Kerry unveils U.S. climate bill, Obama supports it

WASHINGTON (Reuters) - U.S. Senator John Kerry ratcheted up the fight to pass legislation to combat global warming on Wednesday, unveiling a bill as the Gulf of Mexico oil disaster complicates the measure's already slim chances of passage.

Kerry, a Democrat, and Senator Joseph Lieberman, an independent, took the wraps off their bill, but a Republican supporter was conspicuously absent.

Most of the details of the bill, which aims to cut planet-warming emissions in the United States by a modest 17 percent in the next decade, already have been leaked.

Republican Senator Lindsey Graham, who worked with the two senators on the bill, did not attend the ceremony. He reiterated in a statement that this is not the time to press on a climate bill because of the massive oil leak and talk of moving ahead on immigration reform.

But he said the concepts the three senators worked on represent the most consumer friendly efforts to date in dealing with climate pollution and that they can create new jobs in alternative energy and reduce dependence on foreign oil.

The bill still has provisions to encourage offshore drilling but would allow U.S. states to prohibit offshore oil activity within 75 miles of their coasts. It also allows coastal states to reap some revenues from drilling.

But that may not be enough to win drilling opponents from coastal states as concerns mounts over the gushing oil well.

For Kerry and Lieberman to succeed this year, they will have to win over a group of moderate Democrats and Republicans who have voiced reservations about the bill.

"The path to 60 votes in the Senate has been long, but despite Washington conventional wisdom, we are closer than ever to a breakthrough," Kerry said.

However, one of those votes, Republican Senator Richard Lugar of Indiana, told Reuters he would not join their effort.

"No I don't," Lugar said when asked whether he envisioned backing the Kerry-Lieberman bill. Instead, Lugar said he would offer his own ideas in separate legislation sometime soon.

President Barack Obama welcomed a new U.S. climate bill, saying he hoped to pass it this year as the oil spill in the Gulf of Mexico underlined the need for energy reform.

"The challenges we face -- underscored by the immense tragedy in the Gulf of Mexico -- are reason to redouble our efforts to reform our nation's energy policies," Obama said in a statement.

But it is unclear if Obama is willing put the same kind of political capital behind the climate bill as he did for healthcare legislation earlier this year.

The bill would cut emissions in the range that Obama pledged at an international climate conference late last year. Rich and poor countries are divided on how to share the burden of taking action on climate and if Obama signs the bill it could help close the gap.

Without a big White House push, the bill faces slim chances this year with an already clogged congressional schedule that includes dealing with financial reform and a Supreme court nomination.

November congressional elections will distract many lawmakers from focusing on legislation that could boost prices for gasoline and electricity in coming years.

POLITICAL TOXIN

The bill includes provisions for boosting nuclear power and offshore drilling in order to help win votes from states where the economies depend on energy production. Earlier versions of the legislation relied more on boosting alternative energy.

"The Gulf of Mexico spill has turned offshore drilling -- an issue that once greased the wheels of the grand bargain -- into a political toxin," said Kevin Book, analyst at ClearView Energy Partners.

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, Duke Energy and Exelon have lobbied alongside environmental groups for the climate bill as has General Electric, a manufacturer of clean coal and natural gas systems for power plants and wind turbines.

"Enacting a strong federal clean energy and climate program will give business the certainty it needs to unleash significant investments that will create jobs and grow our economy," said Eileen Claussen, president of the Pew Center on Global Climate Change.

The legislation would establish what has become known as a cap and trade system for reducing carbon pollution by electric utilities and factories.

Starting in 2013, electric power utilities would have to obtain pollution permits, initially provided for free by the government and then changing to full auctions by 2030, according to Senate aides.

The permits could be traded on a regulated market. The government would hand out the permits to utility companies based on a formula of 75 percent related to their emissions and 25 percent on their deliveries.

That is a revision from a previously considered 50-50 formula that coal-fired utilities complained was unfair. But the formula could bring a backlash from environmentalists.

"Those ratios of allowances do nothing to ameliorate global warming. Industry is getting exactly what it wants" with the legislation at the expense of the environment, said William Snape, senior counsel for the Center for Biological Diversity.

The legislation also allows polluters to participate in an "offset" program to help with overall carbon reduction. They would get credit for some emission-reductions if they helped out with other projects such as helping capture emissions from coal mines and protecting grasslands and landfills.

Up to two billion tons in offsets each year would be available with 75 percent aimed at domestic programs and 25 percent for international environmental efforts.

International projects could rise to one billion tons if sufficient domestic projects are not identified, according to Senate aides.

(Additional reporting by Jeff Mason; editing by Russell Blinch and Chris Wilson)