updated 11/8/2007 11:36:30 AM ET 2007-11-08T16:36:30

A Senate panel on Thursday voted to create an emissions trading system that would limit the amount of greenhouse gases released by U.S. factories, power plants and transportation companies.

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A Senate Environment and Public Works subcommittee approved the legislation by 4-3, in what the panel sees as the first time a U.S. congressional body has voted to mandate cuts in emissions of carbon dioxide and other heat-trapping gases.

"With the scientific evidence mounting that we are fast approaching a dangerous tipping point beyond which climate change will accelerate rapidly, we really urgently need to move the bill forward," said Sen. Joseph Lieberman, I-Conn., the subcommittee chairman and one of the bill's authors.

The vote comes after a United Nations panel estimated that greenhouse gas emissions must fall by 50 to 85 percent below 2000 levels by 2050 in order to avoid severe environmental damage.

The emissions trading system, also called a cap-and-trade system, is widely seen as the most politically feasible approach, although economists say that taxing emissions such as carbon dioxide would be simpler and leave less room for loopholes.

While calling the measure flawed, environmental groups hailed approval of the bill as a major step forward for a country that had rejected the Kyoto Protocol, which expires in 2012.

"Today the U.S. Congress begins its leadership on climate at home and abroad," said Elizabeth Thompson, legislative director at Environmental Defense, a New York-based nonprofit.

The full committee could vote on the bill by the end of the year, said Sen. Barbara Boxer, D-Calif., the committee chairwoman.

Allowances would decrease
Under the bill, companies would get allowance permits starting in 2012 to release a certain amount of carbon dioxide and other greenhouse gases. The allowances would gradually decrease by 70 percent by 2050.

Companies could buy or sell the permits on a market, in what supporters hope would create an incentive to keep emissions low. Lawmakers said the bill would reduce greenhouse gases by as much as 63 percent below 2005 levels by 2050.

Republicans said they opposed the measure because of the effects on the U.S. economy.

Sen. John Barrasso, R-Wyo., said his state shipped about 450 tons of coal last year, and that "this legislation puts that industry at risk."

Under the bill, the Environmental Protection Agency would have responsibility for allocating the emissions allowances. Initially, some 18 percent of the allowances would be auctioned off by a new body, called the Climate Change Credit Corporation.

By 2036, the corporation would auction off 73 percent of the allowances. Of the auction proceeds, some 55 percent would be used for so-called energy technology deployment, including to encourage the development of new automobiles.

Free credits for utilities
Electric-power utilities — many of which are coal-fired and are among the nation's biggest polluters — would be given free allowances as the program gets under way — a move that raised concern among environmentalists.

According to Clean Air Watch, a Washington-based nonprofit group, the free credits would amount to big profits for electric-power producers because those companies would already have raised rates to cover the costs associated with reducing carbon-dioxide emissions.

"I do not believe that we should be giving the power sector or the industrial sector windfall profits," said Sen. Bernie Sanders, I-Vt.

But Lieberman said Congress needs to help companies as they deal with the costs of lowering or offsetting emissions.

"We have to offer some help on the road to getting there," he said.

Companies would be able to stay within their emissions caps through activities that would offset their pollution, such as planting trees or paying a farmer to reduce methane emissions. Companies could submit "offset" allowances totaling as much as 15 percent of emission permits that must be submitted.

Sanders complained that the offsets would be "nearly sure" to "bust" the emission caps.

But Lieberman said offsetting the allowances was necessary.

It "creates a different way for us to achieve the ultimate goal, and that's the important point," he said.

Businesses, many people believe, have been slow to embark on major emissions reduction efforts because of lack of certainty about the rules. By providing clear guidelines, Congress could usher in an era of change.

Congress is rolling out the legislation as Democratic leaders are at an impasse over a separate bill that addresses global warming in a different way. The Democrats have promised to combine differing House and Senate energy bills into a single bill and send it to President Bush by the end of the year.

But the Democrats have yet to act, in part because Texas's two Republican Senators are refusing to allow Congress to go forward with a conference until Democrats drop a plan to finance investments in alternative energy by rolling back tax breaks on oil and gas companies.

Copyright 2007 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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