Suggested Citation:
Dominguez-Faus, Rosa and Amy Myers Jaffe (2014) Climate, Air Quality and Security: The Policy for Alternative Fuels in Transportation. United States Association for Energy Economics 22 (1), 1 - 7

High global oil prices have encouraged innovation and conservation in many key use sectors, and environmental and security drivers are also driving rapid acceptance of new technologies. This trend is now gaining momentum globally in the transportation sector. Governments are under increasing pressure from many directions, including climate change, air quality, rising urbanization, and national security, to consider policies and directives to hasten the pace of penetration of new more efficient vehicles and adoption of alternative fuels. The period of historic instability across the oil producing regions of the Middle East gives added impetus to programs aimed to diversify national transport fuel sources, especially in the face of increasing demand for mobility among rising middle classes in the developing world.

Oil’s current dominance in the transportation sector is unquestionable. Roughly 93 percent of all fuel used in the transport sector globally is petroleum-based. The International Energy Agency forecasts that almost all of the net growth for oil will come in the next two decades from the transport sector in emerging economies. Road transport for freight and personal mobility will be responsible for 75% of future oil in transportation use, according to the IEA. With the global passenger vehicle fleet expected to double in the coming decades to 1.7 billion by 2035, governments and companies alike are looking for new opportunities to meet some of this demand in alternative ways. Still, in their annual energy projections, the U.S. Energy Information Administration (EIA, 2013) as well as ExxonMobil (ExxonMobil, 2013) and BP (BP, 2013), expect the transportation sector to be dominated by petroleum fuels well into the future. However, increasingly, governments are beginning to look at ways to accelerate fuel source diversification and greater efficiency in transportation, especially in the vehicles arena.