Drilling offshore and a summer gas tax holiday aren't likely to lower gas prices, especially not in the near-term. According to the Department of Energy, drilling in areas that are currently off-limits "would not have a significant impact on domestic crude oil and natural gas production or prices before 2030." The summer gas tax holiday has been widely derided by economists, who believe it would "generate major profits for oil companies rather than significantly lowering prices for consumers." On the other hand, if these measures did succeed in lowering prices, they would also likely increase consumption and global warming.
Nor, however, are economists thrilled with Obama's windfall profits tax. A 1980s version of the tax didn't raise much money and appeared to depress domestic production. And the "use-it-or-lose-it" proposal for federal oil leases isn't taken seriously by industry analysts. Most federal leases already require activity within five or ten years, according to the American Petroleum Institute. A lease doesn't guarantee an oil deposit, and technical or logistic hurdles often make extraction impossible. "The last thing you want to do is sit on potential oil production or natural gas production," API spokeswoman Karen Matusic told CBS News.
Scientists appear to be arriving at a consensus that the world must reduce carbon emissions by 80 percent in 2050 to ward off a serious change in the climate, a goal Obama meets but McCain misses. Economists are divided, though, about whether a cap-and-trade system is more efficient than a straight-up tax on carbon emissions -- cap-and-trade systems are difficult to administer and produce uncertain results, often rewarding middlemen and brokers. On the other hand, as the Union of Concerned Scientists points out, "a carbon tax by itself cannot guarantee any particular level of emissions reductions."
Despite McCain's insistence that government not "pick winners and losers," McCain's clean fuels agenda does just that: ethanol (including next-generation cellulosic ethanol) would get no government support; wind, solar, and hydro power would get production tax credits; nuclear power would get construction guaranties; and clean coal would get $30 billion over 15 years. As Jerry Taylor of the libertarian Cato Institute told Bloomberg News: "It's just a different set of handouts for a different set of industries." Environmental advocates are, in any case, skeptical that coal cr be truly clean, particularly when it comes to turning it into liquid fuels.
Obama's plan to dole out $15 billion a year in investment and subsidies for new energy technologies -- and billions more in transition assistance -- is bound to create a new, enormous federal bureaucracy. But the Union of Concerned Scientists argues that merely setting up an emissions trading program and them stepping back will fall short of delivering the technological advances required to reduce carbon usage. "The government must implement parallel policies alongside a cap-and-trade regime to ensure development and deployment of the full range of clean technologies," writes UCS economist Rachel Cleetus. "Studies have shown that a comprehensive approach including these parallel policies would lower the price for allowances, cut emissions, and save consumers money by lowering their electric and gasoline bills."
Finally, the Congressional Budget Office concludes (right-click to save file) that consumers will pay higher energy prices under a cap-and-trade system regardless of whether the government auctions the permits to polluters, as in Obama's plan, or grants them outright, as in McCain's version. "Giving away allowances could yield windfall profits for the producers that received them by effectively transferring income from consumers to firms' owners and shareholders," according to the CBO. Shareholders would lose some value in a carbon-constrained world, but the CBO finds they would be fully compensated with just 15 percent of the permits.
Still, in the big scheme of things, these distinctions may be smaller than they appear in the campaign. As economist Joseph Aldy, from the nonpartisan organization Resources For The Future, explained to National Public Radio, "One can quibble with some of the details, but at end of the day, the difference between them will get washed out by negotiations between the next president and the Congress."
Responding to the high price of both oil and gasoline in the spring, John McCain proposed a summertime holiday on federal gas taxes and new rules to regulate energy trading and discourage speculation. He has also proposed lifting a moratorium on drilling for oil and natural gas offshore, in the outer continental shelf. (McCain continues to oppose drilling in the Artic National Wildlife Refuge.) Over this longer term, McCain's energy agenda means both to make the country energy independent by 2025 and to reduce global warming. Increasing domestic oil and gas production serves the first goal, but not the second.
To meet that second goal, John McCain proposes a cap-and-trade system that limits the amount of carbon dioxide that can be released into the atmosphere -- in 2050, limits will be set at 60 percent of the carbon dioxide emitted in 1990. Under the McCain version, the government would initially give most of the emissions permits directly to greenhouse gas polluters, which could then trade them freely, presumably leading to innovative measures to reduce emissions from the private sector and eliminating the need for most government regulation or subsidies. According to the campaign: "The profit motive will coordinate the efforts of venture capitalists, corporate planners, entrepreneurs, and environmentalists on the common motive of reducing emissions." Eventually, some permits would be auctioned and the proceeds used to mitigate the impact of higher energy prices on low-income people and to support some emerging technologies. McCain has offered a modest set of proposals for advancing alternative fuels and encouraging efficiency in transportation and for utilities:
Transportation sector: McCain offers moral support for biofuels such as ethanol, but neither federal investment to improve the technology nor subsidies to encourage the industry. He "calls on automakers to make a more rapid and complete switch" to so-called flex-fuel vehicles, which can run on either gasoline or ethanol (or any mixture of the two), but wouldn't require it. He would, however, make existing fuel economy standards more effective by stiffening fines levied against automakers for violating the rules. And, as he told the League of Conservation Voters, he supports increasing fuel economy standards "to a level that is practical and achievable for all new vehicles." (The full Q&A begins here.) To nurture the market for plug-in hybrids and electric cars, McCain would establish a $300 million prize for finding a breakthrough in battery technology that reduces current costs by 70 percent. To consumers, he would offer a $5,000 tax credit for purchasing a "zero carbon emission" car and smaller credits for buying other low-emission vehicles.
Utility sector: McCain would replace today's temporary tax credits that assist renewables generating electricity -- wind, solar, and hydro power -- with "an even-handed system of tax credits that will remain in place until the market transforms sufficiently." He would spur the market for green buildings by requiring higher efficiency standards for federal offices -- the U.S. government is the world's largest single electricity consumer. And he would reduce regulation to foster investment in the national grid and encourage the deployment of SmartMeter technology.
In contrast to these limited measures, the campaign has also proposed a massive increase in government support for nuclear power and coal. McCain would subsidize building 45 new nuclear reactors by 2030, and eventually 55 more. McCain would also devote $30 billion over 15 years to spur development in clean coal. McCain adviser Douglas Holtz-Eakin justified the inconsistency of opposing subsidies for nascent renewable power while supporting it for the incumbent nuclear and coal industries in an interview with the environmental website Grist. In the first case, "you are using the taxpayers' dollars for special interests, not for the national interests," Holtz-Eakin explained. But "if there's a genuine national interest in using nuclear power as an available, feasible, zero-emissions technology, I don't think he would argue that that's a special-interest thing. It's something the nation needs to do as a priority, and if that means a subsidy, then we need to make the agreement we're going to do that for those reasons. I think that's an appropriate role for government, in his view."
How he's voted: McCain early on accepted global warming as a legitimate concern, and in 2003 introduced a cap-and-trade bill in the Senate with Senator Joe Lieberman. (It failed.) "He was way ahead of everyone in his party," says David Sandretti of the League of Conservation Voters. More recently, he conditionally supported the Lieberman-Warner climate bill that the Senate briefly debated this spring -- McCain wanted to see more nuclear incentives in it.
Still, McCain is a newcomer to many of the positions outlined in his energy and climate platform. He opposed lifting the restrictions on off-shore drilling until June. More typically, McCain's been at best an indifferent legislator on renewable energy and conservation, according to the League of Conservation Voters. He's voted against significant incentives for and investment in renewable fuels, says Sandretti, and while he opposed the big tax breaks for the oil industry in 2005, he didn't support repealing them, either. (The measure failed in the Senate by one vote.) He's also opposed raising fuel economy standards. In all, McCain's lifetime score on environmental issues from the League is 24 percent.