Is there any practical replacement for gasoline and diesel fuel in automobiles? Since the oilcrises of the 1970s and the rise in the awareness of environmental and security issues, policy makershave often considered this question. For many reasons, the United States has searched foralternatives 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 inconventional vehicles with little or no modification to the vehicle. However, some of these fuels aresignificantly 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) mustbe part of the discussion. Key factors in the ultimate success or failure of any alternative fuel includethe relative cost of the fuel, the ability to develop and expand fueling stations, and the performanceand 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 stepin. Congress, recent Administrations, and state governments have instituted some key programs topromote the use of alternative fuels. These programs include tax incentives for the purchase ofalternative fuels and alternative fuel vehicles (AFVs), purchase requirements for government andprivate fleets, and research grants for the study of alternative fuels. Despite these efforts, only about480 million gallons (1) of alternative fuels wereconsumed in 2004, just 0.3% of motor fuel demand(136 billion gallons of gasoline and 36 billion gallons of diesel). (2) The three most important statutes concerning alternative fuels are the Alternative Motor FuelsAct 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 governmentuse of alcohol- and natural gas-fueled vehicles. EPAct requires that federal and state agencies, aswell as private firms that distribute alternative fuels, must purchase for their fleets a certainproportion 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 localgovernments 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 citieswith 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 EPActpurchase requirements; E.O. 13031, which required that federal agencies meet EPAct requirementsregardless of budget; and E.O. 13149, which aims to drastically reduce federal governmentpetroleum consumption through the use of AFVs and hybrid vehicles. The major alternative fuelslegislation and relevant Executive Orders are summarized in Table 1 and discussed further below. Table 1. History of U.S. Alternative Fuel Vehicle Policies 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. Inaddition, AMFA established an Interagency Commission on Alternative Motor Fuels to develop anational alternative fuels policy. The act also established a commercial demonstration program tostudy the use of alcohol and natural gas in heavy duty trucks. Since 1991, DOE has supportedprojects in these areas, making the data publicly available through its Alternative Fuels Data Center(AFDC). (3) 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 cleanfuel emissions standards. In metropolitan areas in extreme, severe, or serious non-attainment forozone (5) or carbon monoxide, fleets of 10 light-dutyvehicles or more face purchase requirementssimilar to those for EPAct (discussed below). However, under CFFP, conventional vehicles areadmissible if they meet National Low Emission Vehicle (LEV) standards. Another key differencebetween the CFFP requirements and the EPAct requirements is that under CFFP, a vehicle mustalways be operated on the fuel for which it was certified. For example, if a dual-fuel ethanol vehicleis 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 was enacted to promote energy efficiency and energy independence in the United States. It includes programs that require or promote alternative fuelvehicles, as well as commercial and domestic energy efficiency, natural gas imports, and nuclearpower. Two key programs concerning alternative fuels are the AFV purchase requirements forfederal, state, and alternative fuel provider (6) fleets,and the AFV tax incentives. Fleet Requirements. EPAct (7) requires that acertain percentage of new light-duty vehicles (passenger cars and light trucks) purchased for certainfleets must be fueled by an alternative fuel. (8) Coveredfleets are those that operate 50 or more light-duty vehicles, of which at least 20 operate primarily in a metropolitanarea. Furthermore, the fleetsmust be capable of being fueled at a central location, such as the fleet motor pool. Law enforcementvehicles, emergency vehicles, combat vehicles, non-road vehicles, and vehicles used for testing areexempted from the requirement. Federal, state, and alternative fuel provider fleets are currentlyrequired 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 intheprogram, but recently determined that such a requirement would not significantly reduce energydependence. (9) Table 2. Light-Duty Alternative Fuel Vehicle Purchase Requirements under the Energy Policy Act Source: National Alternative Fuels Hotline, Department ofEnergy, 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-derived liquid fuels, fuels derived from biologicalmaterials, and electricity. (10) Covered vehicles maybe dedicated (11) or dual fuel. (12) 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, thefederal government is was compliance in 1998, mainly due to large purchases such as 10,000ethanol vehicles purchased by the U.S. Postal Service in that year. (13) However, according to acoalition of environmental groups, the government as a whole has failed to comply with EPAct sincethen. In a suit filed by Earthjustice (14) in SanFrancisco federal court, 18 federal agencies are accusedof failing to comply with the purchase requirements. (15) In July 2002, the court ruled that the federalgovernment had violated EPAct. Further, the court required the agencies to compile and makepublic, by January 31, 2003, reports on their non-compliance. Recently, the environmental groupsfiled a motion that the court find the agencies in contempt. Earthjustice argues that some agencieshave failed to submit reports entirely and that others have submitted unsubstantiated reports. (16) Inaddition, 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 meetthe EPAct requirements. The fleet program has been criticized because this use of dual-fuel vehiclesis seen by some as a "loophole." This criticism is another element of the lawsuit filed byEarthjustice. Tax Incentives. Another key provision of EPAct is a set of tax incentives for the purchase of new AFVs. (18) 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 providesa Clean Fuel Vehicle (any alternative fuel) tax deduction of up to $1,000 in 2005 for light-dutyvehicles, 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. TheEV tax credit and the Clean Fuel Vehicle tax deduction are being phased out, and are scheduled toreach zero after 2006. 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 toexceed the mandatory purchase requirements set in EPAct. The order argued that the federalgovernment 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.