Fuel cell maker Ballard Power Systems said it sees some tough new challenges ahead for its alternative fuel technology for transportation applications.

Vancouver, British Columbia-based Ballard said it is most concerned about what it calls "unfavorable government action" related to environmental policies. In particular, Ballard said the California Air Resources Board (CARB) recently recommended delaying implementation of Zero Emission Vehicle (ZEV) mandates in California until 2005, with New York and Massachusetts also proposing delaying ZEV mandates until 2007.

The proposed ZEV regulations in California require that 10% of vehicles sold beginning in 2005 be ZEVs with at least 1% of the requirements being met by true zero-emission vehicles.

The company fears in particular that changing ZEV rules would eliminate vehicle markets for its technology.

Ballard said its fuel cell technology meets those ZEV transportation requirements because it uses hydrogen and oxygen to produce electricity for vehicle propulsion, with water vapor the only exhaust emission.