A high-stakes legal battle is underway in California over whether the state's clean air agency can enforce a first-ever rule to slash carbon emissions in transportation fuels. The fight is being closely watched because the rule could choke global market demand for Alberta's carbon-intensive oil sands at a very precarious time for the industry.

On Wednesday, the Obama administration rejected a permit for the controversial Keystone XL pipeline, which could have increased imports of the fuel into the U.S. by up to 830,000 barrels a day. It was a major setback for the oil industry and its allies and an unexpected victory for environmentalists and their allies. The two sides are now facing each other down in this court case.

California's low-carbon fuel standard is the world's first attempt to require oil suppliers to slash the carbon footprint of their motor fuels, measured not just by emissions from tailpipes but across their full lifecycle, from extraction to combustion. Eleven Northeast and Mid-Atlantic states, and the European Union, are closely tracking California's case because they are working to adopt similar rules.

The state's influential Air Resources Board, or CARB, adopted the Low Carbon Fuel Standard in 2009 as part of its landmark global warming law, A.B. 32. The agency was supposed to begin enforcing the rule on Jan. 1, 2012. But oil companies, which say it unfairly penalizes high-carbon fuels like oil sands crude, have fought furiously to kill the standard. And on Dec. 29, a federal judge in Fresno, Calif., handed them a victory by ruling that CARB can't enforce the measure until an outstanding lawsuit by the oil industry and ethanol advocates is resolved in 2013.

A little-known source of clean energy funding could prove a crucial job-creation engine in the states, as federal support diminishes and they seek fresh growth drivers.

Every state can create clean energy funds, or CEFs, which are typically supported by a small surcharge on monthly electricity bills. So far 22 states have done so, generating $2.7 billion overall for the clean technology sector during the past decade. Most have used the money to install tens of thousands of solar panel arrays, wind turbines and biomass facilities.

But a few states have gone further by broadening investments to include technology research hubs, fledgling cleantech startups and green job training programs. The idea is to use the money, which today totals some $500 million a year, to help develop all the components of the clean economy and stimulate the creation of thousands of permanent local jobs.

The strategy is still experimental, but it could turn these CEFs into a major source of economic growth, according to new report published today by the Brookings Institution, a public policy group, and the Rockefeller Foundation, a philanthropic organization. The report outlines a four-part policy strategy for every state to adopt this "next generation" of CEF spending.

Clean Energy Funds were originally set up more than 10 years ago to help decarbonize state energy systems in the face of climate change. According to the report, the funds have already helped bring forward 72,000 renewable energy installations the country urgently needs.

But times have changed, said Mark Muro, a report co-author and director of policy for Brookings' Metropolitan Policy Program. "Economic development has emerged as a parallel and complementary interest to carbon reduction ... There's been a sharpening concern that the country really needs to look to supporting the emergence of cutting-edge technologies" as a way to start new industries and create jobs, he told InsideClimate News.

Electric vehicles failed to gain traction in the mainstream market last year, which saw lackluster sales for the industry's first arrivals, the Chevy Volt and the Nissan Leaf.

Will 2012 be any better? Depends who you ask, but the general consensus in the first week of this year is probably not.

In a survey of global auto executives released Thursday by KPMG LLP, an audit, tax and advisory firm, nearly two thirds of respondents said plug-in hybrids and all-electric cars won't make a dent in car sales until at least 2025. By then E.V.'s could rise to 15 percent of total car sales, according to the most optimistic projections.

The main reason for the pessimism is low consumer demand. In the United States consumer interest is actually declining, according to Pike Research, which surveyed more than 1,000 Americans for a report published Thursday. Forty percent of respondents were "extremely" or "very" interested in buying an electric car in 2011, down from 44 percent in 2010 and 48 percent the year before.

The biggest deterrent, respondents said, is cost. The gas-electric Chevy Volt sells for roughly $40,000 and the all-electric Nissan Leaf starts around $35,000. By contrast, a fuel-efficient gas-powered compact car, like the Chevy Cruze, can cost half that.

Not everyone is pessimistic though. New models of E.V.'s are hitting showrooms, and that could be a sales catalyst, Rob Bailer of Leaf Clean Energy, a renewable energy and sustainable technology investment firm, told InsideClimate News.  The all-electric Ford Focus rolled out in California, New York and New Jersey late last year, with 16 other states set to get the cars in the second quarter of 2012. Toyota's Prius Plug-in will be sold in 14 states in the first half of this year. California and Oregon residents will be able to buy the all-electric Honda Fit by summer.

"People are going to start to adopt more," Bailer predicted.

But the Chevy Volt and Nissan Leaf missed their 2011 sales goals, fueling speculation that the new releases won't fare much better.

Prompted by pressure from clean energy advocates, Hawaii and California are quietly working to remove a regulatory obstacle that is slowing a boom in rooftop solar systems in the nation's leading solar states.

The culprit is an arcane provision in the rules many states have adopted for how utility companies handle "distributed generation," any system of small-scale power installations, usually solar arrays, that generates electricity at homes or businesses and hooks up with the main electric grid. The regulation requires that once distributed energy reaches 15 percent of peak demand on a local circuit, anyone wanting to add more solar must carry out a lengthy and costly review of the project's ability to connect with the grid.

Utilities in California and Hawaii pushed for the threshold about a decade ago because they worried that customer-owned solar facilities—which they can't always control or monitor— would jeopardize the stability of the electric grid, causing widespread blackouts and power surges and damaging equipment.

As the demand for solar has increased, however, renewable energy developers and advocates have begun complaining that the 15 percent threshold is too low and the studies too cumbersome and expensive.

America's wind and solar industries are stuck in limbo, waiting anxiously to hear if Congress will extend a pair of key subsidies. But Washington, which is emptying out for the holidays, is almost certain not to ease their worries soon.

The solar industry is fighting to renew the 1603 Treasury grant program, a popular incentive that gives renewable energy developers cash payments worth up to 30 percent of their project costs in lieu of future tax credits. The program is particularly attractive to smaller solar startups and companies that struggled during the recession to raise cash for their capital-intensive projects. The subsidy is slated to sunset at the end of the year.

At the same time, the wind industry is scrambling to extend a production tax credit (PTC), which it says is crucial for wind power to compete with coal. The tax credit pays wind farm owners a considerable 2.2 cents for every kilowatt-hour of energy it produces during the first decade of operation. 

Both have lapsed before—the PTC three times since it was introduced in 1999. The three-year-old 1603 grant nearly expired last year before Congress approved a one-year extension in a larger tax deal. Each time the PTC ended, wind installations dropped by at least 70 percent compared with the previous year, sparking job losses, according to industry estimates.

This time the cuts would put even more jobs at risk, advocates for both the wind and solar industries say. As subsidies keep bringing more solar and wind projects online, a workforce of manufacturers, engineers and construction workers is emerging to match demand.

The state of Massachusetts is quietly reaping the benefits of cap and trade, the much-maligned process for curbing greenhouse gas emissions that federal lawmakers and many state governments resoundingly rejected in recent years. According to a recent study, cap and trade has created 3,800 jobs and nearly $500 million in economic activity for Massachusetts since 2008.

Massachusetts belongs to the Regional Greenhouse Gas Initiative (RGGI), the first and only mandatory carbon emissions trading scheme in America. A report analyzing data from the first three years of the effort found that of the 10 participating Northeast and Mid-Atlantic states, Massachusetts benefited most economically, because it used the bulk of its money to help fund its aggressive energy efficiency agenda.

"Energy efficiency investments have a much bigger multiplier effect than any other category of spending," said Paul Hibbard, vice president of the Analysis Group, the Boston-based consulting firm that prepared the report. When homeowners and businesses used RGGI dollars to retrofit and weatherize buildings, they not only ended up saving on energy costs and spending money elsewhere in the economy—they also put contractors and installers to work.

RGGI "is a very successful program ... and we look forward to continue achieving those results," Mark Sylvia, commissioner of Massachusetts' Department of Energy Resources, told InsideClimate News.

The question whether the media made too much of Solyndra continued to rankle this week.

Mainstream news outlets have been rebuked by advocacy groups for fixating on Solyndra's downfall and misrepresenting the loan program that backed the California upstart, which green advocates say is working fine. Now they say they have proof.

An analysis by Bloomberg Government, a news service, describes how the program—which is partly funded by massive fees on loan applicants—was designed to absorb bankruptcy losses like Solyndra's without harming taxpayers. The author, a former Department of Energy analyst under Presidents Bush and Obama, concludes that "the [media] focus on Solyndra is not proportional to its impact."

The problem is that only The Hill and Huffington Post covered the analysis, lamented Media Matters, a nonprofit watchdog group. That's in contrast to the hundreds of reports on Solyndra's collapse and its ties to Obama by dozens of newspapers and television networks in recent months, it said. The group claims that focusing only on negative stories about the DOE program plays into the hands of House Republicans, who have used Solyndra to try and pull the plug on the loan guarantees.

The Bloomberg report tries to make it clear that Solyndra is the exception and not the norm. Its $535 million loan accounted for 3 percent of the $16 billion program, which itself covers less than two percent of the federal government's loan guarantees across all agencies.

Unions and oil companies painted President Obama as a jobs destroyer for his decision to delay the Keystone XL oil sands pipeline at a GOP-led hearing this morning—but is that true?

Not according to one of the lone dissenting witnesses, a clean energy advocate who said if permanent jobs are the goal, the president must shift the country's energy focus away from oil infrastructure to the manufacturing-heavy green sectors.

An energy conservation subsidy that was enacted during the Bush administration is sitting largely untouched, even though it could add thousands of new jobs to the struggling U.S. economy.

The Qualified Energy Conservation Bond program is supposed to help state and municipal governments develop clean energy projects. But of the $3.2 billion available, only $550 million—or just over 15 percent—has been spent since the program was created in 2008.

The problem, according to a coalition of clean energy advocates, is that the program’s guidelines are so vaguely written that it's almost impossible to figure out which projects qualify for the money. The coalition has sent memos and emails to two White House offices asking for clear definitions on how the funds for energy efficiency and green building projects can be spent. They've also raised the issue with officials in the U.S. Energy and Treasury departments. So far, however, they haven't gotten the help they say is needed to put the funding to use.

Now, the coalition, called #CleanEnergyJobs, is ratcheting up its efforts by appealing directly to President Obama to help demystify the energy program.

The group of more than a dozen nonprofits, research institutions and businesses filed a collective We the People petition on Thursday as part of a month-long campaign to put nearly $2.7 billion of Qualified Energy Conservation Bonds (QECBs) to use in energy projects nationwide.

The online petition platform, a two-month-old initiative from the White House, allows citizens to create or sign petitions that seek changes in federal policies. If the QECB petition gathers at least 25,000 digital signatures by Dec. 30, then the White House will be compelled to issue a public response.

The petition asks for clarifications in the language surrounding two components of the QECB program.

A new group has chimed in to oppose the Keystone XL pipeline project that would carry oil from Canada to Texas: local officials who advocate for electric vehicles and alternative fuels.

The officials say the $7 billion project would steer investment and interest away from their efforts to clean up county fleets and get residents off gasoline. And they're speaking out now because they want their opposition heard as the Obama administration continues to deliberate the project.

"Clean vehicle manufacturing and infrastructure development really do create jobs," Efren Carrillo, who chairs the board of supervisors in California's Sonoma County, told InsideClimate News. "My concern is that there is a potential to put these investments at risk if this pipeline were approved."

Carrillo is part of a national network of more than 500 local government officials, called the Climate Communities coalition, which is concerned that the pipeline's approval would undermine their efforts to advance clean transportation initiatives at the local, state and national levels. The four-year-old organization aims to educate federal policymakers about the key role that local governments play in shaping energy and climate policies.

Earlier this month, 103 mayors from 28 states also weighed in on the pipeline in a letter to President Obama. Their concerns included the threat of pipeline leaks, environmental impacts and increased greenhouse gas emissions from the Keystone XL.