Arch Coal supports carbon price ceiling

NEW YORK (Reuters) - A ceiling on carbon prices in any future U.S. greenhouse gas regulation program would prevent costs from hurting the U.S. economy, the chief executive of leading coal producer Arch Coal (ACI.N: Quote, Profile, Research, Stock Buzz) said on Monday.

"One of ways to try to address the unintended consequences on the economy (of regulating greenhouse gases) is to have an offramp," Steven Leer told the Reuters Global Energy Summit via conference call from Houston.

While many companies have warmed to the idea of carbon regulation over the last year, Arch does not support the leading climate bill in Congress because it not contain a carbon price ceiling in its current form.

The bill, sponsored by Sens. Joe Lieberman, a Connecticut independent, and John Warner, a Virginia Republican, is set to be debated this week in the Senate. It would cut total U.S. global warming emissions by 66 percent by 2050.

Leer said Arch supports a bill put forward by Sen. Jeff Bingaman, a New Mexico Democrat, which contained a price cap of about $12 per tonne and is generally seen as more friendly to industry. The price ceiling on carbon in that bill would start in 2012 and rise about 5 percent a year after that.

Also known as a safety valve, a price ceiling would allow companies to temporarily exceed their annual emissions targets when the price of cutting emissions reached the limit.

Supporters of a tough greenhouse regulation oppose a ceiling, saying it would kill incentives to develop technologies that are low in emissions such as solar and wind power.

Leer said he did not know the ideal price range for a carbon ceiling. But he said it has to be high enough for the development of technology that could fight emissions such as capturing carbon dioxide at power plants and storing it permanently underground in aging oil fields and in deep saline formations.

"At the same time it shouldn't be so high that it destroys the basic economic engine of United States," he said.

For years many coal companies had fought any greenhouse gas regulation. But with all three of the main U.S. presidential candidates supporting such a program, the companies have since softened their stance. Leer has said he supports regulation as long as rapidly developing countries participate in greenhouse gas reductions.

President George W. Bush said on Monday he would veto the Lieberman-Warner bill if it passed Congress in its current form, saying it would cost the American economy $6 trillion.

Analysts say climate legislation won't succeed until after a new administration comes to power.

(For summit blog: summitnotebook.reuters.com/)

(Reporting by Timothy Gardner; Editing by Brian Moss, editing by Phil Berlowitz)