June 27 (Bloomberg) -- The U.S. House narrowly passed legislation to impose the nation’s first limits on greenhouse- gas emissions linked to global warming, handing President Barack Obama a win on one of his top policy priorities.

The 219-212 House vote yesterday signaled the fight that lies ahead in the Senate for the plan, which would create a market for trading pollution permits to curb emissions.

Obama called the measure “a bold and necessary step that holds the promise of creating new industry and millions of new jobs.” The bill, he said, would usher in “a critical transition to a clean-energy economy without untenable burdens on the American people.”

House Republicans, who formed the bulk of the opposition to the bill, disputed that characterization. The U.S. Chamber of Commerce called the measure “an unrealistic approach that could further harm the economy and shed American jobs.”

Pollution-cap advocates last night praised the House action even as they vowed to push for rewrites of some key provisions.

“This should be a huge wake-up call,” Sierra Club Executive Director Carl Pope said in an interview. “We should not have had to have a bill this weak to pass by this narrow a margin.”

Reduction Target

The American Clean Energy and Security Act calls for the U.S. to reduce its greenhouse-gas emissions by 17 percent from 2005 levels by 2020. It would establish a limited number of pollution permits, more than 70 percent of which would initially be given away free to utilities, manufacturers, state governments and others, according to the Congressional Budget Office. The permits could then be traded or sold.

The bill’s chief sponsors -- House Energy and Commerce Committee Chairman Henry Waxman, a California Democrat, and Representative Edward Markey, a Massachusetts Democrat -- agreed to reduce the plan’s environmental mandates and increase aid to polluters, including coal-fired power plants, to help companies meet the measure’s clean-air regulations. The strategy was necessary to amass the votes needed to pass the bill.

“The Senate is now going to see it’s possible to do this legislation” by balancing competing interests and building “coalitions of environmentalists and industry to support it,” Waxman said in an interview.

Cost Per Household

The Congressional Budget Office estimated the measure would cost an average of $175 a year per household.

In the House vote, eight Republicans joined 211 Democrats in supporting the bill. Forty-four Democrats and 168 Republicans opposed it. The Democrats voting against it included some from rural districts who worried about the measure’s potential economic costs, and others who complained that the bill didn’t go far enough to protect the environment.

“I don’t know how you could be much more friendly than this bill to coal interests,” said Democrat Peter DeFazio of Oregon, who voted against the bill.

As environmental groups pledged to make the bill tougher on polluters, industry groups said they would try to lower its costs on U.S. companies.

“As the bill moves to the Senate, we believe further discussion and changes are required to ensure a level playing field for American manufacturers who compete in the global economy,” said Cal Dooley, president and chief executive officer of the American Chemistry Council. “We believe more work needs to be done.”

‘Energy Tax’

Republicans and many business groups, including American Farm Bureau, sought to drum up opposition to the bill by saying it would impose a “national energy tax” that would eliminate jobs, not create them.

“This is the biggest job-killing bill that has ever been on the floor of the House of Representatives,” said Republican leader John Boehner of Ohio, who spoke against the measure for about an hour. He said the U.S. should increase drilling of oil and gas while working to create alternative sources of energy.

Anadarko Petroleum Corp. Chief Executive Officer Jim Hackett described the bill as “hugely flawed” before the vote.

A tax on carbon dioxide would be more straightforward than the bill’s so-called cap-and-trade plan, which seeks to “hide the ball” and targets production instead of consumption, Hackett said. The legislation would lead to higher energy prices, he said. Anadarko, based in The Woodlands, Texas, is the second-largest independent oil and natural gas producer in the U.S.

House Agriculture Committee Chairman Collin Peterson negotiated revisions that led to several rural lawmakers backing the bill. Even as he voted in favor of it, though, he said the measure still has “problems” he considers “unworkable.”

“It is too complex, the way they’ve structured this and the deals they’ve cut,” said Peterson, a Minnesota Democrat.

House Democratic leaders say the bill would create 1.7 million new jobs and save 240 million barrels of oil by 2020. It would require in most cases that states get 20 percent of their electricity from renewable sources such as wind and the sun by then.

The measure would boost investment in new energy sources through a number of provisions, including financing research and providing $10 billion to develop technology to capture and store gasses from burning coal. Utilities would get free greenhouse- gas pollution permits to aid investment in renewable energy sources.

A $30 billion revolving loan fund would support small and mid-sized clean-energy manufacturing efforts.

Democrats turned back a Republican amendment from Representative Randy Forbes of Virginia that would have substituted a research summit on clean energy for the Democrats’ plan.

To contact the reporter on this story: Lorraine Woellert at lwoellert@bloomberg.net; Simon Lomax in Washington at slomax@bloomberg.net

Last Updated: June 27, 2009 12:20 EDT