Deal nearing on Senate climate bill: lawmaker

Smoke rises from chimneys at the Sugar Cane Growers cooperative in Belle Glade, Florida January 6, 2010.

WASHINGTON (Reuters) - The Senate is close to wrapping up talks ahead of introducing a compromise climate change bill, said a top Democratic lawmaker who discussed ideas with industry groups on Wednesday.

"We're planning to button up our efforts somewhere I hope next week," Senator John Kerry told reporters after meeting with a coalition that represents automakers, forestry and paper companies, Big Oil, steel, mining, electricity and others.

Kerry is working with Republican Senator Lindsey Graham and independent Senator Joseph Lieberman on a bill to require U.S. industry to cut emissions of carbon dioxide and other greenhouse gases associated with global warming.

Indicating there was still work to be done, Kerry said, "We're trying to build support as we develop (bill) language."

Bruce Josten, an executive vice president at the U.S. Chamber of Commerce, left Wednesday's meeting with the three senators and told reporters: "They're being very constructive; they're trying to figure out how to make this work for the American economy."

The measure will not take the exact approach of legislation approved by the House of Representatives in June, and by the Senate Environment and Public Works Committee in November. This would set an economy-wide "cap and trade" direction to reducing carbon pollution.

Kerry said that while "a lot of language is there" to craft legislation, "we don't have a full outline" yet of a bill.

PRICE COLLAR AND FUEL FEES

The climate bill has been stalled in the Senate and supporters have missed several informal deadlines for producing and passing a bill.

Under cap and trade, companies would face limits on the amount of carbon pollution Washington would let them emit. Those limits would become stricter over the next 40 years, when supporters want an 80 percent reduction from 2005 levels. Also, required pollution permits could be sold on a regulated market.

The three senators also talked about pollution reductions of 17 percent by 2020 below 2005 levels, a goal President Barack Obama has embraced.

The Chamber of Commerce, which says it represents more than 3 million U.S. businesses of all sizes, is staunchly opposed to U.S. Environmental Protection Agency regulation of carbon dioxide.

The three senators said on Wednesday the bill would pre-empt the EPA from regulating the gases, said a source with knowledge of the meeting.

The EPA is ready to issue final regulations as early as March 31 for automobile carbon emissions. That would clear the way for expanding regulations to smokestack emissions, although the agency prefers Congress tackles that problem.

Instead of an economy-wide cap and trade, the three senators are aiming to impose the market system initially on power companies, which contribute about 40 percent of carbon emissions.

The senators are "talking about allowances for that sector that are built around pollution-reduction targets and prohibiting price spikes," Josten said.

Power plants would face emissions limits starting in 2012 while big manufacturers and energy-intensive industry would not face limits until 2016, the source said.

The senators presented an eight-page outline to the industry groups but took it back at the end of the meeting, he added.

The bill would also include a hard price collar that would keep carbon prices between $10 and $30 a ton. Any polluter emitting below 25,000 tons a year would not be regulated, the source said.

As for a possible oil industry tax, the senators discussed a fee on fuels linked to the market price of carbon. The fee would be visible to consumers at petroleum pumps and on airline tickets, the source said.

A tax at the oil refinery level that would not be as visible to consumers has also been discussed by the senators.

Once a bill is put together, the Congressional Budget Office will analyze the potential costs to the federal government and the economy. EPA also is expected to conduct a six- to eight-week analysis of the bill before it could be debated on the Senate floor, possibly in June.

(Editing by Mohammad Zargham)