Presidential candidates are offering up their solutions to the nation’s energy crisis.

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How will each candidate’s energy plan affect our wallets?

OIL DRILLING-Both candidates have softened their positions

High energy prices have forced both candidates to soften their positions on oil-drilling restrictions, but they continue to disagree on the key issue of drilling offshore.

Obama says oil companies need to focus on drilling in areas already leased to the oil and gas companies and supports more drilling within areas, such as in parts of the Gulf of Mexico, where exploration and production are already permitted.

Obama says he is open to a bipartisan proposal in the Senate that would lift the moratorium on drilling in a small portion of the 1.76 billion-acre Outer Continental Shelf, the sloping undersea region between the continent and the deep ocean around the USA, if the move came in conjunction with aggressive commitments to new clean energy technologies and efficiency. Obama argues that drilling in the area is not an answer to reduce prices in the short-term or to promote long-term energy independence.

McCain advocates a complete lifting of the ban on drilling in the Outer Continental Shelf.

Congress imposed a moratorium on drilling in new offshore areas in 1981. It is hard to know how big an impact drilling in the OCS would have on energy costs, says Bruce Bullock, director of the Maguire Energy Institute at Southern Methodist University. It’s unknown how much oil and natural gas is there, how accessible it is or how easy it would be to hook up to pipelines, he says.

Neither candidate supports opening up Alaska’s Arctic National Wildlife Refuge to drilling.

ELECTRICITY- Candidates Split

McCain wants to build 45 nuclear power plants

McCain is far more bullish than Obama on conventional electricity generation, especially nuclear power, as a way to meet soaring energy needs. McCain wants to build 45 nuclear plants which emit none of the greenhouse gases that cause global warming by 2030. That’s ambitious. Until recently, no company had filed an application for a reactor since the 1979 Three Mile Island meltdown.

“We are at a national security exposure due to imported oil, and (McCain) would love to see nuclear power as part of the climate approach,” says McCain senior adviser Douglas Holtz-Eakin.

Some experts are skeptical.

“It’s not going to happen,” says Robert Kaufmann, director of the school of public and international affairs at Boston University. He says it’s simply too tough to get permits to build nuclear reactors, largely due to safety and waste-storage concerns.

McCain also favors big subsidies to help the nuclear industry achieve his goal. Even conservative groups says that conflicts with his opposition to subsidies for ethanol.

“He’s picking favorites,” says Kenneth Green, a scholar at the American Enterprise Institute.

Obama, by contrast, says that before the nation builds a new generation of nuclear reactors, issues such as the security of nuclear fuel and where to store waste must be solved. Some say he’s paying lip service to a vital energy source.

“He’s putting so many caveats on it, he’s saying in effect we’re going to do nothing,” says Deborah-Wince Smith, president of the Council on Competitiveness, a group of CEOs, university presidents and labor leaders. McCain, meanwhile, favors Yucca Mountain in Nevada as a repository for nuclear waste; Obama does not, saying he wants to study alternatives. The Department of Energy has chosen Yucca, but concerns about costs and hazards such as earthquakes have stalled plans.

The candidates also differ on coal, which supplies 50% of U.S. electricity but accounts for 40% of carbon dioxide emissions, the chief greenhouse gas. Both want to develop technology to capture and store carbon dioxide from coal plants. McCain, though, says the U.S. should continue to build coal plants meantime. Obama says new coal plants must be designed to permit retrofitting of carbon-capture devices when the technology is available in a decade or more.

GLOBAL WARMING-Similar strategies, but Obama’s more aggressive

To combat global warming, both Obama and McCain want to impose new constraints and fees on companies that emit carbon dioxide. But Obama’s plan is more aggressive.

Under a so-called cap-and-trade system, utilities, oil companies and other polluting industries would get a limited number of allowances from the federal government to spew carbon dioxide. Utilities that fall below their cap by switching from coal to renewable energy, for instance, could sell permits to those that exceed their limits. The cap would grow more stringent over the years.

Obama wants to reduce emissions 80% below 1990 levels by 2050 the amount the Intergovernmental Panel on Climate Change, an international monitoring group, says is needed to prevent a worrisome rise in global temperatures late this century.

McCain was one of the first Republicans to break with his party several years ago and introduce cap-and-trade legislation. But now he’s calling for more modest carbon dioxide reduction than Obama: 66% below 1990 levels by 2050.

“It has to be a policy that can get through the Senate” without dampening economic growth, McCain senior adviser Douglas Holtz-Eakin says.

A bill that recently fizzled in the Senate would have required a 71% cut in carbon emissions by 2050. It would have raised electricity rates 45% in some areas and boosted gasoline prices 25 cents a gallon under some forecasts.

“We need to get to at least an 80% reduction if you’re serious about avoiding the worst impacts of climate change,” says David Friedman of the Union of Concerned Scientists.

But Tim Profeta, director of the Nicholas Institute for Environmental Policy at Duke University, says the two candidates’ goals are roughly similar. A big difference, though, is that Obama wants polluters to pay for permits; he would use the revenue for clean-energy research. McCain wants to give away most permits so consumers don’t get socked with higher energy prices.

PRICE RELIEF-Obama wants tax credits paid for by oil companies

McCain and Obama have deep differences on delivering relief to U.S. consumers slammed by the rapid rise in energy costs.

Obama advocates tax credits of $500 for an individual and $1,000 for a married couple making up to $150,000 to help offset higher costs for gasoline, heating and other costs. The rebates, which would go to approximately 150 million Americans, would be paid for with a windfall tax on oil company profits. McCain is opposed to a windfall tax, arguing it would discourage investment.

Last summer, when the average price of gasoline rose to more than $4 a gallon, the candidates called for different remedies.

McCain during the summer supported the temporary repeal of the federal gasoline tax of 18.4 cents per gallon as prices at the pump broke records. That proposal is tabled for now as the summer driving season has ended. Obama is opposed to the repeal of the federal gasoline tax, arguing it doesn’t provide much relief to consumers and reduces a key source of funding for roads and other infrastructure.

Obama advocated taking oil out of the Strategic Petroleum Reserve to help reduce prices. He proposed the removal of 70 million barrels, or about 10% of the amount of oil in the SPR, to be replaced within 12 months.

CAR-McCain backs big fines on carmakers with low mpgs

Each candidate would use tax credits to promote higher-mileage automobiles. Obama would require manufacturers to meet higher mileage requirements, while McCain would increase the punishment for automakers that fail to meet the current mileage standard, known as Corporate Average Fuel Economy, or CAFE.

CAFE is the average miles per gallon of a manufacturer’s entire fleet manufactured in the USA.

Obama proposes increasing the U.S. fuel-economy standard by 4% per year in perpetuity. The increases would lead to 49.5 miles per gallon by 2025, up from the current 25.

“Technologically, it’s feasible,” Matthew Auer, an environmental expert at Indiana University, says of Obama’s proposal. Obama backs a $7,000 tax credit for alternative vehicles such as plug-in hybrids and would mandate that all new cars be able to run on alternative fuels, such as biofuels.

McCain backs raising the penalties for violating the existing CAFE standard but does not support increasing the miles-per-gallon requirement.

A number of European automakers, such as Volkswagen and Porsche, pay millions in fines each year for not complying with CAFE. McCain advocates making the penalties high enough that it will be worth it to the companies to comply.

McCain also proposes a $5,000 tax credit for a zero-carbon-emission car, such as cars that are battery-powered. He does not advocate mandating that all cars run on alternative fuels.

RENEWABLE ENERGY-Candidates split over subsidies for innovation

Everyone loves renewable energy, and Obama and McCain are no exceptions. Obama, though, has a more aggressive plan for expanding the role of renewables, while McCain espouses a more market-based approach.

Obama proposes spending $150 billion over 10 years for development of wind, solar, geothermal and other renewable energy, including fuels like cellulosic ethanol, made from grasses and plant waste. That, he says, would create 5 million jobs.

McCain is less precise, proposing a tax credit for companies doing research on renewables equal to 10% of their employees’ wages.

Obama also favors a national standard requiring utilities to get 10% of their electricity from renewable power by 2012 and 25% by 2025. He also would require the U.S. to use 60 billion gallons a year of cellulosic ethanol by 2030.

McCain opposes quotas for the percentage of electricity from renewable sources, preferring to let industry decide how to comply with a cap he’d impose on greenhouse gas emissions. (See “Global warming.”)

The candidates also disagree on subsidies.

Obama supports current multibillion-dollar subsidies for ethanol but also backs a tariff on sugar cane-based ethanol that makes it more difficult and costly to import from Brazil.

LEARN MORE ABOUT THE ENERGY INDUSTRY

In the recently held G-8 summit, US President George Bush praised the move by G-8 leaders to rally behind and completely support a strategy for a global climate-change accord. The G-8 nations are the U.S., Britain, Germany, France, Italy, Canada, Japan and Russia.

Read more about Future of Emissions Trading Markets: SO2, NOX, CO2, Mercury

Climate change is any long-term significant change in the “average weather” that a given region experiences. Average weather may include average temperature, precipitation and wind patterns. It involves changes in the variability or average state of the atmosphere over durations ranging from decades to millions of years. These changes can be caused by dynamic process on Earth, external forces including variations in sunlight intensity, and more recently by human activities.

However, according to many environmentalists argue that the summit’s unclear vows to work towards lowering greenhouse gas emissions by a drastic 50 percent by 2050 does not appear to be legally binding and can be interpreted in various ways.

At the summit, President Bush whole-heartedly supported the broad emissions-reduction goal. In a statement, President Bush reiterated his stance that further progress is going to depend on the further development of clean energy technologies. Developing nations, he said, will need assistance so they can become “good stewards of the environment.”

This was President Bush’s last summit with the G-8 leaders and he was all praises for the group’s attempts at combating global climate change. His main demand on a climate change accord was that developing countries who have a high rate of energy consumption, need to be included in some requirements along with the major industrialized democracies that make up the Group of Eight. However, developing nations such as China, India, Mexico, Brazil, and South Africa have rejected the option of being part of the 50-percent reduction goal. It was the first time at a G-8 summit that the G-8 heads of state sat down together with these developing countries to discuss the problem of global warming. According to the heads of G-8, developing countries are today responsible for releasing nearly 80 percent of the carbon dioxide and other greenhouse gases into the atmosphere.

In a move quite opposed to what President Bush first supported in his first term, at this summit he heartily backed the broad emissions-reduction goal stated by his summit partners. In his first term, President Bush firmly disputed scientists’ assertions about global warming.

In a statement, the President stated, “We made clear, and the other nations agreed, that they must also participate in an ambitious goal. With an interim goal, with interim plans to enable the world to successfully address climate change. And we made significant progress toward a comprehensive approach.”

Overall, US President Bush was instrumental in expanding on the global warming discussions beyond the G-8 membership. However, he won’t be in office long enough to witness the next chapter of the controversial climate change debate play out.

The discussion on global warming is a run-up to U.N.-led efforts to craft a new climate change accord at a meeting in Copenhagen, Denmark, in December 2009. That new accord would succeed the Kyoto Protocol that starts to expire in 2012.

Read more about Future of Emissions Trading Markets: SO2, NOX, CO2, Mercury