This paper presents the results of a study on a pneumatic energy storage system for on-vehicle applications. These are: 1. The 4-stroke diesel engine can be adapted to perform the additional functions of compressor and expander. With the exception of the storage tank, the regenerative braking is accomplished without further increase in weight and cost of the vehicle. 2. The number of miles traveled per gallon of fuel consumed in High Prformance Urban Route Cycle by a heavy urban bus or by a light school bus are increased by a factor of about three. Similar savings of fuel can be expected for a taxi. 3. The reduction in emissions is expected to equal or exceed the reduction in fuel consumption.