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Four years ago, California earned accolades for adopting a law that would slash its greenhouse gas emissions and serve as a model for national climate change legislation. With the state mired in a crippling recession, the law that once looked like a landmark achievement is coming under assault. The regulatory effort Gov. Arnold Schwarzenegger set in motion is facing a political backlash and could come to an abrupt halt in the months ahead.

A coalition of businesses, financed largely by three Texas oil companies, is funding a ballot petition that would delay the law until California’s current unemployment rate is cut by more than half.

Leading Republican gubernatorial candidate Meg Whitman has vowed she would suspend the law on her first day in office, which she would have the authority to do.

Even Schwarzenegger, who has staked his legacy on environmental issues, has begun urging air regulators to take a go-slow approach. But he has vowed to fight the ballot initiative.

The possibility that a state that has set the national agenda on environmental change for decades might shelve its highly publicized climate regulations could have ramifications beyond California’s borders. In Congress, lawmakers are struggling to craft a national climate bill that uses California’s as a template, but are facing headwinds of their own.

“This could very well be an effort to focus on California with the goal of delaying federal legislation,” said state Sen. Fran Pavley, D-Agoura Hills, one of the law’s authors.

At issue: Whether imposing costly regulations on businesses is a smart move as the nation struggles to emerge from recession.

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