The connection between greenhouse gas (GHG) emissions in the atmosphere and climate change has motivated efforts to achieve reductions of GHG emissions. In 1992, the United States ratified the United Nations' Framework Convention on Climate Change (UNFCCC), which called on industrialized countries to initiate GHG reduction. However, in early 2001, President George W. Bush rejected the UNFCCC 1997 Kyoto Protocol, which called for legally binding commitments by developed countries to reduce their GHG emissions. In the absence of a federal program requiring GHG reductions, a growing number of U.S. states are taking action in this arena. Although a majority of states have addressed climate change to some degree (e.g., by creating GHG inventories or state action plans ), the most aggressive actions have come from a smaller group of states, including California and a coalition of states from the Northeast and Mid-Atlantic regions. California recently enacted several laws that seek to reduce GHG emissions. The first section of this report discusses the activity in California. The second section focuses on the Regional Greenhouse Gas Initiative (RGGI), a cooperative effort of 10 states in the Northeast and Mid-Atlantic regions to reduce carbon dioxide emissions from power plants. The report's final section considers these state-led actions from a federal policymaking perspective, examining the potential effects, limitations, and legal challenges of state-led climate change actions. In the environmental policy domain, California is generally on the more proactive side of the regulatory spectrum. The state's recent climate change actions continue this pattern. California has enacted several significant pieces of climate change legislation, each addressing GHG emissions in different ways. A recent executive order from the governor supplements the state's climate change statutes. This section discusses the actions California has taken to decrease its GHG emissions. California enacted legislation in September 2006 establishing a comprehensive GHG reduction regime. The legislation—AB 32, The Global Warming Solutions Act—directs the California Air Resources Board (CARB) to develop and implement a statewide program that would reduce the state's GHG emissions to 1990 levels by 2020. Recent emission levels (based on 2004 data) are approximately 15% higher than emission levels in 1990. However, assuming a business-as-usual trend (i.e., without accounting for any GHG reduction requirements either under way or under development), GHG emissions are projected to increase ( Figure 1 ). Although AB 32 is far-reaching in principle, the law's text does not include many crucial details. Instead, the statute grants considerable authority to CARB, which is charged with establishing the framework and applicability of the program. For example, the law does not specifically require the use of a market-based system, such as a cap-and-trade program, to reduce GHG emissions. Instead, AB 32 authorizes CARB to develop regulations to "achieve the maximum technologically feasible and cost-effective greenhouse gas emission reductions...." Moreover, the statute does not include a list of regulated emission sources or categories, but instructs CARB to determine which sources should be controlled to meet the statewide target. These decisions, which will likely affect the entire California economy to some degree, entrust CARB with significant responsibility. Although the law grants considerable discretion to CARB, the statute does dictate a schedule for various agency deadlines. The following dates highlight significant milestones of the mandatory schedule: June 30, 2007: CARB was to identify the early reduction options, which can be implemented prior to the mandatory program, and for which a facility will receive emissions credit. On April 20, 2007, CARB submitted proposed early actions, which are to be implemented via regulation and enforceable by January 1, 2010. January 1, 2008: CARB must establish the 1990 baseline, which becomes the 2020 emissions cap. January 1, 2008: CARB must develop a mandatory reporting scheme for sources affected by the cap. Sources report emissions for four years in order to establish accurate facility baselines. January 1, 2011: CARB must finalize regulations, including possible market-based programs, that will implement the statewide emissions cap. January 1, 2012: CARB begins to implement and enforce the mandatory emission reduction program created in 2011. When setting up an emissions control program, AB 32 requires that emissions "leakage" be addressed. The Environmental Protection Agency (EPA) states that emissions leakage occurs when economic activity is shifted as a result of the emission control regulation and, as a result, emission abatement achieved in one location that is subject to emission control regulation is offset by increased emissions in unregulated locations. In recognition of emissions "leakage," the statute requires regulators to account for GHG emissions created by any source of electricity that is consumed in California. CARB must develop a structure that will count emissions connected with electricity that is generated from outside the state. Without this provision, California utilities might have a financial incentive to import more electricity from out-of-state generators, who are not subject to the cap. In such a scenario, California emissions would decrease, but the benefit would be negated by increased (uncounted) emissions, or leakage, in neighboring states. When developing the emission reduction program in California, AB 32 instructs CARB to consider other GHG reduction regimes, including the Regional Greenhouse Gas Initiative (discussed below) and the European Union's emission trading program. This instruction might open the door for future emissions trading between California and other states. To catalyze this trading relationship, California Governor Schwarzenegger issued an executive order just a few weeks after signing AB 32, calling for CARB and other state agencies to create a "market-based compliance program with the goal of creating a program that permits trading with the European Union, the Regional Greenhouse Gas Initiative and other jurisdictions." California is also a participating in the development of a regional GHG emission reduction program. Governor Schwarzenegger and the governors of four western states—Arizona, New Mexico, Oregon, and Washington—formed the Western Climate Initiative (WCI) February 26, 2007. Utah and two Canadian provinces—British Columbia and Manitoba—joined several months later. In August 2007, the states and provinces set a regional, economy-wide target to reduce GHG emissions to 15% below 2005 levels by 2020. By August 2008, the participating state/province agencies agreed to develop a "market-based multi-sector mechanism, such as a load-based cap and trade program" that will seek to reduce GHG emissions in the region. Although the WCI is still in early development, there are several issues that may hinder its implementation. As noted, the WCI is an agreement between the states' governors. To implement the program, the states' legislatures would need to enact laws to carry out the initiative's objectives. This may present an obstacle if a state's legislative branch finds fault with the reduction program developed by states' executive branch officials. In addition, the inclusion of British Columbia and Manitoba may raise legal issues, particularly constitutional concerns. Article I, Section 10, Clause 3 of the U.S. Constitution states that "[n]o State shall, without the Consent of Congress ... enter into any Agreement or Compact with another State, or with a foreign Power...." It is uncertain whether this clause (the "compact clause") will create legal hurdles for the WCI. California recently developed a GHG performance standard for the electricity sector that aims to influence investment in long-term power generation. Although not directly requiring emission reductions or offsets from specific facilities or sources, the standard should influence future GHG emission levels by affecting which energy sources (coal, oil, natural gas, etc.) are used to generate electricity for consumers. The GHG performance standard, pursuant to legislation enacted in September 2006 (SB 1368), forbids electricity producers—"load-serving entities" —from entering into new "long-term financial commitments" with power plants unless the plant's GHG emissions are as low or lower than those of a new, combined-cycle natural gas facility. This emissions performance standard will apply to both in-state power plants and out-of-state facilities that seek to export electricity to California. The law directs the California Public Utilities Commission (PUC) to issue standards for investor-owned facilities, which in 2003 accounted for 68% of the electricity consumed in California. The PUC issued interim performance standards January 25, 2007. To address the electricity consumption from publicly owned utilities, the statute directs the California Energy Commission to issue comparable regulations by June 30, 2007. As of the date of this report, these regulations are still under development. The new performance standards complement the statewide GHG reduction program. The implementation of AB 32 is several years away (irrespective of legal challenges). The performance standards act as a stop-gap measure, preventing further utility investment in carbon-intensive fuels while the state is crafting an economy-wide reduction regime. As previous power commitments expire and are exchanged with contracts that meet the new GHG performance standard, California's portfolio of energy sources will change. The statute and its accompanying regulations, once in full effect, would appear to prohibit California consumers from using electricity generated by conventional coal-fired power plants. Compared with a combined-cycle natural gas plant, a conventional coal-fired power plant emits more than twice the amount of carbon dioxide per kilowatt-hour. Using current technologies, coal-fired generators would fail to meet the new emissions standard. From 2002 through 2005, approximately 20% of California's electricity was generated from coal ( Figure 2 ). As the law takes effect, California will likely need to reduce/conserve a comparable amount of energy or replace the coal-generated electricity with alternative sources of power. The new performance standards will affect not only California, but also other states in the West. Although California's electricity imports generally fall between 22% and 32% of the state's total electricity consumption, its imports are responsible for 39% to 57% of the total GHG emissions linked with its electricity.