Democratic leaders fell a dozen votes short of getting the 60 needed to end a Republican filibuster on the measure and bring the bill up for a vote. The 48-36 vote failed to reach even a majority, a disappointment to the bill's supporters.
Majority Leader Harry Reid was expected to pull the legislation, in all likelihood pushing the congressional debate over climate change to next year with a new Congress and a new president.
The bill would have capped carbon dioxide coming from power plants, refineries and factories, with a target of cutting greenhouse gas emissions by 71 percent by mid-century.
"It's a huge tax increase," argued Republican Senate leader Mitch McConnell of Kentucky, a prominent coal-producing state. He maintained that the proposed system of allowing widespread trading of carbon emissions allowances would produce "the largest restructuring of the American economy since the New Deal."
Supporters of the bill accused Republicans of muddying the water with misinformation.
"There is no tax increase," Sen. Barbara Boxer, D-Calif., one of the bill's chief sponsors said. She said the emissions trading system would provide tax relief to help people pay energy prices. And supporters disputed that it would substantially increase gasoline prices.
Four Democrats joined most Republicans in essentially killing the bill.
Both presidential candidates, Democrat Barack Obama and Republican John McCain, were absent, although supporters of the bill said they had sent letters advising they would have voted for the bill.