SB 253 Update: CARB Still Wrestling With Draft Regulations in March 2026
Companies preparing to comply with California’s SB 253 and submit their first required disclosures in August 2026 received additional guidance this week from the California Air Resources Board (CARB). At a public workshop on March 23, CARB outlined proposed approaches under its developing rulemaking, including options for phasing in compliance over time, and solicited public feedback on those concepts. The following article summarizes the key developments from that workshop.
Parent Company Liability Under the Clean Air Act: Federal District Court Applies Bestfoods and Imposes $100 Million Penalty and $20 Million in Mitigation
In a February 17, 2026 decision with significant implications for corporate parents, the U.S. District Court for the Eastern District of Michigan held in United States v. EES Coke Battery, LLC that parent company DTE Energy Company and two affiliates were liable as “operators” under the Clean Air Act (CAA) for New Source Review (NSR) violations at a subsidiary’s coke battery facility. In a case of first impression, the court applied the standard for direct parent company liability established in United States v. Bestfoods to a source under the CAA. Moreover, the ruling includes a $100 million civil penalty, one of the largest CAA penalties issued by a court to a stationary source. The court ordered an additional $20 million in community mitigation, and also ordered EES Coke to obtain an NSR permit that may require the source to install costly new pollution controls.
New York is Latest State to Finalize Greenhouse Gas Reporting Rules for 2026
The New York State Department of Environmental Conservation (NYDEC) finalized its long-awaited Mandatory Greenhouse Gas (GHG) Reporting Program (Part 253), which implements GHG reporting requirements for businesses in New York consistent with directives under the 2019 Climate Leadership and Community Protection Act (CLCPA) and aids the State in meeting obligations under the northeast Regional Greenhouse Gas Initiative (RGGI). The final rule is, in part, the result of an October 2025 court order that required NYDEC to promulgate regulations addressing climate change after NYDEC initially failed to issue the regulations by the CLCPA deadline. Part 253, as finalized, largely conforms with the draft regulations NYDEC proposed in 2025 but includes revisions to address some of the concerns raised by industry stakeholders. New York becomes the fourth state to implement a GHG reporting program after California, Washington, and Oregon.
New York Court Orders NYDEC to Issue Climate Change Regulations by February 2026
On October 24, 2025, a New York trial court ordered the New York Department of Environmental Conservation (NYDEC) to promulgate regulations addressing climate change pursuant to the state’s 2019 Climate Leadership and Community Protection Act, 2019 N.Y. Sess. Laws Ch. 106 (S. 6599) (CLCPA). The court sided with environmental groups that argued that NYDEC’s failure to issue these rules violated a mandatory statutory duty, despite the agency’s arguments that such rules would be “infeasible” because of costs imposed on consumers. With the order requiring promulgation of the rules by February 6, 2026—mere months away—stakeholders should watch closely for details on upcoming compliance requirements.
The Trump Administration’s Pushback Against a Global Shipping Carbon Levy
The International Maritime Organization (IMO), the United Nations agency tasked with regulating global shipping, has proposed an international carbon pricing scheme on shipping. The maritime shipping sector has increasingly faced global scrutiny as the contributor of 3% of global greenhouse gas emissions, and IMO’s proposed mechanism would serve as the first global emissions pricing mechanism affecting the shipping sector.
D.C. Circuit Restores Emergency Affirmative Defense for Title V Permit Holders
The D.C. Circuit recently reversed EPA’s rescission of a 1990s rule that established an emergency affirmative defense under the Clean Air Act for Title V permit holders that exceed an emission limitation due to an emergency. Our team breaks down what this means for facilities facing unexpected emissions exceedances.
D.C. Circuit Upholds U.S. EPA’s HFC Cap-and-Trade Program Under AIM Act
On August 1, 2025, the U.S. Court of Appeals for the D.C. Circuit upheld the U.S. Environmental Protection Agency’s (EPA) authority under the American Innovation and Manufacturing (AIM) Act to phase down hydrofluorocarbons (HFCs) through a cap-and-trade program. In IGas Holdings, Inc. v. EPA, No. 23-1261, a unanimous panel rejected constitutional and administrative law challenges from refrigerant industry members, finding that the AIM Act provides a clear “intelligible principle” to guide EPA’s allowance allocation. The Court also held that EPA’s decision to exclude 2020 market data from its allocation methodology was not arbitrary and capricious.
U.S. EPA Eliminates Key Scope 3 Role, Leaving Gap Ahead of SB 253 Compliance
On July 28, 2025, the U.S. Environmental Protection Agency (EPA) eliminated the positions and unit responsible for maintaining the Extended Input-Output (EEIO) model, a key federal tool used to calculate Scope 3 greenhouse gas (GHG) emissions. The move signals a likely end to federal support for EEIO emissions factors, presenting challenges for companies preparing to comply with California’s landmark climate disclosure law, SB 253 (as amended by SB 219). As federal involvement recedes, the private sector and California regulators may fill the gap, introducing uncertainty about how Scope 3 emissions will be quantified going forward.
Congress Eliminates Corporate Average Fuel Economy (CAFE) Penalties for Passenger Cars and Light Trucks
In one of its many changes, the One Big Beautiful Bill Act, enacted on July 4, 2025, eliminated civil penalties for noncompliance with federal fuel economy standards. Specifically, Section 40006 of the Act amends the language of the Corporate Average Fuel Economy (CAFE) statute to reset the maximum civil penalty to $0.00. Although the statute and its implementing regulations otherwise remain in place, this amendment removes any civil penalties for producing passenger cars and light trucks that do not meet fuel economy requirements.
EPA Updates Clean Air Act Standards Applicable to Small Waste Incinerators
On June 30, 2025, the U.S. Environmental Protection Agency (EPA) finalized updates to its New Source Performance Standards (NSPS) and Emission Guidelines for Other Solid Waste Incineration (OSWI) units under the Clean Air Act (CAA). These units — combustion systems that incinerate solid waste from commercial or institutional sources not otherwise regulated under specific incinerator categories — include very small municipal waste combustors and institutional incinerators. The final rule includes applicability-related and definitional changes expanding the class of incinerators subject to NSPS, revises the OSWI subcategories and tightens emission limits for key pollutants. It also adopts changes to startup, shutdown, and malfunction (SSM), and expands testing, monitoring, reporting, and recordkeeping requirements that will affect both existing and new OSWI units.