Climate bill puts governor on hot seat

SACRAMENTO - An ambitious proposal that would make California a leader in the fight against global warming has emerged as one of the most hotly contested measures in the Legislature this year, and a key environmental test for Republican Gov. Arnold Schwarzenegger in his bid for a second term.

Supporters of the legislation, which would mandate reducing greenhouse gases such as carbon dioxide by 25 percent by the year 2020, say it could spur a wave of clean-energy technologies and create a nationwide model for combating climate change. Business groups have waged a lobbying campaign against it, arguing it would boost energy costs and make the state less hospitable to companies.

Even if Schwarzenegger signs the legislation -- he is at odds with Democrats over some provisions of AB 32, with just days remaining in this year's legislative session -- serious questions linger about California's ability to tackle the issue on its own.

Still, the governor has an incentive to reach a deal. It could give him a boost in his campaign against Democrat Phil Angelides this fall, burnishing the governor's green credentials among the wide swath of voters concerned about global warming.

A recent poll showed that nearly two-thirds of California residents -- including 62 percent of Republicans -- believe that state government should address global warming in the absence of federal action.

``Most Californians believe global warming is happening now and the state needs to do something about it right away,'' said Mark Baldassare of the Public Policy Institute of California, which conducted the survey.

California, the world's 12th-largest greenhouse-gas emitter, is not the first area to consider an end run around the Bush administration to adopt strict state rules to combat global warming.

Two weeks ago, seven Northeastern states approved a mandatory cap on carbon dioxide emissions from their power plants at current levels starting in 2009, and agreed to reduce them 10 percent by 2019.

California's rules would go further, however, by limiting greenhouse-gas emissions not just from power plants, but from all big businesses that generate them -- including oil refineries, factories and cement kilns. Carbon dioxide -- mostly from the burning of fossil fuels -- traps heat, which causes the Earth to warm.

``For California to step up and say we are going to get our greenhouse-gas emissions under control is huge,'' said Tom Graff, state director of Environmental Defense, an environmental group in Oakland, ``both for our own benefit and at a national and international level.''

The bill would require carbon emitters to report their emissions to the state Air Resources Board. One issue at the heart of negotiations is whether to create a market to ``trade'' greenhouse-gas credits. For example, if a company reduced carbon emissions below the cap, it could sell its remaining ``credit'' to another business that's unable to reach the limit. Supporters say that would provide financial incentives. Critics counter it would allow polluters to essentially pay their way out of the problem.

But putting the bill's lofty concepts into practice means overcoming two significant challenges.

First is the problem of ``leakage.'' Twenty percent of California's electricity comes from coal, nearly all of it imported from other states, such as Wyoming and Nevada.

If AB 32 becomes law and power plants in California are required to reduce their greenhouse emissions, some fear that utilities -- instead of producing cleaner energy -- could simply buy more power from out of state, increasing global-warming emissions by driving up demand for coal.

``If all you do in the end is simply export emissions to other dirtier plants outside your borders, you haven't done anything to address the problem of global climate change,'' said Tim Profeta, director of the Nicholas Institute for Environmental Policy Solutions at Duke University.

Northeastern states haven't figured out how to deal with the problem. For now, AB 32 says only that the state must ``minimize leakage.''

The second big challenge is ensuring that poor communities don't get saddled with more pollution. Because many power plants, oil refineries and factories are in poor neighborhoods, some environmental-justice advocates fear that a cap-and-trade system would allow those plants to buy credits to continue polluting, rather than cut emissions.

``The idea that this is some kind of silver bullet is great -- unless you are living next to one of these plants,'' said Angela Johnson Meszaros, a lawyer with the California Environmental Rights Alliance in Los Angeles.

Carbon dioxide doesn't pose a health risk, however, and nobody is suggesting that smog laws be watered down. Still, Meszaros is worried about other toxic contaminants, such as arsenic, dioxin or benzene, that come from power plants, oil refineries and other facilities.

Those concerns have slowed negotiations, as Schwarzenegger insisted on mandatory cap-and-trade rules to give businesses flexibility. Assembly Speaker Fabian Núñez says he wants such rules to be optional.

Profeta, of Duke, said cap-and-trade rules are vital, because they encourage business to reduce emissions more than laws require, since they can earn money doing it.

As negotiations continue, the bill has become an issue in the governor's race. Angelides recently accused the governor of trying to ``gut'' the measure with business-friendly amendments.

Traditional business groups have weighed in against the measure. ``This bill would make it virtually impossible for California industries to remain competitive in the marketplace,'' Dominic DiMare, a California Chamber of Commerce vice president, wrote in a letter to lawmakers.

But other businesses sense an opportunity to develop new clean-energy technologies, such as solar, wind, coal gasification and fuel cells that can create electricity with far lower, or no, emissions of carbon dioxide and other greenhouse gases. Silicon Valley venture capitalist John Doerr predicted that entrepreneurs ``are going to go out and compete and innovate to bring enormous solutions to the market'' if the bill passes.

Scientists have said rising temperatures over the coming decades could have dramatic impacts on California. Among them: increased forest fires, severe summer heat waves, increased energy demand and a substantial loss of the Sierra snowpack, disrupting the state's water supply.

The Legislature adjourns Thursday for the year, so there is urgency on the bill, co-authored by Núñez, D-Los Angeles, and Assemblywoman Fran Pavley, D-Woodland Hills.

Schwarzenegger remains hopeful.

``If we do it right, it can be an example for the rest of the world,'' the governor said. ``But if it fails, then the rest of the world looks at it and says, `See, this is why we shouldn't do this, because it's not wise to do this. It failed in California.' ''

Contact Mike Zapler at mzapler@mercurynews.com or (916) 441-4603.