* Kerry says climate bill negotiators "making headway"
* Graham says "hybrid" system discussed; unsure of success
By Richard Cowan and Timothy Gardner
WASHINGTON, Jan 28 (Reuters) - U.S. Senators are examining ways to fashion a climate control bill to reduce carbon dioxide emissions, which might not include a cap-and-trade system, key senators said on Thursday.
President Barack Obama called for a "comprehensive" bill during Wednesday’s State of the Union address.
In his speech, Obama did not specifically mention the need for a market-based emissions cap. Some interpreted the omission as signaling that he would not actively pursue wide-ranging climate control legislation this year.
"Comprehensive climate change (legislation) means pricing carbon and setting a target for reduction," Senator John Kerry, a Democrat and one of three lawmakers leading difficult talks to hammer out a compromise climate bill, told Reuters.
Kerry strongly rejected the idea that progress had bogged down. "I just don’t agree with that interpretation at all," he said, adding that Senate negotiations were "making headway."
Kerry said: "It’s open to how you price carbon. People need to relax and look at all the ways you might price carbon. We’re not pinned down to one approach."
Kerry and Republican Senator Lindsey Graham are working with Senator Joe Lieberman, an independent, to include incentives for nuclear, offshore oil drilling and clean technology jobs. Graham said the nuclear and oil drilling initiatives would not advance in the Senate "without dealing with the (carbon) emission part."
Meanwhile, Treasury Secretary Timothy Geithner said a tax credit aimed at encouraging investment in factories that make clean energy products would be expanded by $5 billion in Obama’s upcoming budget request to Congress.
The House of Representatives last year tackled global warming when it passed a bill that relies on a cap-and-trade system under which companies could trade an ever-declining number of carbon pollution permits on a market.
But the Senate’s push to pass a bill, which might jack up consumers’ energy costs, could be all the harder in this congressional election year as public support appeared to dip.
A Pew Research Center for the People and the Press poll said 28 percent of those surveyed listed global warming as a top priority this year, down from 38 percent in 2007.
A new poll by the Yale Project on Climate Change and George Mason University concluded that fewer people believe global warming is occurring. But it also said more people now fear global warming has the potential of harming their families and future generations.
Kerry said he plans to outline a comprehensive bill that could be considered this spring, although he did not want to be pinned down to a definite deadline. "We are writing and drafting; we’re pulling together the titles" of a bill.
Graham told Reuters Obama’s speech opening the door for nuclear power and offshore oil drilling helped efforts for a bill that could include "a hybrid system" for reducing U.S. carbon emissions.
Obama acknowledged in his speech that some people doubt the science of climate change but said it was important to move on clean energy such as wind and solar power to compete with countries like China and India in the low-carbon economy.
Graham said that statement and an emphasis on nuclear power could gain support but it was "yet to be determined" if senators could come up with a bill that could pass.
Kevin Book, an analyst at ClearView Energy Partners in Washington, said in a note that Obama "displayed a canny understanding of the political challenges confronting recession-weary, centrist fence-sitters (in Congress)."
"Voters," he wrote, "may be much more likely to embrace a plan to best other nations in trade than a plan to save other nations from rising seas (even if it’s the same plan)."
Some environmentalists were angered that Obama and his fellow Democrats in Congress were receptive to more oil drilling and nuclear power.
"President Obama’s support for all these dirty energy sources was a big win for corporate polluters and their Washington lobbyists, but it was a kick in the gut to environmentalists across the country," said Friends of the Earth President Erich Pica.
In recent days, according to Kerry and Graham, senators have huddled with representatives of energy-intensive industries that would be most affected by government mandating less use of dirty-burning coal and oil.
Graham added that under existing climate control bills, "The potential spikes to consumers are too great in terms of how utilities would have to increase their costs."
The bill has been delayed in the Senate by the healthcare debate, as well as opposition from most Republicans and many moderate Democrats.
It faces an uphill battle as lawmakers from oil and coal producing states say it could raise energy prices.
Graham said cap-and-dividend, which would mandate carbon emission reductions while prohibiting the trading of pollution permits, is under review along with other options.
A carbon tax has no support in Congress, he said. (Editing by Alan Elsner and Chris Wilson)