Beleaguered U.S. climate bill seeks Obama lift

The Valero St. Charles oil refinery is seen during a tour of the refinery in Norco, Louisiana August 15, 2008.

WASHINGTON (Reuters) - President Barack Obama's State of the Union speech to Congress could indicate how badly he wants a global warming bill, which opponents say will cost U.S. jobs and raise prices -- a scary prospect for politicians trying to ride out a horrible economy in an election year.

Obama, who played a dramatic role in negotiating a nonbinding international climate change accord last month in Copenhagen, now faces a tough economic and environmental balancing act to win the climate change legislation in 2010.

Administration officials insist it can be done despite the political difficulties in an election year. "President Obama and this administration ... expect that a comprehensive energy bill, which includes a climate portion, to be passed this year," Energy Secretary Steven Chu told reporters Wednesday.

For that to happen, Obama must put a "job-creation focus" on the bill to build a U.S. economy that would run more on alternative energy than dirty-burning coal and oil, said Daniel Weiss of the Center for American Progress. "The more specifics the better" in the State of the Union speech, Weiss added.

On Friday, Obama announced new tax credits to encourage investments in clean energy development that he said would help combat climate change and create jobs.

"This initiative is good for middle-class families. It is good for our security. It is good for our planet," Obama said.

A House-passed bill is floundering in the Senate, where Obama has to convince 60 of 100 members to back a bill.

In one area -- government incentives for expanding nuclear power -- Senate sources said progress has been made in closed-door talks in search of a "sweet spot" for a compromise on the legislation that they hope to pass in coming months.

Even so, Senate backers and environmentalists off Capitol Hill say they are uncertain of climate change victory in 2010.

Difficult negotiations are expected between senators who want to require industries to cut their carbon emissions and those who see a climate bill as a vehicle for also helping domestic producers of nuclear power and oil and natural gas.

And, many Republicans are working hard to cast doubt on claims the climate change bill will create jobs.

Within the next few weeks, Senator Lisa Murkowski could force a Senate vote to stop the Environmental Protection Agency from regulating carbon emissions as a fallback if more comprehensive climate legislation is not enacted.

"This is a vote about the economy, not about the climate -- whether these regulations will harm the economy," said a Senate Republican aide.

If Murkowski, whose state of Alaska is a major oil and gas producer, manages to get a strong vote, even if less than needed to pass her measure, some undecided Republicans and Democrats could have second thoughts about voting later this year on a more comprehensive climate bill.

SENATORS SEEKING COMPROMISE

Despite all the hurdles, a bipartisan group of senators is forging ahead on a bill to cut carbon emissions by utilities, refineries and factories over the next four decades by 17 percent from 2005 levels.

Senator John Kerry, who is leading the effort, expects to be recovered from surgery and back in Washington when the Senate reconvenes on January 20, to huddle with independent Senator Joe Lieberman and Republican Senator Lindsey Graham, according to a spokeswoman. The two are key to winning support from moderates and conservatives.

One Senate staffer said 17 pro-nuclear senators have had input into what could become a major provision of the bill aimed at luring Republican votes. "That part (nuclear power) ironically is in fairly good shape at this point."

While nuclear power plants do not emit the greenhouse gases that contribute to global warming, the industry has been weighed down by prohibitively high construction costs and controversy over nuclear waste storage.

Expanding domestic oil and gas drilling is another important goal for Republicans and that component of a climate bill is "still 100 percent in flux," said the Senate source.

While producing more oil and gas here will do nothing to reduce greenhouse gas emissions, it would reduce dependence on foreign oil and potentially lure Republican votes.

On the sidelines of the U.N. climate meeting in Copenhagen, Kerry left open the possibility that the core of the climate bill could be scrapped. That is the "cap and trade" system for reducing carbon emissions through ever-dwindling pollution permits that could be traded on a new exchange.

A carbon tax and a "cap" without the "trade" component are among possibilities. But for now, Kerry, Lieberman and Graham are sticking with cap and trade, aiming to quell nervousness over the scheme by including tougher market controls.

(Editing by Jackie Frank and Bill Trott)