Massachusetts Sen. John Kerry (search) is calling for tougher fuel efficiency standards coupled with aid to the auto industry, and a new environmental fund to pay for research on expanding the use of alternative fuels.

Kerry would also spend $1 billion a year to help the U.S. auto industry retool factories to manufacture more efficient vehicles and sets a goal of the nation being independent of foreign oil within a decade.

Kerry cast his energy policy in national security terms, choosing a Veterans of Foreign Wars hall for his speech Friday in the state where precinct caucuses next January will launch the presidential nominating season.

“Our national security is at stake and we have to act today, not wait for decades while new crises threaten or strike,” said Kerry.  “Setting a national goal of ending our reliance on Middle East oil within this next decade is critical to the long-term national security of the United States.  No foreign government can embargo clean, domestic, renewable sources of energy -- and no terrorist can seize control of them.”

Kerry wants to boost fuel efficiency through a carrot-and-stick approach to the auto industry. Little short-term progress can be made to reduce reliance on oil without increasing that efficiency, he said.

"One out of seven barrels of oil in the world is consumed on America's highways," said Kerry. "I propose both economic incentives to build the cars, the trucks, the SUVs and the buses of the future - and higher standards for gas mileage for every new vehicle produced or sold in this country."

He tossed in an attack on President Bush, saying his policies will make the nation permanently reliant on foreign oil.

"Today we have an energy policy of big oil, by big oil, and for big oil," said Kerry.

In addition to investing $1 billion a year to help the auto industry retool production, Kerry said he would build in tax incentives for the purchase of fuel-efficient cars and trucks.

"As we require higher fuel efficiency, we have to help companies and consumers alike make the transition and my plan does exactly that," said Kerry.

A lead role for the United States in producing more fuel-efficient vehicles (search) could create 500,000 jobs, Kerry said. Those vehicles would be produced elsewhere if the nation doesn't act, he said.

Besides ending dependence on overseas fuel within a decade, Kerry wants alternative fuels producing 20 percent of the nation's electricity by 2020.

An Energy Trust would finance research into expanded use of alternative energy, and would be funded by diverting the royalties that energy companies pay for the right to drill for oil and natural gas on public lands.

"We will do justice to conservation and we will for the first time have a guaranteed national commitment to reduce our dependence on foreign oil," said Kerry.

A focus on renewable energy and alternative fuels is an easy sell on Iowa. Alcohol distilled from corn and other crops is blended with gasoline to create a popular alternative fuel that also creates a new market for corn. Kerry said that's only the beginning for alternative fuels.

"The new Energy Trust will fund research in this area - including research to realize the vast promise of new forms of ethanol from biomass which can become an entirely new cash crop for America's farms and commercial forestries," said Kerry.

Kerry wants to increase the use of clean-burning natural gas, proposing a North American Compact with Canada and Mexico to develop and transport natural gas from across the continent. He also called for the development of hydrogen-fueled vehicles, but said that's in the long-term.

"My plan for energy independence calls for a hydrogen-based energy economy by 2020," said Kerry.