The Green Giant

Schwarzenegger and Blair are both eager to position their respective economies as "green tech" hubs, where new jobs will be created in fields such as alternative fuels, new materials and green construction. "If you think this is the direction the world will take and it's only a matter of time, there are great commercial opportunities to be had," says Blair. In Britain, he says, more than 500,000 "clean tech" jobs have been created since the country began complying with the Kyoto treaty. Schwarzenegger predicts the job growth will be even more impressive in California. And he says that U.S. businesses, led by tech-savvy California firms, can reap immense profits by developing low-carbon manufacturing methods and fuel sources, and then exporting them to the rest of the world. California, he boasts, will dominate the global clean-tech sector, just as it does the world's entertainment and high-tech industries.

While California has adopted the most comprehensive legislation, a dozen other states restrict emissions from vehicle tailpipes or certain sectors like utilities. All together, more than 300 bills related to climate change are pending in 40 different states, and more than a dozen bills are before Congress, raising the specter of a regulatory patchwork quilt that would be a nightmare for businesses seeking to comply.

Schwarzenegger says he's approached every day by business leaders who've seen the handwriting on the wall and want to know what the rules of the game will be in the new, carbon-constrained economy of the near future. "I'm looking to protect business, they know that about me," he says. "But I'm also going to do what is good for the environment." Earlier this year he issued an executive order that would make California the nation's largest market for alternative fuels, by requiring a 10 percent reduction in the carbon content of all transportation fuels by 2020. After a disastrous second year in office during which Schwarzenegger battled nurses and teachers unions and called Democratic lawmakers "girly men," he transformed himself into a savvy consensus builder in his second term, introducing major health-care and environmental proposals with something for everyone.

To oil companies, Schwarzenegger stressed the profit potential of his new low-carbon-fuel standard—since they would control the distribution network of the nonfossil fuels to be sold in California. He dispatched another adviser to Detroit to tell the Big Three automakers that they had nothing to fear; their vehicles could run on the low-carbon fuels without costly manufacturing changes. And he enlisted environmentalists to praise the market-based virtues of the new fuel standard, which is projected to remove the equivalent of 3 million cars' worth of greenhouse-gas emissions a year. Proof of his success at coalition-building: at the signing ceremony, Schwarzenegger was flanked by a representative from Chevron on one end of the stage and by the Sierra Club on the other.

Schwarzenegger traces his green sensibilities to his childhood in postwar Austria, where he grew up with rationed food and electricity—and had to haul bath water from a well. "I'm a conservation fanatic," he says. "I still can't walk out of a room without turning off the lights. I can't stand it when the kids spend longer than five minutes in the shower."

When he arrived in Los Angeles in 1968, expecting to find pristine beaches and mountains, he found himself instead hacking in the smog and sidestepping garbage on the boardwalk at Venice Beach. "I thought, 'I'm going to fight those things'," he says. Even in the 1980s, Schwarzenegger lent his stardom to Hollywood environmental causes such as recycling and promoting conservation on his movie sets, campaigns organized by entertainment lawyer Bonnie Reiss, a close friend of Arnold's wife, Maria Shriver. Reiss, who later directed Schwarzenegger's after-school program for inner-city youth, says he was also deeply affected by the number of children he encountered suffering from asthma.