Gov. Backs Greenhouse Gas Strategy

The market-based approach would include controversial "cap-and-trade" requirements mandating greenhouse gas producers who exceed certain tonnages of harmful emissions to buy credits from other companies that have lowered emissions.

Schwarzenegger is expected to make the announcement, endorsing major components of his climate action team's plan, at a summit he has convened in San Francisco this afternoon bringing together economists, investors, business executives, environmentalists and lawmakers.

Legislative approval could be needed to enact key elements of the 1,300-page plan, including the cap-and-trade system and a registry for businesses to report the amounts of greenhouse gases they emit.

Terry Tamminen, special advisor to the governor on environment and energy issues, said that under the market-based program, power plants, for instance, would be able to buy emissions credits not just from other power plants but also from other industries, including timber companies that set aside forests to trap carbon dioxide, a key greenhouse gas. Tamminen said such broad access to the credit market would help to drive prices down.

Limited versions of such market-based programs are operating in Chicago and Europe, he said, adding that California's would go much further. Schwarzenegger has said he wants to reduce greenhouse gases by 80% by 2050, putting the state ahead of the rest of the world.

Tamminen said one-third of those reductions could come from a market-based cap-and-trade program. The plan calls for two years of study to design the program.

Cap-and-trade programs are opposed by the Bush administration as well as by many of Schwarzenegger's business backers, including major oil companies and the California Chamber of Commerce.

Allan Zaremberg, president of the chamber, said his members would "be concerned about any cap program that encourages arbitrary reductions in emissions and encourages companies to migrate operations to other parts of the world where there are no carbon dioxide controls."

Tamminen said industries had expressed similar concerns 35 years ago when the Clean Air Act was put into place but had not left the state or hurt the economy through compliance.