What the candidates mean for your energy bills

This article is part of a series on the candidates and the squeeze on the middle class. Click here to read about health care and housing issues.

Energy policy is one of the most divisive political issues out there, with many middle-class voters feeling squeezed every time they fill up their gas tanks (even at today's lower prices) or think about heating their homes next winter.

Presidential candidates John McCain and Barack Obama have ramped up their rhetoric on energy as they struggle to gain advantage. But both have also flip-flopped.

When it comes to energy, what do these guys really believe?

Initially, both candidates opposed opening more coastal areas to oil drilling. But in July, McCain switched to a "drill here, drill now" mantra, saying the payoff could come in a year or less. Obama has argued that oil companies should drill first on 68 million acres of leases they aren't currently using. But in August, he said he would accept limited new offshore drilling as part of a comprehensive alternative-energy package.

McCain on a gas-tax holiday

Reality check: Experts say it would take eight to 10 years to get new offshore wells into production. And though the best-case yield of an extra 2 million to 4 million barrels a day sounds good, relative to our current consumption of 20.7 million barrels, it would not put a dent in prices, either in the global marketplace or at the gas pump.

Neither candidate wants to talk about it much now, but both support a dramatic reform that's likely to increase your energy costs: a federal cap-and-trade system on carbon-dioxide emissions that would begin to address the threat of global warming and reduce our dependence on oil. But like a lot of good medicine, it would not be pleasant. The extra cost could be about 45 cents per gallon of fuel in 2015 and would rise to $1.75 in 2050, according to Massachusetts Institute of Technology economist John M. Reilly. Reilly was part of a recent cap-and-trade working group at the National Bureau of Economic Research.

Obama on a windfall tax for oil companies

Cap-and-trade systems put a limit on carbon-dioxide emissions by utilities, refineries, factories and other major energy consumers. Then they lower this cap each year. In essence, the system allows companies to buy and sell permits to produce pollution. Each year, the total availability of permits contracts. But because the permits can be bought and sold, individual companies have flexibility in planning their own programs, and pollution controls tend to be put in place where they are most efficient.

Concretely, individual companies decide which approach will be cheaper: to pay for conservation and abatement, or to buy emissions permits from other companies that have already met their abatement goals and therefore don't need the permits. The only obvious alternative to cap-and-trade, a broad tax on carbon emissions, would be political suicide.

Reality check: Cap-and-trade will be a hard sell, too. But it has an excellent track record in this country. Addressing acid-rain pollution in the 1990s was originally projected to

cost power companies up to $25 billion a year. Cap-and-trade kept it to less than $1.4 billion annually.

Both candidates are also promoting new approaches to nuclear and coal power, with major reality-check roadblocks ahead.

McCain wants to build 45 nuclear power plants to complement the 65 nuclear plants now supplying 19% of this country's electricity. He argues that if France can get 77% of its electricity from nuclear power, so can we.

Obama's plan is more cautious. He says he would fund new research but would move forward with new plants only if the power industry could resolve issues of operational safety and safe disposal of radioactive waste, as well as ensure anti-terrorist security.

Reality check: The U.S. hasn't issued a permit for a new nuclear plant since 1977, and it would take at least 10 years to get to production. Matching France's heavy reliance on nuclear power would mean building more than 700 plants -- one a month through midcentury -- at a cost of $4 trillion, according to Climate Progress blogger Joseph Romm.

Both candidates support research on coal, a fuel that is plentiful in the U.S. but particularly damaging to the environment, at least the way it's used today. Coal-fired power plants now generate half the nation's electricity -- and produce 36% of the nation's global-warming emissions.

Tour a coal shipping yard

Both candidates are interested in "clean coal" technology that would capture emissions and pump them into permanent storage underground. McCain is now promising $2 billion a year to develop the technology, with the aim of quickly commercializing it for export to China and other major coal-consuming nations. Obama has included an unspecified amount for clean coal in a 10-year clean-energy investment package, and he has proposed building five power plants with the new technology. He has also threatened to ban any new conventional coal-fired power plants.

Reality check: Several states have already effectively declared a ban on conventional coal plants, and banks have withheld financing for plants based on concern about emissions. So clean coal is an increasingly urgent issue.

But no one knows whether the new technology will work at an affordable cost, and even if it does, there is no plan to retrofit existing coal-fired plants. As with most everything in the energy world, expect a 10-year time horizon before the first "carbon capture and storage" plants get built.

None of this is good news for millions of middle-class families facing tough financial challenges right now.

Chart: Pump price breakdown

Obama wants to ease the pain with an energy tax credit of $1,000 per working family, paid for

with a windfall tax on oil companies. McCain says a windfall tax would just discourage domestic oil exploration. Obama charges that McCain's plan to cut corporate taxes as a means of stimulating growth would put $4 billion a year into the pockets of big oil companies already racking up record profits, with $1.2 billion of it going to ExxonMobil alone.

Both candidates are optimistic about the use of innovative energy technologies to reduce costs and create jobs.

Obama wants to spend $150 billion over 10 years developing new technologies, using funds raised from auctioning off the first round of permits under the cap-and-trade system. McCain prefers rationalizing the current patchwork of tax credits to encourage these technologies, including a $5,000 credit for buying a zero-carbon-emission car. He has also proposed a $300 million prize for the development of a battery package capable of powering plug-in hybrid or electric vehicles at 30% below current costs.

See Subaru's battery-powered car

Reality check: Getting alternative-energy technologies right can be tricky. For instance, the push by both candidates for electric vehicles could just shift the problem from gasoline to coal. The rich federal subsidies for corn ethanol -- promoted by Obama and opposed by McCain -- offer an interesting example of such unintended consequences. The subsidies have led to rapid and, some people say, unsustainable increases in food costs worldwide while doing little for the environment or energy independence.

Still, the U.S. leads the world in environmental technologies, and shrewd choices could lead to rapid commercial development of such technologies, reducing pollution, contributing to energy independence for the U.S. and earning profits for U.S. companies offering technology-based solutions in the international marketplace.

Promising though they may be, plans for new energy sources are all long-term propositions. Forget all those sexy new ideas for now. The quickest, most effective remedy for the energy problems of the middle class may well be conservation -- by individuals, families and businesses.

Obama has been aggressive in promoting conservation. He has called on Americans to reduce total electrical demand by 15%. He has proposed a national goal of reducing new buildings' energy use by 50% and existing buildings' use by 25%. He has suggested that individuals can help with simple checks on their own energy use, at one point arguing that proper tire pressure in all the nation's cars would help as much as new drilling on public lands.

McCain's campaign made fun of the suggestion about tire pressure, handing out pressure gauges reading "Obama's Energy Plan." The tactic was consistent with McCain's record of opposition to increases in auto-

mileage efficiency standards and to other conservation and renewable-energy measures.

Reality check:Figuring out how to do things more efficiently is one of the hallmarks of American ingenuity. Chemical giant DuPont, for instance, has boosted production 33% while cutting global-warming emissions by 72% and saving $3 billion in energy costs. Then it set out to reduce emissions by a further 15% below 2004 levels within 10 years and is already more than halfway there. To achieve that kind of change more broadly, America is going to need bold leadership.

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Updated Oct. 21, 2008