Ken Silverstein EnergyBiz Insider Editor-in-Chief

If nothing else, the series of laws that passed in September represent a sea change -- a shift in overall public opinion that global warming matters and policymakers need to take steps to mitigate its effects. The vast majority of the scientific community says that the issue is real and it must dictate how the global community consumes energy. And most of the nation's leading politicians at least acknowledge the dilemma while many feel a sense of urgency and have set out to do something about it.

California is the first state to set a statewide cap on greenhouse gas emissions. The law requires utilities and refineries to quantify their levels of greenhouse gases and do so by 2008. By 2011, the California Air Resources Board must write the rules for industry to live by -- essentially reducing carbon dioxide and other greenhouse gases to 1990 levels and to do so by 2020. That would amount to a 25 percent reduction from today's levels.

It's a daunting assignment. And while the law does not explicitly call on a cap-and-trade program, the end result is that one will have to get implemented if the law is to have a chance of working. Such a scheme enables companies that cannot meet the new standards to buy credits from those that are able to do so.

"We have gotten to the point in this country where greenhouse gas legislation and greenhouse gas controls are becoming a reality," says Steven Christiansen, a partner at Parr Waddoups Brown Gee & Loveless in Salt Lake City that works on global warming issues. "National legislation may make more sense than checkerboard state legislation. We are talking about when and not if."

He adds that two western states may follow California's lead, namely Oregon and Washington State. The momentum has already started to mount as seven states in the Northeast formed a pact to cut their power plant emissions by 10 percent by 2019.

Proponents of the law say that the technologies currently exist to cut all harmful pollutants and particularly carbon emissions. Voluntary efforts won't be as effective as tough regulatory standards, they add, noting that new laws create opportunities. That is, when companies have to reduce emissions, they buy the most state-of-the-art equipment. That, in turn, creates new jobs while promoting a healthier environment.

In fact, a recent study by University of California at Berkeley says that California's initiatives will prompt the development of efficient machinery, energy saving appliances and the development of new renewable energy sources. That will produce 89,000 new jobs in California and add $60 billion a year to the state's economy.

Some Flexibility

Beyond the global warming rules, companion bills were also enacted. Among them is one that says that the state's public utility commission is required to establish a performance standard for utilities -- one that is no less stringent than the greenhouse gases associated with a combined cycle natural gas plant that is considered among the cleanest available.

Toward that end, the commission now has the authority to regulate all long-term procurement contracts. Now, one-fifth of all California's power is imported. And some of that comes from coal-fired plants in Nevada that are not as clean as modern gas facilities. And with the run-up in natural gas prices, coal is more popular than ever and nationally there are about 100 or so plants on the drawing board. So, if suppliers want to sell into the California market, they would have to adopt the latest and greatest coal technologies.

To be sure, the law could turn out to be devoid of real change. Critics say that the new laws will end up costing consumers more and will subsequently drive out large employers. The Western Petroleum Association says that the emissions cap would require a 17 percent cut in the state's refining capacity.

Court fights are bound to occur. Automobiles, for example, are responsible for about 20 percent of all the state's greenhouse gas emissions and manufacturers are still challenging California as it relates to tailpipe emission rules adopted in 2002. That case may get legs if the U.S. Supreme Court sides with the Bush administration's Environmental Protection Agency in a case in which a dozen states are suing the EPA -- one in which arguments are to begin in December.

The states, most of which are in the Northeast but also include Oregon and New Mexico, want to regulate carbon emissions under the Clean Air Act. But, if the High court rules in favor of the EPA, it would undercut California's new law.

"There are some flexibilities built into California's new laws," says Christiansen with the Parr firm. "The California Air Resources Board must take the cost of implementation and the economic impact into account. This could become a fairly significant factor. And, utilities can still go out in a pinch and buy from coal plants on the spot market."

The Bush administration has championed a voluntary approach to cutting carbon dioxide emissions, at least until the technologies to achieve greater reductions become commercially available. But, its voluntary goals are still less ambitious than what the Kyoto Protocol requires.

In any event, all sides recognize that global warming is a credible issue. Recent studies by NASA say that current increases in temperatures mean that the ramifications - increased floods, coastal erosion and melting ice caps -- would be irreversible. If the problem is managed, they add, the effects could be mitigated.

"Other countries like India and China, Brazil and Mexico will join us when they see all the great work that we are doing," says Governor Arnold Schwarzenegger, at the signing of the global warming bill in September. "Also our federal government will follow us -- trust me."

More information on this topic is available from Energy Central:

Schwarzenegger's California Overhaul EnergyBiz, September/October 2005

For far more extensive news on the energy/power visit:  http://www.energycentral.com .

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