California has long liked to set the trend that others follow: whether it be movies, fashion, celebrities or even clean air. And yesterday was another first. It adopted the world’s first regulation to limit greenhouse gas emissions from transport fuels.

The State’s Air Resources Board adopted a regulation expected to slash gasoline consumption by 25% and encourage development of low-carbon fuel sources for cars and trucks.

The regulation requires producers, refiners and importers of gasoline and diesel to reduce the carbon footprint of their fuel by 10% over the next decade. Starting in 2011, the standard would steadily lower the allowable “carbon intensity” of fuels.

By 2020, fuel refiners and distributors within the state would have to cut the carbon intensity of their fuels by 10 percent. Governor Arnold Schwarzenegger praised the “first-in-the-world low carbon fuel standard,” noting that 16 other states are looking to California as a model and that President Obama has called for a national standard.

It will “not only reduce global warming,” he said, “it will reward innovation, expand consumer choice and encourage the private investment we need to transform our energy infrastructure.”

It also puts another spanner in the ambitions of the oil industry and its plans to mine Alberta flat in quest to develop the tar sands industry.  Amongst the people testifying yesterday was Canada’s consul general in San Francisco who charged that the rule discriminates against oil from Alberta tar sands. He and big tar sands developers like Shell must be terrified that Alberta’s oilsands could be about to be shut out of the largest market in the U.S.

The regulation calculates the life cycle of fuels from their extraction — or cultivation, in the case of biofuels — to their combustion. But the indirect effect of replacing cropland used for energy will also be included, and the board’s calculations of those land-use effects is strongly disputed by corn ethanol producers.

“We have done a lot to make cars cleaner and more efficient, but the petroleum industry, which has a lot more reserves, has gotten off scot-free with respect to greenhouse gases,” said board Chairwoman Mary D. Nichols. “Now we are creating the framework for a new way of looking at automotive fuels. No longer will petroleum be the only game in town.”

And petroleum from dirty oil could be heading for the history books..