Hydrogen transportation has been proposed as a low-carbon alternative to the current gasoline-powered fleet. Using a computable general equilibrium model of the world economy, we explore the economic viability of hydrogen transportation in several different tax and carbon stabilisation policy scenarios. For each scenario, various combinations of hydrogen fuel price and vehicle mark-ups are used as inputs to explore what technological improvements in terms of cost reductions would be necessary for the technology to penetrate the market. The effect of introducing reduced-carbon fuel substitutes, such as ethanol-blend fuels, on the economic viability of hydrogen transportation is also explored. Hydrogen-powered fuel cell vehicles could make a significant contribution to decarbonisation of transportation if production of hydrogen itself is not carbon-intensive. For those involved in hydrogen research, this analysis provides cost targets that would need to be met for hydrogen transportation to be economically viable within the next century. Cost targets needed for the technology to penetrate in the USA are such that the hydrogen fuel would need to be in the range of 1 to 1.7 times the 1997 price of gasoline and the vehicle mark-up of an average fuel cell automobile would need to be no more than 1.3 to 1.5 times an average conventional vehicle.

© 2009 Journal of Transport Economics and Policy