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By Jeff Mason and Valerie Volcovici
WASHINGTON, Feb 2 (Reuters) - President Barack Obama's fiscal 2016 budget proposes boosting funding for clean energy by 7 percent and a new $4 billion fund to encourage U.S. states to make faster and deeper cuts to emissions from power plants, officials said Monday.
Obama's budget also calls for the permanent extension of the Production Tax Credit, used by the wind industry, and the Investment Tax Credit, used by the solar industry, the officials said.
Obama has made fighting climate change a top priority in his final two years in office. The White House sees it as critical to his legacy.
The investment in clean energy technologies would cover programs primarily at the departments of Energy and Defense, the officials said.
The $7.4 billion figure is an increase from the $6.9 billion proposed in Obama's fiscal 2015 budget, a rise of 7.2 percent, and over the $6.5 billion enacted by Congress for this year.
The administration is finalizing controversial rules that will slash carbon dioxide emissions from power plants nationwide. The new fund would give states incentives to hasten that process or go further than their mandated cuts.
The proposed $4 billion fund would be available to any state that applies, Janet McCabe, acting assistant Environmental Protection Agency Administrator in charge of air regulations, told reporters.
"What we will be looking for are states that will get (carbon emission) reductions earlier...or seek to go further than final guidelines require," she said.
States would have access to money that could be used to finance clean energy technologies, funding for low-income communities that face "disproportionate impacts from environmental pollution" and create incentives for businesses to back projects that cut down on emissions, blamed for global warming.
In addition, the budget provides $400 million to help communities assess flood risks.
It also spells out the costs to the federal government of climate-related disasters, highlighting a fiscal argument to fight global warming. The United States has taken on over $300 billion in direct costs resulting from extreme weather and fire in the past decade, the budget says.
The EPA's proposals to slash carbon and other air pollution from power plants and oil and gas facilities are a target of some lawmakers.
Senate Majority Leader Mitch McConnell of coal-producing state Kentucky said Monday he will join the Senate committee that oversees the EPA's budget.
"You can guarantee that I will continue to fight back against this administration's anti-coal jobs regulations on behalf of the Kentuckians I represent in the U.S. Senate," he said.
Acting EPA Deputy Administrator Stan Meiburg said the agency is already working with limited resources, including a "historically low" staffing level.
"This has made us focus on being more efficient...with the staff we have," he told reporters.
The Department of Energy requested $29.9 billion for fiscal year 2016, an increase of $2.5 billion from the amount enacted for 2015, of which $10.7 billion would be spent to support scientific research, development and deployment of new clean energy technologies and advanced manufacturing.
Energy Secretary Ernest Moniz said Monday the department's budget request highlights new investments in energy infrastructure technology to make the electric grid more resilient and reduce methane emissions from natural gas systems.
To support the international component of Obama's climate strategy, the budget requests $500 million to support the United Nations' Green Climate Fund, the first tranche of the $3 billion pledged by the United States in November to help poor countries deal with climate change.
Some lawmakers have said they plan to block the funding. (Reporting by Jeff Mason and Valerie Volcovici; Editing by Sandra Maler and Lisa Shumaker)