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Alternative fuels, also known as non-conventional fuels, are any materials or substances that can be used as a fuel, other than conventional fuels. Conventional fuels include petroleum, propane and natural gas. Some well known alternative fuels include biodiesel, bioalcohol, chemically stored electricity, hydrogen, non fossil methane, non fossil natural gas, vegetable oil and other biomass sources.
The main purpose of fuel is to store energy in a form that is stable and can be easily transported from the place of production to the end user. Almost all fuels are chemical fuels, which store chemical potential energy. The end user may consume the fuel at will and release energy, usually in the form of heat, for a variety of applications, such as powering an engine or heating a building.
In 2007, there were 1.8 million alternative fuel vehicles sold in the United States, indicating an increasing popularity of alternative fuels. There is growing perceived economic and political need for the development of alternative fuel sources. This is due to general environmental, economic, and geopolitical concerns of sustainability.
The major environmental concern, according to an IPCC report, is that "Most of the observed increase in globally averaged temperatures since the mid-20th century is due to the observed increase in anthropogenic greenhouse gas concentrations." Since burning fossil fuels are known to increase greenhouse gas concentrations in the atmosphere, they are a likely contributor to global warming.
Other concerns which have fueled demand revolve around the concept of Peak oil, which predicts rising fuel costs as production rates of petroleum enters a terminal decline. According to the Hubbert peak theory, when the production levels peak, demand for oil will exceed supply and without proper mitigation this gap will continue to grow as production drops, which could cause a major energy crisis.
Lastly, the majority of the known petroleum reserves are located in the middle east. There is general concern that worldwide fuel shortages could intensify the unrest that exists in the region, leading to further conflict and war.
In an attempt to increase demand for alternative fuels in the US, the IRS began allowing taxpayers to claim a special tax credit for using alternative fuels, known as the Alternative Fuel Vehicle Refueling Property Credit. The definition used for alternative fuel under this credit is: Any fuel containing at least 85 percent of one or more of ethanol, natural gas, compressed natural gas, liquefied natural gas, liquefied petroleum gas, or hydrogen; or any mixture which consists of two or more of biodiesel, diesel fuel, or kerosene, and at least 20% of which consists of biodiesel.
The production of alternative fuels can have widespread effects. For example, the production of corn-based ethanol has created an increased demand for the feed stock, causing rising prices in almost everything made from corn. However, in a competitive free market, an increased supply of ethanol reduces the demand for conventional fuels, and thus lowers fuel prices. The ethanol industry enables agricultural surpluses to be used to mitigate fuel shortages.