The Bodybuilder, the Brit, and the Oilman: A Brief History of the Carbon Code

Never was so much owed by so many to so few.

Winston Churchill, August 20, 1940

It was a warm and muggy Southern California day in July 2006, but no hint of perspiration dared to appear on the bronzed face of Governor Arnold Schwarzenegger. He was speaking with Lord John Browne, then chairman of oil giant BP (known then as British Petroleum), and me at a port facility in Long Beach. We were waiting for the arrival of British Prime Minister Tony Blair.

The topic of this summit was putting a price on greenhouse gas pollution—"carbon"—and its genesis was straightforward. A year earlier, The Governator had addressed a crowd in the San Francisco City Hall on the United Nations' World Environment Day, declaring "the science is in; the debate is over; the time for action is now," and set California's goals for reducing carbon—down to 1990 levels by 2020 and 80 percent below that by 2050. He signed an Executive Order that day establishing a path to achieve those goals, but any truly meaningful regulation of carbon would depend on putting all of this into law, because industries such as oil, cement, agriculture, and the catch-all California Chamber of Commerce quickly lined up to criticize the governor's action as a job-killer and business-buster.

Despite the misgivings of some, by early 2006 state agencies and a multitude of stakeholders had developed a credible plan that would achieve the carbon reductions and pay for much of it with energy efficiency measures, renewable energy generation like solar and wind power, and the production of alternative fuels like hydrogen, biodiesel, and batteries—all things that would make California more competitive and create new industries in the Golden State. To convert the plan into law, the governor worked with legislators to introduce Assembly Bill 32 (or simply "AB32"), The Global Warming Solutions Act of 2006.

Locked in a tough re-election campaign and with his own Republican Party firmly opposing AB32, Schwarzenegger began campaigning to get the bill passed. In June, Schwarzenegger and I had flown to Sedona, Arizona to attend the Western Governors' Association annual meeting. We had successfully convinced the other governors at the meeting—conservative Republicans and liberal Democrats alike—to sign an agreement to tackle climate change on a regional basis. We needed this kind of broad support to make the case back home for AB32, but the meeting highlighted another challenge: addressing global issues on a less than global scale.

As we prepared for the formal session where the regional deal would be adopted by the nineteen governors, we compared notes on carbon policy with two other progressive governors—Janet Napolitano of Arizona and Christine Gregoire of Washington. Janet was smart and articulate, qualities that would later bring her to the attention of President Obama and put her at the head of the federal Homeland Security Agency. Christine was a bold risk-taker. She had just won her first term in office, after a recount, by a mere 200 votes (taking Seattle with a 150,000 vote majority, but losing the rest of the state by an equally large margin), highlighting the sharp partisan divisions in her own state. Tackling climate change would be popular in the big city, but feared and opposed everywhere else.

Of all the opposition arguments, the one that seemed to be the hardest for all three governors to overcome was the idea that if only a few states imposed limits or costs on carbon, it would drive businesses to other parts of the country and ultimately wouldn't do much to tame greenhouse gas emissions. We concluded that someone would have to recruit more governors to adopt similar policies, a de facto national climate action plan.

Like Schwarzenegger, I had come to Sacramento to take a turn at public service, not to become a career civil servant. I had served as secretary of the California Environmental Protection Agency and later as Schwarzenegger's cabinet secretary, managing policy for all of state government, but had planned to stay no more than one term. In the absence of federal policy, the three governors knew they needed a "climate ambassador" to help other states figure out how to develop their own climate action plans and to get them working together on regional policies around sharing renewable energy production and creating a market for carbon emission reductions. It seemed like a natural fit for a policy wonk, who came from a nonprofit think tank, to go back to that world and to begin to connect the dots with other states. I was deputized on the spot, but needed a carbon-plated calling card to showcase as a template for other governors. AB32 would have to become law in California for any of this to succeed elsewhere.

"How Much Did You Pay Him to Say That?"

The 2006 Western governors' meeting culminated with a unanimous agreement to collaborate on climate change policy. Even with that endorsement and a growing number of progressive California business interests voicing support, Schwarzenegger still needed one more push to get AB32 across the election-year political finish line, so we organized a CEO forum and persuaded BP to host it at their port facility in Long Beach, California on July 31, 2006. CEOs of global businesses that had prospered under European carbon regulation were asked to share their experience with CEOs of U.S. companies that could influence state lawmakers to support a carbon reduction law. We secured one more key component of this campaign—the keynote speaker at the event would be British Prime Minister Tony Blair.

Years before the massive 2010 oil spill in the Gulf of Mexico tarnished its reputation, BP was the perfect host for a business event focused on the environment—an oil company that conducted business on both sides of the Atlantic and declared its famous initials stood for "Beyond Petroleum." Lord John Browne could testify to the benefits of a lower-carbon future and show off a new oil tanker that ran on cleaner fuels and operated at greater efficiencies and therefore lower cost. A sparkling white tent had been set up to hold the forum on the docks adjacent to the tanker, green plastic grass covering the oil-stained pavement inside.

Blair's motorcade came speeding into the compound in a cloud of dust and tires grinding on gravel. Schwarzenegger strode purposefully...