It should come as no surprise that California, America’s most energy-efficient state, also possesses its strongest economy.

The United States has far greater domestic energy resources than Iceland or Sweden does. We sit atop the second-largest geothermal resources in the world. The American Midwest is the Saudi Arabia of wind; indeed, North Dakota, Kansas, and Texas alone produce enough harnessable wind to meet all of the nation’s electricity demand. As for solar, according to a study in Scientific American, photovoltaic and solar-thermal installations across just 19 percent of the most barren desert land in the Southwest could supply nearly all of our nation’s electricity needs without any rooftop installation, even assuming every American owned a plug-in hybrid.

In America, several obstacles impede the kind of entrepreneurial revolution we need. To begin with, that trillion dollars in annual coal-and-oil subsidies gives the carbon industry a decisive market advantage. Meanwhile, an overstressed and inefficient national electrical grid can’t accommodate new kinds of power. At the same time, a byzantine array of local rules impede access by innovators to national markets.

There are a number of things the new president should immediately do to hasten the approaching boom in energy innovation. A carbon cap-and-trade system designed to put downward pressure on carbon emissions is quite simply a no-brainer. Already endorsed by Senators McCain, Clinton, and Obama, such a system would measure national carbon emissions and create a market to auction emissions credits. The supply of credits is then reduced each year to meet pre-determined carbon-reduction targets. As supply tightens, credit value increases, providing rich monetary rewards for innovators who reduce carbon. Since it is precisely targeted, cap-and-trade is more effective than a carbon tax. It is also more palatable to politicians, who despise taxes and love markets. Industry likes the system’s clear goals. This market-based approach has a proven track record.

There’s a second thing the next president should do, and it would be a strategic masterstroke: push to revamp the nation’s antiquated high-voltage power-transmission system so that it can deliver solar, wind, geothermal, and other renewable energy across the country. Right now, a Texas wind-farm manager who wants to get his electrons to market faces two huge impediments. First, our regional power grids are overstressed and misaligned. The biggest renewable-energy opportunities—for instance, Southwest solar and Midwest wind—are outside the grids’ reach. Furthermore, traveling via alternating-current (A.C.) lines, too much of that wind farmer’s energy would dissipate before it crossed the country. The nation urgently needs more investment in its backbone transmission grid, including new direct-current (D.C.) power lines for efficient long-haul transmission. Even more important, we need to build in “smart” features, including storage points and computerized management overlays, allowing the new grid to intelligently deploy the energy along the way. Construction of this new grid will create a marketplace where utilities, established businesses, and entrepreneurs can sell energy and efficiency.

The other obstacle is the web of arcane and conflicting state rules that currently restrict access to the grid. The federal government needs to work with state authorities to open up the grids, allowing clean-energy innovators to fairly compete for investment, space, and customers. We need open markets where hundreds of local and national power producers can scramble to deliver economic and environmental solutions at the lowest possible price. The energy sector, in other words, needs an initiative analogous to the 1996 Telecommunications Act, which required open access to all the nation’s telephone lines. Marketplace competition among national and local phone companies instantly precipitated the historic explosion in telecom activity.

Construction of efficient and open-transmission marketplaces and green-power-plant infrastructure would require about a trillion dollars over the next 15 years. For roughly a third of the projected cost of the Iraq war we could wean the country from carbon. And the good news is that the government doesn’t actually have to pay for all of this. If the president works with governors to lift constraints and encourage investment, utilities and private entrepreneurs will quickly step in to revitalize the grid and recover their investment through royalties collected for transporting green electrons. Businesses and homes will become power plants as individuals cash in by installing solar panels and wind turbines on their buildings, and by selling the stored energy in their plug-in hybrids back to the grid at peak hours.