Feb. 27 (Bloomberg) -- Senator John McCain, who backs tougher laws to fight climate change, blasted President Barack Obama’s plan to raise revenue from an emissions-trading system and said he will have a tough time getting support from Congress.

The Arizona Republican, who has co-sponsored legislation to create systems to let companies trade pollution allowances on an open market, said the goal of such a program should be strictly reducing greenhouse-gas emissions and addressing climate change.

“I don’t think cap and trade should be used for the purposes of generating revenue,” McCain, who ran against Obama in the 2008 presidential election, said in an interview.

Obama submitted a $3.55 trillion budget plan to Congress yesterday that assumes $78.7 billion in revenue in 2012 from the sale of greenhouse-gas emission permits to polluters.

The Democratic president wants to use a portion of the funds generated from emissions trading, which the administration projects would reach a total of $645.7 billion by 2019, to finance a tax credit for some workers as well as invest in clean energy initiatives and help offset higher electric bills for some lower- and middle-income families.

McCain and other Republican lawmakers, as well as some Democrats, are voicing concern about linking climate legislation, which has long been a contentious issue in Congress, to federal budget goals.

Budget Balancing

“It’s very difficult to get support for cap and trade if you are going to use it for generating revenue to balance the budget,” McCain said.

Obama’s plan assumes an auction of all pollution-trading allowances. McCain has supported initially giving away permits to some industries to help offset the cost of the transition to a low-carbon energy economy.

Obama’s plan ran into criticism from lawmakers almost as soon as he proposed it.

House Republican Leader John Boehner said yesterday in a news conference that Obama’s cap-and-trade plan was really a “carbon tax that increases taxes on all Americans who drive a car, who have a job, who turn on a light switch.”

Senator Ben Nelson of Nebraska is among Democrats who have raised questions about the president’s plan.

“He’s concerned about seeking to raise revenues by addressing climate change policies that have a number of serious concerns and haven’t been implemented,” Nelson’s spokesman, Jack Thompson, said.

Impact on Households

White House budget director Peter Orszag said yesterday that the administration linked the cap-and-trade program to the tax credits because the system “will have some effects on households.”

Congress would have to pass the required legislation by early next year to meet revenue projections in the budget, according to David Doniger, policy director of the Washington- based Natural Resources Defense Council’s climate center, and other analysts.

An emissions-trading system would put a mandatory federal cap on emissions of carbon-dioxide, which most scientists say is a primary contributor to global warming.

Companies including General Electric Co. and Duke Energy Corp. say they favor a cap-and-trade program because it would spur investment in “green” technology and because they want clarity on federal rules so they know how to proceed with long- term business investments.

To contact the reporters on this story: Kim Chipman in Washington at kchipman@bloomberg.net.

Last Updated: February 27, 2009 16:16 EST