Is Governor Schwarzenegger feeling buyer’s remorse on Cali cap-and-trade? Via Dow Jones:

SAN FRANCISCO -(Dow Jones)- California Gov. Arnold Schwarzenegger has asked the state’s top climate-change regulator to loosen proposed cap-and-trade rules to make it easier for companies to comply, in a sign the state is responding to pressures from business groups concerned about the cost of the program.
In a letter dated Wednesday and distributed early Thursday, Schwarzenegger, a Republican, asked state Air Resources Board Chairwoman Mary Nichols not to adopt a proposal by a panel of economists that would require companies to buy all the pollution allowances they would need to comply with state rules in an auction, but instead to consider giving away most pollution allowances for free in the early years of the program and auctioning only “a very small percentage of allowances.
“It is critically important that California’s program be designed in a way that gives businesses and industries in this state sufficient time to reduce their emissions in a cost-effective manner without unnecessary short-term costs, ” Schwarzenegger wrote in the letter.
The Air Resources Board said Wednesday that a new economic analysis showed the state’s policies to reduce greenhouse-gas emissions won’t hurt the economy. But the report did little to diffuse criticism of the agency’s proposed cap-and- trade rules, which would allow companies to use carbon credits, or offsets, for just 4% of their required emissions cuts, and another proposal by a panel of economists that would require polluting companies to purchase all the emission allowances they would need, in lieu of cutting actual emissions, at a state-run auction. The panel proposed that the state either disburse the proceeds from the auction to California residents as a dividend, or put them into the state’s general fund to cut taxes.