The Green Giant

The administration's hesitation has allowed Schwarzenegger, who recently called America's sideline position "embarrassing," to take the lead. "What we're basically saying to the federal government is, 'Look, we don't need Washington'," Schwarzenegger tells NEWSWEEK. "And so let us create the partnerships and let us let the world know that America is actually fighting global warming." Schwarzenegger has met with his counterparts in British Columbia and Baja California to talk about setting up a carbon-trading scheme, which would allow companies able to exceed their emissions targets to sell emissions credits to those who need them via a carbon market. He's also negotiating with them for a "hydrogen highway" dotted with liquid-hydrogen fueling stations up and down the 5,300-mile Pacific coastline.

Last month Schwarzenegger signed a compact with four other Western states to establish a regional "cap and trade" system for greenhouse-gas emissions that would allow companies that reduce their emissions below certain target levels to sell credits to those that don't or can't. Among the signatories: New Mexico Gov. (and Democratic presidential hopeful) Bill Richardson, who told NEWSWEEK that Schwarzenegger's "star power" was more important to the development of the nascent American carbon-trading system than any bill in Congress. The system, similar to one launched in the European Union in 2005, would create financial incentives for companies to save energy and adopt cleaner fuel sources.

Schwarzenegger's carbon diplomacy has been especially well received in Britain, where he and Prime Minister Tony Blair have signed agreements to trade scientific and economic expertise, with the goal of creating a global cap-and-trade system for greenhouse-gas-emission credits.

In the stuffy world of climate-change policy, says the prime minister, Schwarzenegger has made himself a welcome player. "He adds a certain spice to it, that's for sure," Blair tells NEWSWEEK. "To have California, the sixth largest economy in the world onboard, sends a vital signal."

With an assist from Democratic lawmakers, Schwarzenegger has gleefully positioned California as the nation's low-carbon test lab. Last September, he cemented his position by approving California's Global Warming Solutions Act, which requires a 25 percent cut in the state's greenhouse-gas emissions by 2020—and an 80 percent cut by 2050—the most aggressive standard in the nation. The bill received only a single Republican vote, notes former assemblywoman Fran Pavley, who wrote the law. "As a Republican governor, he was walking a fine line with his own party," she says. One conservative Web site took Schwarzenegger to task for imposing a "neo-Euro-socialist" law on California.

The signing ceremony, in the midst of Schwarzenegger's re-election campaign, had all the fanfare of an international treaty, with the flags of the Kyoto signatory nations flying and diplomats in attendance. Prime Minister Blair even popped up on a jumbotron screen to lend his praise.