July 1 (Bloomberg) -- As a senator, John McCain has condemned policies that pick market winners and losers, aiming particular criticism at government ethanol subsidies as a taxpayer rip-off.
As a presidential candidate, the Arizona Republican himself is backing specific industries in proposals for relief from high energy prices and foreign oil dependence.
Coal producers and users would benefit under McCain's energy plan from about $30 billion of government funding for clean-coal technology research. Federal carbon caps and a system for trading emissions credits would create winners and losers depending on how pollution credits are doled out. McCain has promised, without details, to push for construction of 45 nuclear-power plants.
``He can rant all he wants about ethanol subsidies, but he's in favor of clean-coal subsidies,'' said Jerry Taylor, a senior fellow at the free-market Cato Institute in Washington. ``It's just a different set of handouts for a different set of industries.''
McCain said his plan seeks to give American companies ``new incentives and rewards to seek, instead of just giving new taxes to pay and new orders to follow.'' The goal, the presumptive Republican nominee said, is to pursue multiple options in an effort to balance long-term energy production, short-term price remedies, and environmental protection.
``I'm not picking winners and losers here,'' McCain said during a campaign swing yesterday through Pennsylvania. ``I think the way we're going to solve this issue is to let a thousand flowers bloom. I'm for federal funding of pure research and development.''
Energy Anxiety
Both major-party presidential candidates are trying to tap into voter energy anxiety, as record oil prices soar to more than $140 a barrel and gasoline for the summer vacation-travel season tops $4 a gallon. Democrat Barack Obama, a farm-state senator from Illinois, backs ethanol subsidies and has proposed tax credits for development of wind and solar energy, financed by cutting tax breaks for oil companies.
On the campaign trail, McCain often talks about the importance of free markets. ``When the government jumps in and distorts the markets there are unintended consequences,'' he said May 13 in North Bend, Washington.
McCain devoted a cross-country tour late last month to energy policy, proposing to end restrictions on some offshore oil exploration. Obama attacked that plan as ineffective and risky for the environment, and made light of McCain's idea for a $300 million prize to encourage development of high-capacity batteries for plug-in cars.
Level Playing Field
When criticizing government interference, McCain's favorite target is the federal subsidy for ethanol-blended vehicle fuel, worth more than $3 billion last year. U.S. ethanol producers also benefit from import tariffs and crop subsidies for corn, the biggest source of domestic ethanol. On the campaign trail, he says programs to prop up U.S. corn-based ethanol distort energy prices, and promises policies that give the industry some competition from ethanol derived from sugar cane or other sources.
``Instead of playing favorites among the lobbyists, our government must also level the playing field for all alcohol fuels that break the monopoly of gasoline,'' McCain said June 25 in Las Vegas. ``This can be done with a simple federal standard to hasten the conversion of all new vehicles in America to flex- fuel technology.''
McCain's energy plan would spend $2 billion a year through 2024 in taxpayer support for research and development of clean- coal technologies.
Nuclear Power `Guarantees'
McCain has supported Senate efforts for similar government- subsidized development of new nuclear power plant designs. His presidential campaign's energy program calls for new nuclear plant construction, but doesn't promise taxpayer support. McCain said he would consider government ``guarantees'' to encourage nuclear-power development, but declined to provide specifics. ``If we have to provide some guarantees, I'm willing to do that,'' McCain said yesterday.
``We are basically telling the utilities that they will have some guarantees, that we won't abandon them at some point in time, as we did during the 1970s,'' McCain said in Riverside, California, on June 24.
McCain policy adviser Douglas Holtz-Eakin said the Republican's plan balances energy and environmental demands and ignores the pleas of special interests.
Ignoring Special Interests
``The plan is not calibrated to make interest groups happy,'' Holtz-Eakin said.
Indeed, McCain has drawn fire from environmentalists and groups advocating for more exploration of fossil fuels. Conservationists have criticized the Republican for proposing to end restrictions on offshore oil exploration, while pro- development interests say McCain should go farther and permit exploration in some Alaskan wilderness areas.
``He missed an opportunity to talk about where we have an enormous amount of resources'' in Alaska, said Bill Koetzle, senior vice president of public policy at the Institute for Energy Research, which supports lifting a federal ban on offshore drilling. ``Trying to get the moratorium lifted offshore is important, but it's not enough.''
Ethanol producers have fought this battle before with McCain and they're sitting this one out. Matt Hartwig, spokesman for the Renewable Fuels Association, a trade group that represents ethanol producers, wouldn't comment about McCain's energy plan.
Hartwig did make one observation: ``When you talk about the energy business, there is no such thing as a free market.''
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