“I profoundly believe that a cap-and-trade mechanism is the only way we will solve the emissions issue,” Hayward said today in a speech at the Peterson Institute for International Economics in Washington.

The US House of Representatives narrowly passed cap-and- trade legislation last year that would regulate companies responsible for 85% of US greenhouse-gas emissions through a system where pollution rights could be bought and sold.

The legislation, which later stalled in the Senate, favored the electricity industry over the oil companies that produce transportation fuels like gasoline, Hayward said.

London-based BP is “cautiously optimistic” that the US Senate will revamp the cap-and-trade legislation to provide “a much more equitable approach between the power sector and the transport sector,” he said in a Bloomberg report.

BP and ConocoPhillips pulled out of a lobbying coalition that supported that bill earlier this year.

A group of senators led by Massachusetts Democrat John Kerry has started revamping the legislation in an effort to win bipartisan support.

Kerry, who is working with South Carolina Republican Lindsey Graham and Connecticut independent Joseph Lieberman, is still negotiating with other senators on the content of the proposal and has not released details.

One plan being discussed would limit the cap-and-trade program to the electricity industry and charge oil companies a fixed fee for their greenhouse gases, Senator Mary Landrieu, a Louisiana Democrat said earlier this month.

Under the House-passed bill, oil companies would be forced to buy most of the emission allowances they need at government- run auctions or through the carbon market, while the electricity sector receives a number of free pollution rights.

A cap-and-trade program for power plants and a carbon fee for oil companies “would certainly be a way of achieving an equitable, level playing field for carbon,” Hayward told reporters after the speech.

He declined to endorse the fixed-fee proposal.

The company will wait to see what legislation “emerges from the process” in the Senate before deciding what it will support, he said.