CaliforniaÂ’s climate change progress threatened

California AB32 Proposition 23 tests climate policy as cap-and-trade, carbon pricing, and clean energy targets face pushback amid job losses, oil industry funding, and Western Climate Initiative stakes with greenhouse gas emissions limits at risk.

California’s ambitious climate change agenda could evaporate in a vote in November that pits renewable energy advocates and allies against oil companies and manufacturers.

The U.S. Senate has scuttled President Barack Obama’s goal of putting a price on carbon, leaving state and regional efforts the key drivers in the effort to move the country past coal and oil.

California is the clear U.S. leader on addressing climate change, unless California voters kill a landmark 2006 state law known as AB32, an ambitious climate plan which was intended to cut carbon dioxide emission to 1990 levels by 2020.

On November 2 Californians will vote on Proposition 23, which would put AB32 on hold and the voluntary CO2 market as well. The law would go back into effect when unemployment, now more than 12 percent, has remained at or below 5.5 percent for four quarters, which is not expected to happen for years.

“If it passes I think it is a setback for this clean energy future we’ve been talking about that is as significant as the failure to produce comprehensive energy and climate legislation in the Congress,” said John Podesta, head of the Center for American Progress, a research institution.

But if the effort to bury California’s policy fails, as he expects, that result could re-energize advocates. “It finally could signal, ‘O.K., we’re ready to get on with the project,’” he said.

California, the largest U.S. manufacturing state, has more than 10 percent of the U.S. population and an economy that would rank eighth in the world if it were ranked as a separate country. That gives the state the heft to set trends.

The U.S. climate change bill, which passed the House of Representatives but failed in the Senate after a final push for the climate bill in Congress, was modeled after California’s 2006 law.

The state’s plans, championed by the Republican governor, Arnold Schwarzenegger, include getting a third of its electricity from alternative energy, capping greenhouse gas emissions and creating a market, outlined in a greenhouse gas market plan released by the state, for such pollutants, encouraging denser cities and favoring low-carbon fuels like biogas, which would cut the use of gasoline.

The future of the economy is key to the political battle. Whether voters think the environmental agenda creates jobs in alternative energy or hurts the business climate, chiefly through higher energy prices, is the crux, and business itself is split on the issue.

Venture capitalists south of San Francisco turned fruit orchards into Silicon Valley a few decades ago, and now they are pouring investment into clean technology, from solar power and “green fuel” algae oil companies to electric cars.

The smaller the company, the higher the risk that a delay like Proposition 23 would kill it, said Brenden Millstein, whose two-person energy-efficiency company, based in Silicon Valley, is just getting going. Companies with hiccups in their research, a normal thing for a new company in a new field, could lose the flexibility to survive.

“Right now there are literally 150 solar start-ups” in his vicinity, he said. “They are not getting funding if Prop. 23 goes through.”

But manufacturers say they can barely survive now and higher energy prices will only make things worse.

California has lost a third of its manufacturing jobs in the past nine years — it now has 1.3 million — and clean-technology manufacturing facilities are not making up for the losses, said Gino DiCaro, spokesman for the California Manufacturers and Technology Association.

“There is no way we will make a dent in that industrial loss if AB32 continues,” he said.

A number of studies, including one by the state’s budget regulator, have concluded that the current law would have a modest overall effect on the economy but that changes from the climate-change agenda could cost jobs in the short term.

Californians tend to see environmental regulation and economic growth as compatible, polls show, but they are also worried about the economy in California, which faces a $20 billion budget hole.

Oil companies and allies have donated more than $8 million to back the proposition, including more than $4 million from the Texas oil refiner Valero Energy, and $1 million from the Koch family, who has backed the Tea Party movement inside the Republican Party.

Opponents of the new measure are close behind, with big donors including venture capitalists and technology members of the Packard family of the technology giant Hewlett-Packard.

A spoiler in the battle is the Republican candidate for governor, Meg Whitman, who is in a dead heat with the Democrat Jerry Brown and has said that she opposes Prop. 23 but would put parts of the current climate law on hold by executive order.

Eurasia Group, a global political risk consulting firm, calculated that gubernatorial elections in more than a dozen states could change climate policy and disrupt regional efforts with Canadians watching closely.

And if California pulls back, other states will as well. It is at the center of a regional effort, called the Western Climate Initiative, which plans to cap greenhouse gas emissions and allow trade in the pollutants in 2012 through cap-and-trade adoption mechanisms.

“If AB32 is suspended, then both future progress on federal climate legislation and the future of the W.C.I. is thrown into doubt,” Trevor Sikorski, a Barclays Capital analyst, wrote recently.

In Silicon Valley, in the aftermath of the Senate’s failure to pass climate change legislation while seeking emissions bill support in Washington, putting the law on hold looks dangerous.

“To slow it down and stop it, probably means you kill it,” said Jim Fulton, who represents venture capitalists and clean-technology firms as a lawyer with the Silicon Valley firm Cooley.

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