While H2O is a powerful greenhouse gas, it is totally different from CO2 in fundamental ways.
1. The effect is relatively localised.
2. It's temporary - if you stop pumping it into the air, then it rains away in a couple of days rather than hundreds of years for CO2
3.
There's no need to pump it into the air in the first place. You can condense it easily as part of the heating / cooling system, and dispose of it safely down the drain.
4. The amount of free water on the planet is vast compared to the amount of free CO2. A few extra pints will not flood the oceans, where it will all inevitably end up.
5. H2 can be produced to near perfect purity, greatly reducing other toxic emissions compared to petrol.
The main problems with H2 as a fuel right now are:
1. Most H2 is currently generated directly from fossil fuels, releasing CO2 and wasting energy in the process:
http://en.wikipedia.org/wiki/Steam_reforming2. Storage and transportation of H2 is far more difficult than with other gasses because it requires over 9000 times the pressure of Propane to contain the same energy at NTP.
3. Pressurised H2 causes metals to become brittle and fail, potentially leading to fatal disasters.
4. H2 is a very low energy density fuel, so relatively large amounts are required. This increases the weight and size of the vehicle.
There are methods of generating H2 directly from sunlight and water, either using photosynthesis or electrolysis. These may be viable in the very same sunny parts of the world we currently depend on for oil, but until there is a market and while oil is still cheaper there is little financial incentive to invest. It would take millions of acres of solar collectors to replace one oil well.
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