Top takeaways from our lunch with MEP Gerbrandy and MEP Oetjen
In early July, we were thrilled to be hosted by MEP Gerbran-Jan Gerbrandy and MEP Jan-Christoph Oetjen at the European Parliament for our event on delivering on EU mandates and scaling e-fuels for shipping and aviation decarbonisation. Here are our key themes and takeaways.
MEP Gerben-Jan Gerbrandy speaking at our event at the European Parliament titled Delivering on the EU mandates: Scaling E-Fuels to Decarbonise Aviation and Maritime.
The event came at a crucial time. As the Sustainable Transport Investment Plan is due to be released this Autumn, it’s vital that the EU Commission earmarks funding for e-fuels and zero carbon emission aircraft and vessel solutions. This would ensure the EU is competitive and not reliant on overseas imports and can keep in line with climate targets.
Over 40 attendees consisting of policymakers, parliamentarians, stakeholders from across the shipping, aviation and e-fuel supply chains, and NGOs came together for an engaging discussion on e-fuels, funding and policy. Read on for the themes of the conversation…
Getting the technology right for clean shipping and aviation
There was a healthy debate on technology. MEP Gerbrandy confirmed that e-fuels will be crucial for decarbonising shipping and aviation, despite voices from the fossil fuel and aviation industries calling for technology neutrality from the Commission.
But technology neutrality has its limits. Our CEO and Founder Aoife O’Leary explained the importance of scaling up e-fuels and zero carbon emissions technologies in light of the fact that biofuels and used cooking oil are not scalable, due to restricted feedstock availability and competition for use in other sectors.
Besides the fact that these limits put a cap on biofuels’ value for European competitiveness goals and promise an end to the relatively low prices they enjoy today, their production can also lead to deforestation and land issues, and they are susceptible to fraud. Others in the room agreed that although e-fuels are expensive currently, they offer the better path for competitiveness, climate goals and biodiversity.
Policy to target the best solutions for clean and competitive industry
The e-fuel producers in the room thanked the Commission for the ReFuelEU Aviation and FuelEU Maritime mandates that have signalled e-fuels’ role in the transition and future demand prospects – but the mandates have not proved sufficient. The industry leaders present cautioned policymakers that if production lags too far behind demand, pressure could build to roll the mandates back.
The Commission assured participants that they are keen to fix the bottlenecks that industry is facing. This is exactly where the Sustainable Transport Investment Plan can be instrumental: as part of the upcoming policy package, the SASHA Coalition is encouraging the EU to introduce a book-and-claim system exclusively for e-SAF, within the EEA and with a set end-date as a means of giving the e-SAF market the flexibility it needs to develop in its nascency and de-risk investment.
A key factor in projects’ investment risk is price. As representatives from the scientific community explained at the event, e-fuels can be as great as 10 times more expensive than conventional fuels. It is for just this reason that the SASHA Coalition recommends expanding the emissions trading system (ETS) for maritime and aviation to emissions from shipping vessels between 400GT and 5 000GT and departing flights between European and non-European airports: factoring the true cost of emissions into fossil fuels’ price is a key tool for narrowing the gap between conventional fuels and innovative solutions.
Filling the e-fuels finance gap
Indeed, MEP Oetjen aptly raised this issue of investment, noting the absence of large scale e-fuel projects reaching financial investment decision in the EU despite over half of global projected e-SAF capacity being Europe-based. E-fuel producers highlighted that a contracts for difference scheme with double-ended auctions, backed by a market intermediary is a key mechanism for overcoming this challenge. Such a system would help secure long term offtake agreements for producers, achieve revenue certainty, and de-risk investment.
Such a scheme needs funding, and aviation actors in the room were quick to note that the industry would contribute €4m to the ETS next year. While this might seem impressive, aviation’s numerous exemptions from the ETS and other regulations saw €26bn in revenues go missed between 2012-2023 alone. Furthermore, the cost of decarbonising EU aviation is estimated at approximately €1.3tn according to studies commissioned by industry bodies.
Filling this funding gap again means expanding the ETS. This is particularly urgent in the wake of the International Maritime Organization’s agreement to a disappointingly unambitious pricing mechanism for international shipping emissions, and the fact that the International Civil Aviation Organization’s CORSIA mechanism is not fit for purpose at reducing emissions. While some argue that these international mechanisms negate the need for regional regulations, it is quite the opposite: EU regulations should be strengthened to plug the gaps these unambitious frameworks have left.
Ensuring these finances are used to their maximum means targeted policy: indiscriminately funding technologies would see revenues misused driving non-solutions like biofuels that aid neither climate nor European competitiveness.
Making European competitiveness a reality
Technology neutrality also has implications for competitiveness. In her keynote address, Aoife cited the EU’s agnosticism as the root of it ceding its market lead in electric vehicles to China: allowing biofuels to compete with battery-electric despite the latter’s greater climate credentials allowed China to throw its weight behind the latter and seize the global market lead it irrefutably has today. E-fuel producers seconded this pointing to how the EU similarly lost the lead it used to have in solar and wind technology development.
History doesn’t have to repeat itself. The EU is primed to capture a global competitive edge in shipping and aviation e-fuels, provided it sheds technology neutrality and targets policy at the solutions that promise to deliver the most for European industry and climate action alike.
E-fuels’ offer for energy security
Another strategic benefit e-fuels offer is energy security. E-fuel manufacturers at the event compellingly argued that their product would help offset the vulnerability created by energy import dependence exposed during the last five years of geopolitical turbulence. E-fuels’ primary input being renewable energy means they reduce reliance on imports.
Our top takeaways from the event
Policymakers should recognise that e-fuels currently present the only truly sustainable drop-in fuel solutions for long-haul shipping and aviation, and offer huge opportunities for European industrial competitiveness and energy security. The benefits e-fuels offer should be reflected with targeted supportive policy in the Sustainable Transport Investment Plan.
Industry actors across the maritime, aviation and e-fuel value chains should urge the EU Commission to support e-fuel production with policy to overcome barriers to investment. Key policies include introducing an e-fuels contracts for difference scheme with double-sided auctioning backed by a market intermediary in the Sustainable Transport Investment Plan, and expanding the EU ETS to emissions from shipping vessels between 400GT and 5,000GT and departing flights between European and non-European airports.
In order to cultivate a competitive industry, the EU must not take a neutral stance on technology and repeat past mistakes where it has lost its global competitive edge.
E-fuels and zero carbon emission solutions are the most sustainable and competitive in the long-term. This is why funding must be directed to these fuel options rather than less sustainable alternatives. Revenue from the ETS will be crucial in providing capital for e-fuel projects.
Read our Sustainable Transport Investment Plan position paper for more detail on the policies needed to get EU e-fuels off the ground.
