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Senators seen ditching cap and trade in new bill

By Russell Blinch

WASHINGTON (Reuters) - Three senators are seeking to radically overhaul stalled climate legislation by proposing to dump broad cap-and-trade provisions and take a sector by sector approach to cutting greenhouse gas emissions, a White House official and leading U.S. newspaper reported.

Despite strong doubts a climate bill is possible in this election year, Senator John Kerry, a 2004 Democratic presidential nominee, vowed last week to press ahead with a compromise climate bill that he said would win broad support.

The new bipartisan bill could target individual sectors and move away from a system used in Europe and hotly debated in the United States in which companies would be forced to buy and sell the right to pollute, a process that caps and eventually reduces emissions blamed for heating the earth.

"Senators (are) considering sector by sector, market based measures as a means to reduce emissions," an administration official said.

According to the Washington Post on Saturday, Republican Senator Lindsey Graham declared "cap-and-trade is dead" in a private meeting with several environmental leaders this week.

Graham, Kerry and Joseph Lieberman, an Independent, have been working for months on a bipartisan effort to pull together a workable measure after the House of Representatives passed a cap and trade climate bill last June.

The Obama Administration, while saying the Environmental Protection Agency could move independently to regulate emissions, is keen for Congress to pass its own legislation.

The administration argues a comprehensive energy bill would help the country embrace more efficient renewable energy while creating jobs and also giving the United States a leadership role in stalled global efforts to battle global warming.

Environmental groups that helped shape the house bill have been worried that the bill may be watered down. But in the face of tough opposition from Senators in coal and oil states some are becoming more pragmatic.

"It looks like they are pursuing an interesting hybrid approach," said Tony Kreindler of the Environmental Defense Fund. "Our preference is still for cap and trade, but we're open to looking at this new plan if it cuts pollution and addresses the concerns of undecided Senators."

But any legislation faces stiff opposition from Republicans and, now that Democrats have lost their super majority in the Senate, strong doubts persist that a bill will pass this year.

A Reuters poll this week of 12 Democratic and Republican Senators found lawmakers did not believe it would be possible to pass a climate bill this year.

The Washington Post said the Senators were looking at cutting greenhouse gases by targeting three major sources of emissions: electric utilities, transportation and industry.

The paper said power plants would face an overall cap on emissions that would become more stringent over time. Gasoline might face a carbon tax, with the proceeds going toward development of electric vehicles.

Industrial facilities would be exempted from a cap on emissions for several years before being phased in.

In measures the could attract votes from Republicans, the newspaper said legislation would also expand domestic oil and gas drilling offshore, provide assistance for building nuclear power plants and encourage clean coal technology.

(Additional reporting by Jeff Mason and Tim Gardner; editing by Todd Eastham)

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