On Tuesday 28 March the Council adopted a regulation that sets the standard for new cars and vans in terms of CO2 emissions that will decide the fate of alternative fuels. From 2023 to 2034, new cars on the market should produce half the emissions compared to 2021, while from 2035 the level is set at zero emissions.
The regulation followed a heated debate at the EU level and the deal has included, after pressure from the German government, a reference regarding the possibility to exclude synthetic fuels, such as e-fuels, that run combustion-engine cars, since they could be climate neutral in the near future. The regulation does not specifically mention e-fuels but does make a reference to CO2-neutral fuels because of the above-mentioned reason. However, the agreed on deal does not envisage this possibility for biofuels, which saw Italy as a leading advocate. In its statement, the country asked the Commission to include renewable fuels in the regulation mechanism.
Biofuels & eFuels
Apart from the negotiations between MSs and supranational institutions, it is important to give a clear definition of the two alternative fuels and how they impact the market. First, the production of e-fuel relies on extracting hydrogen through an electrolysis process that involves breaking down water into its constituent elements of hydrogen and oxygen. Electricity is necessary to power this process as well as other subsequent production stages. Therefore, to generate a liquid energy carrier, the hydrogen is combined with CO2 obtained from the atmosphere.
Instead, biofuels originate from biomass energy. The latter encompasses a range of sources, including biogas, liquid biofuels (such as biodiesel, ethanol, methanol and butanol), and solid biofuels (typically wood, although any solid substance that can generate heat through combustion can be used). Solid biofuels can be directly burnt to produce energy, while biogas and liquid biofuels require conversion processes before they can be used as fuel. There are multiple methods for converting biomass into fuels that can power homes, vehicles and other energy needs. The specific conversion process depends on the type of biomass (e.g., manure or oilseed crops) and its intended use (e.g., fuel for cars or generators).
Final consumer costs
In terms of cost projections, there is no agreement regarding eFuels since they are still not present on the market. They could be affordable for citizens according to the eFuels Alliance, due to impact of economies of scale reducing production costs, and the combination with conventional fuel. Accordingly, the estimated production costs of eFuel per litre are expected to decrease between 2025 and 2050. At a 4% blending rate with conventional fuels in 2025, the cost will be between €1.61 and €1.99 per litre. However, with a 100% blending rate by 2050, the cost is predicted to decrease significantly, ranging from €0.70 to €1.33 per litre. As a result, the cost of diesel per litre for customers at stations will be €1.22 in 2025. Meanwhile, petrol with an eFuels admixture will cost between €1.34 and €1.36 in 2025, and between €1.45 and €2.24 in 2050 (based on current taxes and duties). On the contrary, an analysis of Transport & Environment, a clean mobility NGO, focused on Germany states, claiming that e-Fuels would cost 50% more than the current petrol price -€2.8 against the current €1.84 per litre. This means that an average person would spend €210 to fill up their car. Where biodiesel id concerned, Eni’s HVOlution is already being sold in Italy by 150 distributors. The current price is more or less €1.91 per litre, similar to the Diesel+ product. Specifically, the product in question is a type of biofuel that is made entirely from hydrogenated vegetable oil. This oil comes from waste feedstocks, plant residues and oils obtained from crops that do not compete with the food supply chain.
A limited production
In terms of supply, Transport & Environment estimates that only 5 million out of the 287 million cars in 2035 will be able to be run on eFuels, only 2% of the entire car fleet. At the same time, looking at the Italian case, biofuels can be used to run 5% of the entire Italian car fleet, a percentage that will rise to 20% in 2030, if Eni’s estimates are respected due to an increased capacity of annual biorefining to 5 million tons of HVO (Hydrotreated Vegetable Oil).
However, emissions would not benefit from the shift to synthetic fuels. A study on the CO2 emissions of a synthetic-fueled car throughout its entire life cycle if purchased in 2030 shows that, when compared to a gasoline car, a hybrid car running on e-fuels would only produce a marginal 5-7% reduction in CO2 emissions over its life cycle. Hybrid cars were chosen as they produce the lowest emissions throughout their life cycle when powered by synthetic fuels. In Europe, regarding biofuels, which are mainly produced from food-based biofuel feedstocks, the improvement in the life cycle GHG emissions compared to the average gasoline and diesel blend cannot be considered as significant. In fact, the life-cycle GHG emissions of the current average diesel blend are 2% higher than those of fossil diesel. However, more significant reductions in GHG emissions could be achieved by using advanced feedstocks that are waste- and residues-based. These types of developed biofuels are theoretically capable of reducing emissions by 88% compared to fossil fuels. However, this also comes with a downside – their availability is eventually limited by the availability of feedstocks.
A yet to be settled debate
As seen above, there are some advantages and pitfalls in the use of these alternative fuels. Clearly, they are a way to smoothen the transition of the car industry to achieve climate neutrality, without compromising the internal combustion engine vehicle fleet and the use the current logistics networks. However, industry may not be ready to effectively cover the vehicle fleet as previously mentioned, when the ban on the sale of combustion engine cars becomes effective in 2035. The governments of Germany and Italy have expressly stated their willingness to consider this alternative to achieve the Commission’s ambitious targets, and for the moment biofuels are excluded from the regulation. The next stop is in 2026 when the Commission will assess the progress achieved to reach the zero emission targets.