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BRIAN WATT: California is going green . . . or at least, greener. The state legislature has hammered out a landmark deal with Governor Arnold Schwarzenegger. California would be the first state to cap green-house gas emissions. Carbon emissions in the year 2020 would match those from the year 1990. Marketplace's Jeff Tyler has more.

JEFF TYLER: The Global Warming Solutions Act has been described by the Sierra Club California's Bill Magavern as . . .

BILL MAGAVERN: ". . . the most important global warming law passed in the United States."(:04)

The challenge of cutting emissions, Magavern says, could spur innovation in . . .

MAGAVERN:". . . new clean technologies that could be developed in California, and then exported to the rest of the world."

But Vincent Sollito with the California Chamber of Commerce predicts the emissions cap will hurt the economy.

VINCENT SOLLITO:"Raising energy costs to consumers and businesses, which in turn will raise consumer costs, consumer pricing, and frankly, chase jobs and businesses out of California."

He says California can't solve a global problem all alone.

But considering that the state is the 12th largest carbon emitter in the world, proponents argue that it's only fitting that California should set an example for the rest of the country.

I'm Jeff Tyler for Marketplace.

Follow Jeff Tyler at @JeffMarketplace