Two California Chamber of Commerce-opposed bills creating climate change-related reporting challenges for large companies and potential increased costs for all businesses passed an Assembly policy committee this week.
• SB 253 (Wiener; D-San Francisco) imposes mandatory climate tracking and auditing of climate emissions that will fall heavily on all California businesses resulting in a negative impact on competitiveness and increasing costs.
• SB 261 (Stern; D-Canoga Park) requires any business with revenues exceeding $500 million annually to prepare a climate financial risk assessment on its holdings, including any supply chain assets.
Joining the CalChamber in opposing both bills are broad coalitions that include employer, agricultural and other industry groups, as well as local chambers of commerce.
In testimony to the Assembly Natural Resources Committee and in response to questions from committee members, CalChamber Policy Advocate Brady Van Engelen pointed out that the state could make greater strides toward its climate goals by encouraging companies to continue their voluntary data gathering rather than using mandates tied to high penalties.
SB 253’s mandate to report on greenhouse gas (GHG) emissions data throughout the supply chain regardless of location won’t lead to emission reductions, Van Engelen told the committee. Instead, the mandate will result in misapplication of useful information that companies have been compiling voluntarily, he said.
As defined in SB 253, Van Engelen told the committee, the emissions reported will lead to irrelevant comparisons between different companies’ emissions, based on technical guidance from the World Resources Institute (WRI).
The WRI is a global organization that works with policymakers, businesses and governments to reduce GHG emissions and build resilience to climate change impacts.
A report prepared by Encina Advisors, LLC for the California Foundation for Commerce and Education estimates that a typical upstream firm will spend from $38,500 to $123,100 on calculating and documenting its emissions, resulting in a potential loss of $1.0 billion to $1.3 billion in state tax revenue.
These economic impacts will likely create inefficient supply chains that will further add to consumers’ costs.
Later in the hearing, Van Engelen identified concerns with SB 261, such as the need to clarify whether emissions reporting should be done by parent companies on behalf of their subsidiaries, and the reporting standard to be used.
SB 261 includes a requirement that reporting entities disclose their climate-related financial risk in accordance with the recommendations put forth by the Task Force on Climate-Related Financial Disclosures (TCFD). Those recommendations differ from requirements adopted by the European Union and the United Kingdom.
A better approach considering that companies reporting emissions operate on a global scale, Van Engelen said, would be for SB 261 to identify reporting metrics for businesses rather than placing in law a requirement to follow the recommendations of a single task force.
Assembly Natural Resources sent both bills along to the Assembly Appropriations Committee with some clarifying amendments on identical votes of 8-3:
Ayes: Addis (D-Morro Bay), Friedman (D-Glendale), Muratsuchi (D-Torrance), Pellerin (D-Santa Cruz), Luz Rivas (D-San Fernando Valley), Ward (D-San Diego), Wood (D-Santa Rosa), Zbur (D-West Hollywood).
Noes: Flora (R-Ripon), Hoover (R-Folsom), Mathis (R-Porterville).