SAN FRANCISCO - California on Tuesday released draft rules for its landmark greenhouse gas cap-and-trade plan that will be the most ambitious U.S. effort to use the market to address global warming.

State law requires California to cut its carbon dioxide and other greenhouse gas emissions to 1990 levels by 2020. Measures will range from clean vehicle and building rules to the cap-and-trade system that lets factories and power companies trade credits to emit gases that heat up the earth.

Federal rules under debate by Congress could eclipse and pre-empt regional plans, but California and other local governments see themselves as the vanguard of addressing climate change, especially in light of slow national action and setbacks for international talks scheduled in Copenhagen next month.

The draft released on Tuesday shows California, seen as an environmental trend-setter, may take on even more than expected in its first round of cap-and-trade, which will start in 2012.

Home fuel and transportation could be included in the first cap-and-trade phase, which had been expected to focus on big pollution sources like power plants and refineries.

California is the first out of the box, state Air Resources Board Chair Mary Nichols told reporters on a conference call. The draft rules kick off a comment period that will lead to final regulation next fall.

A less ambitious Northeastern U.S. regional trading system is already under way, but it focuses on big emitters. California by contrast plans to include nearly every source of emissions to reach its goal.

The draft avoids what may be the toughest issue -- how much to rely on auctions of credits, which would require power companies and the like to buy permission to pollute. The emitters want allowances given to them, especially early on.

But Nichols said California had shown a strong preference for moving to auction as quickly as possible and that its 2006 global warming law provided clear guidance while politicians in the U.S. Congress were still raising support for a bill.

Congress started this, you know, as a political exercise to see how many allowances you had to give out to which groups to get them to buy into the program. They didn't have a climate bill, she said.

We know how many emissions we have to reduce. The question is how do we do it in a way that costs less, added Nichols, whose Air Resources Board was appointed by state law as the main regulator deciding on how to cut greenhouse gases.

(Reporting by Peter Henderson; editing by Mohammad Zargham)

California Climate change