The Sustainable Transport Investment Plan (STIP) published today contains promising steps to boost e-fuels production, T&E has said. But the EU needs to follow through rapidly if it is to retain its industrial leadership on the technology. E-fuels projects in the EU have yet to materialise due to the high costs and a lack of long-term offtake agreements.
Auctions should be for e-fuels only
A commitment to set up an EU-wide double-sided auction for aviation and maritime fuels – based on a pilot e-SAF auction – will provide real money to kick start production, T&E said. But this should be limited to e-fuels. In the short term, STIP proposes relying on existing tools – the Hydrogen Bank and the Innovation Fund – which are now beginning to back e-fuels projects, including e-SAF. While this sends a positive signal, these tools alone have so far been unable to de-risk industrial scale e-fuels production. The plan’s most impactful measures may arrive too late as action on e-fuels is needed by 2026.
Antony Froggatt, senior director for aviation, shipping and energy at T&E, explains: “The plan clearly acknowledges the important role of e-fuels in decarbonising aviation and shipping. For the first time, the EU will develop an effective financial instrument to kickstart production. The EU must now follow through on these commitments if it is to help preserve Europe’s technological leadership in e-fuels. Leaving the door open to biofuels will only detract from this.”
The European Commission will “launch preparations” for the creation of a market intermediary to run the double-sided auctions. T&E welcomed this tool as it is needed to spur the nascent e-fuels industry and match the requirements of e-fuels producers for long-term certainty with the short-term contracts used in aviation and shipping.
A soft stance on biofuels
Worryingly, the plan leaves the door open for biofuels being included in double-sided auctions. Biofuels is a more mature industry and could hog the limited resources of the market intermediary. It is crucial that only e-fuels be eligible for the auctions as there are no market barriers for biofuels production, T&E said. The plan also lacks support for battery-powered vessels and developing the potential of batteries in planes.
STIP promotes the continued use of biomethane in shipping. The limited stocks of biomethane should be prioritised for sectors that currently depend on fossil gas and need to urgently reduce their dependence on imports, such as household heating and heavy industry. This is especially concerning because currently ships only buy green certificates for biomethane while the fuel is actually burned in household boilers and other sectors.
The potential of carbon market revenue
STIP only “encourages” member states to use existing carbon market (ETS) revenues to decarbonise shipping and aviation. T&E believes that the review of the ETS in 2026 should consider incorporating a requirement to use ETS revenues for e-fuels investments. Furthermore, STIP does not recognise the untapped potential of higher ETS revenues should the carbon markets be extended in scope. More than €7 bn could have been raised last year by extending the ETS to all long-haul flights, T&E estimated. Around €2.4 bn a year in extra revenues could be raised between 2028 and 2035 by including small shipping vessels.
STIP failed to recommend much needed EU-level supply mandates for marine e-fuels in European ports, which most EU countries have failed to implement despite clear guidance from the EU Renewable Energy Directive. Finally, the plan missed an opportunity to mobilise the European Investment Bank to invest in e-fuel production.
