A while back, President George W. Bush famously proclaimed that “America is addicted to oil.” Such self-evident truths are rarely uttered in the halls of government.  But however obvious the pronouncement, admission is the addict’s first step toward recovery.  How do we get the addict moving down the path to sobriety?

Ironically, the ultimate and best answer to that question would appeal to the President and hardest rock-ribbed conservative: unleash the free market.

But hasn’t the Invisible Hand provided the cheap oil high that has caused the addiction in the first place?  Didn’t the free market get us into this mess?

Only if you believe in fairy tales.

It’s difficult to argue with a straight face that the energy market is anything close to "free."  The invisible hand of the oil market wears a military-issue, desert camouflage glove and sports subsidy sparklers and preferential tax treatment trinkets on every finger.  To say nothing of the set of the defensive set of brass knuckles it keeps in reserve for times like these when the status quo is threatened.

Today’s energy market is a textbook case of market failure.  Price signals are distorted by the myriad externalities currently absorbed by the lungs and pocketbooks of Americans – and by the lives of American servicemen and women. 

How do we fix that broken market?  One piece at a time, and, perhaps, one state at a time.

Governor Rendell has offered an important model of a smart policy approach that can begin to repair the broken market and rehabilitate the addict.  He has proposed a visionary PennSecurity Fuels Initiative – part of his equally ambitious Energy Independence Strategy - that would replace every drop of oil that Pennsylvania imports from the Persian Gulf with homegrown biofuels by 2017. 

The Governor’s plan would incrementally impose a 10% ethanol content requirement for gasoline and a similar renewable oil content requirement of up to 20% for diesel fuel.

Such "command and control" government mandates may be anathema to the fairytale world of free marketeers, but they are in reality important first steps to energy sobriety.

The Governor’s proposals are smart policies that don’t pick technological winners.  They will clean our air, help to reduce the state’s global warming emissions, and help to spur investment and jobs in the “clean tech” sector of the state’s economy.  They will enhance Pennsylvania’s already strong position as a leader in alternative energy, and provide a model to the nation on how we can wean ourselves from foreign energy sources while building jobs at home and enhancing national security.

Smart policies like those proposed by Governor Rendell and losers, and some of these questions will be answered as technologies compete for the mandated market share.  The invisible hand is still pretty efficient, once it’s pointed in the right direction. 

But some additional pointing may be needed.

We must be careful not to replace one unsustainable energy source with another.  Forward looking policy must be coupled with sustainable resource management planning, incentives, and some regulation to ensure that Pennsylvania’s farms and forests can produce an reliable and sustainable supply of the biofuels that hold such promise for our nation in the emerging Clean Energy Economy.

- Quigley