April 2, 2024
In October 2023, California Governor Gavin Newsom vetoed Senate Bill (SB) 390, which aimed to crack down on what the legislation’s author perceives as a problem with the quality of some offset credits and their associated environmental claims. [1] In vetoing the legislation, the Governor expressed concern that the bill would do more harm than good and create “significant turmoil” in the carbon credit market. SB 390 received support from an overwhelming majority in both the Assembly and the Senate, and in spite of the Governor’s veto, it has since been reintroduced as SB 1036. On March 20, 2024, this bill passed a committee vote in California’s Senate Environmental Quality Committee with unanimous support (5-0). The bill is now scheduled for a hearing in the Senate’s Judicial Committee on April 9th.
Why should you know about this bill?
After reviewing SB 1036, we have serious concerns about its effectiveness in creating clarity in climate claims and its potential to have catastrophic consequences on the voluntary carbon market, an effective tool to reduce climate emissions. While it may be a state bill, it has the potential to have far-reaching negative impacts on carbon reduction efforts.
Our Concerns about SB 1036
- Geographic Specification – To whom does the bill apply if it becomes law? Even though this is a California bill, its language lacks geographical specifications. It is unclear if it will apply to projects located in California or companies doing business in California or if it will apply to any project and stakeholder selling or marketing carbon credits.
- Civil Liabilities – The bill says it is unlawful for anyone who verifies, certifies, or issues carbon credits where the person “knows or should know” that the emissions reduction or removals are unlikely to be quantifiable, real, and additional. This “knows or should know” standard is not the standard by which carbon markets verify and issue credits. Most credible carbon project registries and programs throughout the world, including ARB’s compliance program, utilize reasonable assurance as the verification standard, and the programs set the requirements for each project type as to their additionality and quantification. These are rules-based programs, not optional evaluations, as many critics seem to suggest. Leaving the assessment of what “knows or should know” means to “bounty hunters” with limited carbon expertise will significantly increase the risk for market participants and cause more confusion than truly providing carbon credit transparency. Further, reliance on the undefined term “atmospheric lifetime of CO2” creates new and significant challenges for the creation and use of carbon offsets and would explicitly discourage investments in nature where permanence of carbon storage may be on shorter timescales than technology-based removals. Carbon market mechanisms (e.g., buffer pools and other specific protocol requirements) already exist and are widely employed to mitigate these challenges of impermanence by insuring against the risk of reversal in certain sectors. Nature-based solutions (particularly forests) play an essential role in climate mitigation, accounting for more than 30% of climate mitigation by 2050. [2]
- Durability – The language in the bill makes it unlawful for a person to market, make available/offer to sell, or sell voluntary carbon credits if the person knows that the durability of the credit’s GHG reductions or removals is less than the atmospheric lifetime of the carbon dioxide emissions. The problem is that no scientific consensus exists for a specific atmospheric lifetime of CO2. Both EPA and the Intergovernmental Panel on Climate Change (IPCC – a United Nations body responsible for assessing the science related to climate change) acknowledge that the duration can range from less than 100 years to over 1000 years. [3],[4]
- Project Boundary – The bill uses the term “authorized project designee.” This specific term is exclusively used in CARB’s Cap and Trade regulations. This is a red flag for all who participate in the voluntary market. Since this bill intends to apply beyond the compliance carbon program, we feel it is inappropriate to include such a term that will cause further uncertainty and inconsistencies.
ClimeCo is committed to effective, transparent, and timely emission reduction implementation and believes it is critical to incentivize all possible avenues for reducing GHG emissions as quickly as possible. We believe that driving finance to climate action through high-quality carbon credits is one extremely important element of that action. We see this every day as we work with our clients who are leaving no stone unturned to find a way to reduce their environmental footprint and build a robust and sustainable business.
ClimeCo submitted comments to the California Senate Environmental Quality Committee expressing our opposition to SB 1036. Normally, ClimeCo prefers to submit constructive comments when possible, but ClimeCo feels that this particular legislation is fatally flawed. We want to encourage anyone in this space who sees the need and value of the voluntary carbon market as a part of our path to a low-emissions economy to reach out to the California Senate Judiciary Committee before the April 9th hearing to voice your opposition to this bill.
We welcome further engagement with policymakers, integrity councils, rating firms, and others to discuss what we believe is our mutual goal of facilitating positive voluntary climate action through high-integrity and transparent environmental markets.
[1] Gavin Newsom, “SB 390 Veto,” October 7, 2023, https://www.gov.ca.gov/wp-content/uploads/2023/10/SB-390-Veto.pdf.
[2] Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services (2019): Summary for policymakers of the global assessment report on biodiversity and ecosystem services of the Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services. https://www.biologicaldiversity.org/programs/biodiversity/pdfs/Summary-for-Policymakers-IPBES-Global-Assessment.pdf
[3] Climate Change Indicators: Greenhouse Gases – https://www.epa.gov/climate-indicators/greenhouse-gases
[4] Climate Change 2021 – The Physical Science Basis. https://www.cambridge.org/core/books/climate-change-2021-the-physical-science-basis/415F29233B8BD19FB55F65E3DC67272B
About ClimeCo
ClimeCo is a global sustainability company headquartered in Pennsylvania, with projects and partners all over the world. Our mission is to advance the low-carbon future and restore nature with market-based solutions. We offer comprehensive services spanning environmental asset innovation, ESG and climate strategy consulting, regulatory and policy advisory, environmental credits, API solutions, and climate action certification programs.
Our growing team of respected scientists and industry experts collaborate with companies of all sizes, governmental groups, NGOs, and capital markets players on ESG, decarbonization, and policy issues—allowing us to develop high-quality, purpose-built end-to-end sustainability solutions with measurable impact. We are steadfastly committed to educating and empowering our clients, no matter where they are in their sustainability journey, to be confident in a rapidly evolving marketplace.
Take your climate initiatives to new heights by collaborating with ClimeCo. Contact us at
+1 484.415.0501, info@climeco.com, or through our website climeco.com.
