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A California ballot measure that would suspend the state's climate law was failing early Wednesday after most ballots had been counted.

The measure, called Proposition 23, was rejected by 61.4% of the voters, compared to 38.6% who voted in favor, after 95% of election precincts reported, according to the California Secretary of State's office.

Proposition 23, backed by oil refiners Valero Corp. and Tesoro Corp., both of San Antonio, Texas, and other heavy industry, would suspend California's 2006 climate law until the state's unemployment rate--currently above 12%--drops to 5.5% and stays there for at least a year.

Supporters of the climate law, including Gov. Arnold Schwarzenegger, environmental groups, health groups including the American Lung Association, some Hollywood celebrities and investors in clean-technology companies campaigned against Proposition 23, saying the emission-reduction policy is a necessary step in fighting climate change and a key driver of the state's growing renewable-energy and clean-technology industries. California officials see the law as a model for federal climate legislation, which has stalled in Congress. The Nov. 2 referendum on the climate law, known as AB 32, is being closely watched around the U.S. and the world, as an indication of public support for policies aimed at fighting climate change.

The climate law requires the state's greenhouse gas emissions to be cut to 1990 levels by 2020. The state Air Resources Board released proposed cap-and-trade rules on Friday, with plans to adopt final rules by the end of the year. The agency earlier established regulations that require utilities to use solar, wind or other renewable power for one-third of the electricity they sell by 2020, as well as rules that require a 10% reduction in the carbon content of transportation fuels by 2020.

Supporters of Proposition 23 say the climate law will drive up energy prices and increase the cost of doing business in California, which has been hit hard by the economic downturn and high unemployment.


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