European governments agreed Friday to spend $731 million developing fuel cells and hydrogen technology for cars that could slash oil consumption and carbon dioxide emissions within decades.
Car and energy companies such as Daimler AG and Royal Dutch Shell PLC are expected to match or exceed the EU funding for the six-year research project that should speed up research and make cleaner cars a commercial reality between 2010 and 2020.
The European Commission says hydrogen cars could cut the amount of oil used by road transport by 40 percent by 2040 and halve carbon emissions by 2050.
"The break-even point could be most likely reached between 2025 and 2035," it said. "European industry needs additional stimulation to invest in the technology."
The cost of oil rose as high as $135 a barrel last week, almost doubling from a year ago and pushing up prices across the economy as transport costs soar.
Worried about high energy prices, tight supply and oil's contribution to global warming, companies and governments have invested billions of dollars in alternative fuels such as biofuels made from energy crops. Regulators are also pushing for more energy-efficient vehicles.
Hydrogen-powered fuel cells already are in limited use in place of fossil fuels, but they are so far neither efficient nor inexpensive enough for widespread use.