Nov. 10 (Bloomberg) -- A “cap-and-trade” program being debated in Congress to reduce greenhouse gases must “minimize any job losses” that could result from restricting industry’s right to emit carbon dioxide, said Senate Finance Committee Chairman Max Baucus, a Montana Democrat.

With the U.S. unemployment rate at 10.2 percent, Congress “must be diligent to create jobs, including in the energy sector” when crafting laws to cut greenhouse gases, Baucus said at a committee hearing today. Baucus was the lone Democrat to vote against a cap-and-trade bill that passed the Senate Environment and Public Works Committee Nov. 5.

The bill that cleared the environment panel 11-1, with seven Republicans boycotting the vote, drew heavily from the cap-and-trade legislation that passed the House in June. The House cap-and-trade bill, approved 219-212, would create tradable carbon dioxide permits worth more than $90 billion a year, according to the Congressional Budget Office.

The bills approved by the House and the Senate environment committee would initially give most permits to industry for free. After the environment panel voted, Baucus told reporters the finance committee will come up with its own formula for deciding how many permits the government should auction, how many should be given away and who would get the free permits.

Baucus said he voted against the environment panel’s cap- and-trade bill in part because of its 2020 emissions reduction target of 20 percent below 2005 levels, compared with 17 percent in the House-passed plan.

Emission Permits

Under cap and trade, the federal government would issue pollution permits carrying the right to emit one metric ton of carbon dioxide. Power plants, refineries and other regulated companies would have to acquire enough permits to cover their emissions. Firms could buy and sell the permits.

Baucus said at today’s hearing he will support “meaningful, balanced climate legislation.” He also said some of the industry’s “dire” job-loss predictions for existing environmental programs, such as the cap-and-trade system for acid rain pollution from power plants, turned out to be wrong.

At least six Senate committees, including the finance and environment panels, have completed or are working on legislation that Senate Majority Leader Harry Reid may combine into a single climate-change bill.

Alternative Bill

Senators Lindsey Graham, a South Carolina Republican, John Kerry, a Massachusetts Democrat, and Joseph Lieberman, a Connecticut independent, are also working on a new climate change bill. The trio, who said their legislation will be written to win the 60 votes that are frequently required to pass major bills in the Senate, will also present their plan to Reid.

The process of combining all the climate-change measures into one bill isn’t likely this year because of the Senate’s focus on health-care legislation, Kerry, who serves with Baucus on the finance committee, told reporters after today’s hearing.

“I don’t see that happening before Christmas,” Kerry said. The Senate would then debate and vote on the combined measure in “the early part of the year” after the Environmental Protection Agency completed studies on the bill to estimate its impact on the U.S. economy, he said. Kerry cosponsored the cap-and-trade bill that was approved by the environment panel last week.

New Industries

During the environment committee’s hearings on the bill, Senate Democrats enlisted firms like Google Inc., owner of the world’s most popular Internet search engine, and solar power developer Infinia Corp., to argue that a cap-and-trade program would create more jobs in new industries than are lost in existing ones by making fossil fuels more expensive.

At today’s finance committee hearing, Kerry said developing nations such as China and India could “clean our clock economically” if they develop more quickly than the U.S. energy sources that don’t emit carbon dioxide and more efficient ways to use fossil fuels.

The cap-and-trade legislation before Congress could be “America’s next stimulus package, if you will,” Kerry said. The “naysayers” on cap-and-trade are also failing to factor in the costs of unchecked global warming, which could include population shifts due to rising sea levels and the relocation of agricultural production due to changed weather patterns, Kerry said.

Republicans have seized upon recent comments from Congressional Budget Office Director Douglas Elmendorf, who said there would probably be an overall decline in jobs during the “transition” to a cap-and-trade program that limits U.S. greenhouse gas output.

Job Losses

Iowa Senator Charles Grassley, who leads the Republicans on the finance committee, said under a carbon cap-and-trade program, “high energy prices will result in a net loss of jobs that otherwise would have been created or sustained.”

Under the proposed legislation to limit greenhouse gas emissions, “there will inevitably be winners and losers” and Senate Democrats should “stop trying to sell this policy as if it will have no cost for Americans and accept the basic economic principle that there’s no such thing as a free lunch.”

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

Last Updated: November 10, 2009 17:33 EST