Marissa Gerdes
Senior Manager, Dept. of Professional Practice, KPMG US
As part of California’s recent suite of climate laws – including GHG emissions and climate risk disclosure laws – the Voluntary Carbon Market Disclosures Act supplements global anti-greenwashing enforcement trends with the introduction of disclosure obligations for voluntary carbon offsets and emissions reduction claims.
Voluntary markets only but a broad scope
A voluntary carbon offset is an instrument that “connotes that the product represents or corresponds to a reduction in the amount of greenhouse gases present in the atmosphere or that prevents the emission of greenhouse gases into the atmosphere that would have otherwise been emitted.”
As such, the law applies to any instrument by whatever name that meets this definition – e.g. carbon offset, carbon credit, retail offset. However, the law applies only to voluntary arrangements; it does not apply to offsets under compliance programs – e.g. California’s Cap-and-Trade Program.
The law covers the activities in the table below and applies to both public and private companies, regardless of size.
The activity drives the disclosure
The law requires companies to make specified disclosures on their website, which must be updated at least annually. These disclosures are summarized in the table below.
Violations will be penalized
Companies will be subject to civil penalties not exceeding $2,500 per day for each day that information is not available or is inaccurate on the company’s website. Such penalties do not exceed $500,000 total.
Scoping |
Disclosure requirements |
|
|---|---|---|
| Group 1 | Business entities marketing or selling voluntary carbon offsets in California. |
|
| Group 2 | Entities operating in California that make claims within the state regarding any of the following:
|
Information about the GHG emissions associated with the claims – e.g. how the claim was determined to be accurate, how interim progress is measured, whether there is independent third-party verification. |
| Group 3 | Entities operating in California that make any of the claims outlined in Group 2 above and that also purchase or use voluntary carbon offsets sold within the state. |
Information about each project or program – e.g. name of business entity selling the offset, offset project type, whether there is independent third-party verification. |
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