Slashing greenhouse gases from California's gasoline in the next 14 years will reformulate not just our fuel but quite possibly our entire notion of the California dream, changing what we drive, how we fuel up and — most likely — how much we pay for the pleasure.

Gov. Arnold Schwarznegger last week proposed a revolutionary measure in his State of the State address: Cut the carbon content of fuels 10 percent by 2020.

It's one of the first concrete steps proposed to meet the state's ambitious greenhouse gas limits, which mandate a reduction of California's greenhouse gas emissions by 2020 to 1990 levels — a roughly 25 percent cut.

Tailpipe emissions account for 43 percent of the state's total greenhouse gas load.

Meeting the governor's yet-to-be-penned automotive fuels

standard can only be done one way: Burning less petroleum. Refiners can squeeze more efficiency out of their plants. But the only replacements on the near horizon are ethanol, natural gas, biodiesel and electricity.

Energy companies could hit the governor's target, said Bob Epstein, co-founder of Environmental Entrepreneurs, by dedicating 800,000 acres of farmland in the San Joaquin and Imperial valleys to sugar cane, sugar beets, sorghum grass and other ethanol sources. That could displace 80 percent of the alfalfa grown in California, but it's only 3 percent of the state's 26.4 million acres of farmland.

Meanwhile, cars will be changing. Sometime after 2020, researchers say, a sizeable portion of automobiles on the highway will be next-generation hybrids — cars that plug into an outlet and recharge overnight, bypassing the gasoline station altogether.

At the pump, economists and energy experts predict far more options than the current regular, super and premium unleaded. Imagine, for instance, being able to dial up your level of greenness — though that will come, some warn, with an extra cost at least initially.

This was all little more than a dream a week ago, and it may be yet: Recall the giddiness in environmental circles a decade ago over the state's electric car mandate, long since abandoned.

But an array of thinkers give the governor's order a far better chance of surviving, simply because Schwarzenegger set the target for low-carbon fuel without dictating how it would be met.

"This really says there's a guaranteed market for low-carbon fuels," said Epstein, who champions the economics of environmentalism.

"There's huge amounts of investment capital (for alternative fuels), but you need to know that the market is going to be there."

Indeed, many companies are already on the way to reducing carbon emissions. United Parcel Service, Pacific Gas & Electric Co. and Southern California Edison have been tinkering with different alternative fuels in their fleets. Norcal Waste Systems in San Francisco runs its garbage trucks on liquefied natural gas. And the largest taxi fleet in San Franciscio, Yellow Cab Corp., powers almost a third of its taxis with either gasoline-electric or compressed natural gas engines.

Ethanol has the head start. Boosted by big tax subsidies, the nation's supply has doubled since 2000 to

4.9 billion gallons at the end of 2006 and is set to more than double again in less than 18 months.

But almost all of it is corn ethanol, which in terms of net energy produced and greenhouse gases emitted looks almost as bad as ordinary gasoline. It costs more, too, so many economists suspect the governor's new policy at first will result in higher prices at the pump.

"Would a greenhouse-gas standard raise the price of fuel? I think it's pretty clear the answer is yes," said Richard Newell, a Duke University energy and environmental policy professor and an economist at Resources for the Future.

The real winners of the new policy are likely to include tomorrow's ethanol — made of whole plants — as well as biodiesel, natural gas, hydrogen, electricity and the cars that run on them. When those come into play, prices are likely to come down.

As the fuels market gets bigger, transportation could go the way of telecommunications, where cable, phone and Internet providers compete in a free-for-all. 

"There will be lots of winners and lots of losers, and the competition will be on cost and reliability," said Ralph Cavanaugh, a senior attorney and energy expert at the Natural Resources Defense Council in San Francisco.

Electric utilities already are positioning themselves as fuel providers and chafing to take on Big Oil. "If you as a consumer are confronted with a choice — $3 a gallon for gasoline or anywhere between 25 and 50 percent of that in electricity — the choice is clear," said Edward Kjaer, director of electric transportation for Southern California Edison.

The infrastructure is as close as the nearest socket, and electric motors beat gasoline motors handily for efficiency and emissions. Half the power provided by PG&E, for instance, comes from "noncarbon" sources, said Keely Wachs, a utility spokesman: Nuclear, hydropower, wind, solar and geothermal.

Experts estimate the state's power grid has enough excess capacity to charge up 12 million to 15 million plug-in hybrids. "That's upwards of 50 percent of the cars on the road today in California," Kjaer said.

Rather than an extra drain on the electrical grid, plug-in hybrids are being eyed by utilities as assets — millions of mobile batteries that can store energy at night, during off-peak hours, then perhaps help recharge the grid by day to smooth out peak demand.

"We think we're actually getting to a point where the product development is there, and that potentially is creating a game changer where you can store energy on the grid," Kjaer said. "You could be filling up millions of cars at night and then using it during the peaks of days. But that's a long ways away. You'd need hundreds of thousands of vehicles."

The question is whether the governor and his policy's many supporters can make it stick. Some of the same players tried a decade ago with the state's ill-fated zero emissions car mandate. Opposition from automakers and an overly optimistic reliance on advances in batteries killed it.

The new fuels standard is different, not just because it is agnostic on the solutions but because Big Oil and Detroit stand to make money in California's new low-carbon fuel market. After ag giants Archer Daniels Midland and Cargill, some of the biggest investors in biofuels are BP Amoco PLC, Royal Dutch Shell, Chevron and ExxonMobil.

Contact Douglas Fischer at dfischer@angnewspapers.com or at (510) 208-6425; Ian Hoffman at ihoffman@angnewspapers.com or at (510) 208-6458.