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This will produce just as much green house gas as driving with gasoline. It is the same as E85 you still can only pull so much power from one thing to another like gas burning to make mechanical movement. So what if its air! That air had to be compressed by something and that had to get power from something so we just are making someone else pay and it will all come back around and get us somewhere else.
But one key point here (and with all similar technologies) is that the more you can centralize the power generation, the more efficiently you can produce it, and the easier it is to control the resulting pollution.
Exactly, a minipowerplant in your car (gas engine) is horribly inefficient. I'm not sure how much more efficient having your own air compressor in your car would be but I'm pretty sure it's still not as efficient as running an electric engine in the first place. You'll lose a lot of energy in the electricity to compressed air conversion.