(Fortune Magazine) -- The Governator Takes Aim at Global Warming

Doing business in California will be changed radically by Governor Schwarzenegger's plan to cap emissions of greenhouse gases. New legislation requires the state to cut emissions by about 25% by 2020.

1. How will the state make that happen? By mandating cleaner cars and power plants, green buildings, efficient appliances, renewable energy, and alternative fuels. So-called smart-growth plans will put new development near public transport. Planting trees, which soak up CO2, will help too.

2. Sounds good. Everybody likes trees. Yes, but the law will raise energy costs and gas prices and drive companies elsewhere, according to the state Chamber of Commerce. California has decided "to become a Third World economy," says Myron Ebell of the free-market Competitive Enterprise Institute.

3. So business opposed the law? Not at all. Silicon Valley loves it. VCs like John Doerr say it will usher in a clean-technology boom. At business's urging, the law provides for a market-based "cap and trade" system, which allows companies that can't meet the aggressive new limits to buy credits from more efficient or innovative firms. It "strikes the right balance," says Peter Darbee, CEO of PG&E Corp., one of the state's big utilities.

4. Will Washington act next? Probably. With Al Gore, Senator John McCain, Republican governors, evangelical Christians, and big companies like GE and Wal-Mart backing regulation of greenhouse gases, opponents are on the defensive.