California approves first broad US climate plan

The largest US state, which would be the world's eighth largest economy if a country, will from 2012 start a "cap-and-trade" system under which industry will be required to cut emissions but can trade credits on a new market.

Outgoing Governor Arnold Schwarzenegger, who has differed sharply with much of his Republican Party on the environment, saw the decision by a state panel late Thursday as part of his legacy.

"I campaigned in 2003 about that -- I want to show California that we can protect both the economy and the environment," the actor-turned-politician told the California Air Resources Board which voted 9-1 for the plan at a meeting in the state capital Sacramento.

"This is not just about global climate change," said Schwarzenegger, acknowledging that some people were skeptical about scientists' view that temperature are rising.

"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.

The European Union now has the world's only wide-scale cap-and-trade plan, which plays a pivotal role in the bloc's commitments to reduce the emissions blamed for climate change.

Ten states on the US East Coast have also run a cap-and-trade system that started last year, but the initiative -- the Regional Greenhouse Gas Initiative -- is limited to the power sector.

The US House of Representatives in 2009 approved plans for the first nationwide cap-and-trade system, with President Barack Obama's Democratic Party arguing that it would spur a new green economy and fight climate change.

The proposal died in the Senate, with Republicans leading charges that it would hurt an already weak economy. Prospects for approval have all but vanished after the Republicans swept congressional elections last month.

But voters in Democratic-leaning California soundly defeated a referendum, supported by oil interests, that would have frozen the state's actions on climate change.

Louis Blumberg, director of climate change for The Nature Conservancy environmental group's California branch, said that the state offered "a model" for others.

"At a time of critical need for decisive action to address climate change, California's tremendous leadership is creating renewed momentum at the federal and international levels," Blumberg said.

Initially, California will technically not restrict emissions but instead freely allocate "allowances" to businesses covering their carbon output. The state will gradually reduce allowances, forcing firms to go green.

Companies can also earn credit by supporting environmental projects in forests or farms, including through preservation of woods in Mexico's Chiapas state and Brazil's Acre state.

The provision has divided environmental activists, some of whom voiced anger that companies could reduce their own requirements to curb pollution by supporting timber firms that cut down forests but then plant new trees.

"We cannot and should not try to clear-cut our way out of climate change," said an action appeal from the Sierra Club California.

California aims to reduce carbon emissions by 25 percent, bringing them even with 1990 levels by 2020. The goal is less ambitious than that of the European Union, which has committed to reductions of 20 percent from 1990 levels by 2020.

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