Will New Fuel Standards Drive or Stifle Innovation?

I would never even consider this a debatable question, but for President Obama's government-mandated rule on fuel efficiency standards. Economist Larry Kudlow raised the question on CNBC yesterday and I wanted to take it to BNET's readers.

Going green is a hot-button issue with Obama. He's made that abundantly clear in speech after speech, but definitely drove it home with this initiative. Like it or not, building and selling cars in America, as well as buying and driving them, is going to change, big-time.

I'm sure the environmentalists and Al Gore are ecstatic, and bringing the rest of the nation in line with California's over-the-top environmental standards may or may not be a good thing, but that's beside the point. I'm concerned with what I think is a bigger issue: will the new fuel standards drive or stifle innovation?

During one of his speeches - they're sort of hard to keep track of - I thought I heard Obama make an analogy between advances in information technology over the years and what he hopes to accomplish with green energy, although I can't seem to find the exact text anywhere.

Not to dump a bucket of cold water on the president's enthusiasm, but having spent a couple of decades in the tech industry, I'm pretty sure its unusually steep innovation curve has more to do with Moore's Law - the perpetual improvement in chip integration - and Silicon Valley's entrepreneurial infrastructure than government regulation.

And automotive technology has indeed been a significant beneficiary, although folks seem to overlook this fact.

On the other hand, there is something to be said for attempting to diminish our dependency on foreign oil. But I would choose nuclear energy, natural gas, and increased oil drilling way before I'd consider shoving requirements down company's and consumer's throats that would significantly diminish choices.

Moreover, the move may backfire if the government can't somehow find a way to 1) get consumers to pay more for smaller, less powerful, and less safe cars, and 2) help auto makers make money doing it without ongoing taxpayer funding, neither of which seems plausible.

You know, I don't see how Obama's path can work, but that's just me. What do you think? Are the new rules a path to automotive innovation that reduces our dependency on foreign oil, or will market realities get in the way?