The U.S. Congress will make enough progress on climate change legislation this year to boost prospects for success at December's Copenhagen summit on cutting greenhouse gases, Senate Majority Leader Harry Reid predicted on Friday.

I think we're going to have by the end of this year something that we can take to the ... conference that will be held in Europe, the Senate's top Democrat told a round-table discussion with reporters, lobbyists and industry officials.

Leaders from around the world will meet at December's summit in Copenhagen to write a successor treaty to the Kyoto Protocol, which placed limits on emissions of carbon dioxide and other pollutants blamed for climate change.

Former President George W. Bush opposed U.S. participation in the Kyoto pact, saying it would be too harmful to the U.S. economy. But the Obama administration has made significant U.S. and global carbon reduction a top priority.

Last week, Todd Stern, Obama's top envoy on climate change, told Reuters he needed progress by Congress to help the U.S. negotiating position in the global talks.

Reid said he was uncertain whether a bill to reduce U.S. carbon emissions would pass the Senate in time for Copenhagen. But he was hopeful the House of Representatives could pass a bill by then, as could a key Senate committee.

With Republicans warning consumers that climate change legislation would bring higher energy bills and many Democrats also hesitant -- especially those from states reliant on coal for heating and electricity -- Reid acknowledged there were political difficulties ahead.

CAP-AND-TRADE REGIME

In the House, leading Democrats were struggling to find the recipe for a bill that could pass a key panel next week.

The committee continues active, constructive negotiations, said Eben Burnham-Snyder, a spokesman for Representative Edward Markey of Massachusetts, who is trying to steer a climate change bill through an energy and environment subcommittee.

But some members of that panel are demanding breaks for home-state industries that would have to cut carbon emissions under a cap and trade regime for controlling pollutants.

Representative Rick Boucher of Virginia, a coal-producing state, wants new pollution permits to be given away, instead of sold to industries. Under his plan, 40 percent of the free permits would go to electric utilities, 15 percent to heavy industries, 5 percent to oil refineries and the rest to the transportation sector.

They know I can't vote for it without it, said Representative Gene Green, referring to such a move, which was important to refineries in his Houston, Texas district.

The Obama administration wants those permits to be auctioned to industry, although it has signaled that some permits could initially be given away to ease the transition.

Daniel Lashof, director of the Natural Resources Defense Council's climate center, said, To us, the key issue isn't whether you auction every permit. He added, if the permits create windfall profits for polluters, we're against that. If it keeps jobs in the U.S. and prevents emissions from being outsourced, we're for it.

The House Energy and Commerce Committee is struggling with other issues, including the timetable for reducing carbon emissions, alternative ways of meeting obligations and standards for new coal-fired power plants. (Editing by David Storey)

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