June 23 (Bloomberg) -- John McCain, calling for ``a swift conversion of American vehicles away from oil,'' said he would spur a market for vehicles that emit little or no carbon dioxide by offering consumers a $5,000 tax credit to buy them.

The presumptive Republican presidential nominee today also proposed a $300 million prize for the development of a battery with sufficient capacity and power to ``leapfrog'' those that now fuel plug-in hybrids or electric cars.

Addressing a town hall meeting at Fresno State College in California, McCain said his latest proposals would replace the current ``hodgepodge'' of government incentives for buying fuel- efficient cars that is the ``the handiwork of lobbyists, with all the inconsistency and irrationality that that involves.''

Energy costs are moving to the top of issues voters say they want addressed in the campaign between McCain and Illinois Senator Barack Obama, the presumptive Democratic nominee, as gasoline tops $4 a gallon in the U.S.

The Arizona senator said his agenda would help lessen America's dependence on foreign oil and reduce emission of greenhouse gases that cause global warming.

``The unwise policies of our government have left America's energy future in the control of others,'' McCain, 71, said.

`Clean Car Challenge'

His ``Clean Car Challenge'' would provide a $5,000 tax credit for buyers of zero-emissions cars to encourage their development. For less clean vehicles, credits would be offered on a scale that gives higher credits for lower emissions.

``These tax credits will be available for everybody, not just those who can afford an accountant,'' he said.

Automakers are developing zero-emissions cars. General Motors Corp. last week said it will begin building a test fleet next year of more than 100 Chevrolet Volts, the electric car that recharges at a wall outlet. Honda Motor Co. last week said it plans to lease 200 FCX Clarity hydrogen fuel cell vehicles over the next three years with a goal of mass production within a decade.

McCain said he would pay for the programs, including the $300 million prize for battery development, by eliminating special spending projects that lawmakers add to the budget every year. He said he is emphasizing new incentives for fuel-efficient vehicles because 97 percent of transportation in the U.S. is powered by oil.

Alternative Fuels

``Innovation in the use of alternative fuels in transportation presents the greatest opportunity for energy independence,'' he said.

Regarding the steep rise of oil prices over the past year, McCain said if there's any evidence of commodities speculators manipulating prices of oil, there should be ``a thorough and complete investigation.''

McCain said he would revamp the country's current Corporate Average Fuel Economy standards, which he said are too lightly enforced by fines.

Congress established the CAFE standards for passenger vehicles in 1975 in response to the 1973 Arab oil embargo. The standards are fleet-wide averages, meaning automakers can offset larger, gas-guzzling cars and trucks with fuel-efficient smaller vehicles to meet the overall goal.

``CAFE standards should serve large national goals in energy independence, not the purpose of small-time revenue collection,'' McCain said.

Ethanol

He reiterated his opposition to government subsidies for corn-based ethanol and called instead for equal treatment of all its forms, including sugarcane-based ethanol from Brazil.

``Instead of playing favorites, our government should level the playing field for all alcohol fuels that break the monopoly of gasoline, lowering both gasoline prices and carbon emissions,'' McCain said.

That can be accomplished, he said, with one federal standard that would ``hasten the conversion'' of all new vehicles to so- called flex-fuel capability, which can use more than one source of energy for power derived from renewable resources.

It took Brazil only three years to go from about 5 percent to over 70 percent of all new vehicles with flex-fuel capacity, he said.

As part of a two-week tour to promote his ``energy security'' agenda, McCain on June 18 promised to add 100 nuclear power plants in the U.S. and spend $2 billion to boost research and development of ``clean'' coal.

Two days earlier, he abandoned his opposition to offshore drilling for oil and natural gas, saying he now favors leaving such decisions to the states.

To contact the reporter on this story: Edwin Chen in Fresno, California at echen32@bloomberg.net.

Last Updated: June 23, 2008 15:52 EDT