SACRAMENTO - A week away from their deadline, Gov. Arnold Schwarzenegger and legislative Democrats remain apart over key elements of a landmark global warming bill that would make California the first state to cap greenhouse gas emissions from industries.

The stakes are high for both sides. The Democrats supporting the bill want to toughen California's already stringent emission standards, while Schwarzenegger is seeking to burnish his environmental credentials as he seeks re-election.

Differences remain over how industries would reduce their emissions by as much as 25 percent in the next 14 years.

Democrats released their latest compromise proposal this week, saying they had incorporated suggestions from Schwarzenegger officials to make the bill more palatable to businesses without weakening it.

"It's not going to be everything everyone wants," said the bill's author Fran Pavley, D-Agoura Hills. "If it passes, it will be the strongest reduction law in the country."

Environmental Protection Agency Secretary Linda Adams on Wednesday said the bill as currently written lacks a key Schwarzenegger principle - a flexible market-based program that would allow businesses to trade, sell and buy emission credits rather than reducing their own emissions.

It's an idea being tested in Europe and one that Schwarzenegger officials say must be in the bill. Democrats said they fear it could prove unworkable for one state.

"The governor has been clear on this issue from day one," Schwarzenegger spokesman Adam Mendelsohn said. "He is committed to working with legislators to find a compromise on (the bill). However, we must have legislation that creates a market-based system so we do not endanger consumers or open the door for another electricity crisis."

Democrats say they support a market concept, but say the California Air Resources Board should not be told to launch a program that may not work. At issue is how regulators would monitor a market-based system and be assured that plants in other states or countries that are trading credits with California companies are actually reducing their emissions.

"Philosophically, trading I think is the way other states and the world is going, and I'm fine with that," Pavley said. "But we've got to make sure it's workable and doable."

Assembly Speaker Fabian Nunez said he wants to work out differences with Schwarzenegger but said Democrats would take a hard line on the market-based amendments sought by the governor.

"I am not going to send the governor a bill the environmental community doesn't support," Nunez, D-Los Angeles, said during a Wednesday news conference in which he was surrounded by city mayors who support the bill. "The moment we start tearing away at the enforceability and the mandate to reduce carbon emission, then there's no reason to do the bill."

Schwarzenegger, who has made climate change issues a center of his environmental agenda, is eager to sign a bill before he faces the state's Democratic-leaning electorate in November. Both he and Democrats say the greenhouse gases that scientists blame for warming the Earth must be controlled in a state that is the 12 largest emitter in the world.

Some critics of the California bill say combatting global warming should be an international effort instead of a patchwork of state regulation.

Adams said the governor wants to make sure that any bill would be workable for businesses. Industry sources are divided over whether they can realistically meet the bill's mandatory reductions, both financially and technologically.

The bill calls for utilities, oil and gas refineries, and manufacturers such as cement plants to help the state reduce its greenhouse gas emissions to the levels of 1990 by 2020.

Cement manufacturers are particularly worried by the bill. They say carbon dioxide is a natural byproduct of their manufacturing process and argue that mandatory emission reductions will mean cuts to their business.

Another point of contention is what kind of "safety valve" should be included in the bill to allow government to react in an emergency. Although the latest draft of the bill would allow the 2020 deadline to be pushed back in extraordinary circumstances or catastrophic events, administration officials say the trigger to act comes too late.

"The way it's worded would preclude us from acting until we're in an emergency situation. What we want to avoid is an emergency," said Adams, who referenced the 2001 energy crisis when Gov. Gray Davis had to call a special session of the Legislature to respond. Talks also continue over who should oversee the implementation of the caps. Schwarzenegger has proposed that a board composed of his agency heads be in charge, giving him and future governors complete say over whether to adjust the deadlines.

The latest proposal by Democrats would give the Air Resources Board the regulatory and enforcement powers to implement the caps and create an oversight council. That council would include five gubernatorial appointees and four legislative nominees.

"It provides a lot of accountability," Pavley said. "There would be a lot of voices heard at the table."

ON THE NET

Read the bill, AB32, at http://www.assembly.ca.gov