Methanol is produced from hydrogen and carbon monoxide, the hydrogen can be produced by electrolysis of water and the carbon monoxide can be captured from emission sources. Those are geothermal boreholes or basic infrastructure industrial processes including aluminum smelterring, ferro silicon manufacturing, cement production, and coal-fired power generation.

The use of  methanol as fuel is usually as a blend with gasoline, but little modification is needed for gasoline cars to run on methanol and none at all if the fraction of methanol in the fuel is small.

Methanol has not been used in Iceland as fuel so far, but this may be changing. Carbon Recycling International has already begun construction of an industrial size methanol plant and is planning on starting production at the end of 2010.

Methanol can be further transformed into other fuels, such as DME.