SAN FRANCISCO -- As candidates waited for a court hearing Monday that could decide the date of California's recall election, the leading Democrat to replace Gov. Gray Davis lost a court case that could cripple his ability to pay for his campaign.

Lt. Gov. Cruz Bustamante had used his old campaign account for the 2002 election to raise money above the limits set by Proposition 34. But a Sacramento County judge said Bustamante's acceptance of more than $4 million from Indian tribes and labor unions into that account violated the constitutional amendment voters approved in 2000.

Instead of using the money to pay for ads opposing Proposition 54, the so-called racial privacy initiative on the special election ballot, Bustamante will have to return that money to his old account, Sacramento County Superior Court Loren McMaster ruled Monday.

Meanwhile, Davis focused on the business of governing by introducing a plan to reduce global warming.

Appearing with Washington Gov. Gary Locke in Los Angeles, Davis said their states and Oregon would work together to obtain fuel-efficient vehicles, reduce diesel fuel emissions, and better monitor greenhouse gas emissions.

"Obviously, an initiative from Washington, D.C., along the lines of what we are doing today would be welcome, but in its absence the states have to act."

The announcement was in line with Davis' strategy of appearing active and in charge whether or not he remains in office after the vote, previously scheduled for Oct. 7.

Davis' appearance came a day after actor Arnold Schwarzenegger, the leading Republican in the race to replace Davis, announced an environmental plan aimed at cutting smog by up to 50 percent within five to eight years. Schwarzenegger was preparing to step into the spotlight for his first and probably only debate Wednesday.

Davis, buoyed by new poll results suggesting he has a chance to keep his job, was ready for more campaign stops this week with high-profile Democrats, just days after he stumped with former President Bill Clinton and the Rev. Jesse Jackson.

All the candidates awaited a court hearing Monday afternoon, when an 11-judge panel of the 9th U.S. Circuit Court of Appeals was scheduled to hear arguments on whether to uphold a ruling by a smaller panel last week that the election must be postponed until next spring.

The three-judge panel said the election, previously scheduled for Oct. 7, should wait until six counties still using punch card ballots can upgrade to more reliable voting machines.

The judges chosen for the new panel are more conservative than the three who made the original ruling, and some legal scholars said it was likely that the earlier ruling would be overturned. Depending on the outcome in the 9th Circuit, the case could be appealed to the U.S. Supreme Court.

Schwarzenegger promised Sunday to create a network of hydrogen fueling stations throughout the state in order to promote increased use of hydrogen powered vehicles. He also said he would prevent coastal oil drilling and seek to reduce energy consumption by 20 percent within two years.

Following the speech, Schwarzenegger criticized Davis' environmental record.

"Gray Davis has just started talking about the environment the last few days," Schwarzenegger said. But he backtracked when reminded of recent legislation signed by the governor, saying, "I'm not aware of all those bills that he has signed the last year."

Gabriel Sanchez, a spokesman for Davis' campaign, scoffed at Schwarzenegger's claim.

"Gov. Davis has been active in protecting the environment throughout his entire 30-year career and to say otherwise is misleading and flat-out false," Sanchez said.

Schwarzenegger, who has called Wednesday's forum "the Super Bowl of debates," is preparing extensively for it, aides said.

"He meets regularly with his team of policy advisers and experts, and now the focus is on the debate," campaign spokesman Todd Harris said.

Davis enters the week with new poll numbers showing he is gaining momentum. A statewide poll by the Public Policy Institute of California released Sunday showed just 53 percent of likely voters want to oust Davis, down from 58 percent last month. Forty-two percent said they would vote to keep him in office.

The poll mirrored two other statewide polls released this month which showed that, while a majority of voters wanted to recall Davis, the margin has tightened.

The same poll also showed Schwarzenegger virtually tied with Lt. Gov. Cruz Bustamante, the only Democrat in the race among candidates vying to replace Davis if he is recalled. The poll found 28 percent support for Bustamante and 26 percent for Schwarzenegger, with 14 percent saying they support Republican state Sen. Tom McClintock.

The findings fueled new speculation about whether McClintock will get out of the race in order not to split the Republican vote and hand the election to Bustamante. McClintock has said repeatedly he does not plan to quit.

Jack Pitney, professor of government at Claremont-McKenna College, said the debate will give Schwarzenegger his best chance to win over conservative voters, who are the core of McClintock's support.

"The debate is an opportunity for Schwarzenegger to close the sale with a lot of Republicans and conservatives, or an opportunity for other candidates to stop him cold," Pitney said.

Davis, who will not participate in the debate, planned to campaign this week with Washington Gov. Gary Locke and Sen. Joe Lieberman, a Democratic presidential candidate. Lieberman will also campaign with Lt. Gov. Cruz Bustamante, who is his California campaign chairman.

"We are going to stay focused on the strategy that gotten us through this entire surreal process," said Davis campaign spokesman Peter Ragone. "The governor is going to talk candidly with voters at town hall meetings, and will be joined by Democratic party leaders to point out that this is a power grab by Republicans and is fundamentally unfair."