Changing the fuel we put in our cars can help us in three ways. First, about a quarter of greenhouse gas emissions in the United States comes from cars burning gasoline, and the United States accounts for 45 percent of the world’s total carbon emissions from cars. The carbon in fossil fuel gasoline is released into the atmosphere when burned, resulting in climate change.

Second, generating alternatives to fossil fuels reduces the geopolitical leverage of countries like Iran, Saudi Arabia, Russia and Venezuela, and promotes the development of more diverse economies and more representative regimes in these countries. Seventy percent of our domestic oil consumption is due to cars.

Third, the money we are not sending to Iran can be invested in the American heartland — perhaps the first economic good news rural America has had in five decades.

But how we approach this problem will determine how effectively biofuels meet these objectives — carbon reduction, a geopolitical shift and rural economic development. Poorly designed policies will be expensive, produce little change in greenhouse gas pollution, and will give money to established business interests rather than small farmers.

The main ethanol candidate crop in the United States is corn. Corn is an unfortunate replacement for sugar cane, the main crop used in ethanol programs abroad. Corn can produce around 400 gallons of ethanol per acre, compared to 650 for sugar. Corn also requires large amounts of fossil fuel-based fertilizers to be grown commercially, meaning that large amounts of oil are being used to produce this fuel. Currently in the United States, for every 10 gallons of gasoline replaced by corn ethanol, about eight gallons of gasoline are burned. Corn also requires large amounts of pesticides to grow, producing harmful environmental impacts.

A more promising technology is cellulosic ethanol, which makes ethanol from cellulose instead of starch. Cellulose accounts for much of the substance of plant matter, but is more difficult to distill into ethanol. There are a few commercial plants producing cellulosic ethanol, but it is still in its infancy. Construction began this month on a 100 million-gallon-per-year plant in the United States, the first of its size.

Because cellulosic ethanol can be made from any plant matter, it does not require diverting croplands. There is no added fertilizer needed for a refinery running on agricultural waste, meaning that the ten gallons of ethanol are produced from basically zero fossil fuels. Cellulosic ethanol can also be produced from fast-growing plants such as switchgrass, which does not require much fertilizer or pesticide and can be grown in marginal soils.

How can government policy be used to promote biofuels? In general, the government is better suited to setting goals than to finding innovative ways to meet those goals. When candidates promote corn ethanol through subsidies, they create a federally-dependent industry — one that will quickly learn that it easier to make money by lobbying than through honest work. Proponents of subsidies claim that they will help get the industry off the ground and then be eliminated, but in fact farm subsidies have only grown since they have been introduced. In addition, about three-quarters of subsidies go to large businesses instead of small farmers.

Instead of picking winners and losers, the government should set a standard and let the market take care of the rest. By setting a standard — such as a 10 percent carbon reduction for auto fuels by 2020 — farmers, refiners, distributors, vendors, automakers, researchers and investors all know that there will be a market for carbon-efficient fuels. Different firms and technologies can then compete to create the most cost-effective solution — which may be starch or cellulose, E10 or E85, hydrogen and electric cars, or some new technology that has not yet been developed.

This is exactly the approach Gov. Arnold Schwarzenegger has taken with the Low Carbon Fuel Standard, the world’s first carbon standard for transportation fuels. His program also allows providers to buy and sell fuel carbon credits, so producers who exceed the standard will be able to take their innovations to the bank.

Unfortunately, this impressive, gold-standard public policy is not being adopted on the national stage. Scrambling for votes in Iowa, none of the presidential contenders have followed Schwarzenegger’s lead. Obama and Clinton’s plans rely heavily on per-gallon subsidies for ethanol and various dollar giveaways to install ethanol pumps and refineries. Given the fertilizer costs, these plans are just wasting foreign oil. Adopting Schwarzenegger’s standards would be a better approach.