Oct. 14 (Bloomberg) -- Legislation to curb carbon dioxide emissions would cause job losses while the economy transitions to clean energy sources, the director of the Congressional Budget Office said today.

A measure that passed the House in June would lead to “significant shifts” in employment from industries with heavy emissions, such as oil refineries and coal-fired power plants, to low-carbon businesses, Douglas Elmendorf told the Senate Energy and Natural Resources Committee today. The job losses may harm regions that rely most heavily on energy sources such as coal, he said.

“The net effect of that we think would likely be some decline in employment during the transition because labor markets do not move that fluidly,” Elmendorf said during today’s hearing.

The legislation passed by the House would reduce emissions 17 percent from 2005 levels by 2020 by limiting carbon-dioxide pollution and establishing a market for the trading of pollution permits.

“Reductions in employment that occur rapidly in particular geographic areas or industries could lead to significant reductions in the lifetime earnings of some affected workers,” Elmendorf said.

Senator Sam Brownback, a Kansas Republican, said the measure would cause “a massive market manipulation here on a grand scale that has significant impacts particularly on the Midwest and the South.”

There would be a “likelihood of us to lose a lot of jobs, a lot of businesses,” Brownback said.

Senator Barbara Boxer, a California Democrat and head of the Senate Environment and Public Works Committee, said her panel will start hearings Oct. 27 on a bill to cut U.S. greenhouse gases using a cap-and-trade system.

Elmendorf said that House climate-change legislation would reduce U.S. gross domestic product by 1 percent to 3.5 percent from what it would otherwise have been by 2050. At the same time, he said failing to cut carbon emissions could result in the loss of the equivalent of about 5 percent of U.S. output by 2100 because of damaging effects of global warming.

To contact the reporter on this story: Daniel Whitten in Washington at dwhitten2@bloomberg.net

Last Updated: October 14, 2009 18:22 EDT