Thought Leadership
Understanding California’s AB-1305 Voluntary Carbon Market Disclosures Act
By Pamela Gramlich, Associate, Third Economy, February 2024
Background:
Earlier this year, California's Governor signed the AB-1305 Voluntary Carbon Market Disclosures Act (VCMDA) into law, with the intent of increasing transparency and accountability surrounding the voluntary carbon market and net zero/carbon neutrality claims, making California the first US state to pass a bill of this kind. The act requires that entities operating in California that sell or market voluntary carbon offsets, purchase voluntary carbon offsets and/or make net-zero, carbon neutrality, or significant greenhouse gas (GHG) reduction claims to disclose on their website specified information (see bill and table below) to substantiate the validity of related programs, initiatives and disclosures.
What You Should Know:
- Why: The VCMDA aims to combat greenwashing in the voluntary carbon market and encourage effective, transparent, and legitimate GHG reduction efforts within organizations operating in CA. Violations carry a civil penalty of not more than $2,500 per day, for each violation, not to exceed a total amount of $500,000.
- Who: Entities operating in California that 1) sell or market carbon offsets, 2) purchase offsets for neutrality purposes, and/or 3) claim carbon neutrality, net zero, or significant GHG emissions reductions with or without offsets.
- Where: The disclosures required by AB-1305 (see bill and table below) should be published on the business entity’s internet website.
- When:
- Effective date of the Act: January 1, 2024.
- Legislative intent: On November 30th 2023, the author of the act, Assemblymember Gabriel, stated in a letter that the intent of the VCMDA is for the first annual disclosure to be posted by January 1, 2025. This would provide companies with time to adjust their practices before potential fines could be imposed.
- Disclosure deadline: Due to the ambiguity regarding the effective date of the disclosure requirements, 3ECON advises companies to consult with their legal teams to determine a disclosure plan and timeline.
- What: Disclosure requirements for each group are outlined in the table below.
What To Do Next?
- Consult with your legal team to confirm if and when your organization will need to comply with this and other climate regulations.
- Prepare VCMDA-aligned disclosures in coordination with your legal team and make them available on your website.
- Partner with Third Economy to incorporate VCMDA disclosure requirements into your ESG roadmap.
Disclaimer: The information provided does not, and is not intended to, constitute legal advice; instead, all information, content, and materials available are for general informational purposes only.