There has been controversy in the published literature regarding the scope for alternative fuels to reduce greenhouse gas emissions in passenger transport. This paper aims to resolve this question in an Australian context, and, where possible, to calculate the costs of emission reductions. Fossil-fuel-based alternatives give either marginal or uncertain reductions. Ethanol from sugar cane, the most promising biomass fuel, has high costs per tonne of CO2 reduction, and, when other trace gases are considered, shows no definite improvement over petrol. Electric vehicles, if deployed today in Australia, would exacerbate greenhouse warming. Only if an alternative new energy source such as wind power generated 15% or more of total electricity would emission reductions occur compared to equivalent petrol-fuelled cars.