Nov. 3 (Bloomberg) -- Public anger over the U.S. bank bailout is fueling congressional opposition to creating a market for trading pollution permits aimed at curbing global warming, a carbon trading group said.

“Legislators feel that the banks have let down people,” Henry Derwent, president and chief executive officer of the Geneva-based International Emissions Trading Association, said in an interview in Washington yesterday. He called it “bad luck” that a cap-and-trade bill has come up just as legislators are “under maximum pressure from those who have suffered from market failures in a different area.”

Some Senate Democrats, including Byron Dorgan of North Dakota, are opposing a House-passed cap-and-trade bill out of a concern that speculative trading in a U.S. carbon market could spur another financial crisis. Dorgan cited the $700 billion bailout and the run-up of oil prices in 2008 as reasons to oppose a carbon market.

The U.S. would be making a “serious error” if it doesn’t choose to limit greenhouse gas emissions through a cap-and-trade program, Derwent said.

Under cap-and-trade, the government would issue a limited number of permits, each carrying the right to emit one metric ton of carbon dioxide, which firms could buy and sell before surrendering them to EPA.

Lawmakers have floated a tax on carbon dioxide and other greenhouse gases as an alternative to cap-and-trade and the Environmental Protection Agency plans to start regulating these emissions in March whether Congress passes a new law or not.

A cap-and-trade system was established in the 1990s to reduce the pollution that causes acid rain from U.S. power plants and a carbon trading program was set up in Europe in 2005.

Emissions trading was “invented in the United States” and can “minimize the role of government choice and of government constraint” compared to other options for cutting greenhouse gases, Derwent said.

To contact the reporter on this story: Simon Lomax in Washington at slomax@bloomberg.net.

Last Updated: November 3, 2009 10:16 EST