The Ninth Circuit halts California climate disclosure law SB 261 pending appeal, creating uncertainty for companies as SB 253 emissions reporting rules continue.
A sudden federal court intervention has thrown California’s landmark climate disclosure regime into uncertainty, after the U.S. Court of Appeals for the Ninth Circuit moved to pause implementation of Senate Bill 261 just weeks before companies were expected to begin preparing mandatory climate-risk disclosures. The one-page order, issued on November 18, halts enforcement of the state’s climate-related financial risk law pending appeal, marking a significant development in what could become one of the most consequential legal battles over climate accountability in the United States.
The injunction arrives as California had been positioning itself as the de facto national standard-setter for climate transparency. SB 261 was scheduled to require any business entity operating in California with over 500 million dollars in annual revenue to publicly disclose climate-related financial risks and mitigation strategies. Now, companies face an unexpected pause—while the state’s second major climate disclosure law, SB 253, remains fully on track.
A major climate law halted while its companion pushes ahead
The Ninth Circuit’s order creates a split in enforcement between two interconnected pillars of California’s Climate Accountability Package, signed into law in October 2023 by Governor Gavin Newsom. While SB 261—the Climate-Related Financial Risk Act—is paused, SB 253, the Climate Corporate Data Accountability Act, will proceed as planned.
Under SB 253, companies with over 1 billion dollars in annual revenue must begin publicly reporting their greenhouse gas emissions:
• Scope 1 and 2 emissions by June 30, 2026
• Scope 3 emissions beginning in 2027
The partial injunction leaves California’s regulatory landscape split. More than 3,100 companies were identified in a preliminary list issued by the California Air Resources Board (CARB) in September as potentially subject to one or both laws. CARB noted at the time that the list was incomplete, and companies would need to comply whether or not they appeared on it.
The court offered no explanation for its decision. The simplicity of the one-page order belies its consequences: companies now face a fragmented compliance landscape, regulators must adjust timelines, and legal uncertainty around California’s authority to impose climate disclosure obligations remains unresolved.
Business groups seize on a major opening
The injunction marks a temporary victory for the U.S. Chamber of Commerce, the lead petitioner challenging both SB 261 and SB 253. Joined by several influential business associations—including the California Chamber of Commerce, American Farm Bureau Federation, Los Angeles County Business Federation, Central Valley Business Federation, and Western Growers Association—the Chamber has argued the laws impose “nationwide burdens” and violate constitutional protections, including the First Amendment.
In a statement following the ruling, Daryl Joseffer, executive vice president and chief counsel at the Chamber’s Litigation Center, praised the decision:
“The U.S. Chamber welcomes the Ninth Circuit’s decision to pause California’s unconstitutional climate disclosure law, pending appeal. Stopping this law before its January 1 deadline was critical to businesses and the protection of their First Amendment rights. One state should not have the ability to impose this kind of burden on the entire country.”
The Chamber has been vocal about the cost implications, citing “massive compliance costs for companies and their supply chains.”
The Ninth Circuit’s initial stance in the case was different: it had denied an earlier request for a preliminary injunction and planned to hear the full appeal next year. The Chamber then filed an emergency application with the U.S. Supreme Court on November 15, seeking immediate relief. The Ninth Circuit’s new intervention came days later, pausing SB 261 but not the broader emissions disclosure requirements under SB 253.
Regulatory efforts continue despite the legal pause
The court’s decision landed on the same day that CARB held a public workshop on the development and enforcement of California’s climate disclosure rules. Regulators must now navigate the implications of a split regime in which emissions reporting timelines continue but climate-risk reporting does not.
For companies, this means two drastically different levels of readiness:
- Emissions reporting systems must be built immediately for SB 253 compliance.
- Climate-risk governance systems tied to SB 261 may be delayed but not dismissed, given the law could still be reinstated after appeal.
California’s Climate Accountability Package had been seen as setting the most expansive climate reporting obligations in the U.S.—compared to federal rules, which remain stalled in litigation. The injunction adds to a wider patchwork emerging across the United States, where some states expand climate disclosure while others enact anti-ESG restrictions.
A fragmented U.S. climate-disclosure landscape with global implications
The injunction deepens uncertainty for multinational companies that must reconcile:
- California’s partial disclosure regime
- Potential future SEC rules
- EU CSRD requirements
- International Sustainability Standards Board (ISSB) reporting standards
With SB 261 paused and SB 253 proceeding, the U.S. regulatory environment becomes more fractured. For global firms, this increases the operational burden of meeting overlapping—but not aligned—requirements across jurisdictions.
While the pause is temporary, the legal and political questions it raises are not. The appeal will be heard next year, and the Supreme Court could still become involved given the constitutional claims at issue. For now, the Ninth Circuit’s decision underscores that the U.S. climate disclosure landscape remains highly contested, with California’s authority at the center of the national debate.
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