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US Senate climate bill cuts aid to global forests

* Greens, utilities want forest funds back in climate bill

* Utilities say would would help broaden emissions options

WASHINGTON, May 17 (Reuters) - The climate bill unveiled in the U.S. Senate last week cuts funds to projects protecting tropical forests that also are inexpensive ways to reduce global pollution and keep U.S. power bills affordable, environmentalists and electric utilities said on Monday.

“Unfortunately the Kerry-Lieberman bill ... cuts the heart out of some of the most positive features of the bill that passed the House,” said Douglas Boucher, the chairman of the Tropical Forest and Climate Coalition, which consists of environmental groups, power utilities and other companies.

The bill unveiled by Senators John Kerry and Joseph Lieberman last week faces an uphill battle even though it contains sweeteners for the energy industry like incentives for nuclear power and offshore oil drilling.

The bill removed a measure from previous legislation that would allocate 5 percent of the total emissions allowance value in the domestic cap and trade market on smokestack emitters toward programs to reduce deforestation in developing countries.

The provision, which analysts said would help bring an estimated $3 billion to $5 billion a year to projects in places like Indonesia and Brazil to plant trees and fight deforestation, had been included in the bill passed by the House of Representatives last year.

Mariann Quinn, the environment director at power company Duke Energy DUK.N, said the funding for forestry projects would offer power companies options to cut emissions -- other than at their own smokestacks -- which would ultimately help keep power bills affordable.

Without a robust selection of carbon offsets, many utilities would have to mostly invest billions in new nuclear power plants or siphoning off carbon dioxide at power plants and burying it underground.

Senator Kerry hinted last week that he would like to see the measure added back into the bill. “That’s an issue that has to be reconciled with the House,” he told reporters. “We’re supportive of that.”

Supporters of the measure say that such public funding would make forest projects more mainstream, a step needed to increase investor confidence in the programs. Forestry projects will need billions in private monies to reduce emissions enough to fight climate change, analysts say.

“By making some modest changes, (the bill) could send a much more powerful and less ambiguous signal to those around the world who are waiting to see whether U.S. policy will follow through on its promise to support REDD efforts,” said Eric Haxthausen, director of U.S. climate policy for The Nature Conservancy.

Deforestation accounts for at least 15 percent of global greenhouse gas emissions, a level that’s more than the entire emissions of the European Union, environmentalists say.

New carbon markets to pay owners to not chop down trees are emerging to reduce emissions from deforestation and degradation (REDD), but investors have complained the markets are complicated. [ID:nLDE64C1CA]

Environmentalists said provisions in the bill passed in the House would also help iron out problems in REDD markets like stopping tree cutters from simply moving to unprotected areas. (Additional reporting by Richard Cowan and David Fogarty in Singapore, Editing by Rene Pastor)