Cars climate brief #5: Why e-fuel credits in car CO2 standards is a bad idea

August 18, 2021

This brief is the fifth in a series of short analytical pieces in which T&E will share fresh insights related to the revision of the car CO2 standards.

There has been mounting pressure from e-mobility laggards and the oil industry to include credits for advanced and synthetic fuels into the EU car CO2 standards. However, it is essential that e-fuel credits are not added to the regulation. Such a crediting system would severely undermine the credibility of the CO2 standards, as it would open the possibility of double-counting emission reductions with other existing regulations (FQD and RED II) and delay necessary investments into emobility.

It would also result in an unenforceable regulation since carmakers have no control over what fuel is used in the cars they produce. What’s more, e-fuels are not a decarbonisation solution for cars, as they will cost more than batteries even in 2030, lead to more CO2 emissions, and their limited availability means they must be reserved for sectors such as steel and aviation where emissions are harder to abate.

Why efuel credits should not be included in the car CO2 standards

CO2 standards e-fuels

— CO2 standards regulate cars, not fuels —

Carmakers do not control what fuel is used: Carmakers control car production and their design, not how drivers fill up their tanks, so CO2 reductions from using synthetic fuels cannot be attributed to individual vehicles, or even to one vehicle manufacturer. Adding efuel credits to the car CO2 standards would give OEMs the option to claim an ICE vehicle as low- or zero-emission in registration documents when its lifetime emissions were offset by fuel certificates. This risks emptying the definition of zero- and low-emission vehicle of all meaning, which would in turn undermine the effectiveness of numerous EU, national and local regulations.

Double-counting of emission reductions: Electrofuels will be a scarce resource even in 2030 and will be crucial to decarbonise aviation and shipping, and as such fuels regulation should promote their ramp-up. This is currently the case through the EU Fuel Quality Directive (FQD) and Renewable Energy Directive (RED II). Fuel suppliers already face decarbonisation targets under the FQD, which greenhouse gas reductions from synthetic fuels help them achieve. In addition, synthetic fuels also count towards the target for advanced fuels in REDII. Adding efuel credits in the car CO2 standards would lead to double-counting their emission reductions.

— E-fuels are a distraction for cars, not a solution —

E-fuels emit more than electric cars: Conventional cars running on e-fuels consistently emit more CO2 than equivalent battery-electric cars. Over their lifecycle, new petrol cars running on e-fuels emit 61%–85% more CO2 than new BEVs. Efuel production also requires five times as much energy as direct electrification, thus putting more pressure on the renewable energy supply.

E-fuels cost more than electric cars: As battery-electric cars are expected to reach cost parity with ICE vehicles in the mid-2020s, it will be cheaper for carmakers to comply with the CO2 regulation by making the transition to e-mobility rather than producing conventional cars and then having to buy fuel credits. These would cost them around €10,000 for the amount of synthetic petrol needed to compensate for the emissions of an efficient petrol car placed on the market in 2030.

For the average EU driver, running a conventional car, new or second-hand, on e-petrol would be 43% more expensive than driving a battery-electric car. The lifetime cost of running a second-hand car on e-petrol would even be 10% more expensive than that of buying and driving a new battery-electric car.

E-fuels are needed for aviation and shipping: Contrary to road transport, aviation, shipping and the heavy industry cannot use batteries to fully decarbonise and have to rely on renewable efuels as a result. Given their expected low-availability in the short and mid-term (as supply is limited by the high renewable energy requirements), e-fuels should therefore be reserved for these harder-to-decarbonise sectors.


— Recommendations —

No CO₂ credits to carmakers for alternative or synthetic fuels should be included into the cars CO₂ standards, as this would undermine the credibility of the regulation, shift the cost of the transition towards clean mobility onto consumers, and impede decarbonisation efforts in other sectors.

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