The United States Climate Legislation
Climate legislation in the U.S. is highly susceptible to political agendas and varies among states depending on the scope of the legislation. The Biden/Harris Administration maintains climate policy as a key aspect of their political agenda and has proposed legislation to promote the transition to a clean energy future.
Here’s everything you need to know about U.S. Climate Legislation:
Federal
The Inflation Reduction Act
The Inflation Reduction Act is the most ambitious investment in combating the climate crisis, aiming to cut total U.S. greenhouse gas emissions by up to 41 percent below 2005 levels by 2030 and designating $369 billion in funding for climate- and energy-related purposes. The IRA provides financial incentives for consumers and corporations through subsidies to invest in clean energy alternatives, like electric vehicles and renewable energy (1). Tax provisions are a large aspect of the IRA, constructed to save families money on their energy bills and to accelerate the deployment of clean energy, clean vehicles, clean buildings, and clean manufacturing (2). The vast majority of this funding ($216 billion) is designated towards tax credits to corporations (3). It is intended to catalyze private investment in clean energy, transport, and manufacturing. A majority of the spending in the IRA is going to be offset by increasing government revenue through increasing the minimum tax on corporations by 15% (4).
What’s the Legislation Timeline?
- Enacted in August of 2022
What Companies are Affected?
- Eligibility for tax credits are dependent on the project undertaken by the corporation, more information can be found here
Federal Supplier Climate Risks and Resilience Rule (5)
The Federal Supplier Climate Risks and Resilience Rule was proposed by the Biden administration as an executive order to force federal contractors to publicly disclose their carbon emissions.
What’s the Legislation Timeline?
- Proposed in November of 2022
- Is currently being implemented
What Companies are Affected?
- Federal contractors receiving more than $50 million in annual contracts will be subject to the following requirements
- Have to publicly disclose Scope 1, Scope 2, and relevant categories of Scope 3 emissions
- Disclose climate-related financial risks
- Set science-based emissions reduction targets
- Federal contractors with more than $7.5 million in annual contracts but less than $50 million are only required to report Scope 1 and Scope 2 emissions
Financial Penalties for Non-Compliance?
- No clear financial penalties, likely that the government would cease conducting business with the contractor
California
California’s Cap and Trade Program (6)
The cap-and-trade program in California has minimized greenhouse gas emissions in the state by setting a limit on major emitters through extending businesses carbon allowances. This program has been applied to emissions that account for around 80% of California’s GHG emissions. Each year, fewer allowances are created and the annual cap declines.
What’s the Legislation Timeline?
- Launched in 2013
- Carbon emission allowances have declined by 3% annually since 2013
- Less and less offsets are able to be used to minimize allowances used
- Allowed for 8% of total compliance obligation through 2020; 4% between 2021 and 2025; 6% between 2026 and 2030. Beginning in 2021, at least half the offsets used for compliance must come from projects that directly benefit California.
What Companies are Affected?
- Initially was applicable to electric power plants and industrial plants that emit 25,000 tons of carbon dioxide equivalent per year or more but since 2015, was extended to fuel distributors meeting the 25,000-metric ton threshold (7)
Financial Penalties for Non-Compliance?
- If a deadline is missed or there is a shortfall, four allowances must be surrendered for every metric ton not covered in time (8)
California’s Corporate Data Accountability Act (9)
The CDAA is the first of its kind in the U.S., requiring that large corporations that do business in California publicly disclose their greenhouse gas emissions. This is incredibly significant legislation as California is the world’s fifth largest economy, so this act forces a significant amount of corporations to publicly report their carbon emissions.
What’s the Legislation Timeline?
- Enacted October 7th, 2023
- Corporations must provide annual disclosures for scope 1 and scope 2 emissions starting in 2026 and must report scope 3 emissions starting in 2027
What Companies are Affected?
- Applicable to businesses that generate over $1 billion in annual revenue and either are engaging in any transaction for the purpose of financial gain within California, are organized or commercially domiciled in California, or have California sales exceeding the threshold amount for that year or 25% of total sales
Financial Penalties for Non-Compliance?
- California Air Resources Board is authorized to seek administrative penalties of up to $500,000 for corporate noncompliance with CCDA (10)
New York
New York’s Climate Leadership and Community Protection Act (11)
The NY CLCPA is incredibly ambitious with the intention to reduce total GHG emissions in NY state by 40% by 2030 and 85% by 2050, using 1990 as a baseline. By 2030, 70% of the state’s electricity will be generated from renewable sources. The state is heavily incentivizing renewable energy and energy efficiency. Through the CLCPA, a cap-and-invest program has been advanced, similar to the cap-and-trade program in CA.
What’s the Legislation Timeline?
- The CCLCPA was enacted in 2019 but the cap-and-invest program is still in pre-proposal stages
What Companies are Affected?
- It is anticipated that corporations with large greenhouse gas emissions will be required to purchase emissions allowances (12)
- Specifically, electricity sector, industrial sources, other stationary sources such as large refrigerant utilization facilities, waste sector, and transportation and heating fuel suppliers sector (13)
Financial Penalties for Non-Compliance?
- Compliance regulations are still being debated as the cap-and-invest program has yet to be enacted
Recent legislation in the U.S., the Federal Supplier Climate Risks and Resilience Rule and California’s Corporate Data Accountability Act, has required that many corporations publicly disclose their carbon emissions. Other climate related legislation in the U.S. has placed caps on carbon emissions through the creation of emissions allowances, specifically in California and New York. Understanding Scope 3 emissions through having data on your partners and suppliers is essential to remain compliant. At DitchCarbon, we extract, normalize, and make actionable emissions data from all of your suppliers. We help you understand your emissions then reduce your carbon footprint to maintain compliance with U.S. legislation.
- https://www.epi.org/blog/the-inflation-reduction-act-finally-gave-the-u-s-a-real-climate-change-policy/
- https://www.whitehouse.gov/wp-content/uploads/2022/12/Inflation-Reduction-Act-Guidebook.pdf
- https://www.mckinsey.com/industries/public-sector/our-insights/the-inflation-reduction-act-heres-whats-in-it
- https://www.mckinsey.com/industries/public-sector/our-insights/the-inflation-reduction-act-heres-whats-in-it
- https://www.sustainability.gov/federalsustainabilityplan/fed-supplier-rule.html
- https://ww2.arb.ca.gov/our-work/programs/cap-and-trade-program/about
- https://www.c2es.org/content/california-cap-and-trade/
- https://www.c2es.org/content/california-cap-and-trade/
- https://ghgprotocol.org/blog/statement-californias-climate-corporate-data-accountability-act-requires-companies-disclose
- https://www.crowell.com/en/insights/client-alerts/california-raises-the-bar-for-corporate-accountability-as-newsom-signs-the-most-sweeping-climate-disclosure-laws-in-the-nation#:~:text=On%20Saturday%2C%20October%207%2C%202023,California%20to%20comply%20with%20sweeping
- https://www.suny.edu/sustainability/goals/clcpa/
- https://capandinvest.ny.gov/
Most businesses that decide to act on their net-zero targets reach the same point of friction. Buying carbon credits has meant tracking down brokers, sitting through sales calls, and requesting a quote just to learn a price, sometimes with limited proof of what you are buying.
The earnings calls that quietly reframed climate from sustainability question to operating risk.
Three earnings calls in the last 18 months tell the story without any help from a press release.
Hershey, May 2024: cocoa price exposure compresses margin, and the company attributes part of the cost shock to West African weather. Olam, July 2024: coffee climate exposure quantified in the annual report. JBS, January 2025: supply chain climate disclosures expanded materially in response to investor pressure and regulatory expectation. None of these companies issued the announcement as climate news. They issued it as financial news. The climate-linked supply chain risk did not arrive with a sustainability framing; it arrived as a P&L line.
You are probably reading this article because you suspect the same thing is happening to your business. This piece walks through what is showing up on which earnings calls, how procurement and finance leaders are quantifying the exposure, and what serious corporates are doing about it before the regulator asks.
Where climate risk has already appeared in earnings
The pattern is consistent across resource-intensive sectors. A weather event compresses supply, the price spikes, the cost flows through the income statement, and the analyst on the call asks whether the event is anomalous or structural. Increasingly, the honest answer is the second one.
Cocoa is the cleanest example. The 2023 to 2024 West African harvest fell sharply on the back of erratic rainfall and disease. Cocoa futures more than tripled. Companies with concentrated West African sourcing absorbed the cost; companies with diversified sourcing absorbed less. The exposure was not climate as ESG topic. It was climate as cost of goods.
Coffee follows the same pattern. Brazilian and Vietnamese harvests have moved on weather more sharply across the last several seasons. Roasters with long-tenor supplier relationships and origin diversification have managed the volatility; roasters with spot-market exposure have not. Wheat, sugar, palm oil, beef: the same dynamic in different commodities, a pattern the IPCC AR6 Working Group II report projects will intensify across agricultural systems through mid-century.
What this means: climate risk is no longer a footnote in the 10-K. It is a line item the CFO has to explain on the call.
The three commodity exposures that hit margin first
For most companies with material Scope 3 exposure, three exposures dominate the near-term P&L risk.
- Concentrated single-origin sourcing in a climate-vulnerable region. If your tier-one supply for any material commodity sits in one geography, you have a concentration risk that climate amplifies. Diversification across origins is the obvious hedge, but it takes years to build and requires relationships you cannot acquire by tender.
- Supplier financial fragility under climate stress. Smallholder farmers, who supply a large share of the global cocoa, coffee, and palm oil market, do not carry the balance sheets to absorb yield shocks. When yields collapse, they exit. When they exit, your supply base shrinks, and the surviving suppliers raise prices. The risk is structural, not cyclical.
- Logistics and storage exposure to extreme weather. Hurricane disruptions to Gulf shipping, drought-driven Panama Canal restrictions, flooding in European inland waterways: each of these has moved input costs in the last three years, a pattern documented in Munich Re’s natural catastrophe data. The exposure shows up as a one-quarter event in the financial press but accumulates over time on the cost line.
TCFD and ISSB disclosure changes
The disclosure architecture has now caught up with the risk. The Task Force on Climate-related Financial Disclosures, whose recommendations are now embedded in the ISSB’s IFRS S2 climate standard, requires companies to disclose climate-related risks across physical and transition categories, with quantification where possible.
For physical risk specifically (the climate-linked supply chain risk you are reading about), the disclosure must address both acute exposures (extreme weather events) and chronic exposures (gradual changes in temperature, precipitation, and growing seasons). The disclosure must address the time horizon over which the risk is material, the parts of the value chain exposed, and the financial impact under different scenarios.
The CSRD imposes similar requirements under European law, with double materiality (both financial and impact materiality) embedded in the assessment. The practical effect: your auditors and your investor relations team now need a defensible answer to the climate-linked supply chain risk question, and the answer needs to be quantified.
What procurement and finance can do now
Three actions matter near-term.
Map your exposure. Most companies do not have a clear view of which tier-one and tier-two suppliers sit in which climate-vulnerable geographies. Without the map, you cannot quantify the risk, and without the quantification, you cannot disclose it credibly. The map is the foundation, and World Resources Institute climate risk research provides useful public tooling to start.
Diversify and deepen, in that order. Diversification across origins reduces concentration risk, but the deeper move is to invest in the resilience of the suppliers you already have. Regenerative practices, agroforestry, soil health interventions: these reduce yield volatility under climate stress and protect your input cost trajectory.
Embed the climate spend inside procurement, not outside it. Treating climate risk as a sustainability cost line subordinates it to the ESG budget. Treating it as a procurement and resilience investment puts it in the budget that matters, which is the cost-of-goods budget that the CFO defends quarterly.
Nature-based supply chain investments are the asset class designed for exactly this purpose. They sit inside the value chain, they reduce climate-linked supply risk, they generate verifiable Scope 3 reductions, and they produce the documentation an auditor and a regulator can both test.
If you are quantifying climate-linked supply chain risk in advance of the next earnings cycle or the next disclosure period, the carbon and sustainability experts at Carbon Credit Capital can help you map your exposure and structure a Dual-Value Model response that addresses reduction, resilience, and disclosure-readiness in a single program. Schedule a consultation.
More and more small and medium-sized businesses are hearing the same question from their larger customers: What is your carbon footprint? That question now travels down entire supply chains, and it arrives next to tender requirements, certification criteria, and rising customer expectations.
-
Climate Change1 year ago
Guest post: Why China is still building new coal – and when it might stop
-
Greenhouse Gases2 years ago嘉宾来稿：满足中国增长的用电需求 光伏加储能“比新建煤电更实惠”
-
Greenhouse Gases1 year ago
Guest post: Why China is still building new coal – and when it might stop
-
Climate Change2 years ago嘉宾来稿：满足中国增长的用电需求 光伏加储能“比新建煤电更实惠”
-
Renewable Energy11 months agoSending Progressive Philanthropist George Soros to Prison?
-
Climate Change2 years ago
Bill Discounting Climate Change in Florida’s Energy Policy Awaits DeSantis’ Approval
-
Greenhouse Gases1 year ago
嘉宾来稿：探究火山喷发如何影响气候预测
-
Carbon Footprint2 years agoUS SEC’s Climate Disclosure Rules Spur Renewed Interest in Carbon Credits