No one yet has a comprehensive plan for how we could do so again, but everyone agrees on what the biggest parts of the plan would be. Here's our blueprint for how America can fight—and win—the war on global warming.

First, Price the Sky

The most important part of a blueprint to contain climate change is to put a charge on carbon emissions. As long as the sky is free, renewable energy will never beat fossil fuels. But put a price on carbon, and suddenly the alternatives look a lot better. The most feasible way to do this is through a cap-and-trade system that sets ceilings for carbon output and lets companies that come in under the limit sell credits to those that don't, allowing them to keep polluting—a little. The effect is that overall carbon levels fall, and there is even money to be made by being greener than the next guy. That drives investment and research dollars into renewable energy and efficiency. "Cap and trade changes everything," says Krupp.

The 1997 Kyoto Protocol was an early attempt at such a system, with the aim of having developed nations reduce their carbon emissions an average of 5% below 1990 levels by 2012. The accords were meant to drive cuts in greenhouse gases and promote investment in clean tech in developing nations through carbon trading. What probably doomed Kyoto was the absence of some key players. Large developing nations like China, India and Indonesia were excused from the treaty, since limiting their emissions was seen as likely to limit their burgeoning economies. The U.S., whose participation was necessary if the treaty was going to succeed, cited this perceived favoritism when it abandoned Kyoto altogether in 2001.

While President George W. Bush has little environmental cred left after seven years of the least green Administration in modern memory, in this case he had a point. Carbon is a global pollutant, meaning that it has the same impact whether it's emitted from an suv in Boston, a factory in Beijing or a burning forest outside Brasília. Dramatic reductions in U.S. emissions won't bring the intended environmental benefits if emissions by other countries increase at the same time. The problem is, if we don't clean up our own mess because developing giants don't have to, what's the incentive for them to clean up theirs? "If we don't act, China and India will simply hide behind America's skirts of inactions and take no steps of their own," says Senator John Warner of Virginia.

If the U.S. breaks the logjam and adopts a national cap-and-trade program, it may be Warner who will deserve much of the credit. Last December, a bill that the veteran Republican co-sponsored with independent Senator Joseph Lieberman of Connecticut passed out of the Senate's Committee on Environment and Public Works, giving it the best opportunity of any of the many proposed cap-and-trade bills to become law. Lieberman-Warner, as it's known, calls for cutting carbon from most sources to 2005 levels by 2012 and then 70% below 2005 levels by 2050. Environmentalists would like to see it strengthened, with less wiggle room for polluting industries, but with little else on the table, an attainable good bill may be a lot more attractive than an unattainable perfect one. "The sooner we can get something, the better," says Eileen Claussen, president of the Pew Center on Global Climate Change.

Lieberman-Warner hasn't yet gone to a full vote in the Senate, although it may reach the floor by late spring. It will face opposition from the White House, as well as from many Republicans and some Democrats from coal-dependent states. The principal rap against cap-and-trade proposals is that they would be a drag on the economy. A new study by the National Association of Manufacturers, an industry trade group, estimates that Lieberman-Warner would cost the U.S. up to 4 million jobs by 2030 while eroding gdp by up to $669 billion per year. "The environmental community would have you believe that you can make these changes and not only will there not be negative consequences, there'll be positive consequences," says Republican Representative Joe Barton, ranking minority member of the House Committee on Energy and Commerce.

It's true that there will be costs associated with any carbon-pricing plan; ending climate change won't be free. "You want a clean environment, you have to pay for it," says Peter Fusaro, founder of the green investment group Global Change Associates. But just how high will the tab be? An Environmental Protection Agency (EPA) study found that gdp would grow just 1% less from 2010 to 2030 under Lieberman-Warner than without it—and that doesn't take into account the potential economic benefits. In an April study, the International Monetary Fund concluded that smart carbon-cutting policies could contain climate change without seriously harming the global economy. And while the U.S. business community will fight hard over the details of any cap-and-trade plan, a growing number of companies are now begging for the certainty that will come from what many see as inevitable legislation. "I believe it will be a challenge, but it's doable," says Peter Darbee, CEO of the West Coast utility PG&E.

Of course, such a challenge is easier for a major utility to face than it is for some consumers. Any carbon cap with teeth will boost electricity and gas prices in the short term, before carbon-free alternatives can be scaled to market, and that will hurt those already struggling to heat their homes and fill their tanks. Here's a solution, courtesy of Peter Barnes, a pioneering green entrepreneur: a cap-and-dividend system that returns the revenue raised by a cap-and-trade system to citizens through a flat rebate, similar to the way Alaskans receive oil-industry dividends from the state government.

Though a federal cap-and-trade system for carbon would largely be a foray into the unknown, we can examine how the idea is working in the states, many of which are far ahead of Washington. At the New York City headquarters of the Natural Resources Defense Council (NRDC), organization president Frances Beinecke shows a map that identifies in green those states that have committed to or are considering mandatory carbon caps. A year ago, the map was mostly white, but now it's less than half. Not only are states coming aboard one at a time, but some are joining in groups, as in the West and Northeast, where regional greenhouse-gas trading blocs are being launched. "The momentum that has built up in the states is unbelievable," says Beinecke.

To see why a serious cap-and-trade system doesn't have to come at the expense of economic growth, take a look at California. In 2006, Governor Arnold Schwarzenegger signed the most aggressive carbon regulation in the country: California has now implemented law AB 32, which mandates that the state's greenhouse-gas emissions be cut to 1990 levels by 2020, a reduction of about 25%. "There are so many states in the U.S. that have signed on to [carbon cuts]," says Schwarzenegger, a Republican who has bucked the White House and led the way on global warming.

Schwarzenegger's plans have plenty of critics. Cathy Reheis-Boyd, the chief operating officer at the Western States Petroleum Association, worries that if California gets out too far ahead of the rest of the country, local businesses will flee to unregulated states, a phenomenon called "leakage"—which is another reason a national cap is so important. "I think our industry could be effectively pushed out of California," says Jim Repman, CEO of the California Portland Cement Co.

Past predictions that environmental laws like the Clean Air Act would decimate California's economy, however, proved false, and AB 32 could be no different. A 2006 report by the University of California, Berkeley, concluded that the law would actually boost the state's gdp by $60 billion and create 17,000 jobs by 2020 as the state's entrepreneurial tech culture churns out new companies to meet the need for energy efficiency. While energy-intensive industries like cement-making may indeed be driven out, they could be replaced by clean-tech start-ups like Solarcity, which has become in a couple of years the state's fastest-growing solar installer, employing more than 200 people. Nationwide, the American Solar Energy Society estimates, there are already 8.5 million jobs in the clean-tech sector, which it projects could grow to 40 million by 2030 with the right policies.

Energy by the Sip

The next big piece of a global-warming-control plan involves learning to be more efficient with the fossil fuels we continue to burn. America has long been astoundingly wasteful about energy use, but for years, that mattered little because power and fuel were so cheap. "Until recently, using more energy was a way to get more productive," says Kevin Surace, CEO of Serious Materials, a green building company. "That doesn't change until energy costs go substantially up."

Surace has a point. There are a lot of reasons Western Europe and Japan are so far ahead of the U.S. on energy efficiency, but one is that their higher energy costs simply forced their hand. With oil now well over $100 per bbl., that crisis moment may have arrived for the U.S. too. The answer is an "efficiency surge," a crash improvement that can help offset the steady increase in energy prices and so buy time for the development of carbon-free alternatives. "We need to create breathing room," says Rick Duke, director of NRDC's Center for Market Innovation. "But an unguided market won't take care of that alone."

A coherent plan could. Recent research from the McKinsey Global Institute (MGI) shows that we could slash the projected growth in the world's energy demand by at least half by 2020 just by taking advantage of existing opportunities to cut waste. Think of simple, costless changes like turning off the lights in offices at night—that's "money on the table," in the words of efficiency guru Amory Lovins of the Rocky Mountain Institute. MGI says annual industry-wide investments of $170 billion per year in efficiency improvements like green buildings and higher-mileage cars could yield an additional $900 billion per year in savings by 2020. More important, the emissions cuts resulting from better efficiency could deliver up to half the carbon reductions needed to keep warming at no more than 2°C hotter than the present—considered to be an upper safe level. "There's so much water pouring out of the bottom of the bucket that it's insane to put more water into it," says Adam Grosser, a partner with Foundation Capital, which has invested heavily in energy-efficiency companies.

Some of that hole-plugging has already begun. Last year's federal energy bill raised corporate average fuel economy (cafe) standards for the first time in three decades, to 35 m.p.g. for cars by 2020. That's not world-beating compared with Europe's average of 40 m.p.g., but it's a good start. Efficiency standards could be put in place for household appliances and lighting as well. Japan's smart Top Runner program takes the best model in the marketplace and sets its performance as the industry requirement. Similar rules could be applied to architecture. Since nearly half of U.S. greenhouse-gas emissions channel through buildings, there's a sizable opportunity for savings if we mandate green design rather than simply depend on architects and builders to adopt it voluntarily. And if utilities were able to institute variable pricing—charging customers more for power during periods of peak demand and less during off periods—you'd see enormous efficiency improvements.

California—again the leader—has implemented a pilot program for just such a variable-pricing plan. It uses what are known as smart meters, which provide real-time information about customer energy use and make billing more precise and savings more predictable. Since the project began, energy demand has fallen 13%, giving a taste of the wider savings that could be captured with a more comprehensive, permanent plan. Other efficiency programs have managed to keep per capita energy use in California—already the lowest in the country—essentially flat for the past three decades, even as energy use per person in the U.S. overall jumped 50%. California's pleasant clime plays a role, but efficiency still matters. Darbee of PG&E estimates that the state's green policies have eliminated the need for 24 power plants over the past 30 years—a process called "demand destruction," or cutting carbon before it's even born.

Invent, Invent, Invent

Even an epic surge in efficiency, though, won't by itself solve our energy woes, because demand in the booming developing world will outpace the best productivity measures. Hence the need for the final and most difficult step in the blueprint: the creation of a new energy system, one that doesn't depend on carbon. There's a chasm between where we are and where we need to be—and our current strategy for bridging it is murky at best. "What we need to do over the next 10 to 20 years is redesign our relationship with nature and energy," says Nicholas Parker, chairman of the Cleantech Group, a green research organization.

No problem, right? But the good news is that there are already thousands of very smart people working on alternative energy in what Daniel Yergin, chairman of the Cambridge Energy Research Associates, calls "the great bubbling." Venture-capital funding in the clean-tech sector hit $5.18 billion in 2007, up 44% from the year before. And no surprise, the biggest bubbling is happening in California, specifically Silicon Valley, where a combination of the state's progressive environmental measures, unmatched scientific talent and entrepreneurial culture is giving birth to dozens of start-ups.

Among the new companies is Amyris Biotechnologies in the Bay Area, where Jack Newman and his team are developing ways to genetically modify bacteria to make better biofuels, sidestepping the food-vs.-energy debate that has long dogged the field. With nearly $100 million in venture backing, Amyris is trying to engineer yeast or bacteria that can metabolize biofuel feedstocks like wood chips and dramatically increase the amount of biofuel that can be extracted from them. "There are staggering things that technology can do," says Newman. "But we need to make this happen in as short a time as possible."

That's where government can help. There may be nothing like free enterprise to unleash innovation, but there's nothing like government to put a whip hand to the process. A firm carbon price will accelerate creativity by making alternatives that much more economical. If Washington better allocated its own research-and-development dollars—as it did in the storied Apollo days—it could accelerate things even more. Currently, the Federal Government budgets about $5 billion per year for research and tax incentives for renewables and energy efficiency. With a federal budget of $2.9 trillion in 2008 and the Iraq war alone burning through an estimated $12 billion per month, there is clearly money to be spent if we decide to reprioritize. A plan floated by Democrats to eliminate $18 billion worth of tax breaks for the oil industry and use the money to support research into renewable fuels would be a smart place to start.

There's no shortage of ways to spend whatever money is made available. Photovoltaic solar panels have made significant improvements, but they are still five to 10 years away from achieving economic parity with fossil fuels—at least at current rates of development. More promising are solar thermal power plants, like the one inaugurated this spring in the deserts of Nevada by Spanish clean-energy giant Acciona. The installation—a 300-acre array of 182,000 mirrors, each aligned to catch and concentrate the sun's energy—heats a synthetic oil that runs in a pipeline and produces steam, which drives turbines to generate electricity. Mirrors and turbines are comparatively cheap, and they're hardly the stuff of high technology. The trick is scaling up and pricing down.

Wind power, the most mature renewable technology, is growing fast, but we need to find a way to store electricity when the breeze isn't blowing. Then there are more fringe alternatives like tidal power, geothermal energy and even nuclear fusion—any of which could take off with enough luck and money.

While Washington should flood the zone with research funding, it should refrain from trying to pick a winner. The great biofuel scam—in which government support for corn ethanol choked the market with a fuel that simply creates other problems, such as deforestation and food price spikes—shows that straightforward subsidies can easily be perverted for political reasons. But a national renewable portfolio standard, which would mandate that a certain percentage of the nation's electricity supply must come from renewable sources, can force utilities to adopt alternatives on a wider scale, going with the technologies that are producing the best results. For that to happen, though, the government has to stop providing the fossil-fuel industry with billions of dollars in subsidies, which boost the sector's built-in advantage even more. "How can the oil industry need a dollar in the days of $100 crude oil?" says John Berger, CEO of Standard Renewable Energy.

Finally, there are micropolicies, like tax credits, that can make solar power and green building more economical on a house-by-house basis. Such credits have helped the wind and solar industries grow out of infancy, but the laws establishing them periodically expire if they're not renewed. The solar investment credit, which was part of the 2005 energy bill, provides a 30% tax credit for the purchase of solar power but will cease to exist at the end of the year if it can't move out of the legislative gridlock that is blocking its renewal. Fortunately, Congress seems ready to extend it. "If it expires, it will take out all the good work that's been done on the state and commercial level," says Julie Blunden, vice president of public policy at SunPower, a leading solar manufacturer and installer. "We could watch our business essentially evaporate by the end of the year."

The Long War

If we took all the steps outlined here—a national cap-and-trade system with teeth, coupled with tougher energy-efficiency mandates and significant new public and private investment in green technologies—where would that get us? We'd be a little poorer—a sustained battle against climate change will hit our wallets hard, absorbing perhaps 2% to 3% of gdp a year for some time, according to energy expert Henry Lee at Harvard's Kennedy School of Government, though unchecked warming could end global prosperity. But think of it as an investment: that money, if matched by action internationally, can reduce emissions radically over the next half-century, contain warming and lead us to a postcarbon world.