UPDATE 2-US Senate climate bill unveiled but fate uncertain

Tue May 11, 2010 8:19pm EDT

Related Topics

* Bill would put U.S. on path to cut carbon pollution

* Gulf of Mexico oil spill looms large in debate

* Effort hurt by Republican opposition, Graham's absence (New throughout)

By Richard Cowan

WASHINGTON, May 11 (Reuters) - A new U.S. Senate bill aimed at battling global warming would impose new limits on carbon dioxide pollution from factories, utilities and vehicles, while expanding heavy-polluting domestic oil production and nuclear power generation.

The legislation, which is certain to face tough opposition from Republicans and even some Democrats, will be formally unveiled on Wednesday by Democratic Senator John Kerry and Independent Senator Joseph Lieberman.

There is no guarantee the bill will even be debated this year and it is unclear whether a massive oil spill in the Gulf of Mexico will hamper the legislation or prompt a more urgent look at U.S. energy and environmental policy. [ID:nN11246329]

A summary of the long-delayed bill, obtained by Reuters on Tuesday, contained few surprises as many details had leaked out over the past several weeks. [ID:nN11126331]

At the core of the bill is a goal to cut U.S. carbon emissions by 17 percent by 2020. But the summary did not address several questions, such as how new pollution permits would be distributed or sold to electric power utilities.

The bill also contains tax and loan guarantee incentives to expand nuclear power generation. Offshore oil drilling also would get a new boost from Washington.

Both steps are aimed at building more support from senators than a climate-only bill would get.

But in the wake of the oil spill in the Gulf of Mexico that began in April, the proposal includes protections for coastal states that do not want oil drilling off their shores.

The climate bill would be Kerry's counteroffer to the House of Representatives, which passed a somewhat different version of climate control legislation nearly a year ago.

It aims to back commitments President Barack Obama made to world leaders in December that the United States would get serious for the first time about cutting emissions, which many experts say will wreak havoc on the planet if left unchecked.

About 6.4 billion metric tonnes of the gases are sent into the atmosphere each year by coal- and oil-burning electric utilities, factories, refineries and vehicles in the United States, a level of pollution that is second only to China.

Like the House-passed bill, the Kerry-Lieberman bill tries to cut carbon emissions by more than 80 percent by 2050.

It is expected to require utilities to obtain a dwindling number of pollution permits for every tonne of carbon they emit starting in 2013, similar to the broader cap-and-trade system passed by the House. Those permits would be traded on a regulated market.

European countries, as well as a group of northeastern U.S. states, already have cap-and-trade programs in place with trading done regionally. If passed, the federal legislation would end state and regional programs.

'FRESH EYES'

Aware of broadly held Senate skepticism over the bill's chances this year, Kerry called on his colleagues "to look at it with fresh eyes."

November's congressional elections are likely to result in a dilution of Democrats' power in Congress, making it harder to approve sweeping energy and environmental legislation in 2011.

"Everyone knows this is Congress's last, best chance to pass comprehensive climate and energy legislation," Kerry said. If it fails, he added, "Congress will be rendered incapable of solving this issue."

Kerry has pumped sweeteners into the legislation -- from incentives to expand nuclear power capacity to federal aid for developing "clean coal" -- in a gambit to lure the backing of big business and ultimately Senate Republicans.

Many utilities with big investments in low-carbon nuclear power, natural gas or wind and solar power hope to benefit from a crackdown on greenhouse gases.

Utilities such as FPL Group (FPL.N), Duke Energy (DUK.N) and Exelon (EXC.N) have lobbied for the climate bill, as has General Electric (GE.N), a manufacturer of clean coal and natural gas systems for power plants and wind turbines.

Climate bill supporters cast the initiative as a major step toward reducing U.S. reliance on foreign oil and, in the process, shoring up national security. They argue it also would plant the seeds for green jobs during tough economic times, as fossil fuels would be replaced by solar, wind and other clean energy projects.

But a fundamental shift in the kinds of energy used also pits coal and oil states in the Midwest and Southeast against coastal and other interior states that already are positioned to cash in on clean energy industries.

WHERE IS LINDSEY GRAHAM?

The Senate launch of the bill likely will be overshadowed by an absent player -- Republican Senator Lindsey Graham -- who spent about six months collaborating with Kerry and Lieberman, only to drop out late in the game.

Graham spoiled an April 26 unveiling of the legislation, protesting Senate Democratic leaders' plans to put immigration reform on a fast-track this election year. He complained the maneuver meant the climate bill would not get serious consideration in an already tight legislative calendar.

By last week, with oil gushing from the floor of the Gulf of Mexico, Graham was calling for a "pause" in climate control efforts. He said he feared the oil slick, which threatens the shores of four southern U.S. states, would ruin chances for expanding offshore oil drilling in the climate bill.

As a result, Kerry's efforts to get Graham back on board collapsed.

It is unknown whether the work Kerry and Lieberman are touting will interest any of the Senate's 40 other Republicans. A handful are needed to ensure passage.

The battle Lieberman and Kerry will wage comes as scientists see what they say is mounting evidence of global warming: oceans rapidly becoming more acidic, polar ice sheets collapsing, mountain glaciers melting and sea levels rising. (Editing by Russell Blinch and John O'Callaghan)

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