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Monday, June 23, 2008

McCain Energy Policy Watch: The Plan?

Last Tuesday, June 17th, McCain gave a speech where he finally unrolled his energy policy, which had been conspicuously absent for the first 419 days of his presidential campaign. I'm glad that he's finally tackled the topic, though I think it's remarkable that he ran for president this long with our energy supply in such a precarious state without having articulated any energy policy at all. I was really quite surprised that more people didn't criticize him at the very least for the lack of priority on energy policy it demonstrated.

Before I address the policy proposals, however, I want to emphasize the degree to which McCain and his campaign continues to not prioritize or emphasize energy policy. Yes, he has incorporated attacking Obama over offshore drilling and the gas tax holiday into his stump speech, but his website still fails to provide an issues page for "Energy." His campaign home page provides no clue where to find his energy policy either. His campaign blog makes no mention of his speech on Tuesday. The "multimedia" section of his site has no video of his speech available; nor does the "Speeches" subpage or "About/Issues" subpage (although that one does have two videos of speeches about Reagan...).

A transcript of the remarks is available under the News->Speeches heading, as are all his prepared remarks. Furthermore, a search of the site picks up a number of press releases, editorials, his speech from last April, and his recent remarks.

All together, one can hardly credit the campaign with making energy front and center. Of course, considering the substance of McCain's plan, I can certainly understand why they aren't touting it.

Nonetheless, here we are with an energy policy that we can finally examine substantively. The gist; Drill our way out!

Here are the bullet point proposals that McCain put forward. Skipping the ones that note the state of our energy economy we're left with the following:

  • John McCain Will Commit $2 Billion Annually To Advancing Clean Coal Technologies [It's still unclear how this money will be committed. Direct research grants, tax credits, subsidized loans for new clean capital technology etc. Also, anybody who has ever seen a mountain range decimated for coal mining is likely to question how much more we should lean on coal.]

  • John McCain Will Put His Administration On Track To Construct 45 New Nuclear Power Plants By 2030 With The Ultimate Goal Of Eventually Constructing 100 New Plants. [Accomplishing this, of course, by subsidizing nuclear power rather than renewables. Nuclear power is certainly a strong ally in combating climate change, but one shouldn't be naive about the environmental and health impacts of uranium mining that often aren't incorporated into the price of the energy.]

  • If The U.S. Commits Itself To Expanding Domestic Oil And Gas Exploration, We Can Make A Positive Impact For A Peaceful And Stable International Oil Market. [ie lift the federal off-shore drilling morotorium. The impact that this will have on energy prices is difficult to underestimate. Production will take decades to peak, and the impact on the total supply will be slight, even if states like Florida and California don't block it off their coasts, which they surely will. Short version: weak idea.]

  • John McCain Contends That It Is Important For Us To Understand The Role That Speculation Is Playing In Our Soaring Energy Prices. [No word on investigating the warmongering risk premium...]
The only statement on renewable energy was the following, here in its entirety:
  • John McCain Will Encourage The Market For Alternative, Low Carbon Fuels Such As Wind, Hydro And Solar Power. According to the Department of Energy, wind could provide as much as one-fifth of electricity by 2030. The U.S. solar energy industry continued its double-digit annual growth rate in 2006. Also, across the country, water is currently the leading renewable energy source used by electric utilities to generate electric power. Developing these and other sources of renewable energy will require that we rationalize the current patchwork of temporary tax credits that provide commercial feasibility. John McCain voted against the patchwork of tax credits for renewable power in the past because they were temporary and reflected special interests, not what was the best policy. Because of the urgent need to reform our energy portfolio, John McCain will put in place real support for these sources of energy in the form of permanent credits that are fair, level and rational, letting the market decide which ideas can move us toward clean and renewable energy.
Part of this is his cap-and-trade proposal that we've looked at before. The important things to remember about the candidates' respective cap-and-trade plans is that Obama has a lower cap, auctions 100% of the permits and uses about 15% of the proceeds to compensate low income Americans for high fuel costs and almost all of the rest for investment in renewables. McCain's plan gives away the permits, and he's apparently confused about the "cap" part of cap-and-trade.

The rest is unclear. McCain has opposed the Production Tax Credit in the Senate, which is part of what he is describing as a "patchwork" measure. The infuriatingly dishonest part about the above statement is that he never explains what "John McCain will put in place real support for these sources of energy in the form of permanent credits that are fair, level and rational, letting the market decide which ideas can move us toward clean and renewable energy" means. McCain surely doesn't support feed in tariffs that work so well in Europe. He just never explains, which means probably nothing. Let the market decide and drill in the meantime.

It's important to point out at this point how important measures like the PTC are. GE Financial Servies recently examined the impact of the PTC on the wind power industry and concluded that "Wind Farm Tax Revenues Offset Tax Incentive." First, observe how important the PTC is for the commerical viability of new wind projects (figure from above GE study, via the wonderful REW podcast)Political uncertainty, courtesy of McCain and his Republican allies, decimates new wind capacity every time the PTC dies.

Next, examine the impact of the PTC on total revenues:For the $2.5 billion dollars spent on the PTC, $2.75 billion in increased revenues were brought in, netting $250 million dollars. That doesn't even include less quantifiable impacts such as the environmental and tertiary economic benefits.

So for all of McCain's bluster about the cost of fuel and the price per barrel of oil, he's got nothing up his sleeve besides an old oil rig. Short term supply will be unaffected, and years and years from now we'll be in an even deeper hole.

Finally, I think it's noteworthy the lack of a broader energy infrastructure policy. Obama supports a number of regulatory improvements such as revenue decoupling, portfolio standards, and CAFE standards. McCain is silent. Obama specifically addresses the need to improve our distribution networks and invest in a digital smart grid to handle our electrical needs. McCain is silent. Obama recognizes and mentions the role of land use policies and transportation infrastructure in our energy economy. McCain is silent.

I wonder why?

In his speech, which I watched on C-SPAN this weekend, McCain dismissed investments in renewables as wishful thinking by "futurists." I guess when you're 72 years old and running as the candidate for the status quo, everyone around you begins to look like a "futurist."