California has long prided itself on being a world leader on climate change — and with good reason.

Within the United States, California is No. 1 (by far) in solar power and No. 3 in wind power. It boasts the third-lowest carbon dioxide emissions per capita behind New York and Vermont. Since 2000, the state has managed to shrink its overall carbon footprint slightly even as its population grew and economy boomed:

But now California is taking on a far, far more audacious task: trying to prove to the world that it’s possible — desirable, even — to pursue the really drastic emission cuts needed to stave off severe global warming.

The state is already on track to nudge its greenhouse-gas emissions back down to 1990 levels by the year 2020. Then, in late August, after much fierce debate, the California Assembly and Senate passed a new bill, known as SB 32, that would go much further, mandating an additional 40 percent cut in emissions by 2030:

This Thursday, Gov. Jerry Brown signed the bill into law.

It’s hard to overstate how ambitious this is. Few countries have ever achieved cuts this sharp while enjoying robust economic growth. (Two exceptions were France and Sweden in the 1980s and ’90s, when they scaled up nuclear power.) The EU is also aiming for a similar 40 percent cut below 1990 levels by 2030, though they’ve got a head start.

And California is facing some serious hurdles. The state’s largest source of low-carbon electricity, the Diablo Canyon nuclear power plant, may shut down in 2025. The climate plan faces opposition not just from influential industries like oil and manufacturing, but also from a fair number of Democrats. Making things harder still, California’s signature climate policy, an economy-wide cap-and-trade program for CO2 emissions, is in legal peril — and last month's vote didn’t help.

The stakes are enormous: Policymakers everywhere will be watching to see if California can pull this off. Getting a 40 percent cut will require more than bucking up wind and solar and putting more electric cars on the road. It will mean reshaping virtually every facet of the state’s economy, from buildings to transportation to farming and beyond.

How California’s new climate law actually works

California has a confusing welter of climate policies, but the place to start is with AB 32, the "Global Warming Solutions Act," passed by the legislature in 2006 and signed into law by Arnold Schwarzenegger.

AB 32, weighing in at a svelte 15 pages, required California to reduce its greenhouse gas emissions down to 1990 levels by 2020. But it didn’t specify how, really. Instead, lawmakers told the state’s pollution regulator, the California Air Resources Board (CARB), to figure it out, using a mix regulations and market mechanisms.

CARB was happy to oblige. Starting in 2012, the agency implemented a statewide cap-and-trade system that imposed a ceiling on greenhouse-gas emissions across key sectors and then distributed a fixed number of tradable pollution permits to businesses. The total number of permits dwindles each year.

Under this program, companies either need to cut their CO2 emissions or obtain these increasingly scarce permits — whichever is cheaper. The idea is that by setting a price on carbon, cap-and-trade forces businesses to figure out how best to cut pollution:

On top of that, California’s legislators have passed a flurry of laws to boost specific technologies. There’s a renewable portfolio standard telling utilities to get 50 percent of their electricity from renewables like solar or wind by 2030. There’s a rule to double efficiency from buildings, appliances, and industrial equipment by 2030. There’s a low-carbon fuel standard to limit the carbon content of imported fuel. There are incentives for electric vehicles.

So far, these programs have worked reasonably well. California is on pace to push its emissions back down to 1990 levels by 2020 — and the economy has thrived.

The looming question, though, was what would happen after 2020. Gov. Jerry Brown had long insisted that CARB had the authority to continue making cuts, but he wouldn’t be around forever. Meanwhile, the California Chamber of Commerce is trying to knock down cap and trade in court, arguing that it’s tantamount to a tax and therefore requires two-thirds approval in the Assembly. (AB 32 didn’t pass by a two-thirds vote.) A recent auction for cap-and-trade permits sputtered amid the cloud of uncertainty.

That’s where last month's vote came in. With the newest bill, SB 32, the legislature is explicitly telling CARB to pursue a 40 percent emissions cut below 1990 levels by 2030. The agency can either expand existing policies or develop new ones to get there — again, there’s a lot of flexibility.

There were a few hiccups: First, SB 32 was totally silent on the legal status of cap and trade. That’s still up in the air. Second, many Democrats in the legislature were squeamish about handing CARB so much power. So they also passed a companion bill, AB 197, which will require CARB to put two legislative members on its board and report to the Assembly/Senate regularly. There’s also a third confusing new requirement that CARB prioritize "direct emissions reductions" — we’ll get to that in a bit.

Bottom line, though: SB 32 was a huge, huge deal. Climate hawks won a major victory over industry groups who fought the bill tooth and nail. California will extend its landmark climate efforts into 2030. Drastic emissions cuts are now written into law.

California has the tools to cut emissions 40 percent — but it ain’t easy

Anyone can put lofty climate goals on paper. The real question is whether California can undertake the specific actions needed to actually cut emissions.

One of the most detailed studies on this question is a 2015 paper by Jeffery Greenblatt of Lawrence Berkeley National Laboratory, who created a detailed model to see what effect various state actions might have in reducing California’s greenhouse gases.

Greenblatt’s conclusion was that a 40 percent cut below 1990 levels looked doable, but it would take major changes across a wide variety of different sectors, from boosting clean electricity to ratcheting up building efficiency to managing pastures better to reducing car travel to cutting the HFCs in air conditioners.

"Everyone focuses on solar and wind and electric cars," Greenblatt told me, "but there a hundred different levers to pull."

In his study, Greenblatt modeled three different scenarios. The first, S1, incorporates all the policies that California has already committed to. The second, S2, adds in actions that California is considering. Neither was enough to get the 40 percent cut by 2030.

For that, you need scenario S3, which involves really getting serious about clean energy, efficiency, transportation, agriculture, and more:

So what does the S3 scenario entail? Well, it would mean taking all the steps below on vehicle efficiency, biofuels, building standards, clean electricity, methane capture from landfills, forestry, and so on …

But that’s not all! It also means taking all of these steps on high-speed rail, building efficiency, energy storage, combined heat and power …

And also all these steps, including "double local actions":

Add it up and scenario S3 is serious business. We’re talking about a world where California gets more than 50 percent of its electricity from renewables in 2030 (up from 25 percent today), where zero-emissions vehicles are 25 percent of the fleet by 2035 (up from about 1 percent today), where high-speed rail is displacing car travel, where biofuels have replaced a significant chunk of diesel in heavy-duty trucks, where pastures are getting converted to forests, where electricity replaces natural gas in heating, and on and on.

Possible? Sure. Easy? Hardly. The level of effort is just orders of magnitude different from anything California has done so far.

And no one’s sure what it would cost, since it depends on how clean tech progresses and how much innovation kicks in. If costs go too high, the plan risks a massive backlash. (Note that state Democrats are already starting to fracture over the issue.)

To be clear, scenario S3 isn’t the only way to get a 40 percent cut. It’s just one scenario. Indeed, it may not even be the most likely scenario going forward.

Notice, for instance, that Greenblatt assumes California would extend the lifespan of Diablo Canyon through 2045 and build new nuclear plants to replace the now-shuttered San Onofre nuclear power plant. But Diablo Canyon’s operator, PG&E, has proposed closing the reactors down in 2025. Scenario S3 also assumes that California deploys staggering amounts of CCS technology for gas and builds lots of high-speed rail — both uncertain.

If those actions aren’t taken, then California will have to get its cuts elsewhere. If you close a massive nuclear plant supplying 9 percent of the state’s electricity, you need to make it up. Possibly the state can do this: As Greenblatt told me, his scenarios aren’t meant to be comprehensive. He barely looked, for instance, at the possibilities for renewable natural gas or reductions in jet fuel. Instead, this is meant to be illustrative. It shows the types of changes California needs to consider. And they’re daunting.

One final, crucial, note: Greenblatt explicitly didn’t include cap and trade in his modeling. That’s because a cap-and-trade program assumes the cuts will be made at lowest possible cost and is agnostic on how they’re done. This study, by contrast, was interested in the concrete "how."

If California does have a working cap-and-trade system in place, however, then presumably the covered industries and businesses would pursue the lowest cost actions en route to that 40 percent cut. That might include many of the items on the list above, or it might include other steps. It’s hard to predict.

But that brings us to the final twist: No one really knows yet what will happen with California’s cap-and-trade system.

The fate of California’s cap-and-trade system is … murky

Cap and trade isn’t the only way for California to cut emissions. CARB could simply tally up all the actions outlined by Greenblatt above and pursue them by regulatory fiat. But cap and trade is considered a more flexible, lower-cost policy tool to get those cuts. So it’d be nice to have around. And CARB has a detailed proposal for extending the program beyond 2020.

But as Ann Carlson, a law professor at UCLA who has been scrutinizing California’s climate efforts, explained to me, cap and trade currently faces two key obstacles:

1) It might not even be legal. This is a big one. Back in 2010, California’s voters passed a ballot initiative that redefined all levies and charges imposed by the state government as "taxes." When combined with another initiative from the ’80s, this meant California’s legislature could only enact these levies and charges with a two-thirds vote in the Assembly and Senate.

That poses a problem for cap and trade, since it’s arguably a type of tax (not least since half of the permits are auctioned off to businesses). And AB 32, the bill that originally authorized the program, didn’t pass with a two-thirds majority in 2006. California’s Chamber of Commerce has sued to overturn the program on this basis. This case is winding through the courts — and some legal experts think this could imperil cap and trade past 2020.

There are a couple different ways this issue could play out. The simplest outcome would be for California’s legislators to pass a fresh bill by two-thirds vote that reaffirmed cap-and-trade’s legal status. But they didn’t do so when they passed SB 32, and it’s unclear if the votes are there now. Possibly California’s lawmakers might be able to revisit this after the November elections, when the legislature is expected to be a bit more liberal and climate-friendly. (Or, alternatively, voters could approve cap and trade via ballot initiative, enshrining it into law.)

A second possibility is that the legislature won’t step in and the courts could strike cap and trade down. If that happens, CARB could still pursue emissions reductions with other mandates and regulations. It just might be clunkier and costlier. It’s possible that businesses wouldn’t be too thrilled with this outcome and might end up asking the legislature for a cap-and-trade program.

Third, perhaps the courts will simply require modifications to cap and trade — so that CARB has to hand out all permits for free rather than auction some of them off (thereby making it less tax-like). This wouldn’t affect the cap, but it would constrain CARB’s ability to raise money for initiatives elsewhere, such as high-speed rail or easing the burden on low-income households facing higher electricity bills. (There’s already lots of political wrangling over how to spend the $1 billion CARB is sitting on; see John Upton for a rundown on this.)

In the meantime, this legal haze is affecting CARB’s ability to raise cash. In the last two quarterly auctions for emissions permits, companies bid for just a fraction of the available permits. Why bother if the program might not even be around much longer?

2) AB 197 might constrain cap and trade. The other possible threat to cap and trade is a little wonkier. As part of AB 197, the companion bill to SB 32, California’s legislature told CARB that it had to prioritize "direct emissions reductions" from large polluters. This provision was added at the behest of environmental-justice advocates who have long fretted that big refineries and other polluters (often situated in low-income areas) could simply evade making cuts under cap and trade by buying up permits instead.

If CARB is forced to pursue direct reductions rather than let emissions-trading do its thing, that may blunt some of the flexibility in the program. But at this point, it’s still very much unclear. I’d recommend reading these two posts by Carlson at Legal Planet for more.

The whole world will be watching California

Up until now, the United States has mostly been tinkering around the edges of climate action. Now the country’s biggest, most populous state is really taking the plunge. Along with the European Union, California has some of the most ambitious climate targets around.

California is essentially offering itself as a guinea pig in the world’s most important policy experiment. Everyone else will be watching and learning from the state’s successes and failures — whether it can develop the needed clean tech, whether it can spur innovation, whether it can control costs and navigate political opposition, whether it can rejigger the grid to accommodate enormous quantities of renewable power. No pressure!

Further reading

David Roberts wrote a great post back in June on California cap-and-trade’s growing pains. Also see John Upton for a thorough rundown of the legal issues.

New York state is also making major strides on clean energy, but (unlike California) it’s trying to do so while keeping its existing nuclear fleet open.

A history of inaction on climate change