E-Fuels: A new frontier in decarbonizing U.S. transport

The Transportation Energy Institute looks at the viability of synthetic fuels to decarbonize transport in the United States.

A newly released report, Evaluating the Viability of Commercially Deploying E-Fuels in Road Transport, by the Transportation Energy Institute and Environmental Resources Management (ERM), sheds light on the transformative potential of e-fuels in reducing greenhouse gas (GHG) emissions. The report underscores their promise as a versatile solution for decarbonizing sectors such as road, aviation, shipping, and rail transport while identifying significant barriers to widespread adoption.

E-fuels, also known as synthetic fuels, are manufactured using renewable electricity, water, and captured carbon dioxide (CO2). One of their standout features is compatibility with existing internal combustion engine vehicles (ICEVs) and fueling infrastructure. This makes them an attractive drop-in solution to cut emissions without the need for extensive infrastructure overhauls. According to the report, e-fuels can achieve up to 99% GHG reductions compared to traditional fossil fuels when produced with additional renewable energy.

While the benefits are compelling, e-fuels face challenges in scalability and cost. Currently, their production costs are 2.5 to 4 times higher than those of fossil fuels, driven by the energy-intensive processes of producing green hydrogen and capturing CO2. Despite potential cost reductions to 1.5 to 3 times fossil fuel prices by 2040, these hurdles complicate its path.

Globally, the policy landscape shapes e-fuel adoption. In the United States, incentives under the Inflation Reduction Act aim to lower production costs, but the absence of blending mandates and other demand-side policies creates uncertainty for producers. In contrast, the European Union and United Kingdom have established clearer frameworks, including blending targets and compliance penalties, which are driving demand in sectors such as aviation. This disparity could lead to U.S.-produced e-fuels being exported to capitalize on favorable policies abroad.

The report positions e-fuels as a complementary technology to other decarbonization solutions like battery electric vehicles (BEVs) and hydrogen fuel cells. While BEVs are more efficient in terms of energy use, their adoption is hindered by infrastructure and range challenges. E-fuels, on the other hand, offer an immediate solution to decarbonize existing ICEVs, particularly in sectors like heavy-duty transport, where electrification is less feasible.

Key actions needed to advance E-Fuels in the U.S.

To unlock the potential of e-fuels, the report identifies several key actions. Policymakers are urged to set clearer decarbonization pathways and targets, including a comprehensive roadmap for e-fuels. This should address production, infrastructure, and integration with other transport sectors like aviation and shipping to avoid resource competition.

Ensuring the sustainable development of e-fuels is another priority. Standardizing lifecycle assessment methodologies for GHG emissions will enable stakeholders to evaluate environmental benefits and ensure policy alignment. Additionally, establishing demand-side incentives, such as mandatory blending targets for e-fuels, could create market certainty and encourage investment in domestic production.

As the U.S. road sector accounts for 22% of national GHG emissions, e-fuels represent a promising avenue for achieving climate goals.

Read the full report here