"California banned diesel cars..."
Yes, and no. It's less that the cars are banned, and more that no existing diesel cars can meet the strict emissions standard.
California's low emission vehicle II (LEV) program imposes strict emission standards on motor vehicles. Diesel vehicles that meet the existing Fed standards might not meet the California standards. Some states have opted in to the California standards (Cal, NY, Maine, Mass, Vt, and soon NJ).The Fed diesel standards tighten with model year 2006, so all states will be subject to the stricter rule, unless the Feds back away (always a possibility).
Ultra low sulfur diesel (ULSD) fuel, which EPA has mandated for use beginning in mid-2006, should help modern diesel vehicles meet the stricter standards.
Not a legal opinion or analysis, but a distillation of what I've been reading lately.