From the WSJ Morning Brief:
Energy policy has emerged as a key point of contrast between the proposals of John McCain and Barack Obama, and one likely to stay in the headlines until November
Obama:
... Mr. Obama appears to present a clearer case on the energy-technology plan that the journal describes as the heart of his spending program.
He would pay for that $15 billion-a-year plan with revenue collected from a separate proposal to limit the emissions of greenhouse gases through a system of trading pollution permits that are auctioned off to utilities and other producers of carbon dioxide. Mr. Obama, who compares his energy ambitions to the Kennedy-era space program, would invest that $150 billion over 10 years in solar, wind and possibly nuclear alternatives to fossil fuels. Mr. Obama sees a better chance now of pushing through the kind of major infrastructure programs that failed to make it in the Clinton years. ...
One comment: big government programs make me nervous.
McCain:
Mr. McCain, too, has appealed to voters who worry about global warming, and made high gas prices a prominent issue on the campaign trail. But he offers a more cautious policy path to dealing with both issues. An advocate for moderate government spending and a more forceful believer in tax cuts, Mr. McCain says incentives for alternative energy sources distort the markets, though he would support incentives for building new nuclear power plants. He, too, favors a cap-and-trade system for carbon emissions, but on a smaller scale. And like President Bush, Mr. McCain would like to tackle high gas prices by giving oil companies more latitude to drill where they would like.
To that end, yesterday he called for an end to federal bans on drilling off the American coasts ...
One comment: free markets that fail to allocate resources efficiently due to negative externalities are already distorted. Subsidies and taxes can be used to reduce the distortion.