FACTBOX: Business interests in U.S. climate bill

(Reuters) - The U.S. Senate is debating this week a bill that would aim to fight global warming by creating a carbon market sparked by regulation of greenhouse gases.

Any climate bill is not expected to become law until after the next U.S. administration comes to power. President George W. Bush said he would veto the bill if it passes Congress because it would be too expensive.

But the Senate's discussion of the bill sponsored by senators Joseph Lieberman, a Connecticut independent, and John Warner, a Virginia Republican, has been cited as a first step in forming a climate law in the country that has historically been the world's top greenhouse polluter. Here is a summary of what is at stake for businesses in Lieberman-Warner.

1) ALLOWANCE ALLOCATION

Credits for the right to emit greenhouse gases in a cap-and-trade system would represent an asset worth $100 billion or more annually. There are two approaches to allocations: giving them away, or auctioning them. In other emissions schemes where they have been given away, allowances have been "grandfathered" to regulated emitters, such as refiners or power plants, based on past greenhouse gas output.

Supporters of grandfatherings say giving allowances for free helps businesses deal with initial costs of the pollution regulation. On the other hand, giving away allowances to producers could lead to windfall profits and make them better off under a climate policy than before, because the cost of emissions permits may be passed to consumers.

In an allowance auction, the government receives the auction revenue from the firms that purchase the allowances. Auction supporters say they can cut program costs and raise revenues that the government can use to fund programs such as clean energy investments or reduce taxes.

-WHAT LIEBERMAN-WARNER WOULD DO:

Both. It would give one-third of the allowances to industry, gradually phasing out free allocation by 2030. It would auction or directly allocate a little more than 25 percent of allowances for federal programs, including technology deployment and climate adaptation programs.