The standards approved by the California Air Resources Board are expected to create a new market for alternative fuels and set the stage for a national debate on the future of the country's transportation system.
"I think we're creating the framework for a new way of looking at automotive fuels where no longer will gasoline derived by petroleum be the only game in town," board Chairwoman Mary Nichols said.
The action comes as Congress is debating a national climate bill that features a low-carbon fuel standard modeled after California's. President Barack Obama also has supported the idea.
California's standard calls for cutting the carbon content of the fuels sold in California by 10 percent by 2020. It does so using a groundbreaking approach, by counting all the emissions required to deliver gasoline and diesel to California consumers - from drilling a new oil well or planting corn to transporting it to gas stations.
Environmentalists, public health representatives and supporters of alternative fuels supported the rules as critical to helping California meet its goals to cut greenhouse gas emissions. They also hoped the standards would promote the further development of electric cars.
The air board voted 9-1 to adopt the rules, with member Ronald Loveridge absent.
Some representatives of the ethanol industry, which had expected to profit from the low-carbon mandate, argued that California's new rules would leave them out. They said regulators overstated the negative environmental effects of making corn-based ethanol.
They were especially critical of the air board's decision to tie global deforestation and other land conversions to biofuel production in the United States.
For example, air board scientists said Brazil has converted rainforest into soybean plantations as a direct result of the growth in corn-based ethanol in the U.S. As farmers here plant more corn and fewer soybean fields, other countries must find a way to make up the difference.
The destruction of forests and grasslands elsewhere to do that would count against ethanol producers in the U.S. under the formula adopted by the Air Resources Board.
Representatives of the ethanol industry told the board it was unfair to penalize them for agricultural land changes outside the U.S. They said corn and soybean exports increased last year, along with ethanol production.
"Rainforest deforestation in Brazil has been cut in half despite the fact ethanol production has been increased by a factor of four or five," said retired Gen. Wesley Clark, co-chairman of Growth Energy, a coalition of ethanol companies.
Ethanol producers also complained about unfairness, saying the air board had failed to hold oil and gas companies accountable for similar consequences tied to their operations.
Meanwhile, a coalition of activists representing the Amazon urged the board to ban all fuel made from crops, saying trees are being cleared to make room for sugar cane, a main source of biofuel in Brazil.
Some in the petroleum industry warned that California was moving too quickly without any assurances that the alternative fuels they will be required to sell will be available for a mass market. Representatives asked the board to delay a decision until next year.
"It's frankly unclear to us how we will comply with this regulation," said Catherine Reheis-Boyd, chief operating officer of the Western States Petroleum Association.
Representatives for BP PLC and Chevron Corp. said their companies supported the new standards, with the caveat that the board periodically review the standards. In response, the air board agreed to ensure that the most up-to-date science is incorporated into the rule and that the alternative fuels have become available as expected.
"I think we sometimes make assumptions that certain things are going to happen and they just don't happen," said board member Barbara Riordan.
Under the low-carbon fuel standard, petroleum refiners, companies that blend fuel and distributors must gradually increase the cleanliness of the fuels they sell in California beginning in 2011.
The regulation would not mandate what alternative they must use. Rather, it would assign a so-called carbon-intensity score to various fuels.
Transportation has long been a target of California air regulators because it accounts for 40 percent of the state's greenhouse gas emissions. Two years ago, Gov. Arnold Schwarzenegger directed air regulators to develop a rule that would boost the amount of renewable fuels sold in the state.
Schwarzenegger said Thursday the rule would "reward innovation, expand consumer choice and encourage the private investment we need to transform our energy infrastructure."
Nichols said the low-carbon mandate will reduce California's dependence on petroleum by 20 percent and account for one-tenth of the state's goal to cut greenhouse gas emissions by 2020.
It also builds upon California's previous effort to force auto manufacturers to build more fuel-efficient vehicles. That regulation was blocked last year by the federal government, but the Obama administration is reconsidering that decision.