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California Struggles With Landmark Emissions Law

State is the world's 12th largest producer of greenhouse gases and its emissions-reduction plan is expected to affect some 800 manufacturing facilities.

SACRAMENTO, Calif. (AP) β€” For all the praise and attention California has received for its landmark emissions-reduction plan, it's becoming clear that signing the legislation was the easy part.
Gov. Arnold Schwarzenegger has promoted the state as a world leader in reducing greenhouse gases, telling audiences from Great Britain to the United Nations that the law is a template for the nation and other countries to follow as they seek ways to reduce global warming.
Schwarzenegger's sales pitch prompted Hawaii and New Jersey to adopt California's greenhouse gas emissions cap, which calls for the state to reverse emissions to 1990 levels by 2020. And Congress is weighing a national mandate based in part on the state's 2006 law.
But as California lawmakers take up the nitty gritty task of implementing the law, they are haggling over what the 1990 benchmark even is and exactly who will be asked to make emission cuts. And industry representatives now warning that cutting production may be the only way they can meet its requirements.
Air regulators believe California's output of greenhouse gases increased by at least 13 percent between 1990 and 2004, but they acknowledge their own estimates likely will need updating.
How to cut emissions from vehicles and cement factories, food processors, utilities and hundreds of manufacturing plants without crippling the state's economy is at the core of a debate that already is proving contentious.
At stake is whether the nation's most populous state, which has an economy roughly the size of France, can find a formula that balances the needs of businesses with the mandates for cleaner air.
''We're trying to figure out how in the world we're going to make this work,'' said Catherine Reheis-Boyd, chief operating officer at the Western States Petroleum Association. ''There's too much at stake here to do it wrong.''
California is forging into unmarked terrain in its quest to reverse the state's rising output of greenhouse gas emissions even as its population roars past 37 million.
''It's very important California consider what precedent we are setting for the federal system,'' said Devra Wang, director of California Energy Programs at the Natural Resources Defense Council.
California is the world's 12th largest producer of greenhouse gases and its law is expected to affect some 800 manufacturing facilities.
It requires the major producers β€” utilities, oil and gas refineries, large manufacturers, timber companies and cement plants β€” to collectively cut emissions over the next 13 years so the state can return to 1990 emission levels.
But no one really knows how much that reduction needs to be, although air regulators estimate emissions will have to be reduced by 174 million metric tons, the equivalent of the annual emissions from 43 coal-fired plants.
Air regulators must answer several fundamental questions before they determine the policy to implement the law: What kind of tracking systems can measure greenhouse gas emissions, how can businesses determine what their emissions were in 1990 and how can the state verify emission cuts are happening?
The California Energy Commission maintains greenhouse gas records dating to 1988 but does not have the level of detail required under the new law. Most companies have not tracked these emissions, with the data only now working its way into corporate spreadsheets.
''I think it's going to be really difficult. We don't keep records that long,'' said Scott Butler, vice president of operation services at Del Monte Foods, a San Francisco-based company whose tomato plant in the Central Valley town of Hanford is likely to fall under the regulations.
California's utilities and factories already are among the country's most efficient electricity users, in large part because of the state's high energy prices. But they now will be required to invest millions more to meet California's ambitious global warming targets.
A Frito-Lay plant in Modesto already is trying to do more by designing a carbon-free way to make a potato chip. When its 192 solar panels are operational next spring, water will be heated by the sun to more than 600 degrees. That will produce enough steam to make 145,000 bags of SunChips a day.
The solar power should reduce the company's electricity and natural gas bills, while giving the plant a head start in California's bid to lower greenhouse gas emissions.
Even though Frito-Lay has invested millions of dollars to make those improvements, it won't be enough to meet the requirements of California's law, said Steve Golliher, a regional vice president with the company.
Adding to the uncertainty is whether companies will be given credit for programs to reduce carbon that are started before the emission caps take effect in 2012. The state then will have eight years to reduce emissions to 1990 levels.
''What's a company to do today? Should they go ahead and do emission reductions?'' said Dorothy Rothrock, vice president of the California Manufacturers and Technology Association. ''A company would like to say, 'I did this already. Doesn't that work to my favor?'''
The law was written to provide a broad framework, leaving the California Air Resources Board to sort out the critical details about how to achieve cuts in greenhouse gas emissions.
At the center of the emerging debate is whether businesses that cannot cut their emissions further because of cost or technical hurdles will be allowed to buy emission credits from cleaner companies in other states or countries.
Such market systems are a cornerstone of clean-air efforts elsewhere and are championed by Schwarzenegger. But the Democrats who wrote California's law are more skeptical, describing them as right-to-pollute schemes.
''The world has not been able to identify carbon's monetary value and trading value,'' said Assembly Speaker Fabian Nunez, a Los Angeles Democrat who is co-author of the California law. ''If it's cheap enough, somebody would say I'm going to continue buying pollution credits β€” and you're not going to get anywhere.''
When they wrote the law, Democrats said air regulators could study a market system but did not mandate it. They also prohibited them from creating a trading program until 2012, a move manufacturers say complicates air regulators' effort to make the law work as intended.
Many California companies say they need a carbon-trading system because they cannot reduce their greenhouse gas emission much more. Their only other option is to cut the amount of electricity or natural gas their factories use to power assembly lines, heat water, make steam and light warehouses.
California's utilities, for example, already use more cleaner-burning natural gas, hydroelectricity and renewable sources than power plants in most other states, which rely chiefly on coal.
''It's going to be hard for our customers and us to find incremental reductions just inside the electricity sector, or if we find them it will be expensive,'' said Pedro Pizarro, a senior vice president at Southern California Edison.
Manufacturers have warned the law could put factories out of business, although the group's trade association could not identify a company that has closed or plans to leave California. What they do argue is that the global warming law will only add to the price of doing business in a state already known for its strict regulatory environment.
At this point, lawmakers and regulators say they are confident the law's 2020 target will be met. But they are concerned legal challenges could hamper those efforts.
Automakers have sued to block tighter vehicle emission rules adopted in 2004 and the federal government has refused to give California permission to enact tougher tailpipe standards.
Oil refiners, meanwhile, have threatened to sue for more time to meet a separate proposal requiring them to add up to 10 percent ethanol to California's fuel supplies by 2012.
State Air Resources Board chairwoman Mary Nichols said the state will be working through the challenges for years to come.
''It's more complicated than anything we've had to do before,'' she said.
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