WASHINGTON- The White House has dropped projected revenues from a cap-and-trade mechanism to fight climate change from its new budget, an administration official said, bowing to the possibility that the U.S. Congress may not pass it.

Last year the Obama administration forecast revenues of $646 billion (407 billion pounds) in the years 2012-2019 from an emissions trading program that formed the crux of its proposal to fight global warming.

The legislation that contains that proposal is now stalled in the U.S. Senate, and cap-and-trade -- which sets limits on greenhouse gas emissions and allows companies to trade permits to pollute -- may be cut from a final bill if one is passed.

The $646 billion revenue projection is no longer in the budget, the administration official told Reuters.

Unlike last year, we do not show an assumed amount of cap- and-trade revenue since the exact nature of the legislation remains in flux, the official said.

The trading system had been the keystone to President Barack Obama's plan to reduce emissions blamed for global warming, although he did not mention cap-and-trade last week in his State of the Union address when calling for comprehensive climate legislation.

Some interpreted the omission as a signal that he would not actively pursue a wide-ranging climate bill this year. White House aides, however, are still working hard to advance legislation among lawmakers.

The official said the administration would insist any climate legislation be paid for without adding to the deficit.

We assume neither a specific spending and revenue level -- but stand by the same principle that the policy as a whole must be deficit-neutral, he said.
The $646 billion figure a year ago was based on a presumption that a U.S. law to limit emissions would be in place by 2012. A climate law is crucial to Obama's efforts to get international momentum behind efforts to fight global warming and craft a follow-up pact to the Kyoto Protocol.

The House of Representatives has already passed a bill with a cap and trade component.

A Senate version is still in the works, but chances of passage may be hindered by the looming election in November as lawmakers fear the repercussions of supporting a measure that some say would drive up energy costs for consumers.

(Editing by Sandra Maler)