Do ICEs have a role in a climate neutral future? The debate around e-fuels

We often hear politicians talk about banning Internal Combustion Engines (ICEs) or fossil fuel vehicles and assume these two mean the same thing, given how associated one is to the other.

Even often when politicians say it, they rarely differentiate these, when they could. The truth is, banning ICEs and banning fossil fuel vehicles actually means two different things, and this is due to e-fuels. E-fuels are a type of synthetic fuel made from a combination of hydrogen and carbon dioxide (CO2). Although e-fuels generate tailpipe CO2 emissions, their proponents claim that it would remain CO2 neutral. How come? Because hydrogen production (via electrolysis) would be powered exclusively by renewable energy sources and the COwould be either recycled from industrial processes or directly captured from the atmosphere using renewable energy once again. Another very important characteristic about e-fuels is that they are so-called ‘drop-in’ fuels. This means they can be used in traditional ICE engines, potentially rebranding ICEs as environmentally friendly, and creating a space for them in the ‘zero-emission’ future of road transport. Being drop-in fuels also means car manufacturers could save millions, avoiding a complete overhaul in their business models towards electric or fuel-cell motors, and the thousands of jobs potentially threatened by this transition could be kept as well.

But most importantly, e-fuels mean there could be a way of decarbonizing the existing vehicle fleet (which by 2030 will still consist of 85% ICEs ) creating a less gloomy future for ICEs by limiting political bans to fossil-fuelled vehicles only.

Who’s backing e-fuels and who’s bashing them?

Support for e-fuels in the automotive industry is growing and quickly, especially in Germany. VDA – the German Automobile Association – has been one of the most vocal and earliest backers of e-fuels, stating that they are the only way of bringing down emissions in the existing car fleet. Other important industry groups such as ACEA and CLEPA, especially the latter, have also shown support for the technology. More recently we’ve even seen the unveiling of a stand alone e-fuel association, the E-Fuel Alliance, an industry coalition including Bosch, ZF, Exxon Mobil and others created with the sole purpose of promoting e-fuels to policymakers worldwide.

On the regulatory side, the German Government (or at least the conservative half of it) are advocating for the use of e-fuels as well. Some months ago, Minister of Transport Andreas Scheuer (CSU) stated in a carefully worded interview that we need to ban the sales of fossil fuelled vehicles by 2035, something which he pointed out does not mean the end of the ICEs, which will be led into the future by e-fuels. Already down to business, Germany’s Ministry for Economic Development (also under the command of the CSU) has created plans to import green hydrogen for synthetic fuels from sunny Morocco. Ahead of the Federal elections in Germany this September, the CDU/CSU alliance have reiterated their support for synthetic fuels, stating in their political manifesto that these must have a place within road transport.

Of course, not all that glitters is gold. E-fuels also have many detractors who are reluctant to back the technology and see it as a distraction on the path to decarbonizing transport through electric and fuel-cell vehicles. For starters, e-fuels are extremely energy intensive, needing vast amounts of renewable energy to be produced. According to a study led by by Ricardo Energy & Environment on behalf of the NGO Transport & Environment, wind farms the size of Denmark would be needed to power just a fraction of e-fuelled vehicles in Europe. E-fuels also need to be converted multiple times which means they’re not very energy efficient either, the same study by Ricardo Energy & Environment suggests powering an e-fuel vehicle can be almost five times less efficient than powering a car via direct electrification. Both of these factors also in turn make e-fuels quite expensive which doesn’t exactly help either, The International Council on Clean Transport has estimated that even by 2030, e-fuels won’t be made for less than 3 or 4 euros a litre. These are some of the arguments brought forth by NGOs, who are not completely dismissing e-fuels, but rather saying they should be reserved for types of transport in which electrification is not feasible, like maritime or aviation.

At the moment there is a flurry of Green Deal initiatives on their way to the Council and Parliament in July and e-fuel fans have their eyes on a few key initiatives which could help make or break the technology. E-fuels, they argue, could benefit from a regulatory push at the hands of the EU, which they see as offering too much support to battery electric vehicles (BEVs), on the one side breaking with the technological neutrality principle that had been the norm until now, and as well putting all its egg into one basket, instead of diversifying.

The Role of the EU and the Fit for 55 package

The revision of the Renewable Energy Directive (RED) is perhaps the most important of them all. This Directive sets out an EU-wide sub-target for renewables in transport – currently a humble 14% – which is set to be revised upwards in the upcoming revision to about 24%-26%. Leaked preparatory documents from the Commission show there are plans to include a 4% quota for e-fuels within the Directive, something which ACEA and VDA had specifically called for & and which could significantly help the technology take off.

Another important piece of legislation will be the CO2 emission standards Regulation, which sets CO2 emission targets for car manufacturers but that also establishes crediting schemes to incentivize the use of zero and low-emission vehicles. Here CLEPA, FuelsEurope and a handful of others have sent a letter to top Commission officials calling for the creation of a specific crediting system for e-fuels and other sustainable fuels in which car manufacturers could buy credits from fuel suppliers making the fuel, and then have these credits deducted from their overall CO2 targets.

Lastly, an ambitious revision of the Alternative Fuels Infrastructure Directive (AFID), with binding targets for e-fuel stations could also be extremely useful in helping the technology scale. As a matter of fact many right-wing MEPs have already proposed such a measure through amendments to the Resolution on Smart and Sustainable Mobility Strategy which is being cooked in the European Parliament.

The battle in the months to come

As political lines are being drawn, we know e-fuels are not short on sceptics and although right and centre politicians seem to be warming up to the idea, Greens and some left groups are not convinced and have secluded e-fuels to the hard to abate types of transport like aviation and shipping, similarly to what NGOs are proposing. Several left wing MEPs have already voiced their opposition to low-carbon fuels being included in the RED revision in a letter addressed to Vice-President Timmermans and Energy Commissioner Kadri Simson. These same MEPs will also probably oppose specific crediting schemes in the CO2 standards Regulation, if it ends up on the table. As for binding targets in the AFID, this will certainly be a mountain to climb as well, as Member States in the Council are already not too keen on binding targets for hydrogen and electric infrastructure for financial reasons, so let alone for e-fuels.

What is clear is that e-fuels will be one of the many political debates surrounding the Green Deal in the coming months, and that their fate could very well lie in the hands of these three pieces of legislation. Despite all these important challenges to come perhaps the biggest of them all for e-fuel proponents will be to position e-fuels as a credible low-emission solution. For this they will need to change the current discourse around ICEs, and convince politicians and citizens that if decoupled from fossil fuels, ICEs can have a place in the zero emission future of transport.