An industry group is betting that possible greenhouse gas regulations will spur interest in dimethyl ether (DME), a methanol-based fuel that remains largely unknown in the United States but has started gaining momentum around the world.

The flammable chemical, which can be made from biomass, coal or natural gas, has been used for decades in the United States as a propellant in spray cans and as an active ingredient in over-the-counter wart treatments. But members of the Washington, D.C.-based International DME Association (IDA) expect legislation that would put a price on carbon emissions in the United States will make DME an attractive fuel option.

"That's going to drive up the demand for products like ours, but the thing that we like about DME is that it's a good fuel to use right now without that," said Rick LeBlanc, director of the trade group's newly formed North American Affairs Committee. "We can make it now on a competitive basis without the limits and subsidies that everybody expects to come in the future. When [a carbon price] comes, that just makes it an even better business case."

China has recently ramped up DME production amid shortages of oil and natural gas, aiming to roughly double annual production capacity to 15 million tons by the end of 2010, according to a December report in Xinhua, the country's official news agency. Many rural Chinese homes now use DME as a fuel for heating and cooking, while Shanghai Diesel Engine Co., a division of SAIC Motor Corp., plans to roll out a test fleet of 10 DME-powered buses this year.

Though China's DME is primarily made from coal, sources of biomass such as wood could also provide the United States with renewable fuel for heavy trucks and barbecue grills, advocates say. Placing those environmental benefits front and center, IDA has quietly launched a campaign to obtain key certifications from U.S. EPA and the U.S. Department of Energy, said LeBlanc, who is also CEO of Chemrec, a Swedish energy firm investing in DME.

Members of IDA include Swedish carmaker Volvo, French petroleum giant Total SA and Peoria, Ill.-based heavy equipment manufacturer Caterpillar Inc.

According to industry estimates, DME derived from biomass becomes competitive with conventional fuel when oil costs $70 to $80 per barrel. With the price of a barrel of oil currently hovering around $80, DME appears to be viable in the long term, said Robert Rapier, chief technology officer at Hawaii-based biofuels firm Merica International.

Rapier said he and his company have no stake in DME, but he is bullish on the fuel because it costs less to produce than ethanol and lacks methanol's toxic properties. The results of an upcoming test in Sweden will largely determine whether the emerging fuel is ready for wider use in trucks and other fleet vehicles, said Rapier, who frequently analyzes renewable fuels on his Web site, "R-Squared Energy Blog."

In September, Chemrec broke ground on a $20 million pilot plant in northern Sweden that will make DME from black liquor, a byproduct of pulp mills. Once the plant is up and running, Volvo will provide a fleet of 14 DME-powered trucks, which will be run through their usual paces through 2012. Preem Petroleum AB, Sweden's largest oil company, will install four filling stations around the country so the trucks can refuel.

"A lot is going to be dependent on what happens with the Volvo tests," Rapier said. "If those are successful, you can point to that and say, 'This stuff works.'"

All about DME

Gaseous at room temperature but liquid under mild pressure, DME can be burned in diesel engines with modified fuel injection systems. It can also be used as a heating fuel, like propane.

There are various reasons the fuel is not already in wide use, experts say, such as the fuel's relatively low energy density compared to conventional gasoline and diesel. Drivers would need to hit a filling station about twice as often, making the fuel less attractive for personal cars, Rapier said.

But that is less of a problem for fleet vehicles, Rapier said, and if trucking companies are subject to a tax on emissions, the fuel's environmental benefits could be too good to pass up.

According to an analysis released in 2007 by the European Commission's Joint Research Centre, the production and distribution of DME from biomass yields less than half the greenhouse gas emissions of diesel or gasoline. When burned, DME yields about 8 percent less greenhouse gases than diesel and 24 percent less than gasoline, according to the study.

The fuel also virtually eliminates particulate emissions, Rapier said, mitigating one main challenge of diesel fuel and making the fuel more attractive for heavy vehicles.

Cutting the red tape

For veterans of the DME industry, current efforts to promote the fuel in the United States prompt some feelings of déjà vu.

The technology had found some success securing federal funding until energy policy shifted under the George W. Bush administration, said James McCandless, CEO of Redford, Mich.-based Alternative Fuel Technologies Inc.

"People were very excited. The DOE was excited," said McCandless, who founded the company in 1994. "And then, George Bush came into office and killed everything but hydrogen. ... There was no funding in the U.S., so [DME research] all went offshore."

Since then, the company has done most of its work with automotive companies in Europe and Asia, McCandless said. While the Obama administration seems friendlier to DME, he said, developers of the fuel still face a challenge clearing the regulatory thicket that surrounds new fuels.

If the industry moves forward as hoped, it will likely be about two years before the first test fleet hits the road in the United States, McCandless said, and about five years before DME-powered vehicles become commercially available.

Starting the ball rolling

IDA leaders submitted DME for consideration this spring, when EPA sought comments on the revision of its renewable fuel standards. It remains to be seen whether DME will be included in the revised standards, expected to be finalized this month.

Energy companies developing DME are also in talks with engine manufacturers to begin federally sanctioned tests, LeBlanc said, opening the possibility of having DME certified as an alternative fuel by DOE under the Energy Policy Act.

Inclusion on that list would allow DME-powered vehicles to fulfill requirements that government fleets include a certain percentage of vehicles powered by alternative fuels. Because fleet vehicles are the ideal market for DME, the fuel's eligibility under the Energy Policy Act will be crucial to its development in the United States, said Greg Dolan, vice president of the Arlington, Va.-based Methanol Institute.

The list bears significant influence, opening the door to new research funding and tax incentives, Dolan said. Methanol has been a certified alternative fuel since the act's passage in 1992.

"When you talk to the DOE about that list of alternative fuels, they'll tell you it's only applicable for state and federal fleet requirements," Dolan said. "But on a practical basis, where you see funding and where you see tax incentives, those benefits always refer back to the definitions of alternative fuels from the Energy Policy Act."

"If you really want to have an alternative fuel put into operation by public or private fleets, it's much easier if you're officially designated as an alternative fuel," Dolan added.

Securing a place on that list will be a challenge in itself.

Despite increased emphasis on alternative energy in recent years, only one alternative fuel has been added to the list since the energy act's passage in 1992. That addition to the list was P-series fuel, a blend of liquefied natural gas, ethanol and biomass ether that can be used in flex-fuel vehicles. It was certified in 1999 after a two-year application process.

The most recent applicant, natural gas-derived Fischer-Tropsch diesel, has spent the last five years in regulatory limbo after DOE ruled in early 2005 that it could not decide whether the fuel's environmental benefits are substantial enough to justify the certification.

DME will need influential backers to move through the process quickly, Rapier said. That support could come from lawmakers in states with declining timber industries, which could boost their economy by producing DME from forestry biomass.

"A lot of this is not about science at all. It's about politics. But if you step back and ask what makes the most sense from a scientific perspective, DME makes a lot of sense," Rapier said.