Today a 9th Circuit court in San Francisco hears arguments on the legality of California's low carbon regulation for transport fuel. The case may determine whether California becomes the U.S. leader in climate litigation. - 

California's so-called "climate change law" goes to federal court today. Fuel companies outside of the state say the law puts their products at an illegal disadvantage. Part of that law would allow the state to tax fuels differently, based on their carbon footprint.

Severin Borenstein, a professor at the UC Berkeley Haas School of Business, hopes that California will set a national example with its climate law. On some issues, like fuel efficiency standards, California's moves do go nationwide, but Borenstein stays, "there are also cases where California gets out ahead and the rest of the country doesn't follow."

Sometimes the state has to backpedal, and that's what the plaintiffs in today's case hope will happen with California's climate change law. Since California is the world's ninth largest economy, that's of global importance, says Bonnie Reiss, a policy scholar at the University of Southern California. "When we make policy changes, we impact markets," she says.

With no existing federal policy on climate change, or carbon emissions, California is being watched all the more closely.

Follow Eve Troeh at @evetroeh