China is betting big on another gas engine alternative: methanol cars

As the Chinese government works to reach ambitious carbon goals—an emissions peak by 2030 and neutrality by 2060—the country has become a global leader in the adoption of electric vehicles. But that’s not the only greener car alternative it’s pursuing. 

Earlier this month, on September 16, China’s Ministry of Industry and Information Technology said it would “accelerate the popularization of methanol cars” and “explore the ‘green methanol + methanol cars’ model.” The next day, the director of China’s National Energy Administration, Zhang Jianhua, said that the country is “actively exploring new ways to replace fossil fuels, like green hydrogen, methanol, and ammonia.” 

Commonly called “wood alcohol,” methanol is a simple organic chemical that can be produced from a variety of sources, including coal, natural gas, biomass, and captured carbon dioxide. As a fuel, its advantages are clear: methanol is as powerful as traditional fuel, but greener. It has already been widely used in racecars, for instance, because it gives the engine more horsepower while keeping it cooler. In some scenarios like long-haul transportation, methanol-powered vehicles can be more affordable and dependable than EVs. 

According to Leslie Bromberg, principal research engineer at the Massachusetts Institute of Technology’s Plasma Science and Fusion Center, who has studied the potential of using methanol in transportation in the US, methanol engines can be comparable in efficiency to diesel engines “without the problem of diesel emissions.” 

For a decade, methanol fuel has been discussed and piloted in China as a way to transition the automotive industry into a future with less pollution and less dependence on fossil fuels. But its adoption has long lagged. 

Now the government’s recent moves, along with other state efforts in the last year to draft standards for methanol cars and support relevant industries, reaffirm that China is getting more serious about the alternative fuel. And methanol is finally capturing public attention as Chinese automakers look for the next industry-changing innovation—which, just like EVs, could become both a commercial success and a political boost to China’s climate-tech ambitions.

China’s experiment with methanol

Today, about 60% of the world’s methanol is manufactured and used within China—making the country the global leader. It’s currently used mostly in plastics manufacturing.

The country started a methanol-car experiment in 2012, encouraging automakers to develop models to run in a few cities while collecting data on their economic and environmental impacts over the next six years. The conclusion was that methanol cars can be 21% more energy efficient than gas cars, while emitting 26% less carbon dioxide.

After that pilot phase, the Chinese national government released a policy in 2019 that affirmed its support for methanol fuel, particularly in public transport, taxis, and government vehicles. 

Methanol is also an attractive option to power long-haul heavy vehicles like trucks, says Zhao Kai, the chief China representative of the Methanol Institute, a global trade association. Today’s electric trucks need large batteries that make them much less affordable than traditional trucks. But methanol trucks can cost roughly the same amount as traditional trucks since the engines are similar. 

“The majority of trucks that are running on the roads and delivering parcels in China are owned by individual truck drivers,” Zhao says. “They may not be able to afford it if the truck gets too expensive. If they can’t even make a living, how could they be thinking about achieving carbon neutrality? That’s not something on their mind.” 

Nevertheless, the development of methanol passenger cars in China remains slow compared with other green options, like EVs. In 10 years’ time, the number of EVs in China grew from 20,000 to over 10 million, while the number of methanol cars grew from zero to only 30,000. 

There are also fewer than 200 methanol refueling stations in China, and they are all located in the provinces where the pilot programs were conducted. That means it’s basically impossible for methanol cars to travel outside the province, or even the city, they are in. Future construction of methanol stations will most likely rely on support from China’s two biggest operators of gas stations, Sinopec and CNPC, which collectively operate over half the stations in China. They have yet to show much interest in offering methanol services.

A big reason for the slow development is that methanol cars have not been included in the “new energy vehicles” category that China heavily subsidizes and encourages. When China was drafting rules in the early 2000s on what constitutes a new energy vehicle, it only included cars powered by electricity—pure EVs, plug-in hybrids, and fuel-cell vehicles, says Zhao. Methanol cars, being closer to traditional gas-powered cars, were not included and subsequently missed out on two decades of high-speed growth. 

This means the methanol cars of today remain a local experiment rather than a practical consumer option. But more local officials are now giving out about $700 in subsidies to methanol-car buyers and $3,000 toward renovations that allow gas stations to offer methanol fuel. And Geely, a major domestic Chinese automaker that also owns Volvo Cars, has been developing methanol cars since 2005 and debuted several new models this year. 

“The application and popularization of methanol cars is the most realistic and effective path toward healthy and sustainable development in transportation,” says a spokesperson for Geely, which claims to have produced over 90% of the existing methanol cars in China. Its methanol passenger cars have run a combined 10 billion kilometers (6.2 billion miles), eliminating 19,400 tons of carbon emissions that gas-powered cars would have produced. 

What this means for China’s carbon-neutrality targets

A shift in thinking on methanol happened around 2020, when President Xi Jinping announced the carbon-neutrality pledge at the United Nations General Assembly meeting. “[China’s] general development goal of carbon neutrality has brought about a big opportunity since [then]: people suddenly realized that methanol is actually a carbon-neutral fuel,” Zhao says.

Traditionally, methanol is produced from fossil fuels like coal and natural gas, but it can also be made from renewable resources like agricultural waste. A University of Southern California team has even managed to produce methanol efficiently from CO₂ captured from the atmosphere. This means that car fuels—as well as other chemical products derived from methanol—can be produced in a carbon-negative way, at least theoretically.

Today, the leading company making methanol from carbon dioxide is Carbon Recycling International, an Icelandic company. Geely invested in CRI in 2015, and they have partnered to build the world’s largest CO₂-to-fuel factory in China. When it’s running, it could recycle 160,000 tons of CO₂ emissions from steel plants every year. 

The potential for clean production is what makes methanol desirable as a fuel. It’s not just a more efficient way to use energy, but also a way to remove existing CO₂ from the air. To reach carbon neutrality by 2060, as China has promised, the country can’t put all its eggs in one basket, like EVs. Popularizing the use of methanol fuel and the clean production of methanol may enable China to hit its target sooner.

Can methanol move beyond its dirty roots?

But the future is not all bright and green. Currently, the majority of methanol in China is still made by burning coal. In fact, the ability to power cars with coal instead of oil, which China doesn’t have much of, was a major reason the country pursued methanol in the first place. Today, the Chinese provinces that lead in methanol-car experiments are also the ones that have abundant coal resources.  

But as Bromberg says, unlike gas and diesel, at least methanol has the potential to be green. The production of methanol may still have a high carbon footprint today, just as most EVs in China are still powered by electricity generated from coal. But there is a path to transition from coal-produced methanol to renewables-produced methanol. 

“If that is not an intention—if people are not going to pursue low-carbon methanol—you really don’t want to implement methanol at all,” Bromberg says.

Methanol fuel also has other potential drawbacks. It has a lower energy density than gasoline or diesel, requiring bigger, heavier fuel tanks—or drivers may need to refuel more often. This also effectively prevents methanol from being used as an airplane fuel.

What’s more, methanol is severely toxic when ingested and moderately so when inhaled or when people are exposed to it in large amounts. The potential harm was a big concern during the pilot program, though the researchers concluded that methanol proved no more toxic to participants than gas. 

Beyond China, some other countries, like Germany and Denmark, are also exploring the potential of methanol fuels. China, though, is at least one step ahead of the rest—even if it remains a big question whether it will replicate its success in developing EVs or follow the path of another country with a major auto industry. 

In 1982, California offered subsidies for car manufacturers to make over 900 methanol cars in a pilot program. The Reagan administration even pushed for the Alternative Motor Fuels Act to promote the use of methanol. But a lack of advocacy and the falling price of gasoline prevented further research of methanol fuel, and pilot drivers, while generally satisfied with their cars’ performance, complained about the availability of methanol fuel and the smaller range compared with gas cars. California officially ended the use of methanol cars in 2005, and there’s been no such experimentation in the US since.