Earlier this month, California enacted the Voluntary Carbon Market Disclosures Act, which requires advertisers to include specific disclosures on their websites when making certain types of environmental claims.

"Consumers deserve to feel confident that carbon offsets are actually resulting in meaningful emissions reductions," explained the author of the law, California Assemblymember Jess Gabriel, in a statement issued earlier this summer. "This legislation will provide critical transparency and accountability to ensure that corporations are meeting their climate goals and that we are protecting our planet for future generations."

What does the law require?

If an advertiser makes "net zero" or "carbon neutral" claims, or any other claims suggesting that the advertiser and its products don't add carbon dioxide or other greenhouse gasses to the environment or that the advertiser has significantly reduced its greenhouse gas emissions, the advertiser must disclose the following information on its website:

  • All information explaining the basis for the claim, which may include "disclosure of independent third-party verification of all of the entity's greenhouse gas emissions, identification of the entity's science-based targets for its emissions reduction pathway, and disclosure of the relevant sector methodology and third party verification used."
  • Whether there is independent third-party verification of the claims.

Similarly, if an advertiser that purchases or uses voluntary carbon offsets makes these types of claims, the advertiser must disclose the following information on its website:

  • The name of the business entity selling the offsets and the offset registry or program.
  • The project identification number, if applicable.
  • The project name as listed in the registry or program, if applicable.
  • The offset project type, including whether the offsets purchased were derived from carbon removal, an avoided emission, or a combination of both, and site location.
  • The specific protocol used to estimate emissions reductions or removal benefits.
  • Whether there is independent third party verification of the claims.

The law also imposes detailed disclosure requirements on sellers and marketers of voluntary carbon offsets.

When does the law go into effect?

The new law goes into effect on January 1, 2024. Advertisers only have a short time, then, to collect the necessary information and get it posted on their websites, which must be updated no less than annually.

Who do these requirements apply to?

These disclosure requirements apply to companies that operate in California or make the relevant claims in California.

What are the penalties for non-compliance?

The penalties for non-compliance are up to $2,500 per day, with total penalties not to exceed $500,000. The law is enforceable by the California Attorney General as well as other local authorities in the state.

www.fkks.com

This alert provides general coverage of its subject area. We provide it with the understanding that Frankfurt Kurnit Klein & Selz is not engaged herein in rendering legal advice, and shall not be liable for any damages resulting from any error, inaccuracy, or omission. Our attorneys practice law only in jurisdictions in which they are properly authorized to do so. We do not seek to represent clients in other jurisdictions.