Calif. to cap greenhouse gas emissions
By SAMANTHA YOUNG, Associated Press Writer
1 hour, 30 minutes ago



California would become the first state to impose a limit on all greenhouse gas emissions, including those from industrial plants, under a landmark deal reached Wednesday by Gov. Arnold Schwarzenegger and legislative Democrats.

The agreement marks a clear break with the Bush administration and puts California on a path to reducing its emissions of carbon dioxide and other greenhouse gases by an estimated 25 percent by 2020.

The bill still needs lawmakers' approval, but that appears likely, given that Democrats control the Legislature.

The deal gives Schwarzenegger a key environmental victory as he seeks re-election this fall.

"We can now move forward with developing a market-based system that makes California a world leader in the effort to reduce carbon emissions," the governor said in a statement.

The bill would require the state's major industries — such as utility plants, oil and gas refineries, and cement kilns — to reduce their emissions of the pollutants widely believed to contribute to global warming.

The key mechanism driving the reductions would be a market program allowing businesses to buy, sell and trade emission credits with other companies.

The agreement came after weeks of difficult negotiations and was announced by the governor's office and Steve Maviglio, spokesman for Assembly Speaker Fabian Nunez, a Los Angeles Democrat.

Schwarzenegger had insisted that the California Air Resources Board, which will oversee the program, be required to implement the market-based strategy.

The bill was praised by environmentalists as a step toward fighting global climate change but criticized by some business leaders, who say it would increase their costs and force them to scale back their California operations.

Republicans in the Legislature say climate change should be addressed at the national level, not on a state-by-state basis.

"Adopting costly and unattainable regulations will drive businesses and jobs out of California into other states and even into other countries with no commitment to improve air quality," said Assembly Republican leader George Plescia, a LaJolla Republican.

Schwarzenegger and the Legislature's Democratic leadership have embraced a cap on vehicle and industry emissions as a way to make California a trendsetter in fighting global warming.

The nation's most populous state is the world's 12th-largest emitter of greenhouse gases and could suffer dire consequences if global temperatures increase only a few degrees. Reports by state agencies indicate that a 2- to 3-degree rise in temperature could melt the Sierra Nevada snowpack earlier each year, leading to flooding in the Central Valley and threatening the state's long-term water supply for cities and farms.

The two sides overcame obstacles including election-year politics to make the deal happens, said Sen. Don Perata, an Oakland Democrat and the chamber's president pro tem.

"This is not anecdotal legislation; this is rooted in fact," he said at a news conference. "The facts are if we do not do something to stop carbon emissions in this world, we will see a diminution in the quality of life."

Schwarzenegger has tried to position himself as a leader on the issue. Last year, he issued an executive order calling for the state to reduce its greenhouse gas emissions to 2000 levels by 2010, 1990 levels by 2020 and to 80 percent below 1990 levels by 2050.

He organized a team that recommended a statewide cap and last month signed an accord with British Prime Minister Tony Blair in which California and Britain will work together to research cleaner-burning fuels and technologies.

During the negotiations over the California cap, Schwarzenegger sought to appease his supporters in the business community by arguing for safeguards for the industries that would be most affected.

Administration officials have spent weeks seeking assurances that any legislation would require a market program similar to those in the European Union. The idea would allow businesses to buy, sell or trade emission credits with other companies instead of making their own reductions if those cuts were considered too costly or technology difficult.

Such a program could help industries that may not be able to meet their targets through energy efficiency practices or the use of alternative fuels.

Schwarzenegger also sought a "safety valve" that would allow California to delay the emissions limit if the state is hit with a natural disaster, terrorist attack or another emergency. It was not immediately clear whether such a measure was included in the final bill.

Nunez, the Democratic leader of the Assembly, said he hoped industry representatives would be "much more comfortable" with the bill once they had a chance to read it.

California Pact
Would Place Cap
On Emissions

Anti-Global-Warming Effort
Faces Business Opposition;
A Split With Washington
By JEFFREY BALL and JIM CARLTON
August 31, 2006; Page A1

California, the nation's most populous state and a longtime bellwether on environmental policy, will impose the first broad cap in the U.S. on greenhouse-gas emissions, in a clear break with the federal government over global warming.

Leaders of the state legislature and Gov. Arnold Schwarzenegger announced a deal yesterday under which California will mandate a reduction in the state's emissions of gases contributing to global warming to 1990 levels by 2020. The cut would target the state's biggest industrial emitters of greenhouse gases, such as power plants, oil refineries and cement factories. California already has passed a law requiring greenhouse-gas-emission cuts from cars and light trucks sold in the state.


The cut's effect on individual industries, companies and consumers is unclear, because the state has yet to work out details of how it will implement the broad emissions mandate. But backers of the measure, including Gov. Schwarzenegger, said it won't unduly harm business in the state.

Still, the effort faces almost certain legal challenges. Business groups have said such restrictions will boost production costs and make the state less competitive. "We don't think it looks like a very good deal for business and industry in California," said Jack Stewart, president of the California Manufacturers and Technology Association, an industry trade group in Sacramento.

The measure still must pass both houses of the state legislature to become law, but the agreement by Gov. Schwarzenegger and the majority leaders of both houses all but ensures that outcome. "We can now move forward with developing a market-based system that makes California a world leader in the effort to reduce carbon emissions," Gov. Schwarzenegger, who is running for re-election this year, said yesterday, when the agreement was announced.

California, the world's sixth-largest economy, accounts for only about 2% of the world's annual global-warming emissions. But California leaders made clear their intent is to spur other states, and ultimately the federal government, to follow the state's lead. That has happened with a string of past environmental regulations, notably restrictions on automotive pollution.

"Today it feels as if the whole world is watching, and I hope they are. This shows California knows how to do it right," said Ann Notthoff, California advocacy director for the environmental group Natural Resources Defense Council.

Addressing global warming is more difficult than addressing air pollution. Rather than bolting a filter onto a smokestack or auto tailpipe to reduce the emissions when fuel is burned, it requires re-engineering factories and cars so they burn less fuel in the first place. The main greenhouse gas, carbon dioxide, is produced when fossil fuels like coal and gasoline are burned.

The Bush administration -- which has rejected the international Kyoto Protocol emissions-reduction treaty -- reacted tepidly to word of the California push. "The states are free to make their own decisions about their policies," said Kristen Hellmer, a spokeswoman for the White House Council on Environmental Quality. But she reiterated the administration's philosophical opposition to global-warming caps, saying a cap imposed in one state or country simply causes industry to move to another location. "They're going to still produce greenhouse gas," she said.

California's goal is less ambitious than the cut envisioned in the Kyoto Protocol. Industrialized countries that ratified Kyoto have pledged to reduce their global-warming emissions a collective 5% below 1990 levels between 2008 and 2012. The U.S. has declined to ratify Kyoto, saying it would hobble the nation's economy. California's goal equates to cutting its emissions by 25% in 2020 below the level the state projects it would otherwise reach that year.

This isn't the first attempt by a U.S. state to mandate global-warming reductions in the absence of federal efforts to require emissions cuts. California itself has passed a law mandating a cut of about 30% in global-warming emissions from new cars and light trucks sold in the state by 2016. The auto industry has sued to block that measure, saying it violates federal law because it amounts to a back-door state effort to go beyond federal fuel-economy measures. The case is pending in federal court in California.

In addition, seven New England states have adopted a regulatory scheme that covers carbon dioxide emissions from power plants and California, Oregon and Washington are considering a similar measure. But the law announced by California leaders yesterday would go far beyond those measures, applying to all sectors of the economy.

Industrialized countries that have ratified the Kyoto Protocol have found that agreeing to a broad reduction target is just the first step. Far more difficult is apportioning responsibility for coming up with those cuts among politically powerful businesses -- let alone individual car-driving voters -- within their borders. Many countries that have ratified the treaty have struggled to reduce emissions.

California's effort would direct the California Air Resources Board, the state agency that enforces California's clean-air rules, to come up with the details. The broad requirements of agreement stipulate that, by January 2008, the air board start requiring the state's major greenhouse-gas producers to report their greenhouse-gas output. By January 2009, the air board is to develop a plan outlining how to achieve the emissions cuts. By January 2011, the air board is to adopt actual rules to take effect a year later.

One major source of disagreement during negotiations involving lawmakers, business groups and others was the degree of flexibility California would offer businesses. Business representatives wanted a guarantee that the state would include a mechanism allowing companies to buy and sell carbon-dioxide-emission permits among each other as needed, to soften the potential financial blow. But some environmentalists argued that would make it too easy for California businesses to avoid cleaning up their own operations. The final legislation says the state "may" include such a trading mechanism in its final plan.

On the federal level, Republican Party leaders and President Bush have opposed adding carbon dioxide to the list of air pollutants regulated by the government. But that could change if Democrats take control of the House and Republican control over the Senate is weakened in November elections, as some political analysts now predict.

One reason Gov. Schwarzenegger ended up agreeing to the bill was that some of California's business community supported it. He began tipping his support toward the bill after a delegation of executives from Silicon Valley last week told him many businesses wanted the bill as a way to provide them regulatory certainty and for other reasons, say lobbyists in the statehouse.

"This bill provides a new opportunity here in California," said Bob Epstein, cofounder of Sybase Inc., a software maker in Dublin, Calif., and a leader of a group that represents businesses that support environmental action.

The bill's opponents included oil and natural gas companies. They also oppose an initiative set for the state's November ballot that would tax oil produced in California to fund alternative energy efforts. Yesterday's agreement "will have a severely negative effect on the affordability and reliability of California's energy supply, jeopardizing California's economy and our global competitiveness," said Allan Zaremberg, president and chief executive of the California Chamber of Commerce.

California has lost jobs in many of the industries that likely would face the effects of emissions caps, even as total private-sector employment has risen, according to Bureau of Labor Statistics data. For example, employment in the primary metals manufacturing industry fell 14% last year compared with 2001.

The Republican governor took on liberal constituencies last year but he has been tacking left in recent months to shore up his political support in this Democratic-leaning state. He recently authorized a $150 million loan to California's stem-cell program that will allow it to begin funding research restricted by the federal government, handing a lifeline to the initiative while the courts resolve lawsuits that question its legitimacy.

--John J. Fialka contributed to this article.

Write to Jeffrey Ball at jeffrey.ball@wsj.com1 and Jim Carlton at jim.carlton@wsj.com2

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California Dreamin'
September 11, 2006; Page A14

If you've noticed a certain glow emanating from somewhere out West, don't be alarmed. It's only California, engaged in its latest bout of feel-good environmentalism.

We say feel-good, because even the supporters of that state's recent decision to unilaterally enact a mandatory global warming program are admitting it will accomplish, well, nothing much. That didn't stop a round of media huzzahs when Governor Arnold Schwarzenegger and Sacramento Democrats announced a program to require a 25% cut in carbon dioxide emissions by 2020. A point of special pride was that the new regime would be the most stringent in the nation, encompassing not just power plants but companies ranging from oil refineries to cement manufacturers.

This self-congratulation took place despite an understanding that by 2020 California is expected to account for all of 1.3% of total world-wide CO2 emissions. Even if it reaches its CO2 goals (a big if), the state will have reduced global emissions by 0.3%. By contrast, China is expected by 2020 to increase its share of global greenhouse emissions to more than 22% of the world's total, surpassing the output of the entire U.S. "None of it matters or works if other states or nations don't copy us . . . ," admitted Catherine Witherspoon, who runs the California agency charged with implementing the mandate.

What we really have here, then, is the ultimate in political symbolism. California is getting good at this sort of thing, having passed an equally ineffectual global warming program for automobiles in 2004. Its politicians understand that none of this will register on the global temperature dial -- assuming that humans are even the cause of global warming. They also know the Kyoto Protocol has proven to be a failure, as European countries routinely ignore their CO2 limits. What the bill does provide, however, is a chance for the state's elite, including the Silicon Valley crowd, to feel virtuous, and for politicians such as Mr. Schwarzenegger to bolster their green bone-fides in a election year.

Yet even symbolism can have consequences, and California's economy will be lucky to escape this unscathed. Supporters say the Golden State's "leadership" will force other governments to reduce their emissions too. This is part of the environmental community's latest strategy, which is to whip up enough grassroots support to force the federal government to enact a mandatory CO2 program. They've had some limited blue-state success: In addition to California, seven Northeast states recently approved mandatory limits on carbon from power plants.

But there's little evidence that the federal government is any closer to subjecting the economy to a similar CO2 straitjacket. Even California Senator Dianne Feinstein, who has pledged to introduce federal CO2 legislation, noted that some 40 states rely on coal-fired power plants for their energy and aren't likely to cripple their main electricity producers any time soon. "Forty times two, in terms of Senators, makes a bill very difficult," she sighed. Most of those state legislatures also won't be enacting a California-like program.

Which gets to California's potential problem. That state already boasts some of the highest energy prices, highest taxes, and toughest regulatory regimes in the U.S. Many of its businesses already depend on lower-cost energy from nearby states, and that practice will likely increase. Others have been looking for an excuse to leave the state for better business climes, and a costly global warming mandate could be the final enticement. One irony is that those companies that do depart for other states or other countries, such as China or India, may well be allowed to emit even more CO2 than they do now.

Supporters argue that the new program will simply require utilities and others to become more efficient, which will save them money in the long run. But California's high energy prices and strict pollution controls long ago forced utilities to tighten up; any low-hanging fruit has been picked. Those companies that do stay in the state will thus pay more for the privilege, passing those costs along to consumers via higher energy prices and more expensive products.

The architects of the bill appear to have realized this, too, which is why they included an escape hatch allowing the Governor to extend compliance deadlines if faced with "the threat of significant economic harm." California's politicians may have to take advantage of that wiggle room down the road -- though they can feel good about themselves all the way up to the point they have to do it.

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