In an effort to combat “greenwashing,” California recently passed Assembly Bill (AB) 1305, also known as the Voluntary Carbon Market Disclosures Act (VCMDA). Its goal is to promote transparency and strengthen the voluntary carbon market.

The law, which went into effect on January 1, 2024, mandates that businesses operating in California, engaged in marketing, selling or purchasing voluntary carbon offsets (VCOs), or claiming carbon neutrality, must provide annual disclosures on their websites.

What companies are subject to AB 1305?

AB 1305 applies to all public and private business entities, irrespective of size and revenues, that operate in California or make claims in California. This means that even small businesses with a minimal presence in California are subject to the new regulations.

Specifically, the law applies to:

• Business entities that market or sell voluntary carbon offsets within California.
• Business entities operating or purchasing within California, which purchase or use voluntary carbon offsets and make claims of net zero emissions.
• Business entities in California that make claims of achieving net zero emissions, carbon neutrality or similar claims.

Disclosure requirements for businesses subject to the AB 1305

The law applies to businesses that engage in at least one of three types of carbon offset–related activities: marketing or selling of VCOs; purchase or use of VCOs; and claims of net zero or carbon neutrality. Businesses engaging in any or all of these activities are required to make disclosures available on their websites and update them annually.

The specific requirements vary for each type of activity:

Business entities that market or sell VCOs within California

• Details regarding the carbon offset project include:
  • The specific protocol used to estimate emissions reductions or removal benefits.
  • The location of the offset project site.
  • The project timeline.
• Details regarding accountability measures if a project is not completed or does not meet the projected emissions reductions or removal benefits.

Business entities operating or purchasing in California that purchase or use VCOs

• The offset project type, including whether the offsets purchased were derived from carbon removal, avoided emissions or a combination of both, along with the site location.
• The specific protocol used to estimate emissions reductions or removal benefits.
• Whether there is independent third-party verification of company data and claims listed.

Businesses making net zero, carbon neutral or similar claims

• Details regarding how, if at all, a “carbon neutral,” “net zero emission” or other similar claim was determined to be accurate or actually accomplished.
• Details on how interim progress toward that goal is being measured.
• Whether there is independent third-party verification of the company data and claims listed.

Penalties for noncompliance with AB 1305

Businesses that fail to comply may be subject to significant penalties. AB 1305 imposes fines of up to $2,500, with an overall cap of $500,000, for each day that information is unavailable or inaccurate on a business’s website. Civil actions can be initiated by the California Attorney General, and district and city attorneys in California.

BPM can help

Businesses operating in California should carefully review any carbon-related claims to ensure accuracy and compliance. If you are uncertain about whether AB 1305 applies to your organization or have questions about meeting these new requirements, please contact BPM.