Mary Nichols is no stranger to innovation. As one of the nation’s first environmental attorneys, Nichols has spent her career protecting natural resources at the state and federal level. She also served as the California Air Resources Board Chairwoman from 1978 to 1983, and now she’s at it again. Nichols is tasked with implementing the Global Warming Solutions Act of 2006, California’s historic attempt to drastically reduce the greenhouse gases many scientists believe are the main cause of global climate change. That effort includes a highly controversial emissions cap-and-trade program that limits the emissions companies or governments can produce but also allows the most efficient companies to sell allowances they don’t use for a profit. We sat down with her to discuss some of the key aspects of this effort.

Comstock’s: You say that California lawmakers and industries need to adopt “climate thinking” in both policy and practice. What do you mean by that?
Nichols: First of all, I think many businesses are already doing this. Companies are already thinking about energy use as a factor in business, not just, “How much am I paying for my electricity,” but “Are there ways to make my business more efficient so I use less electricity?” Many companies, for instance, are experimenting with alternative fuels in awareness that petroleum is going to be more expensive, and there’s going to be less of it. [Electricity] is going to be more expensive because the raw materials are more expensive whether they’re nuclear or coal. So while some people are beginning to think of their carbon footprints, others are thinking about it from the bottom line perspective. But either way it involves incorporating climate thinking into their work.

Comstock’s: Assess where California is right now in implementing Assembly Bill 32, the Global Warming Solutions Act of 2006.
Nichols: We’ve met all the deadlines in the statute: developing law for mandatory reporting, developing the scoping plan and then beginning to adopt all the regulations that AB 32 calls for.  So we’re well on the path, and now we’re getting to some of the bigger and more complicated rules. We’ve adopted the low carbon fuel standard, and companies are now beginning to figure out how they’re going to comply with that. It’s an ongoing process, but by 2021, which is the deadline, we expect we will have all the elements in place. The biggest piece that is outstanding — and the one that probably has the most business interest — is the development of the cap-and-trade program. We expect to spend 2011 doing all the prep work to get started so we can open up the market in 2012.

Comstock’s: What will a cap-and-trade program mean to California both economically and environmentally?
Nichols: There are still some big questions we don’t have answers for yet, most importantly whether there will be an international cap-and-trade program. The cost of all of this goes down [as the participation increases] in the program. We’re hoping we will eventually have a U.S. program in place, but even if we don’t have that up and running by the time we’re ready to launch in California, we will at least have our partners in the Western Climate Initiative (seven Western states and four Canadian provinces). We’re also looking at possibly linking our cap-and-trade program with the European trading unit as well, so there are a lot of decisions left to be made about who will actually be participating in this market when it gets started. But however it’s done, there’s going to be revenue generated through this program.

What we have to address is how that is going to be redistributed back to the public. Is it going to be direct dividends to individuals? Is it going to be put into programs that we know benefit small businesses? Is it a mixture of different kinds of programs that keep down the cost of electricity? These are things that we are going to be grappling with for the rest of the year. But assuming that you have to deal with the global climate in the first place, which of course we believe is central, this is the cheapest way to go about bringing down our emissions level in a way that also produces some good things for the economy. On a macroeconomic level we believe that even if the program is only limited to California and our immediate neighbors, it ends up having an overall beneficial effect on this economy. But the real question is, is it pushing us in the right direction? Are we going to be investing in the kind of infrastructure and services that will allow California to be as competitive as possible in a global marketplace with new technologies?

Comstock’s: You mentioned that the federal government is working on its own cap-and-trade plan. How does that impact what California is going to do?
Nichols: If the bill currently under consideration in Congress is adopted and signed as it stands, there would be a moratorium on states enforcing their own programs for five years. States that already had a program would be able to turn in their allowances for federal allowances, so we would basically become part of the federal system.

Comstock’s: Critics contend that everything we’re talking about here will ultimately drive up consumer costs and drive American jobs overseas. Why should California businesses get behind these policies?
Nichols: I feel strongly that California stands to benefit from its leadership in these programs. If you look at all that we’ve already done in California that put us ahead of the rest of the country — energy efficiency, renewable technologies, progressive building codes — you can see that we stand to gain tremendously from the system because other states now have to play catch-up to us. We have the expertise, we have the university graduates, we have the investors, and we have the technology companies that are in a position to profit from a larger market.

Now, I recognize there are transitions that have to take place, and transitions are not always pleasant, especially when you’re thinking about them rather than actually doing them. I think most of the opposition now is from companies thinking about where they are right now and worrying about how they’re going to come out on the other side. But if you talk to consumers, they realize that they stand to benefit from this, not only because we’re dealing with the problem of climate change, which most people now recognize is a serious threat to our entire economy and way of life, but also because they’re going to have an opportunity to participate in a world where you have better choices for fuels, better kinds of vehicles, and communities where you have transit and walking opportunities rather than always having to get in your car and drive miles to get a quart of milk or box of Pampers or whatever. I don’t think that the fear of change here is going to ultimately prevail over the recognition that these are changes that have to be made. Our can-do spirit in California will stand us in very good stead in facing this crisis if we can just get on with it.