CA’s voluntary carbon offset law: What you need to know  

How can your organization prepare?

Taking the following steps can help your company develop the right compliance approach.

1. Assess whether the organization is subject to AB 1305

If the organization operates in California but does not purchase or use VCOs or does not make public claims of carbon neutrality, annual disclosure requirements under AB 1305 might not apply. Otherwise, consider which trigger is relevant. 

2. If the organization is a covered entity under AB 1305, establish proper accounting mechanisms

It’s critical to conduct regular reviews on projects and investments that count toward net-zero goals and to collect data on key project details, such as the name of the seller and associated registry, the carbon offset project name and identification number, the carbon offset project type, measurement protocol, and total numbers of purchased credits, as well as any future carbon offset or carbon avoidance projects. 

3. When making carbon-neutrality or net-zero claims, establish processes and controls

The claims need to be properly substantiated and grounded on science and reputable standards, such as those issued by the Science Based Targets initiative. Net-zero claims might be due to both internal process improvements that resulted in emissions reductions as well as the use of VCOs.

4. Prepare written summaries and publish them on the organization’s website

There are varying disclosure requirements depending on whether the company sells VCOs, purchases VCOs, or makes carbon neutrality or net-zero claims.

• Project start date
• Project identification number
• Project name as listed in the registry or program
• Project locations
• Summary of how the carbon is offset, avoided, and removed
• Amount of carbon avoidance, offset, and removal for which the organization has taken credit
• Specific protocol used to estimate emissions reductions or removal benefits
• Whether independent third-party assurance has been achieved for such carbon removal and avoidance claims

• Specific protocol used to estimate emissions reductions, avoidance, and removal
• Offset project site location
• Project timeline, including start and finish date
• Dates and quantities of when a specified quantity of emissions reductions or removals started or will start, or was modified or reversed
• Type of project, including whether the offsets from the project are derived from a carbon removal, an avoided emission, or both
• Whether the project meets any standards established by law (federal, state, or local) or by a not-for-profit entity
• Durability period for any project that the seller knows, or should know, that the durability of the project’s greenhouse gas reductions or greenhouse gas removal enhancements is less than the atmospheric lifetime of carbon dioxide emissions
• Project-specific emissions reduced, avoided, or physical carbon removed on an annual basis
• Whether there is independent third-party validation for the project and the offsets, credits, or avoided emissions sold

• Steps taken to achieve stated goals (such as purchase of zero-carbon energy and fleet electrification, among others)
• Emissions reduction measurement data
• Accounting methodologies used to measure emissions reduction or net-zero claims
• Whether there is independent third-party verification or assurance in place for these individual claims

While some companies might already report on some of these topics, the extensive nature of the reporting and the timing of the bill mean it’s vital to start assessing your compliance needs now. Pulling together a cross-functional team can help your company gather, organize, and develop your reporting quickly.

If your organization is looking for additional help with compliance, consider engaging an outside firm that has deep knowledge of the bill and experience helping companies manage their ESG regulatory obligations.