John McCain fleshes out his climate policy, draws contrast with Obama

John McCain emphasized the role of the private sector and called for a cap-and-trade system in a prepared speech he delivered today in Oregon, indicating that his policies will differ greatly from those of the Bush Administration, if he is elected.

McCain praised wind, solar and other renewable energy technologies as affordable and attractive alternatives to fossil fuels that could help revamp the country’s failed energy policies and significantly reduce its greenhouse gas emissions.

In an effort to sway moderate and independent voters, McCain stressed his environmental bona fides and sought to distance himself from the Bush administration’s record — calling for a return to 1990 emissions levels by 2020 and for a 60% cut below 1990 levels by 2050.

Citing the success of the sulphur emissions trading program, instituted under the Clean Air Act, in reducing acid rain, McCain said a cap-and-trade system would have an “equally dramatic and permanent effect on carbon emissions by setting clear limits on emissions levels, while giving companies a financial incentive to reduce them.

Such a system would have the added benefit of fostering innovation and entrepreneurship among companies looking to make a profit from the sale of their permits, McCain said. “It is very hard to picture venture capitalists, corporate planners, small businesses and environmentalists all working to the same good purchase. But such cooperation is actually possible in the case of climate change,” he added.

Over time, the government would sell an increasing fraction of permits through an auctioning system to maximize federal revenues. Some of these proceeds would be used to fund advanced carbon capture systems and renewable energy projects, as well as promote the development of promising new technologies like hydrogen-powered vehicles. The rest would be invested in the country’s creaking electrical infrastructure, or used to bring clean energy to the states that need them.

A working cap-and-trade system would also help bring China, India and other developing nations to the table by demonstrating the U.S.’s firm commitment to emissions reduction. The U.S. will need to lead by example by fulfilling its obligations under a future successor to the Kyoto Protocol and by pushing for closer technological and political cooperation. While he stressed the importance of speaking to different nations’ interests, he called any comprehensive plan that did not include China and India a failure.

A McCain administration would use the government’s full purchasing power to encourage greater demand and adoption of the “best technologies and practices in energy conservation” and lean on Congress to eliminate some of the energy bill’s subsidies and tax breaks — even those for clean energy. When interviewed by Grist last October, he said he was opposed to subsidies for wind and solar technologies.

The Arizona senator is a strong advocate of nuclear energy, however, and has hinged his support for the Lieberman-Warner climate bill in part on a provision granting nuclear operators more perks. In fact, McCain has made nuclear energy a central component of his climate agenda, arguing that the U.S. — which currently has 104 reactors in operation — should ramp up the construction of new reactors.

He mentioned the progress made by France and Belgium, which derive over half their electricity from nuclear energy, in reducing their emissions. Under a cap-and-trade system, he said, the costs of building new plants would be much lower. Further research and technological innovation would help overcome nuclear energy’s main drawback — the storage and disposal of waste.

We won’t know for sure what a renewable energy infrastructure could look like under a McCain administration until early June, when he will deliver a speech dedicated solely to his energy policy. At that time, he will lay out some more specifics on his government’s approach to fossil fuels, nuclear energy and renewables. Given his strong backing for the nuclear sector, however, it’s likely that we would see a lot more nuclear reactors popping up around the country under his presidency. His stated opposition to subsidies and tax breaks casts some doubt on the continuation of government tax credits, which could crimp growth prospects for the renewable sector.

Barack Obama’s climate and energy plan, which he unveiled last October, differs in several key respects. He has said he would push for deeper emissions cuts; invest $150 billion in new infrastructure and so-called “green-collar” jobs over the next decade; place a stronger emphasis on energy efficiency; and make explicit the country’s reduced dependence on foreign oil sources.

Under his proposed cap-and-trade system, emissions would have to be cut 80% below 1990 levels by 2050. Like McCain’s, it would start by mandating a return to 1990-level emissions by 2020.

A more accurate way of representing Obama’s plan is to call it “cap-and-auction“: Unlike his Republican rival, Obama endorses a “100% allowance auction” system in which all carbon permits would be auctioned off — rather than giving a portion away for free, as McCain’s system would — to ensure all companies are required to pay for each ton of emissions they produce.

A fraction of this revenue would be used to offset the costs of energy efficiency improvements for lower-income homeowners by expanding the Low Income Home Energy Assistance Program and establishing a dedicated fund to provide continuing assistance. Such programs could prove especially beneficial for solar installers like SolarCity and Sun Run, which are aggressively promoting new lease programs for homeowners to purchase solar panels.

In general, Obama’s expansive agenda contains many more specifics about the key areas of research and development his government would pursue and the carrots it would dangle before companies to encourage clean energy technologies and efficiency gains. In its current form, the plan contains goodies for a range of industries — from nuclear and biofuels to solar and wind — so we could expect to see many more solar farms, windmills and bio-refineries sprout up under an Obama presidency.

Venture capitalists and private equity investors, who have warmed to his candidacy, hope that, as a new face in Washington, he will be more open to their entreaties — and cleantech portfolios. The Democratic candidate’s ambitious proposal to create millions of green-collar jobs would be a boon to both established players and startups that have been struggling to recruit skilled workers.

We’ll have a better idea of McCain’s approach to energy policy in a few weeks, at which point we’ll revisit these issues in more depth.

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