Natural gas became an available fuel for taxis in 2005 and had occupied a market share of 43.6% in taxi industry till 2010 in Nanjing, China. To investigate the energy replacement pattern as well as the pollutants reduction potential of the taxi industry, first, the fuel preference determinants of taxi drivers for their next taxis are analyzed. Results show that as an important alternative for the traditional gasoline, natural gas is widely accepted (75%) by taxi drivers. Different from the previous studies which focused on the early stage of cleaner fuel replacement, taxi drivers with various characteristics (such as age, working experience, and education level) are consistent with their fuel preference when they choose their next taxis. Result suggests that policies that concern consumers with specific characteristics may have little effects on the change of the market share, when the alternative fuel market has been developed well. In addition, the increased share of gas in the fuel market achieves a 7.2% reduction of energy consumption. Considering life cycle emissions, the following air pollutants, namely Greenhouse Gases (GHGs), carbonic oxide (CO), nitrogen oxide (NO ), particulate matters (PM) and hydrocarbons (C H ), gain 10.0%, 3.5%, 20.5%, 36.1%, and 26.4% of reduction respectively. Assuming all taxi fleets powered by natural gas with local policy intervention, the energy conservation and the five major air pollutant emissions could achieve the maximum reductions with 12.2%, 16.0%, 8.8%, 22.5%, 44.2%, and 49.4% correspondingly.