A ballot proposition in California that would have suspended that state's recent climate change legislation has failed, clearing the way for greenhouse gas emissions regulations there to take effect, including a cap and trade program.

The outcome of the election could have implications for greenhouse regulations, and renewable energy, around the country. In many cases, California's environmental regulations have served as models for other states, as well as the federal government--for example, current clean air and national fuel economy regulations can be traced back to environmental regulations in California. The vote is a victory for supporters of clean tech (including some major clean tech investors) who wanted to keep the greenhouse regulations, and a defeat for the oil producers and refiners who wanted to stop the greenhouse gas regulations.

Proposition 23 would have stopped the implementation of Assembly Bill 32, a climate bill passed in 2006 that required greenhouse gas emissions in the state to be reduced to 1990 levels by 2020. The rules designed to achieve this goal are scheduled to take effect at the beginning of 2012. All told, there are 69 measures geared to meet the greenhouse gas goals, but the most important are a cap and trade program, fuel economy regulations, a renewable electricity standard, energy efficiency requirements and a low-carbon fuel standard (some of these measures are also supported by separate laws).

Earlier this year, Prop 23 seemed sure to pass. Its supporters billed it as a way to save jobs, an appealing message with California's unemployment well over 12 percent. At the same time, climate legislation was faltering in the U.S. Senate. The tide seemed to have turned against greenhouse gas regulations as Americans focused on unemployment. But clean tech investors and other opponents of Proposition 23 outspent its supporters by about 3 to 1, and the proposition failed.

Under the cap and trade program, major greenhouse gas emitters such as power plants are allowed to emit a certain amount of greenhouse gas--the cap. To get under this cap, the power plant can either install new technology to reduce emissions, or in some other way reduce its emissions, or it can buy "allowances" from other greenhouse gas emitters that emit less than the cap. Cap and trade is one of the most flexible approaches to regulation, allowing power plants to choose whatever approach is cheapest. As a result, it's typically a cheaper way to reduce emissions than regulations that specify what technology must be used, which is the case with many other environmental regulations.

The low carbon fuel standard requires those who provide fuel to limit the amount of carbon dioxide the fuels emit when they're burned. The main way to do this is to blend petroleum-based fuels with low-carbon biofuels, such as ethanol made from cellulosic sources such as grass, as well as sugarcane, or in some cases corn. It's an alternative that could be more effective than the federal biofuels mandate, says Daniel Sperling, director of the Institute for Transportation Studies at the University of California at Davis. The biofuels mandate requires fuel suppliers to use a certain amount of renewable fuels, but includes provisions that allow suppliers to avoid doing this if not enough biofuel is produced.

The renewable electricity standard requires utilities in California to get 33 percent of their electricity from certain renewable resources, such as wind, solar power, and geothermal. The impact of this measure will be limited, however, by how fast new renewable power sources can be introduced. Financing and power transmission issues have so far kept utilities from achieving a lower 20 percent target that existed apart from A.B. 32. "We can't catch 20 or 33 percent," says Tom Kelly, the chief deputy director of the California Energy Commission. "Demand is growing faster than renewables can be built."

A long-awaited energy bill was unveiled today by its Senate sponsors, John Kerry (D-MA) and Joseph Lieberman (I-CT). According to a summary (pdf) of the bill, it would reduce carbon emissions by 17 percent by 2020 and by over 80 percent by 2050 by putting limits on the amount of carbon dioxide emissions from power plants and heavy industry, and from producers and importers of refined fuels for transportation.

The limits will only apply to those who emit over 25,000 tons of carbon dioxide a year, which works out to about 7,500 factories and power plants, according to the summary. These emitters will have to purchase emissions allowances, cut emissions, or both to meet the targets. Those who pollute less than their allowances can sell them to others in a market-based system.The proceeds from buying the allowances will be divided up--some will go to pay down the deficit; some will fund research and development; some will go to businesses to help them meet the caps; and the rest will be mailed to taxpayers in the form of a refund check. As the years go by, more of the proceeds will go directly to taxpayers.

The plan is very similar to the cap and trade system in a bill the House passed last year, except that one didn't involve sending out refund checks (although there were provisions to help out poor people who are affected by higher energy bills). The new bill also only covers parts of the economy, rather than the whole thing.

Numerous provisions cater to different interests. It supports offshore drilling but lets states opt out. For those worried that a cap on carbon emissions will hurt the coal industry, the bill contains support for capturing and storing carbon from coal plants, which could help them meet the caps. Supporters of natural gas will find tax incentives for people to switch to natural gas powered vehicles, as well as other subtle changes that will make it more attractive to build natural gas power plants. Industries affected by the cap get a couple of boons. First, factories (not power plants) don't get regulated until 2016, and the money from the purchases goes back to them to help them pay for switching to cleaner technology. They also are protected by trade provisions designed to keep business from moving to countries without caps on carbon. Farmers are exempt. And they'll make billions with carbon offsets--such as planting trees that absorb and store carbon dioxide. Nuclear gets $54 billion in loan guarantees, as well as "risk insurance" to help get new power plants financed. There will also be money to promote battery-powered cars.

Renewable energy, carbon capture, and energy efficiency researchers should be happy. Money from the allowances and direct government funding will help extend R&D funding launched by the stimulus package last year.

The summary is careful to emphasize that Wall Street won't make money by buying and trading carbon allowances because of strict regulations. But it didn't mention how much this is likely to increase energy bills.

Now the sponsors have to start gathering votes. We'll soon see if they've spread enough incentives around first to get it taken up on the Senate floor, and then maybe even passed.

Last week researchers and policy experts gathered at MIT to talk about geo-engineering--a subject that's becoming more popular in the face of concern over inaction on climate change.

The upcoming United Nations climate change convention in Copenhagen seems unlikely to produce the binding and stringent agreement needed to sharply curtail greenhouse gas emissions. Meanwhile, greenhouse concentrations continue to mount, driving scientists who were once opposed to the idea of tinkering with the planet to reconsider it.

Now they've got another reason to be worried. Earlier this year a climate bill that would've limited greenhouse emissions and helped renewable energy sources compete with fossil fuels seemed well on its way. In June a version passed the House. But then other matters--mostly health care reform--distracted Congress, and a Senate version of the bill got bogged down. The Senate recently took up the bill again, but yesterday a report in the Washington Post declared that "there is almost no hope for passage" of the bill.

Democrats are divided over the bill, and Republicans have been vocally opposing it. If the report is right, countries meeting in Copenhagen will have even more reason to criticize the U.S. for inaction, and to use that as a reason to delay a climate treaty or water it down.

That's one way to look at it, at any rate. Here's another: Copenhagen is probably doomed already--why the rush to push legislation through? That's essentially what Republican Senator George Voinovich (Ohio), who opposes the current bill, reportedly said last week, "Wouldn't it be smarter to take our time and do it right?"

It certainly is hard to be against getting something right. But will slowing things down lead to a better climate bill? Probably not, as long as the chief objection is that the bill will make energy more expensive, something that seems unavoidable. But if the delay can lead to a better system for distributing those costs equitably, and if along the way inefficient subsidies can be weeded out and emissions caps tightened (wishful thinking?), it could be worth the wait.