California to Require Substantiation of Carbon Neutral Claims

Under a new California law enacted on October 7, 2023, companies selling carbon offsets or making carbon-neutral claims must now provide evidence to substantiate these measures and claims.

The law requires that businesses marketing carbon offsets disclose specific information on their websites.  This includes details on how emissions reductions were estimated, data and calculation methods to verify these estimates, whether there is third-party oversight, and the accountability measures in place if the project is not completed or proves to be less effective than advertised.  Companies that buy offsets will be required to provide an overview of each offset, including the business that sold the offset, on their websites.

In addition, the measure requires companies that claim to be carbon neutral or claim that they have made significant emissions reductions to support their claims with all available evidence.  Companies must also disclose whether there is third-party oversight of their claims or supporting data.

The law, which is reportedly the first of its kind in the US, authorizes fines of up to $500,000 per violation.  In a press release, the law’s author characterized the legislation as providing necessary transparency amid concerns about corporate greenwashing and the effectiveness of many carbon offsets.