How a California Senate bill could stifle the state’s legacy of climate ambition

OPINION – Earlier this month, the California Senate Judiciary Committee advanced Senate Bill 1036, a bill that would cause far-reaching damage to the ability of California – and the world – to fight the climate crisis.

Carbon credits are financial instruments that fund projects aimed at reducing greenhouse gas emissions to compensate for emissions that are difficult to reduce elsewhere, thereby helping mitigate climate change. They are particularly valuable in their nearly unique ability to direct private financing to crucial projects like forest protection and reforestation in the developing world. Many of these carbon projects support Indigenous peoples and local communities, recognizing their vital role in preserving and restoring critical ecosystems.

SB 1036, “Voluntary Carbon Offsets: Business Regulation Bill,” creates undue risks for companies leading on climate action, deterring the private sector from funding key climate projects. The bill’s language is imprecise, with vague terms such as “should know” or “unlikely” as well as technical ambiguities on key matters including the notion of “durability”. Additionally, the bill’s provisions open the door for private civil litigation in a highly technical subject area, increasing the potential burden incurred by good faith actors in the climate space.

The bill’s author, Senator Limón, has good intentions: to improve climate outcomes by preventing businesses from engaging with low-quality carbon credits that do not have as much climate impact as they claim to have. This is the right goal. However, in practice, SB 1036, would stifle climate action by making it much harder for businesses everywhere – not just in California – to engage in voluntary environmental initiatives.

Moreover, the goal of weeding out low-quality carbon credits has already been accomplished by California law. AB 1305, “the Voluntary Carbon Market Disclosures Business Regulation Act,” requires companies making net-zero, carbon neutral, or similar emissions claims to disclose how these claims were assessed, whether they’re verified by a third party, and what carbon offset projects or programs were used. Through AB 1305, California consumers are protected from low-quality carbon projects and unsubstantiated corporate climate claims. These efforts are bolstered globally by work from other expert global organizations further increasing the accountability and transparency of the voluntary carbon market.

Despite its good intentions, in practice, SB 1036 opens individuals and firms engaging with the voluntary carbon market in good faith to increased legal risk and potential civil litigation and misinformed, frivolous lawsuits. And it creates a truly perverse outcome: under its current language, if SB 1036 passes, an entity that opts out of climate action entirely is under less scrutiny and experiences less risk than an entity voluntarily buying carbon credits as part of a strategy in demonstrating climate leadership, protecting nature, and helping California – and the planet – avoid climate catastrophe.

Activities funded by the voluntary carbon market – from carbon removals to avoided deforestation – are needed to avoid a climate catastrophe. The UN Intergovernmental Panel on Climate Change identified carbon removals as “unavoidable if net zero…emissions are to be achieved.” The voluntary carbon market is a crucial mechanism in delivering capital to bring these essential climate projects to fruition.

SB 1036 threatens to take this tool off the table and jeopardize finance for nature-based climate solutions. With an estimated annual requirement of USD6.2 trillion between 2023 and 2030 to deliver net zero globally, we need every high integrity mechanism available. Curtailing investment in high integrity climate solutions is a risk we cannot afford.

California is a leader in climate action and in innovative and effective market-based solutions to addressing complex environmental challenges. The state’s hallmark cap-and-trade program covers and is decarbonizing approximately 75% of the state’s GHG emissions, proving the value of pricing carbon–which is exactly what the voluntary carbon market does. California-based companies need access to a robust, high-integrity voluntary carbon market to purchase credits from carbon reduction and removal projects to offset unavoidable, or residual, emissions.

At a time when communities in California and around the world face the increasingly tragic consequences of the climate crisis, SB 1036 would create undue risk for those supporting voluntary climate action in California and establish obstacles to climate progress, a ramification we cannot afford.

Will Turner, Ph.D. is the Senior Vice President of Natural Climate Solutions at Conservation International.