STEVE INSKEEP, HOST:
Today, California begins its effort to help slow down the warming of the Earth. Businesses have to get a permit, from now on, if they emit greenhouse gases. Some of those permits will be auctioned off today.
Businesses can use those permits or sell them to other businesses that need them. Pollution is capped and you can trade the right to pollute - cap and trade. Though this cap and trade concept, the state is putting a price on polluting and it's a gamble.
For the plan to work, a greener economy needs to take hold. NPR's Christopher Joyce reports on California's climate experiment.
CHRISTOPHER JOYCE, BYLINE: Dan Kammen, an energy expert at the University of California at Berkeley, helped write the climate law. He says it will require businesses to be more energy-efficient and that will entail some pain.
DAN KAMMEN: The way we say it, we've squeezed the lemon a little bit. And we're going to need to squeeze efficiency very strongly. We're going to have to really ratchet down. But at the same time, the global stock of low-power electronics and boilers and generators, is actually ramping up.
JOYCE: Many of those low-energy products are made abroad. But the state hopes to use money from its auction to lure green-business entrepreneurs to California. People like Mike Hart. Hart has set up shop in a big warehouse at a mothballed Air Force base near Sacramento. His company, Sierra Energy, is testing a reactor that makes fuel. He shows me a row of buckets filled with the stuff he makes the fuel from.
MIKE HART: This is garbage we're talking about here. Bottle caps, broken glass, copper pieces, mixed plastics. Walnut shells is an example of biomass. Different sorts of shredded metal that can be recovered and melted.
JOYCE: Engineers pour this trash into a black, steel reactor vessel about the size of a telephone booth. They add some oxygen and steam, and the trash undergoes a chemical reaction. What comes out is synthetic gas, or syngas. It can then be turned into a low-carbon diesel fuel, or burned to make electricity, or even converted to hydrogen for fuel cells. It's low carbon and it also makes use of trash that eventually would decompose and emit methane, a powerful greenhouse gas.
Hart reckons the climate law will drive people to his doorstep, people in search of clean energy who don't want to buy more permits from the state.
HART: In the future, it's going to have a tremendous impact for us because we offset greenhouse gases, because we offset CO2. It's not quite a gold rush yet, but if the prices turn out to be good, it will become one.
JOYCE: The price for permits, that is. If they're high enough at today's auction, then businesses might buy his gasifiers, or the fuel from them, to lower their carbon footprint. Getting carbon out of energy will cost more, though ever since the law was passed, economists have dueled over how much, as well as how many new green jobs might be created. The California Chamber of Commerce supports the law, but opposes the auction and has sued to invalidate it.
The Chamber's Loren Kaye says it's just a hidden tax.
LOREN KAYE: The auction merely transfers wealth from the folks that are producing in the economy to the government, which is then going to use the proceeds for, you know, whatever the politicians and the regulators deem as best.
JOYCE: Even the law's authors, like Dan Kammen, aren't sure how it all will work out.
KAMMEN: What I'm most worried about is, where are our partners? Because this process needs to expand out so that industry is seeing this as a push to innovation and not just to be a penalty to be based in California. We've got to get other states, other municipalities, partnering in.
JOYCE: California is gambling that green entrepreneurs will have to come to California. Several have come through the office of Tony Brunello. He studies green markets at a consulting firm, California Strategies, in Sacramento.
TONY BRUNELLO: It's an exciting time. I don't think all the businesses will make it here. But it's nice to see that with them coming in, I sort of see us, again, as the center of innovation for these low-carbon technologies and opportunities.
JOYCE: With California ranked as the eighth largest economy in the world, it's going to be the largest climate experiment undertaken in the U.S. Christopher Joyce, NPR News.