California AB 1305: voluntary carbon market disclosures

What is California AB 1305?

AB 1305, signed in October 2023, added sections 44475 to 44475.3 to California's Health and Safety Code. It aims to make voluntary carbon offsets and corporate climate claims more transparent, by requiring the information behind them to be public. It took effect on 1 January 2024; the bill's author stated that the first annual disclosures were intended by 1 January 2025. A 2024 bill to delay and clarify it, AB 2331, did not pass, so the original text applies. See carbon credits and offsets.

Who must comply with AB 1305?

• Sellers: businesses that market or sell voluntary carbon offsets within California.
• Buyers making claims: entities operating in California, or buying or using offsets sold there, that use offsets and claim net zero emissions, carbon neutrality or significant reductions.
• Entities making claims: entities operating in California, or making claims there, that claim net zero emissions, carbon neutrality or significant reductions, whether or not they use offsets.

The law does not define operating in California and sets no revenue or size threshold, unlike SB 253's US$1 billion and SB 261's US$500 million. A company can fall into more than one group. See California SB 253.

What must be disclosed under AB 1305?

Sellers disclose, for each project: the protocol and standards used to estimate reductions or removals; the project's location, timeline, type and annual reductions or removals; whether the reductions are durable for less than the time the offset emissions stay in the atmosphere; whether the project was verified or validated by a third party; the accountability measures if the project is not completed or falls short; and the data and calculation methods needed to reproduce and verify the figures.

Buyers making claims disclose the seller's name, the registry or programme, the project name and identification number, the project type, whether it removes or avoids emissions, the protocol used, and whether there is independent third-party verification of the company data and claims.

Entities making claims disclose how the net zero, carbon neutral or similar claim was determined to be accurate or achieved, how interim progress towards the goal is measured, and whether there is independent third-party verification of the company's data and claims.

AB 1305 in practice: a coffee chain's carbon neutral claim

A coffee chain with stores in California advertises carbon neutral deliveries, reducing delivery emissions and buying offsets for the rest. It publishes an AB 1305 page and updates it each year.

Because it both makes a claim and uses offsets, it gives the buyer disclosures for each offset project and the claim disclosures for its carbon neutral promise. Its emissions inventory has limited assurance, so it can say that its data has independent verification; the offsets were verified by the registry's accredited verifiers, which it states separately. In the EU, offset-based claims that a product has a neutral or reduced climate impact are banned from 27 September 2026, so the chain uses different wording in Europe. See greenwashing risk.

What are the penalties under AB 1305?

A person that violates the law is liable for a civil penalty of up to US$2,500 for each day each violation continues, capped at US$500,000, recovered in a civil action brought by the Attorney General, a district attorney, county counsel or a city attorney. There is no private right of action under AB 1305, but misleading climate claims can still be challenged under California's general consumer protection laws and under federal law, where the FTC's Green Guides set the benchmark. See ESG targets and net zero.

How does AB 1305 relate to SB 253 and SB 261?

SB 253 requires large companies to report their scope 1, 2 and 3 emissions to CARB, and SB 261 requires reports on climate-related financial risk; both apply only above revenue thresholds. AB 1305 applies to any size of company that sells offsets or makes climate claims in California, and is about the support for claims rather than emissions totals. Under CARB's proposals, any offsets a company mentions in its SB 253 report are kept separate from its gross emissions, which is consistent with AB 1305's focus on showing exactly what offsets were used. See California SB 261.

How should a company comply with AB 1305?

• Find every net zero, carbon neutral and reduction claim the company makes, including on products, packaging and websites.
• List every offset bought, used or sold, with its registry, project ID, type, protocol and verification.
• Publish the disclosures in one place on the website and record the date of each annual update.
• Check that each claim can be supported by data, ideally with independent assurance of the emissions inventory.

This guide is general information. It is not tax or legal advice for your situation.