In the spirit of technological neutrality, Europe is exploring multiple pathways to decarbonisation. Among them are e-fuels, whose chemical composition is identical to that of fossil fuels but are produced through synthetic processes rather than extracted and refined. This makes them a potential low-carbon alternative – provided that key sustainability criteria are met and critical technological milestones, such as large-scale carbon capture and green hydrogen production, are achieved.
“E-fuels are part of the EU’s decarbonisation efforts because they are the only practical way of decarbonising certain so-called hard-to- abate sectors, within the timeframe required to minimise the effects of global warming” says David Olley, Senior Associate at Aurora Energy Research. “E-fuels also offer the advantage of energy independence, meaning that fuel can be produced from within the EU, rather than relying on imports” he adds.
At a time when Europe seeks to reduce its energy dependence on third countries increasingly viewed as unreliable, developing a domestic industrial supply chain capable of producing its own fuels through advanced technologies offers an appealing response to the energy security challenges that are shaping recent policy decision. However, significant obstacles stand in the way of turning such an ambitious vision into reality – chief among them being the high costs and limited energy efficiency of the overall process.
David Olley, Senior Associate at Aurora Energy Research: “There are many challenges to be overcome in order to ramp up e-fuels in Europe, however they are the only viable avenue to fully decarbonise certain hard to abate sectors, such as aviation and maritime, in the near to medium term future. Therefore, I see the future of e-fuels in Europe as part of the puzzle, particularly in industries that have few other options. This is mainly in applications where direct electrification is not possible”. Read the full interview with David Olley
The two main ingredients composing synthetic fuels are hydrogen and carbon, typically (though not exclusively) combined through the Fischer – Tropsch synthesis – a process developed during the first half of the 20th Century in Germany. In that sense, the underlying concept is not new and is regarded as reliable. By combining hydrogen with carbon, it is possible to produce a range of e-fuels, including e-kerosene for aircraft or e-methanol for ships, while combining it with nitrogen yields e-ammonia.
“Carbon is mainly obtained through various carbon capture processes such as direct air capture or post combustion capture” says Corentin Boillet, analyst at Enerdata. Hydrogen on the other hand is obtained using electrolysers that split the water molecules (H2O). A crucial requirement is that these electrolysers are powered by low-emission electricity. “Once green hydrogen and carbon are obtained, there are several processes for producing e-fuels”. It is at this stage that efficiency challenges begin to emerge.
Corentin Boillet, analyst at Enerdata: “So-called e-fuels are molecules that are produced by combining renewable hydrogen, obtained by water electrolysis using low-carbon electricity, and a carbon containing molecule most of the time (carbon dioxide or monoxide), or nitrogen in the case of e-ammonia. E-fuels is therefore a generic term encompassing synthetic alkanes such as e-diesel, e-gasoline, e-kerosene (which have nearly the same properties as oil-based molecules) and other hydrogen derivatives such as e-ammonia or e-methanol”. Read the full interview with Corentin Boillet
Low energy efficiency
“The efficiency varies depending on the production process, but the conversion rate from renewable electricity to e-fuel typically ranges between 30% and 50%” explains Corentin Boillet. “When you factor in the efficiency of the engine converting the fuel into useful mechanical energy, the overall system efficiency drops further, to around 20% or lower. Given the efficiency figures mentioned above, it is clear that e-fuels will be limited to applications where no more efficient decarbonisation alternatives exist”.
Despite widespread debate over the influx of electric vehicles from the Far East and efforts to safeguard Europe’s automotive industry, e-fuels are unlikely to gain traction in the light vehicle sector: “the two main uses for e-fuels are aviation and maritime transport” also according to Corentin Boillet.
David Olley agrees, but adds a few more options: “the main sectors that are likely to emerge as the main beneficiaries are the aviation and maritime transport sectors, as well as the chemicals, refining, and fertilizer industries” he says. “There are other hard to abate sectors (e.g. steel) that could potentially benefit from e-fuel use, however they are more likely to pursue other routes to decarbonisation. There is also some potential in the road and rail transport sectors, however these both face stiff competition from direct electrification” which is widely recognised as a far more efficient route to reducing carbon emissions.
High economic costs
Beyond efficiency, the other main obstacle is economic. “Even under optimistic scenarios – assuming significant reductions in CO₂ costs, electrolyser expenses, and renewable energy prices – e-kerosene would still be 1.5 times more expensive in the US and 2.5 times more expensive in Europe than conventional kerosene” says Corentin Boillet, referring to data from the International Council on Clean Transportation.
“Similarly, IRENA (International Renewable Energy Agency)’s optimistic projections for e-methanol (Renewable Methanol Outlook, 2021) suggest that, by 2050, its price could fall to around $250 per tonne – provided green hydrogen costs drop to approximately $1/kg and CO₂ costs to about $100/tonne. Even at these reduced prices, e-methanol would still be more expensive than today’s grey methanol. Achieving cost competitiveness for major e-fuels compared to fossil fuels thus remains highly challenging, even in the long term – around 2050” he adds.
“There is no way to dodge the fact that e-fuels are expensive to produce” confirms David Olley. “They are highly energy intensive and require coordination across multiple processes. E-fuel producers need to procure multiple, sometimes hard to come by, feedstocks, and a high degree of scrutiny is applied to the green credentials of these”.
Bottlenecks and sustainability
Overcoming these obstacles requires a careful planning, beginning with the need to address upstream bottlenecks – particularly in the hydrogen sector: “Progress in the hydrogen sector is currently lacking” says David Olley. “There are bottlenecks in infrastructure (pipelines, storage, etc), however the main limitation is offtake. There are many producers out there ready to build projects, but offtake is uncertain. The main driver of e-fuel and green hydrogen offtake is policy. These products are simply more expensive than their fossil counterparts to produce, and will be for some time. Therefore, policy is required to drive uptake of these products”. Over 40 e-fuel production projects are currently in the planning phase across the EU, though none have yet reached a final investment decision.
Breaking this deadlock will be crucial, but it must be done in full alignment with sustainability principles. “E-fuels can reduce carbon emissions by 70% to 90%, but this depends primarily on the electricity mix and, above all, on assumptions about the source of the carbon” says Corentin Boillet. “These figures only hold true if the carbon is captured directly from the air (direct air capture). If the carbon comes from industrial smokestack emissions, the claimed emission reductions become much more debatable”.
Planning through policy
Through the Sustainable Transport Investment Plan, the European Commission aims to reduce greenhouse gas emissions from aviation and maritime transport through the production of approximately 20 million tonnes of sustainable fuels by 2035, of which 6.8 million tonnes are expected to be e-fuels. Achieving this target will require substantial market investment, with an estimated €100 billion needed well before 2035 to scale up production.
According to Corentin Boillet however, this will hardly be sufficient.“For aviation, due to the expected sharp increase in global air traffic, the development of e-fuels – as mandated by European legislation such as ReFuelEU – will not be sufficient to reduce the aviation sector’s CO₂ emissions. According to the NGO Transport & Environment, by 2049, European aviation will still be consuming the same amount of fossil fuel as it did in 2023”.
The outlook is only slightly better for the maritime sector, he adds. Here, “the European Union has set the most ambitious CO₂ reduction targets and they include the deployment of e-fuel projects. However, they remain largely insufficient: the goal is to reduce the sector’s emissions by just 6% by 2035 and to incorporate a minimum of 2% e-fuels into fuel consumption in 2034”.
As a result, Boillet concludes, “e-fuels are expected to have a negligible impact on greenhouse gas emissions in the short term, with their effects becoming more significant only in the long term – around 2050”.
Despite the challenges, David Olley remains optimistic. “I see the future of e-fuels in Europe as part of the puzzle, particularly in industries that have few other options. This is mainly in applications where direct electrification is not possible. To achieve this, policymakers need to enact targeted policies, that give e-fuel producers certainty that there will be demand for their products. This means policy that specifically sets targets for e-fuel production/consumption. Furthermore, there needs to be subsidies provided for the production side, along with the penalties applied to the offtakers”. However, he warns that “if penalties are too great, and supply too limited, there is a risk that these hard to abate sectors will reject the transition completely”.
Useful link:
• David Olley presented the Aurora Energy Research 2025 Market Study on e-fuels in the STOA Panel on 23 October 2025 (after 09:55)
Related content:
• Interview with Corentin Boillet: ‘effects of e-fuels becoming more significant only in the long term’
• Interview with David Olley on e-fuels: ‘main beneficiaries are aviation and maritime transport sector’