California leads the way in reducing emissions in the U.S., recently enacting the first mandatory climate emissions disclosure laws.
California’s new climate disclosure laws require businesses with annual revenues exceeding $1 billion that operate in California to disclose their direct and indirect emissions.
Some 5,300 companies must comply with this new mandate, coming into effect in 2026, according to KraneShares.
The emissions scope includes anything from building operations to employee business travel to product shipping and transport, KraneShares wrote. Downstream value-chain emissions from a company’s suppliers (Scope 3 emissions) will be added in 2027.
California Governor Gavin Newson signed the mandate into law earlier this month. This represents the U.S.’s most comprehensive corporate climate emissions disclosure laws to date.
The California Chamber of Commerce opposed the regulation. However, many major corporations endorsed the rule, including heavyweights Apple, Microsoft, and Salesforce.
Effects of the New Emissions Disclosure Bill
In response to the new climate disclosure laws, KraneShares expects to see increased buying of voluntary carbon credits to offset the impact of emissions.
California operates the largest carbon cap-and-trade market in the U.S. The program addresses roughly 75% of its 300-million-ton carbon footprint, according to KraneShares.
The carbon cap-and-trade market has reduced greenhouse gas emissions by around 3% a year between 2015 and 2020, according to the Center for Climate and Energy Solutions. Furthermore, the program is designed to lower emissions by 5% per year from 2021 to 2030.
The KraneShares California Carbon Allowance ETF (KCCA) provides exposure to the California Carbon Allowances cap-and-trade carbon allowance program.
See more: “Consider a Carbon ETF for Portfolio Diversification”
KCCA can be paired with other carbon ETFs to customize a portfolio’s global carbon credit market allocation. Other funds in the issuer’s suite of carbon ETFs include the KraneShares Global Carbon Strategy ETF (KRBN) as well as the KraneShares European Carbon Allowance Strategy ETF (KEUA).
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