The State of California is facing a lawsuit against two out of three of its new climate laws, namely the ‘Climate Corporate Data Accountability Act’ (Senate Bill 253) and the ‘Climate-Related Financial Risk Act’ (Senate Bill 261).
The lawsuit was filed this Tuesday by the US Chamber of Commerce, along with the Los Angeles County Business Federation, American Farm Bureau Federation, Central Valley Business Federation, California Chamber of Commerce, and Western Growers Association. It was filed in the federal District Court in California.
What are the laws and why are they being challenged?
A look at what these laws pertain to and the reasons the plaintiffs have put forth to challenge the laws.
Climate Corporate Data Accountability Act:
This Act requires US organized entities conducting business in California whose total revenue is more than $1 billion to publicly disclose their Scope 1, 2, and 3 greenhouse gas emissions annually.
Climate-Related Financial Risk Act:
The Act mandates that entities subject to the legislation must disclose climate-related financial risks on a biennial basis. The disclosure should align with the recommended framework and disclosures outlined by the Task Force on Climate-related Financial Disclosures (TCFD) or any equivalent requirement.
In addition to disclosing climate-related financial risks, entities covered by the Act are also required to outline the measures they have adopted to mitigate and adapt to these disclosed risks.
Reasons for the lawsuit:
The lawsuit argues that these Acts violate the First Amendment of the US Constitution. Specifically, it contends that these Acts compel businesses to engage in speech that is subjective and controversial in nature.
The complaint suggests that the requirement to make certain statements or engage in specific speech is not tied to any commercial purpose or transaction.
Rather, the state is using its regulatory power to force businesses into expressing viewpoints or engaging in communication that aligns with the political agenda of the state.
The complaint indicates that “The plan [for compelling speech to combat climate change] violates the First Amendment. It forces thousands of companies to engage in controversial speech that they do not wish to make, untethered to any commercial purpose or transaction. And it does all this for the explicit purpose of placing political and economic pressure on companies to “encourage” them to conform their behavior to the political wishes of the State.”
It is also contended that the Senate Bills 253 (S.B. 253) and 261 (S.B. 261), infringe upon the federal Clean Air Act and overstep California’s authority by attempting to regulate emissions beyond its borders.
According to the complaint, “Because the new disclosure requirements of S.B. 253 and 261 operate as de facto regulations of greenhouse-gas emissions nationwide, they are precluded by the Clean Air Act and are invalid under the Dormant Commerce Clause and principles of federalism.”
The Clean Air Act is a federal law that sets standards for air quality and regulates emissions of various pollutants. The plaintiffs claim that the Clean Air Act takes precedence and preempts California from imposing regulations on emissions in other states.
