Offshore drilling?  Ethanol?  Wind and solar subsidies?  Nuclear energy?  Higher fuel efficiency standards?  These are the typical stopgap, short sighted solutions to rising energy costs being bandied about by the lifetime politicians who seem incapable of thinking originally about energy and oil issues.

Proposals to drill offshore are certainly practical, but of course they have long start times and are temporary sources of relief at best.  What we need to do is think in terms of crafting economic policy that rewards innovation and research and development to create more efficient vehicles and alternative sources of energy.  To wit, I propose:

The 4PVC - the Four Passenger Vehicle challenge.  This challenge will reward the company that can first produce an alternative fueled vehicle that can transport a family of four at 70 mph with a minimum range of 300 miles, at a cost of 5 cents per mile or less.  The vehicle must be capable of mass production at a base price of $30,000 or less.

A similar prize can be awarded for the hydrocarbon fueled vehicle that can do the same at a cost of 1.5 cents per mile or less (based on $4.00 a gallon gas).

What prize, you ask?  Simple -- profit!  I would propose that the company that first attains this challenge will first receive a double length patent.  In addition, all income derived from that patent will be tax free.  Investors in companies pursuing the prize will not be subject to capital gains taxes.  Moreover, since many more companies will fail than succeed, investors in those companies that fail will be entitled to write off double their capital losses.  By economic incentives, we can drive companies to participate and investors to contribute.

Now take this approach and extend it to alternative fuel and alternative power development.  We can set appropriate goals and incentivize research and development and reward investment while minimizing downside risk. For better or worse, tax policy has always been a means to social engineering.  We use it to stimulate construction, savings, to reward procreation and (under the death tax) to punish the accumulation of wealth.  Why is it that our policymakers are so averse to using tax policy to address energy issues?