ExxonMobil is taking a firm stand against California, filing a lawsuit late Friday that claims two recently enacted state laws designed to combat climate change unlawfully restrict the oil company’s free speech. These groundbreaking pieces of legislation, collectively known as the California Climate Accountability Package and passed in 2023, mandate that thousands of major companies operating within the state disclose comprehensive details about their greenhouse gas emissions and the financial risks they face from climate change.
A significant shift introduced by these laws is the requirement for companies to calculate the climate impact of their products once they are used by consumers. Historically, climate regulations typically focused solely on a company’s internal operational emissions, not the broader emissions generated by the end-use of their manufactured and sold goods. For energy behemoths like Exxon, this means that starting in 2026, they will need to quantify and report emissions stemming from activities such as cars and trucks burning their gasoline or diesel. Transportation is a major contributor to greenhouse gases like carbon dioxide, which act as a heat-trapping blanket in our atmosphere, driving global warming.
Exxon’s lawsuit, lodged in the United States District Court for the Eastern District of California, contends that these laws would force the company to employ flawed accounting methods for emissions, thereby misrepresenting its and its products’ actual contribution to global warming. The company is seeking a judicial injunction to prevent California from enforcing these new regulations. “The statutes compel Exxon Mobil to trumpet California’s preferred message even though Exxon Mobil believes the speech is misleading and misguided,” the lawsuit states.
California has consistently been at the forefront of legislative efforts to reduce greenhouse gas emissions, with its policies often inspiring other states to adopt similar measures. However, Exxon’s lawsuit argues that these two California laws are not genuinely aimed at curbing emissions but rather at punishing large corporations. The lawsuit asserts, “While California might believe that making Exxon Mobil report historical emissions for an oil refinery acquired in Canada or speculative business risks for a Kazakhstan pipeline is the best way to spur climate solutions, Exxon Mobil disagrees. The First Amendment bars California from pursuing a policy of stigmatization by forcing Exxon Mobil to describe its non-California business activities using the State’s preferred framing.”
As of late Friday, the California governor’s office and other state officials had not yet commented on the lawsuit. The legal challenge names officials from the California Air Resources Board, the state’s primary agency for air and climate matters, and Attorney General Rob Bonta as defendants.
One of the contested laws, SB 253, mandates businesses to calculate emissions using a global methodology that encompasses a company’s total worldwide emissions. Exxon argues that this approach unfairly attributes disproportionate blame to large companies simply because of their scale. California’s chosen methodology, the Greenhouse Gas Protocol, was developed by the World Resources Institute and the World Business Council for Sustainable Development—a network that includes some of Exxon’s rivals, such as Chevron and Shell.
Exxon’s lawsuit advocates for an alternative approach that would incentivize more efficient companies. It also raises concerns that including emissions from consumer product use, rather than just internal business operations, could lead to double counting and confusion. Furthermore, Exxon argues that California’s laws should be limited to activities within its borders, rather than requiring reporting on emissions and calculations for operations beyond the state, given that the vast majority of Exxon’s key business activities, including exploration, production, manufacturing, and transport of crude oil or natural gas, occur outside California. Exxon’s headquarters are in Texas, and it operates in over 60 countries.
The second law under challenge, SB 261, requires companies to disclose climate-related risks, such as potential flooding of coastal oil facilities during storms or the financial implications of changing government policies. Exxon claims it already provides such information under federal securities laws and that California’s provision would necessitate a “very speculative” framework significantly different from federal standards.
The oil giant’s suit characterizes these laws as an overreach by California officials attempting to control corporate speech, suggesting their true purpose is to publicly shame large businesses rather than effectively regulate emissions. This lawsuit mirrors a similar one filed in January 2024 by the U.S. Chamber of Commerce and other business groups. In that instance, Judge Otis D. Wright II of the U.S. District Court for Central California initially dismissed several claims earlier this year, allowing only the First Amendment argument to proceed. He later denied the plaintiffs’ request for a preliminary injunction to halt the laws’ implementation in August. The Chamber of Commerce has since appealed to the U.S. Court of Appeals for the Ninth Circuit.
In the Chamber of Commerce’s legal battle, Attorney General Rob Bonta’s office argued in court filings last month that the laws actually support a fundamental First Amendment objective by promoting informed financial decision-making. Caitlan McLoon, a deputy attorney general, stated, “Plaintiffs have yet to explain how the laws compel even a single company to state a political or ideological opinion.” Several groups have submitted amicus briefs in the appellate court case, supporting both sides. The Washington Legal Foundation, advocating for free-enterprise principles, maintains that the laws force businesses to echo the state’s opinions. Conversely, Ceres, a business network promoting clean energy, highlighted broad support for the laws from corporations and investors. A recent filing from FarmSTAND, an organization against industrial animal agriculture, underscored the importance of these laws in combating ‘greenwashing’—deceptive environmental claims—by meat and dairy companies.
Near the end of the Biden administration, the Securities and Exchange Commission (SEC) was close to implementing new federal climate disclosure rules. These rules also faced legal challenges, and in March, shortly after the start of the current Trump administration, the commission voted to cease its legal defense of them. While these federal rules are effectively stalled, they have not been repealed, notes Jayson O’Neill, senior director of climate finance at Focal Point Strategy Group, a communications firm working with climate and good-governance organizations. He also points out that other states are now considering their own climate disclosure laws. Internationally, the European Union is also advancing new climate disclosure regulations. Energy Secretary Chris Wright and his Qatari counterpart, Saad Sherida al-Kaabi, minister of state for energy affairs, recently sent a letter to the E.U., expressing concerns about their Corporate Sustainability Due Diligence Directive and urging its repeal or the removal of provisions deemed economically detrimental.