Green Wombat

photo originally uploaded by BinaryLA

While Steve Jobs sent the tech world into a tizzy on Tuesday when he unveiled the iPhone in San Francisco, up in Sacramento California Governor Arnold Schwarzenegger was wowing green techies by ordering Big Oil to slash the amount of greenhouse gases produced by transportation fuels sold in the Golden State. (The governor from Hollywood was not about to try to share the media stage with the Apple (AAPL) chief’s carefully choreographed extravaganza so the Low Carbon Fuel Standard was strategically leaked to the press a day earlier). Green Wombat was off the grid in the Australian bush when the news broke, but the new standard – the first of its kind – looks to be a bonanza for biofuels producers and will boost efforts to develop plug-in hybrid cars and a new generation of all-electric vehicles. Schwarzenegger’s green team will let the market determine how the Low Carbon Fuel Standard is met, creating new opportunities for green tech startups. Given that 40 percent of greenhouse gases produced in California come from cars and other vehicles, the new standard is a significant step to meet the state’s efforts to reduce global warming emissions 25 percent by 2020. According to the governor’s office, the Low Carbon Fuel Standard will more than triple the market for alternative energy fuels while putting more than 7 million hybrids and other renewable energy vehicles on the road.

In a nutshell, the new standard means the carbon content of the total mix of fuels used in California must decline by at least 10 percent by 2020 as measured in CO2-equivalent gram per unit of fuel energy sold. Given that oil provides 96 percent of the state’s transportation fuel, Shell and Chevron are going to be in the market for alt energy sources. The nitty gritty of the regulations remains to be worked out and fought over, but to meet the standard fuel producers can blend more ethanol into gasoline, produce hydrogen for fuel cell cars or purchase credits from utilities that sell power for electric vehicles. Details on how the latter would work are hazy at the moment but a carbon credit program would provide further incentives for Big Oil and Big Power to push for a new generation of electric cars. Another possible consequence of the carbon fuels standard was floated by the green group Environmental Defense yesterday:  An expansion of California’s nascent cow power efforts – which extracts the potent greenhouse gas methane from manure and uses it to generate electricity – to provide a renewable energy source to produce ethanol.

Over the decades, the oil and auto industries have fiercely resisted California’s cutting-edge efforts to reduce air pollution, and they essentially gutted a regulation requiring 10 percent of the state’s cars be electric-powered by the end of this decade. But the green tech boom and global warming worries has created a constituency that will fight efforts to do the same to the new low carbon fuel program. The ethanol industry – backed by big Silicon Valley players like venture capitalist Vinod Khosla – and PG&E (PCG) – one of the country’s biggest utilities – immediately threw their support to Schwarzenegger. "PG&E applauds the governor’s new Low Carbon Fuel Standard and his bold leadership in addressing alternative fuels as a way to lead the nation to a climate friendly future," said Pacific Gas and Electric chief executive Thomas King in a statement. "We are committed to doing our part and have seen first hand the significant benefits of alternative fuels on reducing carbon intensity."