Alternative Transportation Fuels and Vehicles: Energy, Environment, and Development Issues

CRS Report for Congress
Alternative Transportation Fuels and Vehicles:
Energy, Environment, and Development Issues
Updated January 7, 2005
Brent D. Yacobucci
Specialist in Energy Policy
Resources, Science, and Industry Division

Congressional Research Service ˜ The Library of Congress

Alternative Transportation Fuels and Vehicles:
Energy, Environment, and Development Issues
The sharp increase in petroleum prices beginning in mid-1999, experiences with
tighter supply, and international instability have renewed concern about our
dependence on petroleum imports. One of the strategies for reducing this
dependence is to produce vehicles that run on alternatives to gasoline and diesel fuel.
These alternatives include alcohols, gaseous fuels, renewable fuels, electricity, and
fuels derived from coal. The push to develop alternative fuels, although driven by
energy security concerns, has been aided by concerns over the environment, because
many alternative fuels lead to reductions in emissions of toxic chemicals, ozone-
forming compounds, and other pollutants, as well as greenhouse gases.
Each fuel (and associated vehicle) has various advantages and drawbacks. The
key drawback of all alternative fuels is that because of higher fuel and/or vehicle
prices, alternative fuel vehicles (AFVs) are generally more expensive to own than
conventional vehicles. And while many AFVs have superior environmental
performance compared to conventional vehicles, their performance in terms of range,
cargo capacity, and ease of fueling may not compare favorably with conventional
vehicles. Furthermore, because there is little fueling infrastructure (as compared to
gasoline and diesel fuel), fueling an AFV can be inconvenient.
Any policy to support AFVs must address the performance and cost concerns,
as well as the issue of fueling infrastructure. Within this context, a “chicken and
egg” dilemma stands out: The vehicles will not become popular without the fueling
infrastructure, and the fueling infrastructure will not expand if there are no customers
to serve.
Three key laws, the Alternative Motor Fuels Act of 1988 (P.L. 100-494), the
Clean Air Act Amendments of 1990 (P.L. 101-549), and the Energy Policy Act of
1992 (P.L. 102-486), as well as three Executive Orders, support the development and
commercialization of alternative fuels and alternative fuel vehicles. These legislative
acts and administrative actions provide tax incentives to purchase AFVs, promote the
expansion of alternative fueling infrastructure, and require the use of AFVs by
various public and private entities.
The 108th Congress considered comprehensive energy legislation, but a final bill
was not submitted to the President for signature. H.R. 6 would have promoted the
development of renewable fuels, especially ethanol and hydrogen. Further, it would
have provided incentives for the development and purchase of alternative fuel and
advanced technology vehicles. In addition to the energy bill, other bills were
introduced to create vehicle purchase tax credits, promote research and development
of fuels, and require the use of alternative fuels. It is likely that similar legislation
will be introduced in the 109th Congress.
This report reviews these issues. It will be updated as events warrant.

In troduction ......................................................1
Legislative Background.............................................2
The Alternative Motor Fuels Act of 1988 ...........................3
The Clean Air Act Amendments of 1990...........................3
The Energy Policy Act of 1992...................................3
Fleet Requirements........................................3
Tax Incentives............................................5
Executive Orders..............................................6
Alternative Fuels..................................................6
Propane (LPG)................................................7
Consumption .............................................7
Cost ....................................................8
Infrastructure .............................................8
Performance ..............................................9
Safety ...................................................9
Other Issues..............................................9
Natural Gas..................................................9
Consumption ............................................10
Cost ...................................................10
Infrastructure ............................................11
Performance .............................................11
Safety ..................................................11
Other Issues.............................................12
Biodiesel ...................................................12
Consumption ............................................12
Cost ...................................................12
Infrastructure ............................................13
Performance .............................................13
Safety ..................................................13
Other Issues.............................................13
Ethanol .....................................................14
Consumption ............................................14
Cost ...................................................15
Infrastructure ............................................15
Performance .............................................16
Safety ..................................................16
Other Issues.............................................17
Methanol ...................................................17
Consumption ............................................17
Cost ...................................................18
Infrastructure ............................................18
Performance .............................................19
Safety ..................................................19
Fuel Cells...............................................19
Electricity ...................................................19

Cost ...................................................20
Infrastructure ............................................20
Performance .............................................20
Safety ..................................................21
Fuel Cell and Hybrid Vehicles...............................21
Hydrogen ...................................................22
Consumption ............................................23
Cost ...................................................23
Infrastructure ............................................23
Performance .............................................23
Safety ..................................................24
Coal-Derived Liquid Fuels......................................24
Conclusions .................................................24
Congressional Action..............................................25
List of Tables
Table 1. History of U.S. Alternative Fuel Vehicle Policies.................2
Table 2. Light-Duty Alternative Fuel Vehicle Purchase Requirements
under the Energy Policy Act.....................................4
Table 3. Summary of Alternative Fuels................................7

Alternative Transportation Fuels and
Vehicles: Energy, Environment, and
Development Issues
Is there any practical replacement for gasoline and diesel fuel in automobiles?
Since the oil crises of the 1970s and the rise in the awareness of environmental and
security issues, policy makers have often considered this question. For many reasons,
the United States has searched for alternatives to petroleum fuels. These reasons
include limiting dependence on imported petroleum, controlling the emissions of
pollutants into the air, and limiting the emissions of greenhouse gases.
Several fuels are considered alternative transportation fuels by the federal
government. These fuels are electricity, natural gas, propane (liquefied petroleum
gas, or LPG), ethanol, methanol, biodiesel, and hydrogen. Some of these fuels are
similar to conventional fuels, and can be used in conventional vehicles with little or
no modification to the vehicle. However, some of these fuels are significantly
different, and require the use of completely different engine, fuel, and drive systems.
Consequently, cost as well as performance of the associated alternative fuel vehicles
(AFVs) must be part of the discussion. Key factors in the ultimate success or failure
of any alternative fuel include the relative cost of the fuel, the ability to develop and
expand fueling stations, and the performance and safety of the fuel.
For various reasons — notably cost, performance, and availability — alternative
fuels have yet to play a major transportation role in the United States. Many argue
that the government must step in. Congress, recent Administrations, and state
governments have instituted some key programs to promote the use of alternative
fuels. These programs include tax incentives for the purchase of alternative fuels and
alternative fuel vehicles (AFVs), purchase requirements for government and private
fleets, and research grants for the study of alternative fuels. Despite these efforts,
only about 480 million gallons1 of alternative fuels were consumed in 2004, just
0.3% of motor fuel demand (136 billion gallons of gasoline and 36 billion gallons of
di esel ). 2

1 This does not include ethanol blended in gasoline, which constitutes approximately 1% of
the volume of motor gasoline in the United States.
2 U.S. Department of Energy, Energy Information Administration (EIA), Alternatives to
Traditional Transportation Fuels 2003, December 2004.

Legislative Background
The three most important statutes concerning alternative fuels are the
Alternative Motor Fuels Act of 1988 (AMFA, P.L. 100-494), the Clean Air Act
Amendments of 1990 (CAAA, P.L. 101-549), and the Energy Policy Act of 1992
(EPAct, P.L. 102-486). AMFA promoted federal government use of alcohol- and
natural gas-fueled vehicles. EPAct requires that federal and state agencies, as well
as private firms that distribute alternative fuels, must purchase for their fleets a
certain proportion of vehicles that are capable of being fueled by specific non-
petroleum fuels. Furthermore, EPAct grants the Department of Energy (DOE) the
authority to make similar requirements of local governments and private fleets. In
addition, EPAct provides tax incentives for private purchases (both individual and
commercial) of AFVs. CAAA requires government and private fleets in cities with
significant air quality problems to use low-emission, “clean-fuel” vehicles.
In addition to these laws, recent executive orders have also shaped alternative
fuels policy in the United States. These include E.O. 12844, which urged federal
agencies to exceed EPAct purchase requirements; E.O. 13031, which required that
federal agencies meet EPAct requirements regardless of budget; and E.O. 13149,
which aims to drastically reduce federal government petroleum consumption through
the use of AFVs and hybrid vehicles. The major alternative fuels legislation and
relevant Executive Orders are summarized in Table 1 and discussed further below.
Table 1. History of U.S. Alternative Fuel Vehicle Policies
PolicyYearKey Provisions
Alternative Motor1988 — Promoted Federal Government acquisition of
Fuels Act AFVs
(42 U.S.C. 6374) — Established commercial demonstration programs
for alternative fuel heavy-duty trucks
Clean Air Act1990 — Established Clean Fuel Fleet Program
(42 U.S.C. 7581)
Energy Policy Act1992 — Established AFV purchase requirements for
(42 U.S.C. 6374)Federal, state, and fuel provider fleets
— Established tax incentives for the private
purchase of AFVs
Executive Order1993 — Urged agencies to exceed requirements set in
Executive Order1996 — Required federal agencies to meet EPAct
13031requirements regardless of budget
— Required yearly progress reports on EPAct
Executive Order2000 — Set goal of reducing federal government
13149petroleum consumption
— Identified several strategies, including the use of
AFVs and hybrid vehicles

The Alternative Motor Fuels Act of 1988
Beginning in FY1990, the Alternative Motor Fuels Act called for the federal
government to acquire the “maximum practicable” number of light-duty alcohol and
natural gas vehicles. In addition, AMFA established an Interagency Commission on
Alternative Motor Fuels to develop a national alternative fuels policy. The act also
established a commercial demonstration program to study the use of alcohol and
natural gas in heavy duty trucks. Since 1991, DOE has supported projects in these
areas, making the data publicly available through its Alternative Fuels Data Center
(AFDC ) . 3
The Clean Air Act Amendments of 1990
The Clean Air Act Amendments of 1990 established the Clean Fuel Fleet
Program (CFFP).4 This program requires cities with significant air quality problems
to promote vehicles that meet clean fuel emissions standards. In metropolitan areas
in extreme, severe, or serious non-attainment for ozone5 or carbon monoxide, fleets
of 10 light-duty vehicles or more face purchase requirements similar to those for
EPAct (discussed below). However, under CFFP, conventional vehicles are
admissible if they meet National Low Emission Vehicle (LEV) standards. Another
key difference between the CFFP requirements and the EPAct requirements is that
under CFFP, a vehicle must always be operated on the fuel for which it was certified.
For example, if a dual-fuel ethanol vehicle is certified LEV using ethanol, but not
using gasoline, the vehicle must be operated solely on ethanol. This provision avoids
a perceived “loophole” in EPAct.
The Energy Policy Act of 1992
The Energy Policy Act of 1992 was enacted to promote energy efficiency and
energy independence in the United States. It includes programs that require or
promote alternative fuel vehicles, as well as commercial and domestic energy
efficiency, natural gas imports, and nuclear power. Two key programs concerning
alternative fuels are the AFV purchase requirements for federal, state, and alternative
fuel provider6 fleets, and the AFV tax incentives.
Fleet Requirements. EPAct7 requires that a certain percentage of new light-
duty vehicles (passenger cars and light trucks) purchased for certain fleets must be

3 [].
4 P.L. 101-549, section 246.
5 Ozone standards are maintained by limiting emissions of the three key components of
ozone: nitrogen oxides (NOx), volatile organic compounds (VOCs), carbon monoxide.
6 An alternative fuel provider fleet is a fleet of vehicles owned and operated by a private
company that sells or distributes alternative fuels.
7 P.L. 102-486, sections 303, 501, and 507.

fueled by an alternative fuel.8 Covered fleets are those that operate 50 or more light-
duty vehicles, of which at least 20 operate primarily in a metropolitan area.
Furthermore, the fleets must be capable of being fueled at a central location, such as
the fleet motor pool. Law enforcement vehicles, emergency vehicles, combat
vehicles, non-road vehicles, and vehicles used for testing are exempted from the
requirement. Federal, state, and alternative fuel provider fleets are currently required
to purchase AFVs. The purchase requirements were phased in between 1997 and
2001. (See Table 2.) DOE was required to consider whether to include municipal
and private fleets in the program, but recently determined that such a requirement
would not significantly reduce energy dependence.9
Table 2. Light-Duty Alternative Fuel Vehicle Purchase
Requirements under the Energy Policy Act
Percentage of all Acquisitions for Covered Fleets
FederalStateAlternative Fuel





2001 and beyond75%75%90%

Source: National Alternative Fuels Hotline, Department of Energy, September 1998.
DOE currently recognizes the following as alternative fuels: methanol and
denatured ethanol as alcohol fuels (mixtures that contain at least 70% alcohol),
natural gas (compressed or liquefied), liquefied petroleum gas (LPG), hydrogen, coal-10
derived liquid fuels, fuels derived from biological materials, and electricity.
Covered vehicles may be dedicated11 or dual fuel.12

8 EPAct defines an alternative fuel as “any fuel the Secretary [of Energy] determines, by
rule, is substantially not petroleum and would yield substantial energy security benefits and
substantial environmental benefits.”
9 69 Federal Register 4219.
10 Some fuels may actually be covered by more than one category. For example, most
ethanol (an alcohol fuel) is derived from corn or other agricultural products (biological
11 Dedicated: operated solely on an alternative fuel.
12 Dual-fuel: capable of being operated on both conventional and alternative fuel. There
are two types of dual-fuel vehicles, bi-fuel and flexible fuel. Bi-fuel vehicles can only be
operated on one fuel at a time, while flexible fuel vehicles can operate on any mixture of the
two fuels.

There have been mixed results from the program. According to DOE, some
federal and state agencies are exceeding their mandates, while others are far below
their quota. As a whole, the federal government is was compliance in 1998, mainly
due to large purchases such as 10,000 ethanol vehicles purchased by the U.S. Postal
Service in that year.13 However, according to a coalition of environmental groups,
the government as a whole has failed to comply with EPAct since then. In a suit filed
by Earthjustice14 in San Francisco federal court, 18 federal agencies are accused of
failing to comply with the purchase requirements.15 In July 2002, the court ruled that
the federal government had violated EPAct. Further, the court required the agencies
to compile and make public, by January 31, 2003, reports on their non-compliance.
Recently, the environmental groups filed a motion that the court find the agencies in
contempt. Earthjustice argues that some agencies have failed to submit reports
entirely and that others have submitted unsubstantiated reports.16 In addition,
questions have been raised about the success of the program since other covered
fleets, especially fuel provider fleets, have not reported their purchases to DOE.17
A key concern over the fleet requirements is whether they actually support the
goals of EPAct. This is because EPAct does not require the use of alternative fuels,
only the purchase of AFVs. Fleets can purchase dual-fuel vehicles, operate them
solely on gasoline or diesel fuel, and still meet the EPAct requirements. The fleet
program has been criticized because this use of dual-fuel vehicles is seen by some as
a “loophole.” This criticism is another element of the lawsuit filed by Earthjustice.
Tax Incentives. Another key provision of EPAct is a set of tax incentives for18
the purchase of new AFVs. The act provides an electric vehicle (EV) tax credit of
10% of the purchase price, up to a maximum of $2,000 in 2005. In addition, it
provides a Clean Fuel Vehicle (any alternative fuel) tax deduction of up to $1,000 in
2005 for light-duty vehicles, with larger deductions for heavier vehicles. Vehicles
are not eligible for both incentives, and vehicles purchased to meet mandated fleet
requirements are ineligible for either incentive. The EV tax credit and the Clean Fuel
Vehicle tax deduction are being phased out, and are scheduled to reach zero after


13 In 1998, the U.S. Postal Service placed an order with Ford for 10,000 specially-designed
Ford Explorers. The redesigned sport-utility vehicles use flexible fuel ethanol/gasoline
14 Earthjustice is representing the Sierra Club, the Center for Biological Diversity, and the
Bluewater Network.
15 “U.S. Agencies Sued on Alternative Fuel Rule,” San Francisco Chronicle. January 3,

2002. p. A3.

16 Rachel Gantz, “Groups File Motion to Find U.S. Gov’t in Contempt of Alt Fuel Law,”
Oxy-Fuel News. April 7, 2003.
17 U.S. General Accounting Office (GAO), Limited Progress in Acquiring Alternative Fuel
Vehicles and Reaching Fuel Goals. February 2000. p. 9.
18 P.L. 102-486, section 1913.

Executive Orders
Three Executive Orders have also played a key role in developing alternative
fuels policies. Executive Order 12844, issued on April 21, 1993, urged federal
agencies to make every effort to exceed the mandatory purchase requirements set in
EPAct. The order argued that the federal government could provide impetus for the
development and manufacture of alternative fuel vehicles, and the expansion of
fueling stations and other infrastructure to support privately-owned AFVs.
Executive Order 13031, issued December 13, 1996, expanded the
Administration’s policy on EPAct fleets. The order required that federal agencies
must comply with EPAct regardless of their budgets. The order also required that
agencies must submit a yearly progress report to the Office of Management and
Budget (OMB) along with their yearly budgets. Further, it established penalties for
failing to meet the EPAct requirements. If an agency reported to OMB that it did not
meet its EPAct requirements, that agency must submit a detailed plan for meeting the
requirements the next year. The Order also established credits for the use of
medium- and heavy-duty vehicles and EVs to meet the requirements.
Most recently, the Administration issued Executive Order 13149 on April 21,
2000. This order presents the goal of reducing the federal fleet’s annual petroleum
consumption by 20% below the FY1999 level by the end of FY2005. It suggests
several strategies for attaining this goal, including using alternative fuel vehicles and
high-efficiency hybrids. The order also requires that a majority of EPACT vehicles
must be fueled with alternative fuels by FY2005. This helps fix the “loophole” that
allows dual-fuel EPACT vehicles to operate solely on conventional fuel.
Alternative Fuels
As noted above, several fuels are considered alternative fuels. This section will
address alternative fuels recognized by EPAct. Many technical and market factors
affect the usability and ultimate success of these fuels as alternatives to petroleum-
based fuels. Since many of these fuels require entirely new engines, or extensive
modifications to conventional vehicles, the characteristics of both alternative fuels
and alternative fuel vehicles must be discussed together. Fuel cost and fueling
infrastructure, vehicle cost, fuel and vehicle performance, and other factors for each
fuel will be addressed in turn in the discussion below. Table 3 presents a summary
of the various alternative fuels.

Table 3. Summary of Alternative Fuels
FuelFuelVehicles inFuelingbIncrementalc
ConsumptionaUse SitesVehicle Cost
(million GEG)
LPG 242 194,000 3,451 $1,000-$2,000
Natural Gas170146,000945$4,000-$6,000
Bi odiesel d 37 N/Ae 177 —
Ethanol 22 f 146,000g 205 $0
Electricity1256,000674up to $20,000
Methanol 0.3 4,600 0 $500-$2,000
Hydrogen — — 10 —
Coal-Derived Fuels————
Source: Department of Energy and California Energy Commission.
Notes: All estimates are for 2004.a
GEG: Gasoline Equivalent Gallon. To compare various fuels, an equivalency factor is used. In this
case, it is the amount of energy in one gallon of gasoline.b
As of December 3, 2004.c
This does not include additional infrastructure/fueling equipment costs or additional life-cycle vehicle
costs (e.g. maintenance, resale).d
Since biodiesel can be blended with conventional diesel, separate refueling sites are not necessary.e
Biodiesel is used in conventional diesel engines.f
1,813 million GEG including ethanol in blended gasoline.g
This does not include flexible fuel ethanol/gasoline vehicles that operate primarily or exclusively on
gasoline. In 2002, there were approximately 4.1 million of these vehicles in the United States (Energy
Information Administration estimate).
Propane (LPG)
Liquefied petroleum gas (LPG) is produced as a by-product of natural gas
processing and petroleum refining.19 Because the components of LPG are gases at
normal temperatures and pressures, the mixture must be liquefied for use in vehicles.
In addition to vehicles, propane is also used in home heating as well as recreational20
Consumption. LPG is the most commonly used alternative fuel. Domestic
consumption was approximately 242 million gasoline equivalent gallons (GEG)21 in

19 LPG is a mixture of hydrocarbons, mainly propane (C3H8), but also propylene (C3H6),
butane (C4H10), and butylene (C4H8).
20 Alternative Fuels Data Center (AFDC), Propane (LPG) General Information.
21 Since all fuels have different energy contents, to compare performance factors (e.g. fuel
economy and fuel cost) an equivalency factor is used. The most common factor is to
determine the amount of alternative fuel needed to generate the energy in one gallon of
gasoline. This amount is called a gasoline equivalent gallon (GEG). While some
publications refer to this as a gasoline gallon equivalent (GGE), this report uses GEG
throughout for clarity.

2004, or about 0.2% of gasoline demand.22 This is greater than all other alternative
fuels combined.23 Propane is used in both light- and medium-duty vehicles, and there
were approximately 194,000 LPG vehicles on the road in 2004,24 or about 0.1% of
the roughly 230 million gasoline and diesel-fueled vehicles.25 In 2003, the federal
government operated about 360 vehicles.26 LPG vehicles tend to be custom vehicles;
in fact, the only light-duty production vehicles with an LPG option are the Ford F150
pickup and the GM Express and Savanna vans (the latter two supplied by
Quan tum). 27
Cost. On a GEG basis, fuel costs for LPG are approximately equal to those of
gasoline, and tend to fluctuate with gasoline prices, although they can fluctuate more
dramatically in response to high heating costs or other factors. Between April 200028
and October 2002, the price for LPG averaged approximately $1.16 to $1.95 per
GEG. While fuel costs are only slightly higher for LPG as compared to gasoline,
there is an incremental purchase cost for an LPG vehicle, which ranges between
$1,000 and $2,000.29 This additional cost covers modifications to the fuel system and
the addition of a high-pressure fuel tank. Some of this incremental cost currently
may be defrayed by federal, state, local, or manufacturer incentives that promote the
purchase of alternative fuel vehicles.
Infrastructure. Because of its many uses,30 the refueling system for LPG is
extensive. There are approximately 3,500 refueling sites in all 50 states,31 which
corresponds to roughly 3% of the approximately 124,000 gasoline stations in the
United States.32 Because of its wide use, if the demand for LPG as an alternative fuel
were to expand, it is likely that the supply infrastructure could expand proportionally.

22 EIA, Alternatives to Traditional Transportation Fuels. Table 10.
23 Excluding ethanol in gasoline. When used as a blending agent, ethanol does not qualify
as an alternative fuel.
24 EIA, Alternatives to Traditional Transportation Fuels. Table 1.
25 U.S. Department of Transportation, Federal Highway Administration, Highway Statistics

2001. Table MV-1.

26 EIA, Alternatives to Traditional Transportation Fuels. Table 9.
27 National Alternative Fuels Hotline, Model Year 2002: Alternative Fuel Vehicles.
November 2001.
28 U.S. Department of Energy, Clean Cities Program, The Alternative Fuel Price Report.
5/5/2000 through 12/27/2002. It should be noted that this price includes federal and state
fuel excise taxes. In general, these taxes are lower for alternative fuels than for gasoline.
29 California Energy Commission, Liquefied Petroleum Gas / Propane-Powered Vehicles.
Updated March 10, 1999.
30 Including home heating and outdoor grills.
31 Department of Energy, Alternative Fuels Data Center (AFDC), Refueling Sites.
[]. Updated
January 23, 2003.
32 Department of Commerce, Bureau of the Census, County Business Patterns for the United
States. [].

LPG is delivered to retailers through a pipeline and tanker truck system much
like the gasoline delivery system. Therefore, an expansion of the LPG supply
infrastructure would face few technical barriers. However, because the fuel must be
kept under pressure, special equipment is required to transfer LPG to a vehicle.
Addition of new refueling equipment would lead to additional capital costs for
Performance. In terms of environmental performance, LPG vehicles tend to
produce significantly lower ozone-forming emissions, although it can be difficult to
quantify the differences. According to the California Energy Commission, LPG
vehicles emit up to 33% fewer volatile organic compounds (VOCs), 20% less
nitrogen oxides (NOx), and 60% less carbon monoxide.33
A key performance drawback to LPG is the somewhat decreased range as
compared to gasoline. However, because LPG has the highest energy content (by
volume) of the alternative fuels, this range reduction is only about 26%. Further,
larger LPG vehicles can carry a larger tank, and tend to maintain a range of between

300 and 400 miles. However, to allow longer range, payload is diminished due to the34

size and weight of the LPG tank.
Safety. LPG has a higher ignition temperature than gasoline, making it safer
in that respect. Furthermore, LPG must be present in greater concentrations than
gasoline to ignite.35 Because LPG is stored under pressure, it must be stored in
heavy-duty tanks. In order to prevent failure of the fuel tank, LPG tanks must
undergo rigorous testing. Further, LPG is odorless, so an odorant is added to make
it detectable in air.36
Other Issues. There are few major issues involving LPG fuels and vehicles
other than those issues relevant to all alternative fuel vehicles, such as the need to
expand fueling infrastructure. However, because LPG is often derived from
petroleum refining, it may do little to diminish petroleum dependence.
Natural Gas
Natural gas is a fossil fuel produced from gas wells or as a by-product of
petroleum production. Natural gas is composed of hydrocarbons, mainly methane.37
It is used extensively in residences and by industry, and is therefore widely available.
Because of its gaseous nature, natural gas must be stored onboard a vehicle either as

33 California Energy Commission, Liquified Petroleum Gas.
34 In the case of a passenger car, the tank usually reduces available trunk space.
35 In fact, propane can ignite through a slightly wider range of concentrations (in air) than
gasoline. However, the lower flammability limit for LPG is higher than gasoline, making
it generally more difficult to ignite. Below this concentration, the mixture is too “lean” to
ignite. Source: Alternative Fuels Data Center, Properties of Fuels. August 28, 2000.
36 National Propane Gas Association, Consumer Info. []
37 The chemical formula for methane is CH4. Natural gas also contains minor amounts of
ethane (C2H6), propane (C3H8), butane (C4H10) and pentane (C5H12).

compressed natural gas (CNG) or as liquefied natural gas (LNG). CNG is generally
preferred for light-duty applications such as passenger cars, while both CNG and
LNG are used in heavier applications, such as buses.
Consumption. Vehicles consumed 170 million GEG of natural gas in the
United States in 2004 (mostly as CNG).38 This was about 0.1% of gasoline demand,
although consumption has been rising steadily over the past ten years. After propane,
CNG is the second most widely used pure alternative fuel.39
Approximately 146,000 natural gas vehicles were in operation in the United40
States in 2004, and the number has been growing by approximately 20% per year.
These include CNG passenger cars such as the Honda Civic, Toyota Camry, and41
Chevrolet Cavalier, as well CNG light trucks natural gas transit buses. In 2003, the
federal government operated approximately 18,000 CNG vehicles, and 50 LNG42
vehicles. In fact, the federal government consumes more CNG than all other
alternative fuels combined. Nearly 90% of the federal CNG vehicles are light duty
vehicles purchased to meet EPAct requirements; the rest are heavy trucks and buses.
Cost. Using natural gas can cut fuel costs significantly, since natural gas tends
to be a relatively inexpensive fuel43. The median price for one GEG of CNG ranged
from $0.89 to $1.19,44 between April 2000 and October 2002, and the price for LNG
was comparable. In addition to the low cost of the fuel, natural gas is also subject to
a much lower federal excise tax rate (5.4 cents per GEG45) than the gasoline excise
tax rate (18.3 cents per gallon). Depending on fuel prices, natural gas vehicles can
reduce annual fuel costs significantly.46
While fuel costs tend to be lower for natural gas than for gasoline, equipment
costs tend to be higher. Equipping a light-duty vehicle to operate on CNG typically
costs between $4,000 and $6,000, though some of this incremental cost may be
defrayed through federal and state incentives. In addition, although there are some

38 EIA, Alternatives to Traditional Transportation Fuels. Table 10.
39 More ethanol is consumed, but most of this is blended with conventional gasoline.
40 EIA, Alternatives to Traditional Transportation Fuels. Table 1.
41 National Alternative Fuels Hotline, Model Year 2000.
42 EIA, Alternatives to Traditional Transportation Fuels. Table 9.
43 Current high natural gas prices have made CNG less attractive as a fuel.
44 Clean Cities Program, Alternative Fuel Price Report.
45 Based on a tax rate of 48.44 cents per 1000 cubic feet of natural gas and approximately

112 cubic feet per GEG. Source: ATA Foundation, Alternative Fuels Task Force, 1998-

1999 Tax Guide for Alternative Fuels.

46 Using a natural gas price of $0.77 per GEG, and a gasoline price of $1.20 per gallon,
annual savings would be $200 for smaller cars and $300 for larger vehicles. However,
current prices are significantly higher for both natural gas and gasoline. Source: John
DeCicco, Jim Kleisch and Martin Thomas, ACEEE’s Green Book: The Environmental
Guide to Cars and Trucks, 2000.

public fueling stations, if in-home fueling is desired, a small slow-fill unit can be
installed for approximately $3,500.47
Infrastructure. Refueling infrastructure for CNG is more broadly available
than for most alternative fuels. There are approximately 900 public CNG refueling
sites and 60 LNG refueling sites in 44 states.48 Again, this number is small compared
to the number of gasoline refueling stations. However, with the extensive natural gas
system in the United States, the CNG refueling network could be greatly expanded.
Furthermore, since slow-fill refueling systems are available for home installation,
consumers could fuel their vehicles overnight, and would only need to access public
stations on longer trips. However, because the technology differs significantly from
a gasoline pump, vehicle users or station operators would need to be trained in the
use of natural gas pumps.
Performance. Compared to gasoline vehicles, the environmental performance
of natural gas vehicles is exceptional. Particulate emissions are virtually eliminated,
carbon monoxide emissions are reduced by as much as 65% to 95%,VOC emissions
are reduced by up to 80%, and nitrogen oxide (NOx) emissions by as much as 30%.49
Furthermore, greenhouse gas emissions are also reduced compared with gasoline
vehicles. 50
The key performance drawback to natural gas vehicles is their significantly
shorter range. Most natural gas passenger cars can only travel 100 to 200 miles on
a full tank of fuel.51 This is significantly less than the range of 300 to 400 miles for
most gasoline-powered passenger cars.52 For this reason, natural gas vehicles have
been popular for use as delivery trucks or other fleets that operate in cities or other
localized areas.
Safety. Natural gas tends to be safer than gasoline for many reasons. First, the
fuel is non-toxic, although in high gaseous concentrations it could lead to
asphyxiation. Second, natural gas is more difficult to ignite than gasoline, and tends
to dissipate faster due to its lower density. However, since natural gas is colorless
and odorless, like LPG, an odorant is added to the fuel to make it detectable in air.53

47 California Energy Commission, Frequently Asked Questions About Natural Gas Vehicles.
Updated March 10, 1999.
48 AFDC, Refueling Sites.
49 Hydrocarbon and nitrogen oxide emissions contribute to the formation of ground-level
ozone, the main component of urban “smog.”
50 California Energy Commission, Natural Gas Vehicles: Fuel and Vehicle History and
Characteristics. Updated March 10, 1999; James S. Cannon, Paving the Way to Natural
Gas Vehicles, 1993.
51 Larger vehicles such as pickup trucks and vans can utilize larger fuel tanks by occupying
some of the storage area of the vehicle.
52 National Alternative Fuels Hotline, Model Year 2000.
53 California Energy Commission, Frequently Asked Questions About Natural Gas Vehicles.

A key safety concern with natural gas has to do with on-board storage. Because
CNG is compressed under such high pressures, the rupture of a fuel tank would be
extremely dangerous. For this reason, CNG tanks must undergo “severe abuse” tests
such as collisions, fires, and even gunfire.54
Other Issues. Besides the environmental benefits of natural gas, another
benefit is the fact that over 80% of natural gas used in the United States comes from
domestic sources.55 Therefore, it has been argued that natural gas vehicles can help
promote energy security in this country by lowering our reliance on imported fuel.
However, because natural gas is used extensively in electricity production, significant
increases in its use for transportation could result in increased demand for other fuels
for electricity.
Biodiesel is a synthetic diesel fuel that is produced from fatty feedstocks such
as soybean oil and recycled cooking oil.56 Although more expensive than
conventional diesel, it has some important advantages. The most notable advantage
is that because biodiesel is very similar to conventional diesel, the fuel can be used57
in existing diesel engines.
Consumption. Currently, U.S. consumption is about 37 million gallons per
year,58 as compared to approximately 36 billion gallons per year of conventional59
diesel. Because biodiesel can be used in existing diesel engines, there are no
vehicles designed specifically for its use.
Cost. The most significant drawback to biodiesel is its increased cost as
compared to conventional diesel. Diesel pump prices averaged between $1.15 and60
$1.50 per gallon in 2003. At the same time, median pump prices for B20 (a blend
of 20% biodiesel in conventional diesel) ranged between $1.29 and $1.60.61 This
price difference (approximately 8 to 20 cents per gallon) implies that pure biodiesel
costs as much as $1.00 more per gallon to produce. However, wholesale biodiesel
prices have been dropping due to process improvements and increases in production

53 (...continued)
Updated March 10, 1999.
54 The Natural Gas Vehicle Coalition, Questions and Answers about Natural Gas Vehicles
[]. Updated March 16, 2000.
55 Energy Information Administration, Natural Gas Monthly. October 2000.
56 Biodiesel is mixture of various compounds called mono alkyl esters.
57 National Biodiesel Board, General Interest. []. Updated
November 10, 2000.
58 EIA, Alternatives to Traditional Transportation Fuels. Table 10.
59 Ibid.
60 Clean Cities Program, Alternative Fuel Price Report.
61 Ibid.

scale. Further, in some places, where recycled oil is used, wholesale prices of pure
biodiesel may actually be lower than for conventional diesel.
Relative to other alternative fuels, there is one key cost advantage of biodiesel.
It can be used in existing diesel vehicles with little or no modification. Therefore,
covered EPAct fleets — and others interested in reducing their petroleum
consumption and improving their environmental performance — may use biodiesel
without the capital investments necessary for other alternative fuels.
Infrastructure. Because biodiesel is chemically very similar to conventional
diesel, it could be placed in the existing diesel distribution system with only a few
modifications. Most importantly, since biodiesel is a more effective solvent than
conventional diesel, it can cause deterioration of rubber and polyurethane materials
(e.g. seals). Currently, most biodiesel supply involves purchase contracts by fleet
owners, and delivery of biodiesel to fleet-owned dispensing sites. However, 177
biodiesel refueling stations have opened in 37 states in the past five years.62
Performance. Biodiesel is generally mixed with conventional diesel at the
20% level. The resulting fuel, B20, can be used in existing diesel engines with few
or no engine modifications. Higher concentrations can be used, however, especially
with newer equipment. The use of biodiesel (B20 or higher concentrations) leads to
substantial reductions in emissions of VOCs, carbon monoxide, and particulate
matter.63 However, NOx emissions tend to increase with the use of biodiesel.
Other than the changes in emissions, there seems to be little, if any, difference
in performance between biodiesel and conventional diesel. Payload and range remain
the same, and maintenance costs may actually be decreased due to the lower sulfur
content of the fuel. Some minor modifications may be necessary with concentrations
above 20%, due to fact that biodiesel is a very effective solvent and can corrode
engine seals.64
Safety. There seem to be few additional safety concerns for biodiesel. Its
safety properties are consistent with conventional diesel. However, it does have one65
advantage over conventional diesel. Because biodiesel has a higher flash point than
conventional diesel, it is more difficult to ignite, reducing the risk of fire.66
Other Issues. Biodiesel currently faces two key issues. The first has to do
with the tax structure for biodiesel. Because biodiesel is a renewable fuel, there has

62 AFDC, Refueling Sites.
63 AFDC, Biodiesel General Information.
[]. Updated May 7,


64 Personal conversation with Roy Truesdale, Director of Operations, National Biodiesel
Board. September 25, 2000.
65 The flash point is the minimum temperature at which chemical can ignite under normal
66 National Biodiesel Board, General Interest.

been interest in creating a tax incentive similar to the ethanol tax incentive. This
incentive, supporters argue, would allow biodiesel to compete and play a larger role
in our fuel supply. In 2004 Congress approved the American Jobs Creation Act (P.L.
108-357). Among other provisions, the act established a tax credit of $1.00 per
gallon for the production and use of biodiesel made from agricultural products.
The second issue involves a 1998 amendment to EPAct. This amendment67
grants credits to owners of covered fleets who purchase biodiesel. These credits
count toward the purchase requirements for alternative fuel vehicles. Every 450
gallons of biodiesel purchased earns one credit. This allows fleet owners to meet
their EPAct requirements without purchasing new vehicles and without modifying
their existing fueling infrastructure. Environmentalists have charged that because the
fuel is then blended at the 20% level, there is little impact on oil consumption or
vehicle emissions.68
Ethanol 69
Ethanol, or ethyl alcohol, is an alcohol made by fermenting and distilling simple
sugars.70 Ethyl alcohol is in alcoholic beverages, and it is denatured (made unfit for
human consumption) when used for fuel or industrial purposes. Although the
broadest current use of fuel ethanol in the United States is as an additive in gasoline,
in purer forms it can also be used as an alternative to gasoline. It is produced and
consumed mostly in the Midwest, where corn — the main feedstock for ethanol
production — is produced. When used as an alternative fuel, ethanol is usually
blended with gasoline at a ratio of 85% ethanol to make E85. As with other
alternative fuels, there are many benefits but also drawbacks associated with its use.
Consumption. Ethanol is the most commonly used alternative fuel, although
most of this is blended at the 10% level with 90% gasoline to make E10, or
“gasohol.” Including its use in gasohol, 2004 ethanol consumption was
approximately 3.1 billion gallons, or 2.0 billion GEG. This corresponds to
approximately 1% of annual gasoline consumption. However, E10 is not recognized
by EPAct as an alternative fuel because its widespread use does not significantly
diminish gasoline consumption. Consumption of E85 — which is recognized by
EPAct — is relatively low. Only about 22 million GEG of E85 were consumed in71

2004, although consumption has steadily increased since 1992.

67 P.L. 105-388, section 312.
68 “Committee Backs Biodiesel,” The Oil Daily. August 6, 1998.
69 For more information on ethanol fuel, see CRS Report RL30369, Fuel Ethanol:
Background and Public Policy Issues.
70 Its chemical formula is C2H5OH.
71 EIA, Alternatives to Traditional Transportation Fuels. Table 10.

As of 2004, there were approximately 146,000 E85 vehicles being fueled
primarily by ethanol in use in the United States.72 This number has been growing,
but is still negligible against the total number of conventional vehicles on the road.
However, many E85 vehicles can be fueled with E85, gasoline, or any mixture of the
two. There are many more of these flexible fuel vehicles (FFV) than dedicated
ethanol vehicles. Models of some popular production vehicles, including the Ford
Explorer and Ford Taurus now have E85/gasoline flexible fuel capability standard.
Other vehicles with the option of FFV capability include the Dodge Caravan, the
Chevrolet Silverado pickup, and the Mercedes-Benz C240 sedan.73 The Energy
Information Administration estimates that approximately 4.1 million ethanol FFVs
were on the road in 2003. It is expected that the vast majority of these vehicles will
be fueled with gasoline. However, it is possible that the greater availability of FFVs
will spur the market for ethanol fuel. In 2002, the federal government operated
approximately 53,000 ethanol FFVs, although most of these are fueled with gasoline.
Cost. One of the key drawbacks to the use of ethanol is its cost. Per gallon,74
median E85 retail prices ranged from approximately $0.84 to $1.41 between April

2000 and October 2002. In terms of GEG, ethanol costs ranged between $1.16 and75

$1.95. When blended with gasoline, ethanol benefits from an exemption to the
motor fuels excise tax.76 This benefit makes ethanol competitive with gasoline as a
blending agent. In fact, when used to make E10, the exemption is a nominal 52 cents
per gallon of pure ethanol. However, for neat fuels, the exemption is much less —
only a nominal 6.4 cents per gallon of pure ethanol for E85.
While fuel costs are higher for E85, there is little, if any, incremental vehicle
cost.77 Further, ownership and maintenance costs tend to be equal for ethanol and
gasoline vehicles.
Infrastructure. Most of the current infrastructure for the delivery of ethanol
is in the form of tanker trucks used to deliver ethanol to terminals for blending with
gasoline. However, there were 205 E85 refueling sites nationally as of December
2004, mostly in the Midwest, where ethanol is produced.78 Since there is experience
in storing and delivering ethanol, and since the fueling systems are similar to
gasoline, the refueling infrastructure could expand to meet increased demand if the
delivery costs were reduced.

72 EIA, Alternatives to Traditional Transportation Fuels. Table 1.
73 National Alternative Fuels Hotline, Model Year 2005: Alternative Fuel Vehicles and
Advanced Technology Vehicles Available or Nearing Completion.
74 Clean Cities Program, Alternative Fuel Price Report. This includes federal and state tax
incentives for ethanol and ethanol-blended fuels.
75 Based on 1.41 gallons of ethanol per GEG.
76 26 U.S.C. 40.
77 Because ethanol is more corrosive than gasoline, some components (e.g. seals) must be
78 AFDC, Refueling Sites.

Performance. Because of its lower energy content, the key performance
drawback of ethanol is lower fuel economy. Fuel economy is reduced by
approximately 29%, resulting in reduced range. However, this reduction in range can
be mitigated somewhat by increasing fuel tank size (with the associated drawbacks
of a larger tank). Another problem with ethanol is that in cold weather, an ethanol-
powered vehicle may be difficult to start. For this reason, most ethanol that is used
in purer forms is E85. The 15% gasoline allows for easier ignition under cold-start
conditions. There are few other technical concerns over the performance of ethanol
because of the relatively few modifications necessary to operate a vehicle on ethanol.
There are key environmental advantages to ethanol, as well as some drawbacks.
Ethanol-powered vehicles tend to emit 30 to 50 percent less ozone-forming
compounds than similar gasoline-powered vehicles, including significant reductions
in carbon monoxide emissions.79 In addition, ethanol tends to have a much lower
content of toxic compounds such as benzene and toluene, leading to lower emissions
of most toxic compounds. However, ethanol-powered vehicles tend to emit more80
formaldehyde and acetaldehyde, although these emissions can be largely controlled
through the use of advanced catalytic converters.81
Another key environmental advantage with ethanol is its relatively low life-82
cycle greenhouse gas emissions. Ethanol-powered vehicles tend to emit lower
levels of greenhouse gases than gasoline vehicles. Also, the growth process of the
ethanol feedstock results in uptake of carbon dioxide, further reducing net
greenhouse gas emissions. Conversely, when the raw materials and practices used
to produce the feedstock and the fuel are taken into account, emissions for both fuels
are increased. According to a study by Argonne National Laboratory, the use of E85
results in a 14% to 19% reduction in life-cycle greenhouse gas emissions, and with
advances in technology, this reduction could be as high as 70% to 90% by 2010.83
However, other studies cite lower efficiency in the ethanol fuel cycle, leading to
smaller reductions in greenhouse gas emissions.84
Safety. Fuel ethanol tends to be safer than gasoline. At normal temperatures,
E85 is less flammable than gasoline, and tends to dissipate more quickly. While an

79 California Energy Commission, Ethanol Powered Vehicles. Updated November 3, 1998.
80 Formaldehyde and acetaldehyde are toxic compounds that, in air, can irritate tissues and
mucous membranes in humans, and are characterized by EPA as possible carcinogens.
81 California Energy Commission, Ethanol Powered Vehicles.
82 Although most greenhouse gases are not regulated pollutants, environmentalists are
concerned that the accumulation of these gases (such as carbon dioxide) in the atmosphere
will lead to global warming.
83 M. Wang, C. Saricks, and D. Santini, Effects of Fuel Ethanol on Fuel-Cycle Energy and
Greenhouse Gas Emissions, January 1999. Argonne National Laboratory.
84 Alan Kovski, “Study Defends Fuel Efficiency of Ethanol, While Another Notes Emissions
of Pollutants,” The Oil Daily, March 9, 1998. p. 6.

ethanol flame is less visible than a gasoline flame, it is still easily visible in
Other Issues. The most significant issue surrounding ethanol is the
exemption from the motor fuels excise tax. Because a few producers control a
majority of ethanol production capacity in the United States, the exemption has been
called “corporate welfare” by its opponents. Proponents of the exemption argue that
it helps support farmers (through increased demand for their product), and helps
compensate for added economic value from benefits to the environment, and to
energy security because ethanol is produced from domestic crops.86
Because of concerns over the fact that the exemption lowers receipts to the
Highway Trust Fund, an income tax credit for ethanol blending was inserted into the
American Jobs Creation Act (P.L. 108-357). The act replaces the existing exemption
with a tax credit paid from the general treasury, as opposed to the Highway Trust
Another key issue is the possible development of a renewable fuels standard
(RFS). An RFS would require the use of a set amount or percentage of renewable
fuel in gasoline. Although there are several potential fuels that could be used to meet
the standard (including biodiesel), it is likely that most of the requirement would be
met with ethanol (blended at the 10% level or lower). It has been argued that an RFS
would promote agricultural production and lessen the need for imported oil. Critics
argue that the standard would increase gasoline prices with little effect on oil imports.
Legislative proposals on an RFS are discussed below in the section on
“Congressional Action.”
Methanol, the simplest alcohol, is also called “wood alcohol.”87 It is usually
derived from natural gas, but can also be derived from coal or biomass. As a fuel,
methanol is most often used as a blend with gasoline called M85 (85% methanol,
15% gasoline), although the fuel can also be used in an almost pure (neat) form
called M100. In addition to general transportation, Indianapolis-type race cars use
methanol exclusively. As a motor fuel it has many benefits, but also many
Consumption. Because of its drawbacks, methanol consumption is relatively
low. In 2004, 0.3 million GEG of methanol were consumed.88 This corresponds to
roughly 1/1000th of 1% of the approximately 133 billion gallons of gasoline demand.
Methanol consumption peaked in 1996 and has decreased since.

85 Center for Transportation Research, Argonne National Laboratory, Guidebook for
Handling, Dispensing, & Storing Fuel Ethanol.
86 For more information, see CRS Report 98-435E, Alcohol Fuels Tax Incentives.
87 Its chemical formula is CH3OH.
88 EIA, Alternatives to Traditional Transportation Fuels. Table 10.

There are few methanol-powered vehicles operating in the United States.
Consistent with the decline in methanol consumption, after a peak in 1996, the
number of M85 and M100 vehicles has declined. There were approximately 4,600
methanol vehicles in 2004. The federal government operated only 70 methanol-
fueled vehicles in 2003.89 The major automobile manufacturers have not sold
methanol-powered production cars since model year 2001.90
Cost. A notable concern with methanol is its cost. Per GEG, methanol tends
to be more expensive than gasoline. As of January 1, 2000, the price for methanol
was between $0.95 and $1.20 per gallon.91 However, due to the lower energy content92
of methanol, the fuel cost roughly $1.73 to $2.10 per GEG.
In addition to the fuel cost, incremental vehicle cost is higher with the use of
methanol. The incremental cost for the purchase of a methanol-fueled vehicle (or the
conversion of an existing gasoline-fueled vehicle) can range from $500 to $2,000,
though some of this incremental cost currently may be defrayed by purchase
incentives. The most notable part of the incremental cost is replacing parts (such as
certain seals) that may be corroded by alcohol.
Infrastructure. Another barrier to the wide use of methanol as a motor fuel
is the lack of fueling infrastructure. While there were a few public methanol
refueling stations, these stations have closed in recent years. Currently, the
Department of Energy does not list any public refueling sites for methanol.93 This
lack of infrastructure makes it difficult for the methanol vehicle market to expand.
In fact, due to lack of demand, methanol infrastructure has declined in the past few
years. However, existing gasoline tanks and pumping equipment could be readily
converted to store and deliver methanol, and vehicle users would experience little
difference between a methanol pump and a gasoline pump.
Because methanol can be produced from natural gas and petroleum, a raw
material shortage would be unlikely if methanol consumption increased. However,
in terms of delivery to stations, most methanol is transported by tanker truck from the
methanol plant.94 This delivery method tends to be less flexible and more costly
compared to the existing gasoline infrastructure, which relies primarily on pipeline
delivery. Methanol cannot travel through pipelines due to its physical properties.

89 EIA, Alternatives to Traditional Transportation Fuels. Table 9.
90 National Alternative Fuels Hotline, Model Year 2002.
91 GAO, Limited Progress. Appendix 1. Because of methanol’s limited use, current price
data are not readily available.
92 Based on 1.77 gallons of M85 per GEG.
93 AFDC, Refueling Sites.
94 In contrast, gasoline is usually shipped in pipelines from the refinery to a distribution
terminal, where tanker trucks transport the fuel to the fueling stations. This distribution
network is considerably more cost effective than relying solely on tanker trucks.

Performance. One of the key benefits of methanol vehicles is improved
environmental performance over gasoline vehicles. M85 vehicles tend to emit 30%
to 50% less ozone-forming compounds. And while formaldehyde emissions tend to
be higher with methanol than gasoline, M85 vehicles would likely be able to meet95
new emissions standards.
A key performance drawback with methanol vehicles is a reduction in vehicle
range. Since it requires 1.77 gallons of methanol to equal the energy in 1 gallon of
gasoline, range per gallon is decreased by approximately 40%. By increasing the size
of the fuel tank, the loss of range can be significantly improved or even eliminated.
However, a larger fuel tank would decrease fuel economy and cargo space.
Safety. On the whole, methanol fuel is safer than gasoline. Since methanol
vapor is only slightly heavier than air, vapors disperse quickly compared to gasoline.
Furthermore, methanol vapors must be more concentrated than gasoline to ignite, and
methanol fires release less heat. Since methanol burns with a light blue flame, one
key drawback is that in bright daylight it may be difficult to see a methanol fire,
although it may be possible to add colorants to the fuel.96
Fuel Cells. Methanol has been touted as potential step from gasoline to
hydrogen in fuel cell vehicles because the fueling infrastructure is similar to gasoline,97
while the fuel is much cleaner. Fuel cells are a type of power system that generates
electricity from hydrogen (or a hydrogen-bearing compound) without combustion.98
The chemical process is highly efficient and drastically reduces vehicle emissions.
For more information on fuel cells, see CRS Report RL30484, Advanced Vehicle
Technologies: Energy, Environment, and Development Issues.
Another potential advantage of methanol is that it can be derived from biomass
waste products. Research is ongoing, and there have been a few, small-scale
demonstration projects at landfills. If methanol is produced instead from fossil fuel
resources, it may be less likely to promote energy independence.
An electric vehicle (EV) is powered by an electric motor, as opposed to an
internal combustion engine. Energy is supplied to the motor by a set of rechargeable
batteries. When the vehicle is not being used, these batteries are recharged.

95 California Energy Commission, Questions and Answers About M85 and Flexible Fuel
Vehicles. Updated December 14, 1998.
96 Environmental Protection Agency, Fact Sheet OMS-8: Methanol Fuels and Fire Safety.
August 1994.
97 Vanessa Houlder, “Big push to reduce fuel emission problems,” Financial Times.
September 21, 2000. p. 5.
98 If pure hydrogen is used, the only emissions would be water vapor.
99 For more information on electric vehicles, hybrid electric vehicles, and fuel cell vehicles,
see CRS Report RL30484, Advanced Vehicle Technologies: Energy, Environment, and
Development Issues.

Because no fuel is burned, there are no emissions from the vehicle, making it
a zero emissions vehicle (ZEV). However, there are emissions from electricity
production associated with electric vehicles. When the entire fuel cycle is
considered, pollutant emissions from EVs are still low relative to gasoline vehicles.
Like other AFVs, however, there are key cost and performance drawbacks associated
with these vehicles.
Consumption. Approximately 12 million GEG of electric fuel were100
consumed in the United States in 2004 by approximately 56,000 electric vehicles.
Most of these vehicles were located in California, and several models were available
exclusively in that state. One of the most popular EVs was the General Motors (GM)
EV1, although GM has discontinued production of the vehicle and has recalled all
of its leases, due to limited consumer acceptance of the vehicles. Other
manufacturers have also discontinued production of their electric vehicles101 The102
federal government operated approximately 1,300 electric vehicles in 2003.
Cost. Electric fuel is considerably less expensive than using gasoline, about

2.5 to 3.3 cents per mile, as opposed to 4 to 6 cents per mile for a gasoline vehicle.103

Despite the fuel cost advantages, a major drawback with EVs is the incremental
vehicle purchase cost, which can be as much as $20,000. Most of this cost is related
to the batteries, which are very expensive to produce.104
Infrastructure. There are very few electric recharging sites in the United105
States. Currently, there are about 700 recharging sites, mostly in California. With
the extensive nature of the electricity infrastructure in the United States, there are few
technical barriers to expanding EV recharging sites. However, with existing
technology, only a few vehicles can access a single charger in one day, as opposed
to a gasoline pump which can serve a new vehicle every few minutes.
Performance. The environmental performance of EVs is very good. When
the entire fuel cycle is considered, electric vehicles produce low overall levels of

100 EIA, Alternatives to Traditional Transportation Fuels, Tables 1 and 10. These vehicles
are light- and heavy-duty highway vehicles. Golf carts are another popular application for
electric vehicles, and there are many of these in operation in the United States, especially
in smaller communities.
101 National Alternative Fuels Hotline, Model Year 2000.
102 EIA, Alternatives to Traditional Transportation Fuels. Table 9.
103 Because of the vast differences between electric and conventional vehicles, cents per mile
are used to discuss fuel cost, as opposed to dollars per GEG. In this case, it was assumed
that electricity was 10 cents per kilowatt-hour (kWh), an electric vehicle achieved between
3 and 4 miles per kWh, gasoline cost $1.20 per gallon, and a gasoline vehicle achieved
between 20 and 30 miles per gallon. Currently, electricity prices are somewhat lower than

10 cents per kWh, while gasoline prices are above $1.20 per gallon.

104 This is based on suggested retail prices for the EV1 and the Chevrolet Cavalier, a similar
gasoline vehicle.
105 AFDC, Refueling Sites.

toxic and ozone-forming pollutants.106 Depending on the fuel mix for local electric
power generation, overall emissions can be decreased by 90% or more as compared
to gasoline vehicles.107
A major performance drawback of EVs is their relatively short range. On a full
charge, an electric vehicle can travel between 50 and 130 miles, as opposed to a
range of 300 to 400 miles with a conventional vehicle.108 Another drawback is that
fueling an electric vehicle takes between 3 and 8 hours, as opposed to a few minutes
for a conventional vehicle.109
Safety. Few additional safety issues are associated with electric vehicles.
Because no chemicals are transferred during fueling, there is no risk of spillage or
inhalation, and with existing recharging systems, electric shocks are unlikely. In the
event of an accident, there is no combustible fuel so there is no danger of fire or
explosion. However, because of the acid contained in some types of batteries, there
could be concern over acid leaks if batteries were to rupture in a collision. Further,
because of the higher current in the electrical systems, there is increased potential for
shock to emergency responders in the case of a collision.
Fuel Cell and Hybrid Vehicles. While battery-powered electric vehicles
tend to be very expensive, and have many other drawbacks, there is growing interest
in fuel cell and hybrid electric vehicles. Research into batteries, electric drivetrains,
and lightweight materials will play a key role in the development of EVs, as well as
both hybrid and fuel cell vehicle technology. For a more detailed discussion of fuel
cell and hybrid technologies, see CRS Report RL30484, Advanced Vehicle
Technologies: Energy, Environment, and Development Issues.
Fuel Cell Vehicles. Unlike a conventional vehicle, a fuel cell vehicle uses
chemical reaction (as opposed to combustion) to produce electricity to power an
electric motor. Unlike a battery-powered EV, fuel cell vehicles have a fuel tank,
eliminating the long recharging time. These systems can be very efficient, although
the technology is far from commercialization. A few auto manufacturers have
offered a small number of fuel cell vehicles for lease in model year 2004, and several
other manufacturers plan to introduce fuel cell vehicles in the next few years. It is
expected that these vehicles will be leased to corporations and that the lease costs
will be relatively high (compared to conventional vehicles).
Hybrid Electric Vehicles. A hybrid electric vehicle combines an electric
motor with a gasoline or diesel engine. This combination leads to very high fuel
efficiency and low emissions while avoiding some of the problems associated with
pure electric vehicles. Most hybrids operate solely on conventional fuel, with the
engine providing power to the wheels and to an electric generator simultaneously.

106 The fuel mix plays a key role in the overall fuel-cycle emissions for electric vehicles
because power plant emissions can vary greatly depending on the fuel used for generation.
107 California Energy Commission, Questions & Answers About Electric Vehicles.
108 Alternative Fuels Data Center, Model Year 2000.
109 California Energy Commission, Questions & Answers About Electric Vehicles.

Therefore, hybrids can be fueled as quickly and conveniently as conventional
vehicles, while achieving even longer ranges.
A total of seven production vehicles are expected to be available by early 2005,
and most of the major car companies plan to have hybrid models available in the next
few years.110 Although hybrid electric vehicles are not considered AFVs for
compliance with EPAct requirements (because they utilize conventional fuel), they
do qualify for a Clean Fuel Vehicle Tax Deduction. The environmental performance
of hybrids has led to congressional interest in larger incentives to promote their
commercialization. 111
Due to its presence in water, hydrogen is abundant, although it does not appear
in pure form in any significant quantity.112 The hydrogen in water can be separated
from oxygen through a process called hydrolysis.113 Other key hydrogen sources are
fossil fuels and other hydrocarbons. Hydrogen fuel is of interest because it can be
used in a zero-emission fuel cell. Because hydrogen fuel can be stored in sufficient
quantity onboard the vehicle, fuel cell-powered electric vehicles do not face some of
the range and fueling limitations as battery-powered electric vehicles.
Currently, no production vehicles are powered by pure hydrogen, although all
of the major domestic and foreign automobile manufacturers are researching
hydrogen fuel cells, and a few have introduced a limited number of hydrogen fuel cell
vehicles for lease in model year 2004. However, it is possible that the first publicly
available fuel cell vehicles will be operated on a liquid fuel such as gasoline or
methanol, because these fuels are much easier to deliver and are more readily
available at present (see above section on methanol).
In his January 28, 2003, State of the Union Address, President Bush announced
a new five-year, $720 million research and development initiative for hydrogen fuel.
This initiative is intended to complement the FreedomCAR initiative, which focuses
on the development of fuel cell vehicles. The Administration’s plan would dedicate
a total of $1.8 billion over five years for hydrogen and fuel cells. Among other
provisions, the conference committee report on H.R. 6 (the comprehensive energy
bill in the 108th Congress) would have authorized a total of $2.15 billion for the
initiatives. The Administration requested $257 million in FY2004 for these
initiatives. However, while Congress approved an increase of $50 million over

110 Gregg Easterbrook, “Hybrid Vigor,” The Atlantic Monthly. November 2000. p. 5.
111 Several bills in the 108th Congress would provide tax credits for the purchase of hybrids,
although none of these bills passed their respective committees. See section below on
Congressional Action.
112 The chemical formula for hydrogen gas is H2.
113 The chemical formula for water is H2O.

FY2003 levels, this was still $23 million below the requested level.114 For FY2005,
Congress appropriated $261 million, slightly below the Administration’s request.115
Consumption. Currently, hydrogen fuel consumption is very low. In fact, the
Energy Information Administration does not report U.S. hydrogen consumption in
its Alternatives to Traditional Transportation Fuels.
Cost. Storage and delivery of hydrogen are complicated because at standard
temperatures and pressures, hydrogen gas has a very low density. Therefore, the fuel
must be compressed, stored in liquid form, or stored in some other manner (e.g.,
bonded with other chemicals or stored in a container with complex geometry).
Currently, each of these storage options has its drawbacks, which can include safety,
cost, and the ability to store enough hydrogen onboard the vehicle to provide
acceptable range.
In addition to the increased cost of storing hydrogen fuel on a vehicle, other
system componets are currently prohibitively expensive. It is estimated that a fuel
cell for passenger car applications is roughly 10 times more expensive than a
conventional engine at today’s costs. However, it is expected that with technological
advances and the use of mass production the price of a fuel cell system will decrease
in the future.
Currently, because hydrogen is produced in very low quantities for fuel use (it
is used most as a process chemical in petroleum refining), it is considerably more
expensive than gasoline at current prices. Further, because the infrastructure to
deliver hydrogen is vastly different from petroleum infrastructure, expanding
hydrogen delivery will also be complicated, and likely expensive.
Infrastructure. There is very little infrastructure to deliver hydrogen fuel, and
most current facilities are in place to serve small demonstration and test fleets. As
was stated above, expanding hydrogen infrastructure will likely be expensive.
Performance. The potential environmental performance of hydrogen fuel
could exceed all other alternative fuels. Fuel cells are significantly more efficient
than gasoline engines, and the only emissions from hydrogen fuel cells are heat and
water vapor. However, the fuel cycle emissions from the production of hydrogen fuel
could diminish its environmental performance, depending on the primary fuel used.
For example, if produced from solar energy, the total fuel cycle pollutant and
greenhouse gas emissions could be very low or even zero. But if fossil fuels are
burned or reformed to generate hydrogen, depending on whether emissions are
captured, total emissions could equal or even exceed those of efficient gasoline and
diesel vehicles. Therefore, the ultimate feedstock for hydrogen production has
become a significant policy concern.

114 P.L. 108-108 and P.L. 108-137. For more information on these initiatives see CRS
Report RS21442, Hydrogen and Fuel Cell Vehicle R&D: FreedomCAR and the President’s
Hydrogen Fuel Initiative.
115 P.L. 108-447; H.Rept. 108-792.

Safety. There are some key safety concerns and some likely benefits from the
use of hydrogen fuel. Because of its low density in air, hydrogen fuel is likely to
dissipate quickly in an open area, reducing safety concerns. Further, hydrogen rises,
which may make it less likely than other fuels to lead to asphyxiation if released in
an enclosed area. However, when hydrogen does burn, the flame is transparent.
Further, hydrogen is highly reactive, and in the presence of a leak the fuel can be
ignited with a small spark of static electricity. Other concerns include the safety of
high-pressure or low-temperature onboard fuel storage, the safety of hydrogen
stations in populated areas, and the need to train first responders about hydrogen
Coal-Derived Liquid Fuels
Although EPAct recognizes coal-derived fuels as alternative fuels, these fuels
have seen little commercial success. This is largely due to their high production costs116
and poor environmental performance. However, research to reduce costs and
improve environmental performance is ongoing, mostly through support of the117
Department of Energy. A potential advantage of coal-derived fuels is that the
feedstock is an abundant domestic resource.
Alternative fuels have reached varying levels of commercial success, although
currently none are able to compete with conventional fuels. LPG and natural gas
fuels and vehicles have been successfully commercialized, and are widely used in
both private and public fleets. Ethanol is a common additive in gasoline, but is used
sparsely as an alternative fuel. Other fuels, such as methanol and electricity have had
less commercial success, but may play a key role in the future of transportation.
The degree to which various alternative fuels have been used has been a result
of economic factors, as well as government tax policies and regulatory mandates.
Further, the performance characteristics of the fuels have also played a major role.
In general, there are potential energy security benefits to alternative fuels, as
most alternative fuels can be derived from domestic sources. Further possible
benefits include lower emissions of toxic pollutants, ozone-forming pollutants, and
greenhouse gases. However, performance and cost are key barriers to consumer
acceptance. Without considerable advances in alternative fuel and vehicle
technology, or significant petroleum price increases, it is unlikely that any fuel or
fuels will replace petroleum-based fuels in the near future.

116 In fact, while the fuels themselves may result in lower vehicle emissions, the processes
for converting coal to liquid fuel tends to lead to high pollutant emissions.
117 Nicholas P. Chowey, “Coal Conversion Keeps Itself Relevant,” Chemical Engineering.
September 1998. p. 35.

Congressional Action
Recent policy debate has focused on American energy security. Because of this,
discussion has turned to alternative fuels. Proponents argue that expanding
alternative fuel tax credits and other incentives would promote improved air quality
and energy security. Opponents argue that alternative fuel programs could lead to
“corporate welfare” and that there are less expensive ways to reduce pollution and
cut fuel consumption, such as efficiency improvements and conservation. For
example, an increase in fuel economy of one mile per gallon across all passenger
vehicles in the United States could cut petroleum consumption more than all
alternative fuels and replacement fuels118 combined.119
The Bush Administration’s National Energy Policy120 supports an increased roleth
for alternative fuels, as did several bills in the 108 Congress. Provisions in various
bills would have provided tax credits for the purchase of alternative fuel and hybrid
vehicles, and would have expanded the existing electric vehicle tax credit. Further,
some bills would have expanded the existing tax credits and deductions for the
installation of alternative fuel refueling infrastructure. Some bills also would have
provided per-gallon tax credits for the retail sale of alternative fuels, and some bills
would have allowed states to exempt alternative fuel and/or hybrid vehicles from
high occupancy vehicle (HOV) restrictions. Finally, some bills would have provided
grants to schools, municipalities, and/or transit systems for the purchase of alternative
fuel vehicles, refueling infrastructure and/or fuel.
Most notably, the Energy Policy Act of 2003 (H.R. 6) contained several
provisions on alternative fuels. The conference report (H.Rept. 108-375) would have
required the use of 5.0 billion gallons of renewable fuel in gasoline by 2012
(renewable fuels standard). Further, the bill would have authorized the $2.15 billion
over five years for hydrogen and fuel cell research and development. The bill also
would have provided a tax credit for the purchase of fuel cell vehicles. Finally, the
bill would have modified the way vehicle purchase credits are generated under
EPAct. The House approved the conference report on November 18, 2003. On
November 21, 2003, a cloture motion on the bill was rejected in the Senate. It isth
likely that a similar bill will be introduced in the 109 Congress.
Another key piece alternative fuel legislation in the 108th Congress was the
CLEAR ACT (H.R. 1054 and S. 505). These bills would have expanded the existing
EV tax credit and infrastructure deduction, and created new credits for alternative
fuel vehicles and hybrids. Further, the bills would have established a tax credit for121
the retail sale of alternative fuel.

118 Replacement fuels include blending agents such as ethanol in E10, that are used in
gasoline but do not qualify as alternative fuels.
119 Source: CRS analysis of data from the Department of Energy.
120 National Energy Policy Development Group, National Energy Policy. May 2001.
121 For a detailed discussion of the CLEAR ACT, see CRS Report RS21277, Alternative
Fuel Vehicle Tax Incentives and the CLEAR ACT.

Most notably, on October 22, 2004, the American Jobs Creation Act was signed
into law (P.L. 108-357, H.R. 4520). Among other provisions, this act replaced the
existing tax exemption for ethanol-blended fuel with a tax credit. In addition, it
established a tax credit for the production and sale of biodiesel fuel.