Widely promoted in the US as a "clean fuel," methanol in fact has many desirable combustion and emissions characteristics, including good lean combustion characteristics, and low flame temperature (leading to low NOx emissions) and low photo-chemical reactivity.

The major drawback of methanol as a fuel is its cost, and the volatility of pricing. While methanol prices have proven highly volatile in the past, there is little prospect for it to become price-competitive with conventional fuels unless world oil prices increase greatly.

With a fairly high octane number of 112, and excellent lean combustion properties, methanol is a good fuel for lean-burn Otto-cycle engines. Its lean combustion limits are similar to those of natural gas, while its low energy density results in a low flame temperature compared to hydrocarbon fuels, and thus lower NOx emissions.

Light-duty vehicles using M85 tend to have emissions of NOx and CO similar to gasoline vehicles. The total mass of tailpipe non methane organic gas (NMOG) emissions tend to be similar to or somewhat higher than for gasoline vehicles, but the lower ozone reactivity of the NMOG results in similar or somewhat lower ozone impacts overall. Emissions of formaldehyde (a primary combustion product of methanol) tend to be significantly higher than those from gasoline or other alternative fuel vehicles, but emissions of other toxic air contaminants (especially benzene) tend to be lower. Formaldehyde emissions have been controlled successfully by catalytic converters.

Heavy-duty methanol engines are capable of much lower NOx and particulate emissions than similar heavy-duty bus diesel engines, while engine out NMOG, CO and formaldehyde emissions tend to be higher. These emissions have been controlled successfully by catalytic converters.

Methanol can be produced from natural gas, coal, or biomass. At current and foreseeable prices, the most economical feedstock for methanol production is natural gas, especially natural gas found in remote regions where it has no ready market. The current world market for methanol is as a commodity chemical, rather than a fuel, and world methanol production capacity is limited and projected to be tight at least through the 1990s.

In addition to new methanol supply capacity, any large-scale use of methanol for vehicle fuel would require substantial investments in fuel storage, transportation, and dispensing facilities, which would further increase the delivered cost of the fuel.