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The critical role of low-carbon liquid fuels in the energy transition

The critical role of low-carbon liquid fuels in the energy transition

A few weeks ago 195 parties reiterated in Glasgow at COP26 their willingness to keep the increase in global average temperature well below 2C above pre-industrial levels and continue efforts to limit the temperature increase to 1.5C. Earlier in July, the European Commission presented its Fit for 55 package aimed at achieving climate neutrality by 2050 and Europe delivering its share in addressing the climate challenge.

FuelsEurope and its members support these strong and repeated engagements and developed its own pathway that will contribute to achieving these critical mid-century objectives.

Clean Fuels for All and the Fit for 55 package

The industry’s Clean Fuels for All pathway was developed to shape its transformation and contribution to meet the EU’s 2050 climate ambitions. This pathway outlines a strategy that could enable the production of 150 million tons of oil equivalent (Mtoe) of low-carbon liquid fuels to contribute to achieving climate neutrality in aviation, maritime and road transport.

To be successful, our Clean Fuels for All strategy requires a clear and predictable policy framework that delivers the policy signals to create the markets and investment conditions. The Commission’s Fit for 55 package should set the foundation for that policy framework by proposing a revision of all climate and energy regulations to enable reaching at least 55 percent emission reduction of by 2030 and climate neutrality by 2050.

FuelsEurope believes that this legislative package goes in the right direction and contains constructive proposals for the decarbonization of transport, and for developing the policy framework necessary for the transition of the fuels industry. These constructive proposals include the Refuel EU Aviation and Fuel EU Maritime, the Renewable Energy Directive, the Energy Taxation Directive and the new ETS for road transport and buildings.

FuelsEurope, however, also has some concerns about the lack of recognition of the contribution of sustainable and renewable fuels in the vehicle CO2 regulation, and the weakening of the carbon leakage protection for EU industries. Additionally, the implementation of a transport and buildings ETS will generate a cost for fuels customers on top of existing fuels taxation, which will need careful judgement.

The critical role of low-carbon liquid fuels in the transport sector

The transport sector is responsible for almost 25 percent of Europe’s greenhouse gas emissions. Its decarbonization entails unique challenges, but it is a precious constituent of the EU economy. Transport is indeed the backbone of the European economy and we need to ensure our transport system, while progressively decarbonizing, remains competitive, energy-secure and affordable. There is no room for approximation and misjudgments. The objective of reaching climate neutrality in road, aviation and maritime transport is clearly defined and accepted, but the trajectory to 2050 remains very challenging and requires making the right choices and decisions.

Produced from waste, sustainable biomass, renewables and captured CO2, sustainable liquid fuels offer unrivaled energy density and storage capacity, and emit no or very limited additional CO2 during their production and use. These characteristics are essential for hard-to-abate sectors such as aviation, maritime and heavy-duty transport.

Biomass feedstock availability has often been raised as a justification to minimize the role of low-carbon liquid fuels. Imperial College London Consultants published a study  that shows that the total EU potential sustainable biomass availability (agriculture, forestry and biowastes) is more than sufficient to supply feedstock for bio-based liquid fuels to aviation, maritime and a share of road transport.

Accelerating climate neutrality and ensuring social inclusiveness

Low-carbon liquid fuels will play a critical role in the energy transition in all transport modes including light-duty vehicles. The uptake of electrification will require time to turn over the vehicle fleet and put in place the distribution infrastructures. During the transition of passenger cars and vans to Electric Vehicles (EVs), low-carbon liquid fuels are the most efficient way to cut emissions from vehicles with an internal combustion engine (ICE), enabling so the 200 million ICE vehicles that will be on the road after 2030 to progressively become climate neutral and allow the optimization of the implementation plan of infrastructures for electricity and hydrogen.

These low-carbon fuels will also address the needs of those citizens who don’t have the means to purchase new vehicles and are dependent on the second-hand market for their next vehicles. These users should also be offered the opportunity to reduce their CO2 footprint by increased used of low-carbon liquid fuels in their ICE vehicles. No one should be left behind, and access to affordable mobility should be protected as one of the fundamental rights of all citizens.

Creating lead market for scaling up low-carbon liquid fuels

In addition, road transport at large, including passenger cars and vans, is an essential trigger for unlocking the production of these fuels at industrial scale. With a significant carbon-price signal, road transport is currently the only sector in EU transport that can become a lead market and support a rapid industrial uptake of low-carbon fuels. These new fuels will then be available for the progressive decarbonization of aviation and maritime fuels, enabling so to achieve climate neutrality these sectors by 2050.

2022, the year of an enabling policy framework for investor engagement?

The transition of the EU refining industry has already started. There is no time to waste. The potential availability of sustainable biomass is more than sufficient to allow biofuel to contribute, together with e-fuels, hydrogen and electrification to the decarbonization of EU transport in line with the 2050 climate-neutrality objective without leaving anybody behind.

Investors will only commit resources to support the development of disruptive low-carbon liquid fuel technologies if there is a business case and prospects for a profitable market. 2022 is approaching very quickly and together with EU policymakers we have to find the way to create that policy framework that will drive confidence, build the necessary market demand and incentivize investments as soon as possible. The next couple of months will be critical as policymakers work on legislation that will determine whether or not industries will be encouraged to unlock significant investment and accelerate climate action.


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