The U.S. Senate will postpone until next year its debate on energy and climate legislation, along with its controversial plan to cap greenhouse gas emissions.

Key Senators, including Senate Majority Leader Harry Reid (D-Nev.) and John McCain (R-Ariz.), told the Wall Street Journal this week that the climate and energy bill will have to wait while the Senate tackles bills aimed at reforming the nation's health insurance system and financial market regulation.

The proposed cap-and-trade legislation has drawn harsh opposition from Republican lawmakers and industry groups such as the U.S. Chamber of Commerce and the American Petroleum Institute that say it will increase energy costs and harm the economy (see Energy-Climate Bill Could Boost Electricity Costs 20% by 2030 and Green Light post).

In June, the House passed the American Clean Energy and Security Act, which includes a cap-and-trade system aimed at cutting the nation's greenhouse gas emissions by 17 percent by 2020.

A corresponding Senate bill from John Kerry (D-Mass.) and Barbara Boxer (D-Calif.), which would seek to cut those emissions by 20 percent by 2020, was passed by the Senate environment panel earlier this month.

Republicans have asked for more support for nuclear power and offshore oil drilling in any legislation (see Green Light post). Earlier this week, Sens. Lamar Alexander (R-Tenn.) and Jim Webb (D-Va.) proposed a bill, the Clean Energy Act of 2009, that would offer about $20 billion over the next decades, much of it to support nuclear power.

News of a delay until next year leaves the Obama Administration bereft of legislation it hoped to present in December at a United Nations climate summit in Copenhagen to craft an agreement to replace the Kyoto Protocol (see Green Light post).

The Environmental Protection Agency has moved on its own to regulate greenhouse gas emissions under the Clean Air Act, but has yet to formulate standards for enforcement. The EPA program is expected to cover 70 percent of the nation's total emissions, including power plants, refineries, and cement production facilities that emit at least 25,000 tons of greenhouse gases a year.

But the EPA may well face years of legal battles over regulating greenhouse gases, which could lead the agency to look to Congress to pass a bill, Eric Olbeter, analyst with Pacific Crest Securities, said in a Tuesday note.

In the meantime, questions remain over the competing renewable electricity standards contained in the House and Senate energy and climate bills, Olbeter said. The Senate bill would require 9 percent of the nation's power to come from renewable resources and 6 percent from efficiency gains by 2021.

But Olbeter said it's likely the Senate will move to adopt the more aggressive measures in the House bill, which calls for 12 percent of the nation's power to come from renewables and 8 percent from efficiency by 2020.

These renewable energy mandates, as well as provisions in the House energy and climate bill to give new federal authority to site transmission lines, could be taken up separately from cap-and-trade rules, some observers have noted (see Green Light post).

Olbeter predicted that an energy bill without cap-and-trade could pass by May 2010, but questioned the likelihood of greenhouse gas limits being put into law during an election year.

Any energy efficiency provisions passed into law could well benefit energy services companies such as Honeywell and Johnson Controls, Olbeter said.

But he said solar and wind power "are likely to be left empty handed by a hollow renewable electricity standard."

Tags: american clean energy and security act, cap-and-trade, harry reid, jon wellinghoff, lindsey graham, renewable electricity standard, senate