In two months' time, a committee of 14 scientists, bankers, environmentalists and regulators is slated to deliver a report that will set the tone for future rules on greenhouse gas emissions in the U.S. The Market Advisory Committee (MAC) was called into being last September, when California Gov. Arnold Schwarzenegger signed into law a bill that commits the state to cut greenhouse gas emissions to 1990 levels by 2020–the first law of its kind in the U.S. As required by the new law, California's environmental officials assembled the panel to work out how the state could deliver on its new obligations, which are expected to amount to roughly a 25% cut in emissions.

The committee is unelected. It has no regulatory authority of its own. But these 12 men and two women find themselves in a position of influence at what could come to be seen as an historic turning point in the planet's struggle to reverse the course of global warming.What that panel tells the state when it delivers its report on June 30 should define the regulatory framework that California adopts–and, as the first framework of its kind in the U.S., its influence could reach all the way to Washington, says Winston Hickox, the MAC's chair. "It's a tight time frame, but we can do it. And if the quality of the work is sufficient, there's a chance that it could end up benefiting deliberations in Congress about how to construct a national program."

All solutions have to do one simple-sounding thing: cut the amount of carbon dioxide released into the atmosphere. But designing regulations to do that requires a tricky balancing act: The cost of emitting carbon has to be high enough to make investment in new technology worthwhile–but not so high that it cripples whole industries. The market-driven approach used in most existing carbon regulations starts with a political and environmental decision about exactly how much of a cut in emissions is required, over what period. The next step is to identify companies that will do the actual cutting and then hand out emissions allowances, measured in millions of tons. If a company can reduce emissions below its permitted level, it has credits which can be sold to a company that has not been able to meet its target, thereby creating a de facto market for CO₂ and giving companies a financial incentive to cut their emissions.