Several French cities have made public transport free, working on the same principle as Ken Livingstone's 'Fare's Fair'. It saves money in the end to subsidise public transport. See map for the towns in France where you can travel around for free.
All you ever wanted to know about buses and probably a lot of things you didn't want to know. Brilliant PDF with pros and cons re: different fuels and looking towards what runs our buses in the mid and long term future. See text document on buses and the environment too.