Trade groups question reliability of California climate reporting bill

A California bill that would require corporations to report their greenhouse gas emissions would not meet its stated goals without agreed-upon methodologies for calculating those emissions, the American Bankers Association, the California Bankers Association and five financial industry associations said in a recent letter. The Climate Corporate Data Accountability Act was reintroduced in the California State Senate in January after it was narrowly defeated last year. It would require businesses with annual revenues of more than $1 billion to report their direct and indirect emissions to the state every year.

In the letter, the associations noted that the bill not only requires businesses to report emissions coming from their operations—known as scope 1 and 2 emissions—but also scope 3 “value chain” emissions over which they have no direct control, such as the emissions generated when customers use their products. They said that no widely accepted methodologies exist for calculating such emissions. The groups urged lawmakers to exclude scope 3 emissions from the legislation.

“While [the bill]proposes to limit the disclosure requirement to reporting entities with more than $1 billion in annual revenue, bank customers could find it costly and challenging to supply detailed and reliable value chain information to their lenders, especially without an accepted standardized calculation methodology,” the groups said. “In addition to large corporations, information from consumers, small businesses, municipal entities and federal agencies will be needed. Without a standardized calculation methodology, reporting will depend primarily on untimely, inconsistent and unreliable practices and estimates from this diverse set of entities.”