An alternative fuel is any vehicle fuel that serves as a substitute for conventional gasoline or diesel made from petroleum. The U.S. government formally defined the category in the Energy Policy Act of 1992, which listed specific fuels that qualify: ethanol, methanol and other alcohols, natural gas, propane, hydrogen, electricity, biodiesel, coal-derived liquids, and a synthetic blend called P-Series fuels. The definition matters because it determines which fuels, vehicles, and infrastructure qualify for federal incentives and fleet requirements.
Fuels That Legally Qualify
The Energy Policy Act created a specific list rather than a broad standard, so not every non-petroleum fuel automatically counts. The recognized alternative fuels include:
- Ethanol (and blends of 85% or more alcohol with gasoline, sold as E85)
- Biodiesel (B100, derived from biological materials like vegetable oils or animal fats)
- Natural gas (compressed or liquefied, plus liquid fuels produced domestically from natural gas)
- Propane (liquefied petroleum gas)
- Hydrogen
- Electricity
- Methanol and other alcohols
- Coal-derived liquid fuels
- P-Series fuels (a blend of natural gas liquids, ethanol, and biomass-derived components)
Regular gasoline blended with 10% or 15% ethanol does not qualify. The alcohol content must reach 85% or higher. Similarly, standard diesel blended with a small percentage of biodiesel falls outside the definition. The threshold is pure biodiesel (B100) or, in practice, high-percentage blends used in qualifying fleet vehicles.
How the Major Types Work
Electricity
Electricity powers battery electric vehicles through rechargeable lithium-ion battery packs. The electricity itself comes from whatever mix feeds the local grid: natural gas, coal, nuclear, wind, solar, or hydropower. Because no fuel is burned in the vehicle, there are zero tailpipe emissions. Lifecycle emissions depend on how the electricity was generated. Battery electric trucks and buses produce at least 63% lower lifetime greenhouse gas emissions than diesel equivalents even on today’s average grid mix, according to research from the International Council on Clean Transportation. That figure climbs to a 92% reduction when powered entirely by renewable electricity.
Ethanol
Ethanol is an alcohol fuel made primarily from corn, grains, or agricultural waste (called cellulose). It’s blended with gasoline at high concentrations and sold as E85 for use in flex-fuel vehicles, which have engines designed to run on either gasoline or ethanol blends. The U.S. has roughly 4,983 E85 fueling stations, making it one of the more accessible alternative fuels outside of electricity.
Biodiesel
Biodiesel is produced from fats and oils, including soybeans, waste cooking oil, animal fats, and rapeseed. Chemically, it consists of methyl esters of fatty acids. It works in standard diesel engines, often with little or no modification, and is used in commercial trucks, buses, and farm equipment. About 1,967 biodiesel stations operate across the country, along with 1,242 renewable diesel stations (renewable diesel is a chemically distinct but related product refined to be a drop-in replacement for petroleum diesel).
Hydrogen
Hydrogen fuel powers fuel cell electric vehicles. Inside a fuel cell, hydrogen gas reacts with oxygen to produce electricity, with water vapor as the only tailpipe byproduct. The environmental benefit hinges on how the hydrogen is produced. Most hydrogen today comes from natural gas through a process called steam methane reforming, which still generates carbon emissions. Fuel cell vehicles using that hydrogen reduce lifecycle emissions by roughly 15% to 33% compared to diesel. When hydrogen is produced using renewable electricity to split water (electrolysis), the reduction reaches up to 89%.
Hydrogen infrastructure is still developing. The country has 714 retail hydrogen stations, heavily concentrated in certain regions.
Natural Gas and Propane
Compressed natural gas (CNG) and liquefied natural gas (LNG) are used mainly in fleet vehicles like transit buses, delivery trucks, and refuse haulers. Natural gas vehicles offer modest emissions reductions of 4% to 18% compared to diesel over their full lifecycle. Propane powers a wider range of vehicles, from school buses to forklifts, and benefits from a more dispersed network of about 1,684 stations. CNG has 715 stations, while LNG has just 52.
Infrastructure by the Numbers
As of April 2026, the U.S. has approximately 258,083 alternative fueling stations across all fuel types. Electricity dominates that count, with 79,731 station locations housing a total of 246,477 individual charging ports. The gap between electric charging and everything else is enormous. E85 ethanol comes in second with just under 5,000 stations, followed by biodiesel at roughly 2,000.
This infrastructure disparity shapes the practical experience of using alternative fuels. If you drive a battery electric vehicle in most metro areas, finding a charger is straightforward. If you’re considering a hydrogen, CNG, or LNG vehicle, station availability becomes a serious planning factor, especially for long-distance travel.
Tax Credits for Refueling Equipment
The federal government offers a tax credit for installing alternative fuel refueling or recharging equipment. For property placed in service through June 30, 2026, the credit covers 30% of the cost, up to $1,000 per item for individuals. Each charging port, fuel dispenser, or storage unit counts as a separate item. The equipment must be installed at your main home, must be new (not used), and must be located in an eligible census tract, specifically a low-income community or non-urban area as defined by 2020 Census data.
Businesses and tax-exempt organizations can claim a base credit of 6% of the cost, up to $100,000 per item. That rate increases to 30% (same $100,000 cap) for businesses that meet prevailing wage and apprenticeship requirements. The same census tract eligibility rules apply. You can look up whether your location qualifies using the IRS Census Tract Identifier tool with your 11-digit GEOID.
Why Alternative Fuels Exist
The push toward alternative fuels is driven by two goals: reducing dependence on imported petroleum and lowering greenhouse gas emissions. Different fuels deliver on those goals to very different degrees. Natural gas vehicles cut emissions modestly but use a domestically abundant resource. Electricity and hydrogen, when produced from renewable sources, can nearly eliminate lifecycle carbon emissions. Ethanol and biodiesel reduce petroleum consumption by substituting crop-based or waste-based feedstocks, though their net climate benefit depends on farming and production methods.
For most consumers, the practical question comes down to vehicle availability, fuel cost, and infrastructure. Electric vehicles have pulled ahead on all three fronts for passenger cars, which is reflected in their overwhelming share of alternative fueling stations. For commercial fleets, the calculus is more complex, and natural gas, propane, biodiesel, and hydrogen each fill niches based on vehicle weight, route length, and duty cycle.