California v. the Federal Government on Climate Policy

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Large corporations are among the most significant contributors to greenhouse gas emissions worldwide across industries such as fossil fuels, manufacturing, and supply chains. In addition to direct contributions, corporations are increasingly susceptible to climate-related risks, which can disrupt supply chains and compromise physical infrastructure. The need for transparency of these risks has been an ongoing interest for shareholders—similar to how securities regulation mandates that companies report material financial risks—yet federally-enforced climate disclosure remains nebulous. 

California’s Climate Disclosure Laws

In 2023, California introduced the California Climate Accountability Package (CCAP), which contained legislation aimed at enhancing corporate accountability regarding climate impact. Primarily, this is realized by two Senate bills, SB 253 and SB 261, which pertain to companies “doing business in California” as defined by specific thresholds. SB 253, the Climate Corporate Data Accountability Act, requires companies with over $1 billion in annual revenue in California to disclose their yearly greenhouse gas emissions. Similarly, SB 261, the Climate-Related Financial Risk Act, mandates that companies making over $500 million in annual revenue disclose “climate-related financial risks”—material risks to a company’s operations that may arise from climate change.

The California legislature’s reasoning behind the CCAP is to allow markets to assess climate risk more accurately. As opposed to specifically limiting emissions, the state intends to use these disclosure laws to promote corporate accountability. 

In November 2025, the U.S Court of Appeals for the Ninth Circuit issued a temporary injunction on SB 261, prohibiting the state of California from enforcing the first reporting deadline of January 1, 2026. This was prompted by lawsuits filed both by private companies and trade groups such as Exxon Mobil and the U.S. Chamber of Commerce. The court declined to do the same with SB 253; consequently, companies are still required to prepare for its reporting deadlines later in 2026. Although oral arguments on the merits of the appeal took place on January 9, 2026, the court has not yet issued a final ruling. 

Legal Arguments

The First Amendment is at the heart of the litigation challenging SB261, brought by a coalition of trade groups headed by the U.S. and California Chambers of Commerce. According to the precedent set by Zauderer v. Office of Disciplinary Counsel (1985), the government can compel disclosures if they are “purely factual and uncontroversial” and related to preventing the deception of consumers. For example, in 2024, Zauderer was used to uphold the USDA’s country-of-origin labeling requirements for meat products, as such disclosure factually informed consumers about product origin. 

The plaintiffs argued that the bill unconstitutionally compels speech beyond factual data supported by Zauderer, as it mandates that companies generate speculative statements such as projecting climate-risks and mitigation strategies. 

In addition, the plaintiffs contend that SB 261 imposes extraterritorial reach by imposing regulations that overlap with areas already regulated by the federal government, such as financial disclosure laws. The Department of Justice has supported this argument, citing an interest in consistent regulation at the federal level, nationwide. 

The state rebutted by noting that enforcing climate risk disclosure is no different than companies disclosing financial risks under traditional securities regulation. Moreover, they added that climate-related exposure is simply another category of economic risk that investors are entitled to. 

Future Implications

The Ninth Circuit’s decision on this matter will not only determine the efficacy of California’s disclosure policy but also shape the broader trajectory of U.S. environmental legislation. Because many of the corporations impacted by CCAP operate nationally, the ruling has the potential to engender renewed environmental policies on a state-by-state basis, in a time when federal regulations regarding protecting the climate are virtually nonexistent.

Ethan Seiz is a sophomore concentrating in Computer Science. He is a staff writer for the Brown Undergraduate Law Review and can be contacted at ethan_seiz@brown.edu.

Priyanka Nambiar is a pre-law sophomore at Brown University studying Cognitive Neuroscience. She is a staff editor for the Brown Undergraduate Law Review and can be contacted at priyanka_nambiar@brown.edu.

Michaela Hanson is a sophomore at Brown University studying English and Economics. She is an Associate Editor for the Brown University Law Review blog, and can be reached at @michaela_hanson@brown.edu.