The Voluntary Carbon Market Disclosures Act (AB 1305): A Model Case of State Law Filling the Gap Left by Federal Regulatory Retreat

California's Voluntary Carbon Market Disclosures Act (AB 1305), enacted in October 2023, is the third law—alongside SB 253 and SB 261—that together make up the "California Climate Accountability Package." Unlike SB 253 and SB 261, AB 1305 contains no revenue-based exemption threshold, and broadly applies to any entity that markets, sells, purchases, or uses voluntary carbon offsets (VCOs) within California, as well as any entity making climate-related claims such as net-zero or carbon neutrality.

AB 1305 took effect January 1, 2024, though technical ambiguity regarding the effective date led the bill's author to communicate to the legislature in writing that January 1, 2025 was the practical effective date. During the 2024 legislative session, a cleanup bill (AB 2331) aimed at clarifying the rules and delaying enforcement (to July 1, 2025) passed the Senate but failed to achieve final passage before the session ended, and it was not enacted. No similar amendment has been enacted in subsequent sessions either, and as of August 2026, AB 1305 continues to operate under its original enacted text (a March 2026 KPMG guide confirms that no additional rulemaking has occurred since enactment).

Violations carry penalties of up to $2,500 per day, with a maximum of $500,000 per violation. Disclosures must be updated annually. As the SEC's climate disclosure rule faces a 2026 rescission proposal and federal-level climate and environmental labeling regulation retreats more broadly, AB 1305 stands—alongside the stalled revision of the FTC's Green Guides (a theme also relevant to the market-disclosure domain, see [[gri-us]])—as a representative example of state law filling the resulting federal gap.