Senate Majority Leader Harry Reid said no Republican was willing to back a comprehensive energy bill, a development he called "terribly disappointing."
The decision represents a significant setback for President Obama who had hoped to add the bill to his two other major legislative successes, a comprehensive health care bill and a broad overhaul of the U.S. banking and financial system.
The move also will weaken the U.S. negotiating position heading into international climate control talks in Mexico at the end of the year.
Senate Democrats have been trying for more than a year to pass a plan that charges utilities and other major polluters for their heat-trapping carbon emissions, which contribute to global warming. They are also abandoning a compromise plan to limit emissions only from utilities that also failed to attract the 60 votes needed to advance it in the 100-member Senate.
Reid and other Democrats said they would focus on a narrower bill that responds to the oil spill in the Gulf of Mexico and improves energy efficiency.
"We've always known from day one that to pass comprehensive energy reform, you've got to have 60 votes," said Sen. John Kerry, a Democrat and the bill's lead sponsor. "As we stand here today we don't have one Republican vote."
Kerry spoke at a news conference with Reid and White House energy adviser Carol Browner. The event followed a closed-door meeting in which Senate Democrats decided they lack the votes needed to bring the larger energy bill to the floor before the Senate's August recess. The House already has passed a climate bill.
Browner said President Barack Obama continues to support comprehensive energy reform that includes a cap on carbon emissions, but supports Reid's decision to go forward with a narrower bill.
Reid said the new bill will likely focus on holding oil giant BP PLC responsible for the Gulf spill, as well as ways to improve energy efficiency and increase spending on land and water conservation.