There is little doubt that coal can be converted to fuel for ICEs. Germany did it in WWII, and South Africa was doing it during the embargoes of the Apartied era. I think they may still have a commercial coal-to-gasoline production.
The only thing stopping that in the US is cost. It’s still cheaper to get oil from the ground and make gasoline from that, but whenever the supply gets low enough that the price goes up, we have a lot of coal in the US.
There is also some possible bio solutions. There may be some bio-engineered algea that will convert atmospheric CO2 into oil some time in the not too distant future.
The pressure to replace ICEs is IMHO being driven by three factors, the desire to move away from petrolium based fuels because the supply is finite, the desire to move away from them due to the belief that they’re a primary cause of global warming (if one buys into that theory), and the perecption that we’re at the mercy of OPEC in our gas costs.
I believe that other technologies will match the ICs versitility and, critically, it’s purchase and ownership costs. I believe it will be electrics, mainly because the basis for a nationwide refueling (recharging) infrastructure already exists, and because Tesla has made major strides in this area by proving it’s viability and developing manufacturing, cooling, protection, and control systems for lithium-ion battery packs containing thousands of cells.
I believe that someday electrics will replace ICEs just as the ICEs replaced horses. They’ll be someday less costly, less troublesome, and just as convenient.
And the water vapor from a fuel cell vehicle is certainly less than the amount of water vapor put out by an ICE - about a gallon of water per gallon of gasoline. And a ‘drop in the bucket’ compared to someone watering their lawn.