California tackles greenhouse emissions

Companies could reap huge financial rewards, some say. Others see a net loss of jobs.

As it has done with tailpipe emission standards, coastal protection, and endangered species, California is trying to become a leader on one of today's most pressing environmental concerns: global warming.

Gov. Arnold Schwarzenegger (R) and Democratic leaders are getting behind measures to curb greenhouse gas emissions by forcing California businesses to measure how much they emit, and establish ways to limit them.

Last week, Mr. Schwarzenegger brought together top environmental, political, and business leaders for a "Climate Action Summit" in San Francisco. There, he called for a "market based system" in which companies would receive strict caps on how much global-warming gases (carbon dioxide, methane, and others) they could emit. Companies with emissions below such caps could then sell their unexpelled allotment to others who have exceeded their limits. [Editor's note: The original version mischaracterized the gases that would be capped.]

Assembly Speaker Fabian Núñez (D) and Assemblywoman Fran Pavley (D) are already sponsoring a specific "cap and trade" bill. And Senate President pro tem Don Perata (D) is sponsoring a bill that would require in-state utilities, which establish long-term contracts with out-of-state energy providers to no longer allow sources with high carbon content.

"It is clear that this country is moving in the direction of understanding the danger of global warming, and not surprisingly that California might be the bellwether for significant reform yet again," says David Yarnold, of Environmental Defense, an organization which seeks to solve environmental problems. "It is exciting that you have a Republican governor and a Democratic legislature moving in the same direction with broad public acceptance in the state that is home to one-eighth of Americans."

Eight northeastern states announced a similar "cap and trade" agreement for utilities in January. California's measures, however, target all industries, and could become law by September.

"California is looking at caps on not just utilities but stationary sources such as landfills, and oil refineries," says Ann Notthoff, California Advocacy Director for the National Resources Defense Council. "When you approach reform from an economy-wide perspective, you open the door for more kinds of innovation and policies that can help contribute to solutions," she says.

Many business coalitions and individual entrepreneurs are concerned companies might want to move elsewhere. "We think it will force jobs out of the state and overseas," said Tom Tietz of the California Nevada Cement Promotion Council at the summit.

Some of this negative reaction results because the relationship between limiting greenhouse gases and reducing global warming has not been clearly established, according to some.

"What is distressing to many businesses is that it's unclear to them that curbing these emissions will have a significant impact on global warming, but they know it will have substantial economic impact," says Sterling Burnett, senior fellow with the National Center for Policy Analysis in Dallas. He cites a National Center for Atmospheric Research study that global warming would only be reduced by one-fifth of a degree over 100 years if all signatories to the Kyoto Protocol Treaty met their obligations.

But others say the governor is considering how the reduction could be economically positive for the state based on recent findings from the "Climate Action Team." They estimate a net benefit of $7 billion to $9 billion for state businesses.

"This is an issue of how to grow business, not whether they are going to leave or not," says Bob Epstein, cofounder of Environmental Entrepreneurs. He said that venture capitalists spent more than $1.6 billion in low-emission business products in 2005, a 34 percent increase from 2004. "California is already a leader in biotech, software and semiconductors. I think these bills will spur new industries, jobs, and make the state a center of clean-energy technology as well," he says.

Still other observers say that global warming will force antipollution measures on other states and countries soon, so that businesses concerned about extra costs and restrictions will not be able to escape them.

"The most important thing to understand is that climate change is like a budget deficit," says Tim Profeta, director of the Nicholas Institute for Environmental Policy Solutions at Duke University. "The day of reckoning will come, and the sooner we begin to reverse course the better and less painful it will be."

Captains of industry, therefore, should not be scrambling to alter business strategies to avoid regulation, others say.

"Business has a legitimate concern in asking what it will cost to take these preventive measures and in the short term they may see more costs," says Nabil Nasr, director of the Center for Integrated Manufacturing Studies at the Rochester Institute of Technology. "But if they look at the long term, they will likely find they are both cleaning up their act, and developing better products, better methods, which will prepare them for a more lucrative future." [Editor's note: The original version misnamed Nasr's organization.]

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