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U.S. climate bill to set utility cap-trade: Senator

WASHINGTON (Reuters) - Compromise climate control legislation being developed in the U.S. Senate will use a cap-and-trade approach to reduce carbon emissions from utilities such as power plants, a key senator said on Monday.

The senator, who asked not to be identified, added, "That's not to say there are not some details left to be resolved with utilities but the overall approach is that."

In an interview with Reuters, the senator said: "There's more certainty about cap and trade for utilities" than how the government would mandate carbon pollution reductions from other sectors, such as transportation and manufacturing.

Under cap and trade, companies would have to obtain permits for every ton of carbon dioxide and other greenhouse gases they emit. The number of permits would steadily decline during the next 40 years and companies could trade those permits on a regulated financial market.

A bill passed last June by the House of Representatives would set an economy-wide cap-and-trade program, including power companies, oil refineries and factories. Emissions would decline by 17 percent by 2020, from 2005 levels under the House bill. Senators are looking at a similar target, which the Obama administration has embraced.

But an economy-wide cap-and-trade program does not appear to have enough votes to pass the Senate.

Instead, senators have been looking at a possible oil industry tax to help control carbon emissions in the transportation sector. Some senators from heavy manufacturing states have been pushing for a delay in carbon emission requirements for factories before moving to a cap-and-trade program or other mechanism.

The Senate compromise bill, which the senator said could be sketched out sometime next week, will "be different ways to deal with different sectors. It's a step-by-step sectoral approach," the senator said.

Many Republicans, who oppose government mandating emissions reductions, have called cap and trade nothing more than "cap and tax." As a result, and because cap and trade is difficult to describe, senators have been looking for different names for the program.

"We probably won't use the word 'cap and trade'" in the legislation, the senator told Reuters.

(Reporting by Richard Cowan; Editing by Jackie Frank and Bill Trott)

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