many businesses, Scope 3 emissions account for 70% of their carbon footprint, according to the consulting firm Deloitte.

The other challenged law requires companies that operate in the state with over $500 million in revenue to disclose climate-related financial risks and strategies to mitigate that risk.

The lawsuit filed by the business groups broadly argued that the California laws would usurp the role of federal regulators that are better situated to develop climate regulations that apply consistently across the country.

The groups said the laws could also create uncertainty for businesses and investors should other states pass their own, potentially conflicting climate disclosure laws.

The case is Chamber of Commerce of the United States of America et al. v. California Air Resources Board et al., in the U.S. District Court for the Central District of California, case No. 2:24-cv-00801.

For the plaintiffs: Eugene Scalia, Katherine Moran Meeks and Brian Richman of Gibson Dunn & Crutcher

For the state: California Attorney General Rob Bonta, Gary Tavetian and Myung Park of the California Department of Justice

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Reporting by Clark Mindock

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