{"id":57283,"date":"2025-03-04T18:45:38","date_gmt":"2025-03-04T23:45:38","guid":{"rendered":"https:\/\/theicct.org\/?p=57283"},"modified":"2025-03-04T12:24:14","modified_gmt":"2025-03-04T17:24:14","slug":"getting-investors-to-say-yes-to-low-ghg-fuels-for-aviation-and-marine-mar25","status":"publish","type":"post","link":"https:\/\/theicct.org\/getting-investors-to-say-yes-to-low-ghg-fuels-for-aviation-and-marine-mar25\/","title":{"rendered":"Getting investors to say yes to low-GHG fuels for aviation and marine: Opportunities in Europe\u2019s Clean Industrial Deal"},"content":{"rendered":"[et_pb_section fb_built=”1″ specialty=”on” _builder_version=”4.22.1″ _module_preset=”default” custom_padding=”0px|||||” global_colors_info=”{}”][et_pb_column type=”3_4″ specialty_columns=”3″ _builder_version=”4.16″ custom_padding=”|||” global_colors_info=”{}” custom_padding__hover=”|||”][et_pb_row_inner _builder_version=”4.22.1″ _module_preset=”default” custom_margin=”|||-80px|false|false” custom_margin_tablet=”|||0px|false|false” custom_margin_phone=”|||0px|false|false” custom_margin_last_edited=”on|phone” global_colors_info=”{}”][et_pb_column_inner saved_specialty_column_type=”3_4″ _builder_version=”4.22.1″ _module_preset=”default” global_colors_info=”{}”][et_pb_text _builder_version=”4.27.4″ _module_preset=”default” text_text_color=”#36424A” text_line_height=”1.8em” global_colors_info=”{}”]\n

Although the requirements in the FuelEU Maritime and ReFuelEU aviation regulations already send a strong signal about future demand for low-greenhouse gas (GHG) emission fuels, many renewable fuel projects<\/span><\/a> still haven\u2019t reached final investment decision (FID). Costs are the primary challenge, but now there\u2019s new hope for progress. The European Commission\u2019s recently announced Clean Industrial Deal (CID)<\/span><\/a> is generating lots of well-deserved buzz, and as we\u2019ll outline here, the Commission\u2019s commitments could help support low-GHG emission advanced fuels in a few important ways.\u00a0<\/p>\n

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We define advanced fuels as (1) second-generation biofuels produced from hard-to-break-down cellulosic materials that require nascent technologies to convert them to biofuel and (2) renewable hydrogen and its derivatives, also known as renewable fuels of non-biological origin (this includes e-fuels like e-kerosene). Advanced fuels are critical for the long-term decarbonization of maritime shipping and commercial aviation because first-generation fuels like low-GHG hydroprocessed vegetable oils, although already produced at commercial scale, are only available in limited quantities and carry fraud risk. It\u2019s second-generation advanced fuels made from cellulosic wastes and residues or renewable electricity that could be produced at a much greater scale in the European Union<\/span><\/a>.\u00a0\u00a0<\/p>\n

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While advanced fuels offer much larger GHG savings than many of the existing alternative fuels on the market, they\u2019re also more expensive and challenging to finance. Previous analyses highlighted how the high upfront capital costs<\/span><\/a> of second-generation fuel pathways make it challenging to attract investment due to uncertain market prices and project timelines. Many industry stakeholders have called on the European Union to implement policies<\/span><\/a> to de-risk these investments and foster market certainty. The CID\u2019s intention to centralize and expand the funding available from the EU Emissions Trading System (ETS)<\/span><\/a> and the Innovation Fund<\/span><\/a> can respond to this call by providing funding for capital support and assisting early stage projects. The CID also calls for adoption of a new State Aid Framework and this, too, can help Member States better provide the needed capital support.\u00a0<\/p>\n

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The EU ETS currently reserves 20 million allowances for a sustainable aviation fuel (SAF). As detailed in a previous ICCT blog post<\/span><\/a>,\u202fthe\u202ffunds from EU ETS reinvestment by themselves could only cover a portion of the projected cost gap between fossil jet and e-kerosene, in order to meet the European Union\u2019s e-kerosene targets. More importantly, the reinvestment subsidy is given to airlines, not fuel producers, and none of the allowances are earmarked for advanced fuels; for this reason, it does little to reduce market uncertainty for producers of more challenging advanced fuels. Additional grant funding or price support mechanisms stemming from the CID could instead directly improve the fuel producers\u2019 balance sheets, which would support them in reaching FID and allow them to get the needed investment to start building production facilities.\u00a0\u00a0<\/p>\n

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Member States are also urged in the CID to finalize revisions of the Energy Taxation Directive (ETD). If Member States accept the 2021 proposal for fossil jet taxation and roll back the aviation sector\u2019s traditional exemption from fuel taxes, it would be a critical component of bridging the cost gap between SAFs and conventional fossil jet and be a potential additional revenue source for renewable fuel. The abovementioned ICCT blog post<\/span><\/a>\u202falso highlighted how the proposed ETD tax rate on jet fuel could significantly contribute to closing the cost gap for e-kerosene.\u202f\u00a0\u00a0<\/p>\n

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There\u2019s more good news for SAFs in the CID\u2019s proposal to expand the Hydrogen Bank program<\/span><\/a> with an additional auction and to create a new Hydrogen Mechanism in Q2 2025; the mechanism would de-risk investments in aviation and marine fuels by connecting producers and offtakers and providing them with financing instruments. Such support for renewable hydrogen is likely to be critical for e-kerosene production to scale up in Europe.\u00a0\u00a0<\/p>\n

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The Commission\u2019s commitment in the CID to reducing permitting requirements for electricity, grid expansion, and storage may not only impact the power sector, but could also speed up the rollout of domestic e-fuel production and vehicle fast charging infrastructure. Bottlenecks in upgrading the grid raise the cost of electricity, and that\u2019s one of the most important factors influencing\u202fe-fuel cost<\/span><\/a>.\u202f\u00a0<\/p>\n

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The FuelEU Maritime and ReFuelEU aviation policies are setting a global precedent for how to decarbonize the maritime and aviation sectors by pairing rigorous sustainability criteria with binding long-term targets. However, those policies are at risk if emerging advanced fuel technologies fail to scale up. The world is watching to see if the European Union succeeds in implementing these regulations, and it\u2019s important that advanced fuel pathways get the support they need to reach FID and start production. The upcoming Sustainable Transport Investment Plan will outline further measures to support renewable and low-carbon fuels for the aviation and marine sectors, and the ICCT\u2019s research and analysis will inform this process.\u00a0\u00a0<\/p>\n[\/et_pb_text][\/et_pb_column_inner][\/et_pb_row_inner][\/et_pb_column][et_pb_column type=”1_4″ _builder_version=”4.16″ custom_padding=”|||” global_colors_info=”{}” custom_padding__hover=”|||”][et_pb_text admin_label=”Title” module_id=”policedepartment” _builder_version=”4.27.4″ _module_preset=”680e9250-5983-47d2-b125-d1c0a97feb17″ text_text_color=”#007A94″ header_text_color=”#007A94″ custom_margin=”||||false|false” global_colors_info=”{}”]\n

Authors<\/strong><\/span><\/h6>\n[\/et_pb_text][et_pb_text admin_label=”Author” _builder_version=”4.27.4″ _module_preset=”default” text_text_color=”#36424A” header_text_color=”#36424A” custom_margin=”||||false|false” custom_padding=”||14px||false|false” global_colors_info=”{}”]\"\"<\/strong><\/span><\/a><\/p>\n

Nikita Pavlenko<\/strong><\/span>
Program Director, Fuels and Aviation<\/em><\/span><\/p>\n[\/et_pb_text][et_pb_text admin_label=”Author” _builder_version=”4.27.4″ _module_preset=”default” text_text_color=”#36424A” header_text_color=”#36424A” custom_margin=”||||false|false” custom_padding=”||14px||false|false” global_colors_info=”{}”]\n

\"\"<\/strong><\/span><\/a><\/p>\n

Chelsea Baldino <\/strong><\/span>
Program Lead, Fuels<\/em><\/span><\/p>\n[\/et_pb_text][et_pb_divider color=”#36424A” divider_weight=”2px” _builder_version=”4.21.0″ _module_preset=”default” custom_margin=”-50px|||||” custom_padding=”23px|||||” global_colors_info=”{}”][\/et_pb_divider][et_pb_text admin_label=”Title” module_id=”policedepartment” _builder_version=”4.27.4″ _module_preset=”680e9250-5983-47d2-b125-d1c0a97feb17″ text_text_color=”#007A94″ header_text_color=”#007A94″ custom_margin=”-15px||||false|false” global_colors_info=”{}”]\n

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The new Clean Industrial Deal and potential impacts for the EU automotive sector<\/a><\/strong><\/p>\n

The European Commission is rolling out a new industrial strategy that\u2019s likely to bring substantial support for decarbonizing the automotive sector and the transition to electric vehicles.<\/p>\n[\/et_pb_text][et_pb_divider color=”#36424A” divider_weight=”2px” _builder_version=”4.21.0″ _module_preset=”default” custom_margin=”-50px|||||” global_colors_info=”{}”][\/et_pb_divider][et_pb_code admin_label=”blog post meta shortcode” _builder_version=”4.22.2″ _module_preset=”default” custom_margin=”-30px||||false|false” custom_margin_tablet=”||||false|false” custom_margin_phone=”||||false|false” custom_margin_last_edited=”on|phone” global_module=”27472″ global_colors_info=”{}”]