State on Verge of Greenhouse Gas Restrictions

SACRAMENTO —  Gov. Arnold Schwarzenegger and legislative leaders agreed Wednesday on a plan to cut by 25% the amount of greenhouse gases emitted from California electric power plants, refineries and other sources by the year 2020.

Later, the agreement was approved by the Senate 23 to 14 with Democrats supporting it and Republicans opposed. It then went to the Assembly, where final approval was expected.

It would make California the first state in the nation to fight global warming by slapping caps on carbon dioxide and other emissions.

Wednesday’s compromise followed weeks of intense lobbying by environmentalists, who supported tough standards, and business groups, which labeled the bill a top “job killer” of the legislative session set to end today.

The governor was pleased. “The success of our system will be an example for other states and nations to follow as the fight against climate change continues,” he said in a statement released just after top Democratic lawmakers announced the agreement.

The deal was also seen as a rebuke to the Bush administration, which favors voluntary efforts to reduce greenhouse gases.

Assembly Speaker Fabian Nunez (D-Los Angeles) praised the compromise as “a huge opportunity to champion not just on the national level but the international level a significant piece of environmental legislation.”

Business interests, especially oil companies, were irate and said they felt abandoned by the Republican governor, who had pledged to work for a bill they could support. They accused Schwarzenegger and Democrats of cobbling together behind closed doors a haphazard bill that could create unintended economic chaos.

“We remain very concerned about the long-term impact of this legislation on jobs, the economy and our industry’s ability to continue meeting increasing demand for gasoline and diesel fuels,” said Tupper Hull, a spokesman for the Western States Petroleum Assn.

Environmental activists were satisfied with the compromise, although they had sought more stringent controls. They called the greenhouse gas reduction plan proposed for California more sweeping than a more limited effort by a group of Northeastern states to curb emissions from electric power plants.

“For years, the world has been waiting for the United States to step up to the plate and do something about global warming. This bill is basically the first step,” said Bernadette Del Chiaro, an advocate for Environment California.

They also expressed hope that the victory in Sacramento would be a signal to the Bush administration to take more forceful action.

The compromise immediately positioned Schwarzenegger as a national leader in the burgeoning movement to curb greenhouse gas emissions.

It also allows him to burnish his credentials as a political centrist in blue-state California during the final 10 weeks of his reelection campaign against the Democratic state treasurer.

Schwarzenegger pushed himself into the international spotlight last month by signing a cooperative agreement on greenhouse gases with British Prime Minister Tony Blair.

“It takes another issue away from Phil Angelides,” said Jack Pitney, a government professor at Claremont McKenna College. “It isn’t the top issue, but for Schwarzenegger it raises the comfort level of Democrats and independents. Signing this bill makes the political climate more hospitable to the governor.”

The compromise bill, AB 32, was sponsored by Nunez and Assemblywoman Fran Pavley (D-Agoura Hills). In 2002, Pavley was author of a law limiting carbon emissions from motor vehicles that is being challenged by the auto industry.

The latest bill authorizes the California Air Resources Board to begin a process of measuring the amount of carbon dioxide and other greenhouse gases coming from every major pollution source, including electric power plants, oil refineries and cement kilns.

Once a tally is taken, regulators would set limits for each facility and industry that would take effect beginning in 2012. Emissions would be reduced gradually, dropping to 1990 levels in eight years.

Most major business groups don’t like the caps and contend that placing limits on California industry alone will not curb greenhouse gases globally.

Instead, they said, the caps on emissions will only drive up the cost of California’s already expensive electricity and force many large employers to flee to other states with more permissive regulatory climates.

What’s more, “the authority given to regulatory agencies is vast,” warned Dorothy Rothrock, vice president of the California Manufacturers & Technology Assn.

Other business lobbyists took a more modest stand toward the proposal but said they remained disappointed that the governor did not stick to his guns in insisting that the bill specifically mandate a market-based program for trading emissions credits.

Rather, the bill says that such a trading system “may” be created if the Air Resources Board deems it effective for lowering levels of carbon dioxide in the air.

Many businesses contend that they are unlikely to invest billions of dollars in new equipment if they don’t have the flexibility to trade carbon credits.

Other business groups, including venture capitalists who invest in alternative fuels and high-tech pollution-control equipment, contend that putting limits on greenhouse gases will spur the creation of thousands of jobs and new industries.

“By combining market-based mechanisms and enforceable emissions reductions, this bill strikes the right balance between improving the environment and protecting the economy,” said a statement from Pacific Gas & Electric Co., the state’s largest investor-owned electric utility, which is based in San Francisco.

Until Wednesday, a deal appeared elusive. In fact, Nunez had scheduled an afternoon news conference with environmentalists to announce that the Legislature would proceed with the bill -- without the governor’s support.

But just before the news conference, Nunez told the environmentalists that the governor’s chief of staff, Susan Kennedy, had called him to say Schwarzenegger would sign the bill after all.

Administration officials said later that the governor acted after his staff assured him that the final version met his goals.

The symbolism of who was in the driver’s seat at the end was made clear at the news conference, where Democratic lawmakers and environmentalists gleefully announced the deal while a lone Schwarzenegger press aide stood outside the room to distribute a written statement by the governor.

The final bill contains concessions from both sides. Schwarzenegger had to give up his desire of having his administration officials set and enforce the rules. Democrats demanded and got the more independent Air Resources Board to enforce the rules instead.

For his part, Schwarzenegger won the ability for the governor to suspend the rules for as much as a year in cases of “extraordinary circumstances, catastrophic events or threat of significant economic harm.”

It will be a major new responsibility for the Air Resources Board, which will have to hire about 100 workers and will require an annual budget of about $20 million. The board can assess fees on the companies it regulates to pay for its operation.