The Trump administration told California regulators on Thursday that woke state laws forcing businesses to detail their carbon emissions should not apply to banks — or consumers could face stiff consequences.
The Office of the Comptroller of the Currency, under the U.S. Treasury Department, sent a warning to the California Air Resources Board over two first-in-the-nation climate reporting laws passed in 2023 over the objections of many corporations.
The disclosure laws “are likely to decrease competition, drive up prices, and reduce Californians’ access to financial services, all of which will harm residents and main street businesses,” the letter read.
The costly rules could even force some banking firms to ditch the state, according to the letter.
The laws in reference are Senate Bill 253, which requires companies with $1 billion revenue or more to disclose their greenhouse gas emissions, and Senate Bill 261, which mandates businesses with $500 million-plus revenue to publish a biennial report on climate-related financial risk.
Dubbed the “California Climate Accountability Package,” California Dems pushed the bills in an effort to help the state lead on reducing carbon emissions and make large corporations more accountable.
Business groups eventually sued both laws, arguing they were compelled speech in violation of the First Amendment and that they violated interstate commerce rules.
A federal appeals court last year temporarily blocked enforcement of Senate Bill 261 but let the other law remain active as the case is pending. As a result, the Air Resources Board is in the process of writing regulations to implement emission disclosures.
Businesses argue that the required disclosures are an unreasonable hassle.
They say they’ll be forced to spend time and money on an immense logistical and financial task of tracking emissions and conducting third-party audits.
The OCC said that burden would fall on banks as well — potentially leading to higher costs, reduced services or “withdrawal” from the market entirely.
“Smaller banks may withdraw from doing business in the state. Banks that cannot withdraw, including banks headquartered in California, will be disadvantaged,” the federal office said. “They will face substantial compliance obligations that could materially affect their operations.”
However, federally regulated banks are under its jurisdiction, the OCC claimed, and they told the state agency to exempt the disclosure laws on the banks.
“Federally chartered banks are governed by a robust framework of federal laws that preempt conflicting state laws by operation of the Supremacy Clause of the U.S. Constitution,” the OCC said.
Not respecting that authority, the OCC added, would hurt the banking system in the U.S. and “distract” banks from paying attention to actual financial risks if they spend resources on tracing emissions.
