How to prevent an e-fuels loophole undermining the EU car CO₂ law

This is a summary of the position paper, which you can download in full.

In 2022, a historic agreement was reached on ending sales of new polluting combustion engine cars by 2035 in the EU. In March this year, however, just before the final sign off by national governments in what had been considered a formality, the German government declared last-minute opposition. Backed by just three other countries (Italy, Bulgaria and Poland), the blocking minority demanded that sales of new cars with internal combustion engines (ICE) be allowed after 2035, if they run on e-fuels.

The basis of this opposition was the inclusion of a non-binding recital (Recital 11) in the new car CO₂ standards regulation that asks the Commission to propose a role for e-fuels – or CO₂ neutral fuels – in vehicles that are outside the scope of the regulation. An agreement was eventually found and the Commission agreed to make a proposal that would allow cars running only on climate neutral fuels to be registered under vehicle type approval rules, before setting out how these rules would be aligned with the car CO₂ standards.

Why using e-fuels in cars is a bad idea

T&E has previously set out why using synthetic e-fuels in cars is a bad idea (see both here and here) from both an environmental and economic perspective. Because producing e-fuels is such an energy intensive process, running a car on synthetic petrol is close to five times less efficient than powering a BEV through direct electrification. The overall efficiency of the direct electrification pathway is 77% whereas it is 16% for petrol cars powered with synthetic fuels, meaning over four fifths of the energy is lost along the way. This is an enormous waste of renewable energy, which is still a scarce resource and needed to decarbonise the rest of the economy.

Wasting limited e-fuels in new cars – the objective of the forthcoming provisions – will not only undermine efforts to decarbonise sectors that cannot rely on direct electrification such as shipping and aviation, but will also thwart efforts to clean up cars already on the road. Carbon-neutral fuels can be a limited contributor to the task of decarbonising the existing fleet. However, using them in new car registrations would actually increase emissions as there would be less or no e-petrol to decarbonise the existing car stock. It would result in an additional 135 billion litres of fossil petrol being burned between 2030 and 2050 that could have been saved if e-petrol was used exclusively in the existing fleet, resulting in an extra 320 MtCO₂e emissions by 2050.

Switching from importing conventional to synthetic fuels risks continuing Europe’s dependency on autocratic regimes, as with today’s oil. Carving out a loophole for e-fuels in cars also risks creating a Trojan Horse for continued use of fossil fuels and unsustainable biofuel use. As e-fuels are chemically similar to fossil and biofuels, both could still be used in e-fuel cars. As e-fuels will be much more expensive there would be a strong incentive for drivers to tamper and use regular fuel. Neither carmakers nor regulators can guarantee or control how cars are fueled over their lifetime. 

How to prevent e-fuels undermining the car CO₂ standards

Crucially, if e-fuels are to be allowed to make a contribution towards Europe’s zero emission cars goal, they have to demonstrate the necessary climate credentials. When burnt in petrol or diesel cars, synthetic fuels release similar amounts of CO₂ (and air pollution) as fossil fuel. It is only by reducing GHG in their production that can make them climate neutral, i.e. balance the CO₂ emitted in combustion with the CO₂ in their production. This means that the hydrogen used to produce these e-fuels must come from 100% renewable sources, while the carbon molecules necessary to turn the hydrogen into the fuel should be captured from air (Direct Air Capture – DAC). This means that only a car powered exclusively with e-fuel that delivers a 100% CO₂ reduction can be exempt from the 2035 deadline to comply with the derogation as agreed in March by the European Parliament and member states. 

Although T&E remains opposed to any use of e-fuels in cars, with the Commission’s stated aim to implement Recital 11 from the car CO₂ regulation, the following must be done to ensure the new rules are watertight and prevent the e-fuels loophole from undermining the EU car CO₂ law.

What fuels should be allowed and how the vehicles should be type approved 

• Only CO₂-neutral e-fuels or RFNBOs (Renewable Fuels of Non-Biological Origin) must be allowed under the scope. Biofuels are not, and cannot be considered as, CO₂-neutral as none of the biofuels listed under the Renewable Energy Directive (Annex V) are able to deliver a 100% CO₂ reduction, delivering only an average reduction of 55-61%. Furthermore, advanced biofuels – those not derived from food and feed crops (which contribute to biodiversity loss, deforestation, and severe climate damage) are extremely limited and have competing uses. If all sustainable advanced biofuels were used in the aviation sector – which will rely heavily on fuels to decarbonise -, only 11% of EU’s aviation needs by 2050 would be covered. 
• A new framework is needed to certify RFNBOs as carbon neutral. RFNBOs as defined by current EU rules can not be considered CO₂-neutral. In the new RED methodology, RFNBOs require a 70% GHG emissions reduction compared to fossil fuel. Therefore, e-fuels placed on the market in Europe cannot currently be guaranteed to provide a 100% emissions reduction. To ensure e-fuels can be certified and guaranteed CO₂-neutral, new rules are needed to ensure that all of the electricity used in the full production process is both 100% generated from renewable energy sources and additional. The carbon used must also be from 100% direct air capture (DAC) to prevent any additional CO₂being released into the atmosphere. This is not currently a requirement for RFNBOs.
• Cars approved under the carbon neutral fuel car category must be exclusively fuelled by e-fuels and tested throughout their life. Unlike changing powertrains, e-fuels and fossil fuels are hard to distinguish when in use – so it is critical to guarantee that the EU car CO₂ standards are not undermined through continuing use of fossil fuels in e-fuel approved cars. Every e-fuel approved car must be fitted with a sensor within the fuel tank which can determine if the vehicle is running exclusively on e-fuel certified as fully CO₂ neutral. This must be combined with inducement measures to prevent the vehicle’s engine starting if the vehicle’s tank is filled with the noncompliant fuel. The functioning of fuel monitors and inducement measures must be tested both at type-approval and throughout the entire lifetime of the vehicle via robust in-service conformity and market surveillance tests to prevent tampering and fraud.

How should e-fuels be counted towards EU Car CO₂ standards?

• E-fuel cars should not be designated as zero-emission for the purposes of regulatory compliance. Even if produced according to a CO₂-neutral pathway (100% additional renewable energy and direct air capture), when burned in an internal combustion engine, e-fuels still emit exactly the same CO₂ emissions as conventional fuels. In addition to CO₂, e-petrol and e-diesel also emit air pollutants, with tests showing that they emit as much toxic nitrogen oxides (NOx) as fossil fuel engines and much more carbon monoxide and ammonia, doing nothing to alleviate the air quality problems in our cities. So e-fuel type approved vehicles should not be allowed to have a ZEV denomination in certificates of conformity (CoC) for the purposes of EU vehicle standards, local emission rules or national taxation. 

In line with Recital 11 of the new car CO₂ standards, e-fuel cars should be limited to niche applications outside the scope of the regulation. The wording of Recital 11 states clearly that provisions for registering vehicles running on CO₂ should be “outside the scope of the fleet standards”. According to EU regulation this includes only special purpose vehicles such as ambulances, mobile cranes and military vehicles and so-called small scale manufacturers that only register less than 1,000 units of cars or vans in the EU per year.