California Fights Trump Deregulation by Implementing Its Own ‘Green Accounting’ Rule

California is leading the resistance against President Donald Trump’s deregulation agenda with new rules that will force companies operating in the state to produce audited reports on their CO2 emissions, and analysts say these rules may soon apply to companies throughout the United States. 

California is preparing to implement two laws, SB 253 and SB 261, which would require companies operating in the state to monitor and report their CO2 emissions, as well as those of their suppliers and customers. These rules, originally passed in 2023, are similar but broader in scope than the mandate that was imposed nationwide by the Securities and Exchange Commission during the Biden administration, but which was effectively canceled under the current Trump administration. 

California’s so-called “green accounting” mandate “sets the U.S. standard for climate-related disclosures and has the potential to reach every part of a company’s value chain,” Sidley, a global law firm, stated. The mandate would also align America’s climate accounting rules with those of the European Union.  

“California’s SB 253 and SB 261 function as a de facto national mandate, especially for large companies that do business in the state,” Jason Isaac, CEO of the American Energy Institute, told The Daily Signal. “While the Trump administration is backing away from the SEC’s overreaching climate disclosure rule, California is charging ahead, forcing private companies to publish speculative and politically motivated climate data, even if they’re not headquartered in California.” 

In March, the SEC dropped its opposition to lawsuits against a mandate it enacted in 2024, which would have forced American companies to produce audited disclosures of their greenhouse gas emissions, together with their plans to reduce them. This mandate is now effectively dead at the federal level. 

The SEC had attempted to force firms to disclosure their own emissions (Scope 1 emissions) and those of their energy suppliers (Scope 2). But California’s laws go further, mandating that companies also disclose “upstream” and “downstream” emissions from their supply chain and users of their products (Scope 3).  

A report by Baker Donelson, a law firm, states that Scope 3 emissions “are notoriously hard to record as they encompass indirect emissions from purchased goods and services, business travel, employee commutes, and the processing and use of sold products.” 

These reporting rules, which require third-party audits and are scheduled to take effect in 2026 for Scope 1 and 2 emissions, and in 2027 for Scope 3, will apply to firms operating in California with $1 billion or more in sales. But analysts say California could set the standards for other states. 

“I think the goal of California right now is to get as many other states as it possibly can to go along with this,” Bonner Cohen, senior fellow at the National Center for Public Policy Research, told The Daily Signal. “They know that as long as Trump is in the White House they’re not going to get anything done on this nationally, so if they can get other states—Oregon, Washington, Illinois, New York, Massachusetts, Vermont, Connecticut, Rhode Island—to do something similar, they can at least reach part of their goal.” 

State-level “green” accounting rules could lead to a patchwork of regulations for companies to reckon with, forcing many to comply with the strictest standards to be able to operate across the country.  

“Companies doing business in California, which is a huge market, might find it easier to comply with their rule than have different rules for states vs. federal,” asset manager William Flaig, CEO of American Conservative Values ETF, told The Daily Signal. “This would likely circumvent what Trump is doing at the federal level.” 

A similar fight between California and the Trump White House is ongoing over the regulation of CO2 emissions. In 2024, the Biden administration granted California an exception to implement its own greenhouse gas emissions laws, but Trump revoked that exception this past June. 

Critics of “green accounting” say the costs of compliance could be enormous and doubt that it will help to reduce global temperatures.  

A 2022 analysis of the SEC’s “green accounting” proposal by Heritage Foundation economic policy fellow David Burton stated that it would create a $6.4 billion annual wealth transfer from American companies to “a new compliance ecosystem” of economists, accountants, attorneys, compliance officers, consultants, and emissions auditors.  

“We should always be skeptical of environmental rules that have all economic pain and no environmental gain, and that’s precisely what we have here,” Jack Spencer, The Heritage Foundation’s senior research fellow on environmental policy, told The Daily Signal. “You have a single state trying to impose its will on the rest of us, and it will result in nothing but lining the pockets of special interests.” 

However, policy analysts say the costs to companies could go beyond collecting and reporting emissions data and include exposure to climate-related lawsuits. 

“It’s something of a litigation trap, in that they are being forced to turn over information which might be completely benign in its own right, but in the hands of an enterprising, well-funded green lawyer, can at the very least drag the company into court,” Cohen said. 

In recent years, more than 20 states and cities have filed lawsuits against energy companies such as ExxonMobil, Shell, Sunoco, Citgo, Chevron, Koch Industries, and BP, according to the Center for Climate Integrity, and claims of harm from CO2 emissions could amount to trillions of dollars. These lawsuits have been financed by millions of dollars from tax-exempt philanthropic organizations, according to the Capital Research Center, an investigative think tank.  

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