Critics say Bush is appeasing US big business
Mr Bush said his plan focused on giving companies tax incentives to reduce emissions of heat-trapping "greenhouse" gases voluntarily and gradually without hindering US economic growth.
Mr Bush said they were the most significant steps Washington had ever taken to cut such emissions, but critics of the deal say it is ineffectual and panders to Mr Bush's business supporters.
Mr Bush said economic growth was the key to environmental protection - because it paid for the means to invest in cleaner industries.
Mr Bush said his plan would cut "greenhouse gas intensity", meaning the ratio of emissions to US gross domestic product (GDP) growth - by 18% over the next 10 years.
Mr Bush said the Kyoto treaty - approved by the Clinton administration but not ratified by the Senate - would have put millions of people out of work because of its mandatory reductions.
Environmental 'goals'
Mr Bush said he had rejected the treaty on the grounds that it would have damaged the US economy - and that it exempted many developing countries such as India and China.
His stand against the treaty was strongly criticised by newspapers and environmentalists in many countries with close ties to the United States - and also in the developing world.
Now, Mr Bush says he is offering "a new environmental approach that will clean our skies, bring greater health to our citizens and encourage environmentally responsible development in America and around the world."
The main difference between the Bush initiative and the Kyoto treaty is that it proposes goals rather than mandatory reductions.
Mr Bush said his approach to power plants was "market-based" and would "replace a confusing, ineffective maze of regulations for power plants that has created an endless cycle of litigation."
'Too little'
His new initiative, however, has failed to appease many environmentalists who say it does not go far enough.
But Peter Raven, president of the American Association for the Advancement of Science welcomed the proposal:
"President Bush came in highly sceptical about the basis for global warming but has become convinced that it is a real problem for the world. The speech he is giving today is a very reasonable beginning."
To fund his initiatives, Mr Bush plans to increase the 2003 budget by $700 million to $4.5 billion.
Under his plan, companies will be assigned permits for each tonne of pollution and will be permitted to trade them so that the US government's targets will be met.
Critics of Mr Bush's proposals say the plans are kind to big business in the United States but do little to curb fossil fuel emissions such as oil and coal, which environmentalists say cause more problems and contribute to global warming and acid rain.
"Unfortunately, the Bush administration is using Valentine's Day to give a sweetheart deal to the corporate polluters that funded his campaign," Carl Pope, executive director of the environmental agency, the Sierra Club, told Reuters news agency.