The New York Times recently wrote about UPS inc. trying out a hydraulic "transmission" (actually a whole drivetrain) invented by the EPA to improve the efficiency of their trucks "60 to 70 percent". That's great, but better work may have been done elsewhere.
Artemis Intelligent Power, a UK company spun off from the University of Edinburgh, has a continuously-variable hydraulic transmission called HEDDAT that operates at 90 - 95% efficiency through almost its entire speed range. As they say, "Cars spend little of their lives at full power, so DD's part load efficiency is particularly suited to the automotive duty cycle." Their system requires more sophisticated control and electronics than the EPA's hydraulic-turbine drive, so it would likely be more expensive, but it can also do regenerative braking, independent traction control for each wheel, and "engine off operation"--using a fluid accumulator to give bursts of energy without using the motor. They would also like their devices to be used as transmissions in renewable energy-generation as well (read: windmills).
IHC Holland has also been researching a continuously-variable transmission that is partly geared and partly hydraulic, which they claim over 95% efficiency for, though not over broad speed ranges like HEDDAT. In Japan, Honda has worked on continuously variable transmissions for a decade, both geared and hydraulic, and they already appear on the road in models such as the Insight. Although to be fair, these do not achieve the system efficiencies that the EPA's hydraulic turbine drive, or Artemis's HEDDAT, would give. They are still worse than a manual transmission.
Note that normal manual transmissions for most cars today give a respectable ~90% efficiency, with some poor performers at 82 - 85% (and automatic transmissions significantly worse). However, because these transmissions have a limited number of gears, you can rarely run the engine in its optimal performance range, and that can quickly cut your efficiency, sometimes by as much as half. Continuously variable transmissions ("CVT's") allow the engine to stay nearer to its optimal RPM range no matter what speed you're going. This is how a CVT can improve fuel economy by 60% as the EPA hopes, or even double it.
Regardless of whether there are better solutions, though, the NYT points out the EPA's invention would make compelling business sense as well as ecological sense: "the system would raise the cost of a standard truck by about $5,000 but would save about $2,500 a year in the cost of diesel fuel".
