One-on-one battle takes on a tax versus incentive divide

Source: Agencies  |   2008-6-24  |     NEWSPAPER EDITION

UNITED States presidential nominee Democrat Barack Obama says he would close an energy trading loophole and tax excess oil profits, while Republican John McCain is proposing a US$300-million government prize for a battery to power automobiles that outstrips current technology.

As both men sought to entice voters to their vision for curbing soaring energy costs, the candidates' proposals reflected the sharp contrasts in the parties' approaches to government. Obama sees a need for regulatory and tax fixes while McCain proposes incentives to entrepreneurs.

Obama claims a McCain victory would produce little more than a continuation of the policies of President George W. Bush, whose approval rating is at a record low over the economic nose dive and the Iraq war. McCain says Obama is untested, too liberal and a backer of policies that have failed in past administrations.

Going into the third week of their one-on-one bid for the White House, the wobbly US economy, record energy costs in particular, dominate a campaign landscape littered with US$1.05-per-liter gasoline prices, growing unemployment and home mortgage foreclosures at a rate not seen in decades.

McCain said viable battery power for cars should deliver power at 30 percent of current costs and have "the size, capacity, cost and power to leapfrog the commercially available plug-in hybrids or electric cars."

The Arizona senator also called for stiffer fines for auto makers who skirt existing fuel-efficiency standards, as well as incentives to increase use of domestic and foreign alcohol-based fuels such as ethanol.

In addition, a so-called Clean Car Challenge would provide US auto makers with a US$5,000 tax credit for every zero-carbon emissions car they develop and sell. "In the quest for alternatives to oil, our government has thrown around enough money subsidizing special interests and excusing failure," said McCain. "From now on, we will encourage heroic efforts in engineering, and we will reward the greatest success."

The McCain plan answered a proposal by Obama on Sunday to end unregulated oil trading, claiming the so-called "Enron loophole" was partly to blame for the spike in American fuel costs.

Energy trading giant Enron collapsed in a major corporate scandal in 2001 that sent executives to prison, but not before the company won exemption a year earlier from federal oversight for energy commodity trading. Critics claim that measure has allowed speculators to drive up the price of oil well beyond levels dictated by supply and demand.