Four years ago, California earned accolades for adopting a law that would slash its greenhouse gas emissions and serve as a model for national climate change legislation.
With the state mired in a crippling recession, the law that once looked like a landmark achievement is coming under assault. The regulatory effort Gov. Arnold Schwarzenegger set in motion is facing a political backlash and could come to an abrupt halt in the months ahead.
A coalition of businesses, financed largely by three Texas oil companies, is funding a ballot petition that would delay the law until California's current unemployment rate is cut by more than half.
Leading Republican gubernatorial candidate Meg Whitman has vowed she would suspend the law on her first day in office, which she would have the authority to do.
Even Schwarzenegger, who has staked his legacy on environmental issues, has begun urging air regulators to take a go-slow approach. But he has vowed to fight the ballot initiative.
The possibility that a state that has set the national agenda on environmental change for decades might shelve its highly publicized climate regulations could have ramifications beyond California's borders. In Congress, lawmakers are struggling to craft a national climate bill that uses California's as a template, but are facing headwinds of their own.
"This could very well be an effort to focus on California with the goal of delaying federal legislation," said state Sen. Fran Pavley, D-Agoura Hills, one of the law's authors.
At issue: Whether imposing costly regulations on businesses is a smart move as the nation struggles to emerge from recession.
Under the measure, oil refineries, manufacturers, cement plants, utilities and other carbon polluters to begin cutting their emissions in 2012.
It is the first economy-wide cap on emissions in the nation, obligating California to reduce greenhouse gas emissions to 1990 levels by 2020, about 30 percent from the levels projected if there were no climate regulations.
Oil companies have long opposed California's climate law.
The ballot petition is expected to qualify for the November ballot, with taxpayer groups, businesses and oil companies contributing nearly $1 million so far to get signature gatherers on the streets.
The bulk of that money has come from Texas-based oil companies. Valero Services Inc. of San Antonio, has given $500,000. Tesoro Companies of San Antonio and World Oil Corp. of Houston have given $100,000 a piece.
Petition backers say California cannot afford to impose environmental regulations that would raise utility bills, fuel prices and cost jobs. Republican lawmakers say the law gives companies another reason to flee California or locate elsewhere when they decide to expand.
That may be an appealing message to voters who are frustrated with high unemployment, continuing home foreclosures and an ongoing state budget crisis that has forced deep cuts to social services, public schools and higher education.
"We need to try to heal our economy before we travel a road we've never traveled before," said state Assemblyman Dan Logue, R-Linda, one of the initiative's sponsors. "Since this is going to have such a huge effect on every person of California, what's wrong with the public being able to weigh in and decide if this is what they want?"
The global warming law also is a target of both Republican candidates seeking to replace Schwarzenegger, who is termed out of office after this year.
Whitman intends to trigger a so-called "safety valve" in the law that allows a governor to suspend climate regulations in "extraordinary circumstances, catastrophic events, or threat of significant economic harm." Ironically, it was a provision Schwarzenegger demanded on behalf of business interests at the time he was negotiating the bill with Democrats in 2006.
"Let's take stock of where we are. Let's understand what our alternatives are," Whitman said during a March debate in Orange County.
Her opponent in the GOP primary, state Insurance Commissioner Steve Poizner, said suspending the law for just a year isn't enough. He supports Logue's initiative to delay climate regulations until California's 12.5 percent unemployment rate drops to 5.5 percent and stays there for a year.
Both candidates cite a much disputed study by the dean of the business school at California State University, Sacramento, which concludes the law could cost 1.1 million jobs.
That study, which also is a key element of the initiative campaign, has been discredited by the state's nonpartisan legislative analyst.
The California Air Resources Board, the entity charged with implementing the law, estimates climate regulations will promote investments in clean energy and will reduce California's overall fuel expenses $3.8 billion by 2020.
Yet it also could lead to higher energy prices because utilities and oil and gas companies are among California's top carbon emitters.
Valero spokesman Bill Day said the initiative gives California voters a "chance to delay the detrimental economic effects" of the climate regulations, which are slated to go into effect in 2012.
Valero has more than 1,600 employees in the state and has a vested interest in keeping California's economy strong, Day said in an e-mail to The Associated Press.
The state's dismal economy — hit by the nationwide foreclosure crisis and bank failures — also has given Schwarzenegger pause.
He has urged regulators to tread cautiously as they write the rules to oversee a carbon market in California for the companies that will be asked to cut their emissions.
In a March 24 letter to the California Air Resources Board, the governor suggested the state initially give away carbon credits as a way to avoid high costs to regulated industries. That idea has been criticized by environmentalists, who argue that oil companies, cement plants and other polluters ought to pay to cut their emissions.
Nevertheless, Schwarzenegger has ruled out any call to suspend the law, the centerpiece of his environmental legacy.
"I think that the California people are outraged about the fact that Texas oil companies ... are coming to California and trying to change laws and policies in California," Schwarzenegger told reporters recently, after touring an exposition of Sacramento-area businesses considered environmentally friendly.
Associated Press Writer Juliet Williams contributed to this report.
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