By Erin McNeill, CQ Staff

The Senate is scheduled to debate climate change legislation next week. And before lawmakers left for their Memorial Day break, a group of 52 institutional investors, asset managers and state treasurers representing $2.3 trillion in managed funds wrote to ask senators to produce a clear federal policy on the global warming issue in order to give businesses some certainty when they are making capital decisions.

This was the second time the group, called the Investor Network on Climate Risk, has called on Congress to require limits on emissions of carbon dioxide and other greenhouse gases that contribute to atmospheric warming. The members, brought together by a Boston-based investor and environmental coalition, Ceres, include such major investment firms as Deutsche Asset Management and AIG Investments, as well as investment officials in 13 states.

UNCAPPED: Oil refineries like this California plant are a major source of carbon emissions. (BLOOMBERG NEWS \ JAMIE RECTOR)

The group’s efforts show the divisions that have opened in the U.S. business community over how the government should tackle climate change and whether the legislation Congress is considering should be influenced by what other countries and regions are doing, or not doing, on the subject.

A number of big companies — just like the alliance of investment managers — want a mandatory limit on emissions and a trading scheme for emissions credits, a system called “cap and trade.” Not only would that give them regulatory certainty for investment decisions, but they worry that without such a program, U.S. companies might be shut out, or taxed out, of the European market, which has adopted carbon limits.

Enacting a law based on the legislation the Senate will take up — by John W. Warner , a Virginia Republican, and Joseph I. Lieberman , an independent from Connecticut — would “help to repair a serious and growing threat to the global competitiveness of U.S. businesses in a world where the energy and carbon intensity of companies’ products, services, and supply chains is increasingly important,” the investment managers wrote.

Business executives who don’t think the United States should mandate emissions limits are looking at the same dangers, but from a different perspective. Just as the European Union might penalize American companies that don’t comply with the EU’s climate policies, these executives worry that the United States risks retaliation from trading partners such as China and India if it adopts carbon limits and requires their companies to comply.

The senior director for international policy at the U.S. Chamber of Commerce, Christopher Wenk, told members of the House Energy and Commerce Committee in March: “In this time of economic uncertainty, the Chamber urges Congress not to risk provoking a trade war with countries like China and India, where the U.S. exported almost $83 billion worth of goods combined in 2007.”

The Chamber, like the Bush administration, has contended that limiting carbon emissions without reciprocal steps by China and India would seriously damage the U.S. economy and its competitiveness. “Without participation by developing nations, the carbon constraints . . . would penalize domestic businesses attempting to compete in the world market while non-participating developing nations continue to get a free ride,” executive vice president R. Bruce Josten wrote Warner and Lieberman last fall.

The Chamber got in trouble with some of its members last year for running commercials opposing government action on climate change and is being more circumspect now, focusing on the details of the Warner-Lieberman bill that it doesn’t like.

Last week, the Chamber hosted a conference to examine what it thinks would be potentially huge costs due to regulation and litigation from a climate change law.

The investors group makes the case that the lack of federal regulation of carbon emissions makes it difficult for companies to make capital investment decisions in clean energy and other low-carbon technologies and practices. That could undermine their long-term competitiveness, according to the group.

The debate that Congress is about to begin will not take place in a vacuum, of course. Other countries are making their own decisions. Rob Bradley, director of the International Climate Policy Initiative at the World Resources Institute, an environmental group, says the European Union is debating whether its climate policies might drive industry to less restrictive countries, such as the United States.