California Air Resources Board Provides A Roadmap: 2026 Revised Initial Regulations Open For Public Comment

On Monday, July 27, the California Air Resources Board (“CARB”) published its revised Initial Regulation intended to implement the Climate Corporate Data Accountability Act (“SB 253”) (see CARB’s notice here and its revised Initial Regulation here). The proposed substantive revisions in CARB’s draft address definitions, fee schedules, and reporting requirements unique to the inaugural 2026 report. The 15-day public comment period is open through August 11, 2026. Once the comment period ends, the California Office of Administrative Law (“OAL”) must approve the Regulation before it will have binding effect.

Takeaways

1. CARB is accepting public comments on the revised text of the Initial Regulation until August 11, 2026.
2. As expected, CARB is proposing to codify November 10, 2026, as the deadline for inaugural SB 253 reporting for Scope 1 and Scope 2 greenhouse gas (“GHG”) emissions.
3. If the revised Initial Regulation is approved by OAL in its current form, by November 10, 2026, reporting entities will have the option of submitting: (i) a Scope 1 and Scope 2 GHG emissions report from the entity’s prior fiscal year in accordance with the statute and applicable regulations; (ii) Scope 1 and Scope 2 emissions data from the entity’s prior fiscal year that can be determined from information in their possession on or before December 5, 2024; or (iii) a statement on company letterhead indicating that the reporting entity is not submitting a report because it did not possess Scope 1 or Scope 2 emissions data and was not collecting information on or before December 5, 2024.
4. In line with the delayed November 10 reporting deadline, CARB is proposing to extend the deadline for written fee determination notices from September 10 to December 10, 2026, and has clarified that payment will be due within 60 calendar days of when an entity receives a notice.

Key clarifications of the proposed regulatory text

On December 26, 2025, CARB proposed its Initial Regulation to implement SB 253 (see our previous article here). On February 26, CARB unanimously approved adoption of the Regulation (see our previous article here). Four months later, on June 24, 2026, CARB announced that it would implement a three-month delay in the reporting deadline for Scope 1 and Scope 2 emissions (from August 10 to November 10, 2026) to provide reporting entities with additional time and allow for CARB “to clarify certain requirements” (see our previous article here). On Monday, July 27, CARB published the eagerly awaited proposed clarifications, which are now subject to a 15-day comment period. 

The material changes between CARB’s December 2025 Initial Regulation and its revised version published on Monday are as follows:

• Wholesale Electricity Transactions. CARB is proposing to amend the exclusion for wholesale electricity retailers in Section 96071(b)(5) to clarify that it applies only to wholesale electricity transactions “that occur in interstate commerce.” CARB reasoned that this revision is “appropriate” because it aligns the exclusion more closely with a January 30, 2024, letter from Senators Wiener and Stern in which the Senators clarified that “it was not [their] legislative intent to include such energy transactions within the scope of [the] reporting obligation” for SB 253 or SB 261, the Climate-Related Financial Risk Act. See CARB’s July 27, 2026, Notice (“July 27 Notice”) ⁋ 1.
• Doing Business in California. CARB is proposing to amend the definition of “doing business in California,” in Section 96072(a)(8), to confirm that the definition does not include wholesale sales of electricity “that occur in interstate commerce” (in line with the exclusion discussed above) and to clarify that the term captures any “business entity” doing business in California, rather than simply “taxpayer[s],” within the meaning of California’s Revenue and Taxation Code. With respect to use of the new term “business entity,” CARB reasoned that “[t]his change avoids potential uncertainty as to whether a ‘business entity’ also constitutes a ‘taxpayer’ for purposes of assessing whether that business entity is ‘doing business in California’ under the California Revenue and Taxation Code section 23101(b)” and clarified that this proposed modification is not intended to expand applicability, because CARB’s revisions also clarify that “doing business in California” will be evaluated at the individual business entity level. See July 27 Notice, ⁋ 3.
• Revenue. CARB is proposing to amend the definition of “revenue,” in Section 96072(a)(13), to clarify that (a) revenue is calculated at the individual business entity level, and (b) intercompany transactions between entities of the same combined reporting group do not count toward a business entity’s revenue under the Regulation, as described in Section 21506.5-1 of Title 18 of the California Code of Regulations. CARB has not defined “intercompany transactions”—which is a new term for the Agency—so we expect this revision to be a focus of public comment as the regulated community continues to seek clarity about the applicability of these reporting requirements. CARB reasoned that these additions respond to stakeholder feedback, reduce confusion, and align the Initial Regulation with existing California corporate tax filing practices. See July 27 Notice, ⁋ 5. 
• Subsidiary. CARB is proposing to amend the definition of “subsidiary,” in Section 96072(a)(16), to clarify that subsections 95833(a)(1)-(3) and (a)(5) of Title 17 of the California Code of Regulations should be used to determine whether an entity is properly characterized as a subsidiary. The revisions eliminate the prior list that served as a reference to determine “indicia of control” and instead reference the indicia of control criteria in subsection 95833(a)(1). Those criteria focus on whether an entity holds more than 50% ownership, voting power, management authority, partnership interests, or other rights that provide majority control over the entity. 
• Annual Fees. CARB is proposing to extend the written fee determination deadline in Section 96074(a) from September 10 to December 10, 2026, in alignment with the three-month reporting delay. In accordance with Section 96074(a), as revised, the Executive Officer shall, for each calendar year beginning in 2026, “provide a written fee determination notice to each reporting entity and covered entity of the amount due,” using the fee calculation formulas set forth in Section 96073 (that remain unchanged).
• Payment of Annual Fees. CARB is proposing to revise the Regulation’s payment provision (Section 96074) to expressly permit consolidating fee payment “at the parent company level” and has clarified that, if a subsidiary qualifies as a reporting entity or covered entity and the parent company chooses to consolidate payments, “the subsidiary is not required to submit a separate payment.” Reporting entities will have 60 calendar days to remit payment (revised from “60 days” in the prior draft text) in accordance with the written fee determination issued by CARB. Each reporting entity and covered entity failing to remit the fee to CARB within 60 calendar days of the fee determination notice date “is subject to a late fee.”
• Emissions Reporting Under SB 253 (Health and Safety Code Section 38532). CARB is proposing several changes to the implementing regulations for the inaugural SB 253 reporting year. These include:
  • Revising the inaugural reporting deadline to November 10, 2026, in line with CARB’s prior notice (see our previous article here).
  • New language confirming, consistent with the statutory mandate, that Scope 3 emissions reporting is not required for 2026. 
  • New language clarifying that SB 253 reports may be consolidated at the parent company level and, where a parent company elects to consolidate reporting, its subsidiaries that independently qualify as reporting entities are not required to submit a separate report. 
  • Codification of CARB’s December 5, 2024, enforcement notice (here), which allows a reporting entity to limit their inaugural report in reliance on Scope 1 and Scope 2 emissions data that was in its possession as of the December 5, 2024, notice. Alternatively, a reporting entity may submit a statement on company letterhead indicating that it is not submitting a report because it did not possess Scope 1 or Scope 2 emissions information, and was not collecting such information, on or before December 5, 2024. 

Next steps

While many of CARB’s proposed changes are merely clarifications, others—like the proposed new term “intercompany transactions”— go a step further, and may raise questions about whether CARB, and the full extent of the regulated community, can be truly prepared to for the SB 253 inaugural reporting deadline in just several months. Entities that have feedback about CARB’s proposal should submit comments by the August 11 deadline.

Once the Initial Regulation is finalized in its revised form, it must go to OAL for review and approval. Assuming OAL does so, inaugural SB 253 reports will be due by November 10, 2026—less than four months away. On this date, for this first year, reporting entities (or parent entities reporting on behalf of their subsidiaries, as applicable) will have the option of submitting one of the following and remaining in full compliance with their reporting obligations, none of which require assurance:

• A Scope 1 and Scope 2 GHG emissions report from the entity’s prior fiscal year in accordance with the statute and applicable regulations;
• Scope 1 and Scope 2 emissions data from the entity’s prior fiscal year that can be determined from information in their possession on or before December 5, 2024; or
• A statement on company letterhead indicating that the reporting entity is not submitting a report because it did not possess Scope 1 or Scope 2 emissions data and was not collecting information on or before December 5, 2024.

The broad range of expertise at Hogan Lovells Cadwalader US LLP. – including the Environment and Natural Resources, Litigation/Consumer Products, Sustainable Finance and Investment, Corporate and Finance, and Infrastructure, Energy, Resources and Projects teams – are available to assist clients with complying with California’s climate-related financial risk and GHG emissions disclosure requirements and can help you understand interactions with other relevant sustainability-related reporting regimes required globally.