Under California law, known as AB 32, the state is setting limits on greenhouse gas emissions from automobiles, oil refineries and other industries, and encouraging the sale of more fuel efficient cars. California will probably also require 33% of the state's electricity come from renewable sources by 2020, up from about 15% today.

If passed, The proposition on the November ballot would delay AB 32 until unemployment falls from 12.4 percent to 5.5 percent or lower.

Republican Californian Gubernatorial candidate Meg Whitman, who is vying to replace Schwarzenegger in the November 2010 election, says AB 32 would put California's businesses at a disadvantage to rivals in other states. Meanwhile rival Democratic candidate Jerry Brown, the state's attorney general and former two-term governor, supports AB32.

Schwarzenegger, who sees AB 32 as part of his legacy, commented, "This initiative sponsored by greedy Texas oil companies would cripple California's fastest-growing economic sector, reverse our renewable energy policy and decimate our environmental progress for the benefit of these oil companies' profit margins."