U.S. Energy Secretary Steven Chu on Thursday pledged to work with Congress to pass legislation that would impose a cap-and-trade system to curb greenhouse gas emissions and fight global warming.

Such legislation will provide the framework for transforming our energy system to make our economy less carbon-intensive, and less dependent on foreign oil, Chu said at a Senate Energy and Natural Resources Committee hearing.

The Obama administration wants to cap carbon emissions from U.S. power plants, oil refineries and other industrial sites, then auction permits to exceed those limits. Plants that then lower their emissions could in turn sell their permits to other facilities that pollute more.

If we, our children and our grandchildren are to prosper in the 21st century, we must decrease our dependence on oil, use energy in the most efficient ways possible, and decrease our carbon emissions, Chu said.

Sen. Jeff Bingaman, a New Mexico Democrat who chairs the energy panel, said earlier that any climate bill that passes the Senate is unlikely to adhere to the administration's plan that the government auction all the permits to emit greenhouse gases because such a plan would be too harsh on big industry.

Instead, Bingaman said any Congressionally developed system capping and trading emissions probably will include carbon allowances given to polluters like cement factories and coal-burning power plants, along with permits that are sold.

Auctioning 100 percent of the permits would essentially make polluters pay quickly for emissions. In the European Union's Emissions Trading Scheme, emissions permits were given away to polluters at first. This led to a glut of permits and windfall profits for some emitters.

Bingaman said he thinks the chances of passing a climate change bill are reasonably good, but it is not likely the Senate would approve legislation that does not provide companies with some free allowances for carbon emissions.

I think it's unlikely we will pass a cap-and-trade bill with 100 percent auction, Bingaman told reporters at the Platts Energy Podium.

He said such a system has the risk of substantially increasing the burden on some utilities and major emitters.

I don't know that you can properly buffer that without some allocation of allowances in ways other than auctioning, Bingaman said.

He said lawmakers must evaluate how many allowances to give out and what industries will receive them.

There needs to be a substantial burden on anyone who would claim a right to an allowance without having to buy it at auction, Bingaman said.

In his proposed federal budget for the 2010 spending year released last week, Obama reiterated his support for a cap-and-trade system that auctioned 100 percent of the permits. Obama's budget proposal estimated the government would receive $646 billion from such a program from 2012 to 2019.

Obama wants proceeds from the cap-and-trade system to go toward investing $15 billion annually in clean energy technology and a making work pay tax credit.

Climate change