Senior Fellow Newt Gingrich

The pursuit of 21st-century energy solutions is an urgent concern of American consumers and our government. With the average price of gasoline in the United States climbing to more than $3.50 a gallon in some cities, drivers cringe when they pull up to the pump. And while the economic impact of a petroleum-based energy system affects virtually every American, so do the consequences for national security.

It is in America's best interest to reduce the world's dependency on oil from unstable regions of the world. Starting with a collaborative effort among individuals, businesses and government leaders, we can fundamentally transform the American energy system to one that is more dependable and more affordable. Yet there is no panacea for the energy challenge we face. It will take a wide-ranging approach that adopts more aggressive development of biofuels and solar, wind, hydrogen and nuclear power.

We also need increased domestic exploration and development of oil and gas as well as a concurrent and significant effort toward energy conservation through materials technology breakthroughs for lighter, stronger vehicles.

As a part of this mix, the federal government has recognized the importance of ethanol, making increased ethanol production a cornerstone of the Renewable Fuels, Consumer Protection, and Energy Efficiency Act of 2007. The act calls for the production of 36 billion gallons of ethanol a year by 2022 (up from the 2007 production level of 6.5 billion gallons), of which at least 21 billion gallons will come from cellulosic ethanol.

And the law moves us toward a more energy-independent future by requiring more research and testing of moving biofuels via pipelines and higher ethanol blends.

While ethanol energy development continues to progress, this act will help solidify America's system of domestic biofuels production by discovering and dealing with challenges to its development. The expansion of biofuels production in the United States is good news. It means more of America's energy dollars will be kept within our borders and go to the Iowa or Georgia farmer rather than to the Saudi princes or the Venezuelan dictator. And that means greater rural development.

Ethanol is but one answer to America's long-term energy needs. Without the strides being made in corn-based ethanol and soy biodiesel, there would be no foundation for future improvements.

Many vehicles already on the road are equipped to run on E-85 fuel (a fuel made from 85 percent ethanol and 15 percent gasoline), and the number of refueling stations that supply E-85 is growing rapidly. Even the widespread use of E10 (a fuel blend made from 10 percent ethanol) is decreasing our use of energy from foreign sources.

The future for ethanol is bright. In the next decade cellulosic ethanol, which is derived from crop residues, grasses and other plant materials otherwise discarded, will become a reality. The development of cellulosic ethanol at Iowa State and other universities, government labs and in the private sector portends an even brighter cost-benefit future. The potential is enormous.

The development of an expanded energy system that is affordable and ultimately self-sustaining cannot be the government's job alone. America is home to countless innovative entrepreneurs who may hold the key to our energy independence. That is why incentives and prizes must be offered to spur new inventions and accelerate the development of more efficient processes to make and use ethanol.

Though ethanol holds a lot of potential as a partial replacement for gasoline, the ethanol we use today will be replaced by an improved ethanol in the future as ethanol producers continue to advance the fuel's positive energy return on investment (the ratio of how much energy the fuel produces to how much energy is needed to produce the fuel).

The federal government should put up a monetary prize for the development of ethanol with dramatically higher energy return on investment. The prize money would be a fraction of the benefit the country would gain from the increased efficiency of the fuel.

To create a 21st-century energy system, we must embrace and execute a bold strategy. We've taken the first step with support for renewable fuels like corn ethanol. While record prices at the pump have lent urgency, inducements for real change ought to take the form of providing large rewards for those creative citizens who succeed in speeding up the journey toward energy self-reliance.

Newt Gingrich is a senior fellow at AEI.