To help fight global warming, every fuel sold in California must have 10 percent less carbon content by the end of the next decade. The state would then assign a carbon-intensity score to each fuel, so that consumers can chose to buy the cleanest one.
"The petroleum industry, which has a lot more cash reserves, to put it mildly, really has gotten off scot-free with respect to greenhouse gasses," California Air Resources Board Chairwoman Mary Nichols said.
The Low Carbon Fuel Standard is controversial because the score includes emissions from start to finish: from drilling or planting, all the way to transporting to the pumping station. That would put ethanol, the emerging corn-based fuel, at a huge disadvantage.
The ethanol industry says California regulators have over-stated the environmental effects of its product and call the standard premature.
"We had letters submitted from a hundred scientists who say it's not ready for prime time, so, it puts to question some of the great skill and credibility of the board," Growth Energy Co-Chairman Wesley Clark said.
Protesters outside Thursday's hearing were from the Rainforest Action Network; some live in Brazil where sugar-cane is planted instead of corn for bio-fuel. They know firsthand the consequences of worldwide demand for ethanol.
"In order to increase sugar cane plantations for the production of ethanol, you need to destroy the rainforest, so it's actually making the problem of global warming worse," environmentalist Maria Luisa Mendonca said.
The petroleum industry does not know how it will comply with a 10 percent reduction in carbon content. The state already requires different summer and winter blends of gas, making it the cleanest-burning in the country, but that is one reason California's gas is so expensive. Cutting down carbon could raise the price even more.
"What matters is what the consumer thinks, and as we go forward, we know one thing: they will ultimately be the judge of the success of this program," Western States Petroleum Association spokesperson Cathy Reheis-Boyd said.
The Obama administration is closely watching California's handling of the situation; the state's choices could become the model for federal regulations.