Liquid fuels are interesting as they don’t really need to be efficient, but they really need to be convenient! Obviously efficiency helps but having a liquid that contains 32 million joules per litre is very handy!
So to make a fuel environmentally friendly we need to look at where that energy comes from.
In fossil fuels that energy comes from the ground and is obviously unsustainable, because one day there won’t be any more. They also have the side effect of releasing a lot of CO2.
What I’ve worked on in the past uses ethanol from crops as this source of energy. However this has the side effect of requiring a lot of land and we also need that land to live on and grow crops on.
What I work on now uses renewable energy like wind or solar or even nuclear (which is not strictly sustainable but doesn’t make CO2 and will last for a very long time, much longer than fossil fuels with the right methods). This energy is used to turn CO2 from other sources like factories into a fuel. This fuel can then be burnt, releasing the CO2 again but means no extra CO2 from petrol has been released. This method is “CO2 neutral”. So really the CO2 is acting like a battery to turn renewable and low carbon electricity into fuel for your car!