California sued over Newsom-signed laws forcing companies to disclose greenhouse gas emissions

A coalition of business groups led by the U.S. Chamber of Commerce filed a federal lawsuit against the State of California over its two recently-enacted laws forcing companies to disclose climate data.

The lawsuit, filed Tuesday in the U.S. District Court for the Central District of California, alleges that the laws violate the First Amendment, which prohibits states from “compelling a business to engage in subjective speech” and the federal Clean Air Act, which prevents states from regulating emissions in other states. 

“We are proud of the leadership and innovation shown by America’s businesses in tackling climate change. Businesses and government need to work together to address the problem and that requires policies that are practical, flexible, predictable, and durable,” said Tom Quaadman, the executive director of the Chamber of Commerce’s Center for Capital Markets Competitiveness.

“California’s corporate disclosure laws are the opposite of that and violate the First Amendment by forcing businesses to engage in subjective speech,” he continued. “California’s laws usurp the role of federal regulators, opening the door for other states to take an opposite approach to disclosure, leaving businesses and their investors caught in the middle of a political scrap between states.”

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Democratic California Gov. Newsom speaks in San Francisco on Nov. 9, 2023. (AP Photo/Jeff Chi, File)

According to Quaadman, the California laws will usher in duplicative and conflicting state-imposed requirements that will ultimately threaten the competitiveness of U.S. capital markets. He also said the cost of complying with the regulations will have negative impacts on businesses of all sizes, including small businesses.

In October, Democratic California Gov. Gavin Newsom signed Senate Bill 253, which orders the California Air Resources Board (CARB) to develop and issue regulations by January 2025 that mandate businesses operating in California with total annual revenues exceeding $1 billion to disclose their greenhouse gas emissions to an emissions reporting organization.

When he signed the legislation, Newsom acknowledged that the timelines included were unreasonable and called for the legislature to address those issues. He also expressed concern about the overall financial impact of the bill and instructed CARB to monitor the costs businesses would incur as a result of its regulations.

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“This important policy, once again, demonstrates California’s continued leadership with bold responses to the climate crisis, turning information transparency into climate action,” the governor said upon signing the bill.

“However, the implementation deadlines in this bill are likely infeasible, and the reporting protocol specified could result in inconsistent reporting across businesses subject to the measure,” Newsom added. “Additionally, I am concerned about the overall financial impact of this bill on businesses, so I am instructing CARB to closely monitor the cost impacts as it implements this new bill and to make recommendations to streamline the program.”

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A driver charges his electric vehicle at a station in Monterey Park, California on August 31. The state has sought to lead on climate and green energy policy in recent years. (FREDERIC J. BROWN/AFP via Getty Images)

That same day, Newsom signed Senate Bill 261, which requires businesses operating in California with total annual revenues of more than $500 million to develop biennial reports detailing their climate-related financial risks beginning in 2026. The governor similarly called for CARB to monitor the financial implications of the law and said its timelines would need to be revised.

The Chamber of Commerce — and co-plaintiffs American Farm Bureau Federation, California Chamber of Commerce, Central Valley Business Federation, Los Angeles County Business Federation and Western Growers Association — alleged in the lawsuit Tuesday that the state laws will force companies to disclose direct and indirect emissions which can be “nearly impossible for a company to accurately calculate.”

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In addition, the lawsuit states that the laws attempt to impose a national standards since the regulations apply to companies that have even minimal business in California.

“The Chamber and its partners will continue to fight back against illegal and excessive government overreach at the state and federal levels, especially micromanagement that undermines responsible efforts by businesses to address climate risks,” Quaadman said.

California state Sen. Scott Wiener speaks on May 16, 2023, in Sacramento, California. Wiener authored Senate Bill 253 requiring businesses in California to disclose their greenhouse gas emissions. (Kimberly White/Getty Images for Demand Justice)

After the lawsuit was filed, Democratic California state Sen. Scott Wiener, who crafted Senate Bill 253, blasted the Chamber of Commerce’s actions as “straight up climate denial.”

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“Why is the Chamber of Commerce working so aggressively to block basic transparency for the public? We know the answer,” Wiener said in a statement. “It’s not because of the Chamber’s bogus arguments about cost and implementation, since it’s both inexpensive and easy for corporations to make these disclosures. It’s not because of the Chamber’s bizarre and frivolous First Amendment argument.”

“Rather, the Chamber is taking this extremist legal action because many large corporations — particularly fossil fuel corporations and large banks — are absolutely terrified that if they have to tell the public how dramatically they’re fueling climate change, they’ll no longer be able to mislead the public and investors,” he said. “The Chamber and large corporate polluters don’t want the public to know how much they’re strangling the planet with carbon emissions — that’s why they filed this baseless lawsuit.”

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