"In five or six years, all cars will be hybrids," says Dale Hill, president of Transportation Techniques, a manufacturer of alternative-fuel buses. Ambitious thinking, but Hill is not alone in his opinion. Edward Michelin, president of Michelin Tires, agrees. "Environmental technology and innovation will drive car companies to make it happen," he says.

Well, that and government regulations. You can credit California, where the car is king and smog was invented, for pioneering regulatory actions. The state has mandated that by next year, 10 percent of cars sold there must have far lower emissions than today's cars, and 2 percent of these must be ZEVs—zero-emission vehicles—as in hydrogen fuel cells.

"We absolutely would not have fuel-cell vehicles today without the California ZEV mandate," says Sandy Thomas, president of H2Gen Innovations Inc., a fuel-cell manufacturer in Alexandria, Va. "It keeps the auto industry's feet to the fire."

But while technology progresses, infrastructure looms as a pothole on the road to a hydrogen-based economy. There are about 180,000 gas stations in the country, but only three hydrogen filling stations, all in California. Hence, the logic in starting with hydrogen-powered bus fleets so that a single, central filling station serves all. Next on the list? Don't be surprised if airplanes make the switch, too.