California regulators approve nation's first system that gives polluters financial incentives to emit fewer greenhouse gases

This article is more than 9 years old

This article is more than 9 years old

California regulators yesterday approved the first system in the United States to give polluting companies such as utilities and refineries financial incentives to emit fewer greenhouse gases.

The Air Resources Board voted 9-1 to pass the key piece of California's 2006 climate law – called AB32 – with the hope that other states will follow the lead of the world's eighth largest economy. State officials are also discussing plans to link the new system with similar schemes that are underway or being planned in Canada, Europe and Asia.

California is launching into a "historic adventure," said Mary Nichols, chairwoman of the state's air quality board.

"We're inventing this," she said. "There is still going to be quite a bit of action needed before it becomes operational."

California is trying to "fill the vacuum created by the failure of Congress to pass any kind of climate or energy legislation for many years now," said Nichols.

A standing-room only board chambers featured testimony from more than 170 witnesses. Outside the chambers, climate change sceptics held signs reading "Global Warming: Science by Homer Simpson."

Some businesses that would fall under the new rules say the system could dampen California's already flagging economy, complicate lawmakers' efforts to close a $28.1bn (£18bn) revenue shortfall and lead to an increase in the price of electricity.

The rate increases, however, would still need approval from the state.

The governor, Arnold Schwarzenegger, told the board he is sensitive to the recession, but argued that many of the new jobs being created under the system are in the clean technology industry.

"The real jobs we're creating right now are green jobs. Since 2006 or so green jobs have been created 10 times faster than in any other sector, so it's also an economic plus," he said.

But he said reducing greenhouse gas pollution is not just about climate change, but about human health and national security.

"I despise the fact that we send $1bn a year to foreign places for our oil and to places that hate us. We send this money to people that hate us and that are organising terrorists and trying to blow up our country," he said.

Supporters say the system will help spur economic recovery and innovation, pushing business to invest in clean technologies.

They say the billions of dollars the state collects in the system could help fund clean air programmes and help offset any increases in utility rates. Details of the uses of these new funds is still uncertain.

California has already enacted the strictest climate-related regulations in the country involving renewable energy mandates for utilities, tighter fuel-efficiency standards for automobiles and low-carbon fuel standards.

The state's landmark climate law had a 1 January 2011 deadline for devising and enacting the so-called cap-and-trade system.

In the US, New Mexico narrowly approved its own cap-and-trade programme last month and approved the state's participation in a regional market. There is another market proposed in the Midwest and in New England.