Hydrogen, tested in buses from Amsterdam to Vancouver and used in the rockets of the U.S. space shuttle, is a clean power that promises to break dependence on oil and gas--at least in Iceland.
"Sometimes I have to explain to passengers that it's just water vapor," the driver said of white clouds trailing after his bus along the streets of the capital, Reykjavik.
"When it's very cold there's a lot of white steam."
With almost unlimited geothermal energy sizzling beneath its surface, Iceland has an official goal of making the country oil-free by shifting cars, buses, trucks and ships over to hydrogen by about 2050.
By then, in theory, the only oil used on the volcanic North Atlantic island will be in planes visiting Reykjavik airport.
Other countries, such as the United States, where President Bush is a strong backer of hydrogen, face a far tougher path.
Hydrogen's big drawback is that it is very expensive to produce--either by splitting water into its components of hydrogen and oxygen or by separating hydrogen from natural gas or methane.
With current technology, burning oil to make hydrogen to run a bus produces more pollution than simply running the bus on oil.
Car makers from Tokyo to Detroit have visited Iceland's hydrogen projects to discuss fuel cell design, Arnason said.
The world's first hydrogen filling station, run by Shell, opened in Reykjavik in April 2003.
Bush, for instance, wants to break reliance on Middle Eastern oil supplies as part of a wider quest for national security with a $1.2 billion scheme to promote hydrogen.