Carbon-neutral fuels can supplement wind and solar energy.

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The shift to alternative powertrains for cars, light utility vehicles, buses and freight transport vehicles is an important contribution to the decarbonisation of the transport sector, but it’s not enough. For instance, experts believe that ships and airplanes will continue to require liquid or gas fuels for the foreseeable future.

Fuels for the energy transition in transport must be carbon-neutral. As the transport sector becomes increasingly decarbonised, vehicles must be powered directly by electricity from renewable sources or from liquids or gases converted from renewable electricity and from certain biofuels with low greenhouse gas emissions.129
The climate and energy policies for the fuels of the future must take into account GHG emissions and well-to-wheel energy consumption for fuels. Due to their high levels of GHG emissions, traditional liquid fossil fuels must phased out if the transport sector is to be decarbonised (figure 7.1).

Compared with fossil fuels, natural gas produces less CO2 and thus has the potential to decrease GHG emissions, but this won’t be enough for a thorough decarbonisation of the transport sector. Natural gas is only a bridge fuel, and must be gradually replaced by synthetic methane or other synthetic fuels.

Figure 7.1 shows that electricity from renewables is cleanest and most efficient in battery electric vehicles (BEV) and fuel cell electric vehicles (FCEV). A number of electricity-based fuels also perform quite well when it comes to emissions. Yet like biofuels, they consume more energy and are less efficient than electricity used in electric batteries and fuel cells. Furthermore, the GHG emissions depicted in figure 7.1 might be far greater on account of indirect land use change (ILUC).130


129. See INFRAS, Quantis (2015).
130. The effects of land use change are not included in the calculations of JRC, EUCAR, CONCAWE (2014b). The reasons are discussed in more detail in JRC, EUCAR, CONCAWE (2014a), p. 10: “We do think these effects [of Land Use Change] are likely to have a significant impact on results, but the current state of knowledge does not allow us to estimate them with confidence.“

  • Carbon-neutral fuels can supplement electricity but they are no substitute

    Converting electricity into fuel requires several steps. First, electricity is used to produce hydrogen from water. Hydrogen can be used directly in fuel cell vehicles or it can be converted into methane gas via P2G (power-to-gas) technology or into liquid fuels using a P2L (power-to-liquid) procedure. The resulting fuels are carbon-neutral only if the electricity used for their generation comes from renewables (figure 7.2).

    Presently, the conversion of renewable electricity into fuels is being tested at several pilot facilities but has yet to be commercialised. A large-scale generation of sustainable electricity-based fuels requires more renewable power than is currently available. Experts are now studying whether, when and how P2G/P2L plants can become economically viable and climate friendly.

    Electricity-based fuels have one significant disadvantage relative to direct electricity for battery electric vehicles: high conversion losses. The losses from hydrogen production are lower than P2G and P2L as only one conversion step is necessary.

    If the transport sector were decarbonised for the most part using electricity-based fuels, electricity demand for transport could amount to 914 terawatt hours (TWh) by 2050 (figure 7.3). This is more electricity than Germany’s gross electricity generation in 2016.131

    A decarbonisation strategy that relied mostly on direct electricity would require less energy. Such a strategy would push technological efficiency, and encourage the use of electric vehicles and the construction of overheard contact lines for trucks (Insight 8). But even in this scenario, electricity demand would be very high – 542 TWh – because airplanes and ships would still rely on electricity-based fuels.132

    Two consequences can be drawn from these scenarios. First, the use of carbon-neutral fuels should be reserved only for modes of transport that are unable to use electricity directly.

    This applies first and foremost to air traffic, which for the foreseeable will have no alternative power save carbon-­neutral drop-in fuels. The same goes for ships. And like airplanes, they must be made carbon-neutral within a few decades. The second consequence is that carbon-neutral fuels, while providing a necessary supplement to direct electricity use for individual modes of transport, are not a practical option for every segment.

    131. This conversion is based on data from the Öko-Institut (2016). In 2016, gross electricity production in Germany amounted to around 648.2 TWh. See AGEB (2016b).
    132. This conversion is based on data from the Öko-Institut (2016).

  • Sustainability standards ensure the integrity of electricity-based fuels

    All evidence indicates that Germany will be unable to produce the additional electricity needed for a mass rollout of synthetic fuels. The expansion of wind turbines and photovoltaic systems has already reached the limits of public acceptance. This, coupled with concerns about production costs, is a sure sign that electricity-based fuels will also have to be imported.

    In the face of this near certainty, Germany must push for carbon-neutral renewable electricity both in and outside its borders. In this connection, sustainability criteria must be defined requiring solar sites to have sufficient quantities of water for hydrogen generation. Such criteria should also define other basic conditions for the sustainable production of these fuels. These criteria should be drafted and internationally ratified as soon as possible.

    As of today, little is known about the world’s sustainable potential for these fuels. This, and the fact that its commercial production is still being tested, further underline the importance of using them only where no alternatives are available.

    The example of biofuels shows that underestimating sustainability can lead to an overly optimistic assessment of a fuel’s potential. Biofuels are used in Germany as an additive in fossil fuels. The share of renewable energies in final energy consumption of the transport sector in 2015 was just over 5%, with biofuels making up the largest share.133 If they are to contribute to the complete carbonisation of transport sector, their production will have to ramp up considerably without undercutting essential environmental and sustainability goals. From today’s perspective, however, this does not seem realistic. Their large land requirements and low efficiency limit potential benefits.

    For instance, food-based biofuels take up valuable arable land that could otherwise be used for food production. As demand for biofuels grows, there’ll be more pressure on communities to cultivate areas not being used for agriculture, giving rise to indirect land-use change (ILUC). Converting untouched areas or natural preserves into agricultural land is likely to release greenhouse gases and destroy the habitats of many plants and animals.134

    The world’s potential for sustainable biomass, therefore, is limited. Fuels from sustainably produced biomass in Germany will not be enough to replace growing amounts of diesel and petrol. The same goes for the rest of the world. A noticeable increase of the share of biofuels in the global fuel supply above today’s level of 3% would lead to massive increase in agricultural land.135 In addition to indirect land-use changes, this would create more conflicts between the energy and food production industries. From the vantage point of mitigating climate change, then, biofuels from cultivated biomass offer neither the quantity nor the quality of energy needed from a viable alternative to fossil fuels.

    Biofuels from waste and residual products are different from biofuels from cultivate biomass in that they do not compete with agricultural land for human food and livestock feed.

    But the quantities of these biofuels in Germany are limited – too little, at any rate, to make a difference in the transport sector. The same goes for other countries. Globally, second-generation biofuels from agriculture and forestry waste products can only provide a maximum of between 13 and 19 exajoules (EJ). By contrast, the global final energy consumption of the traffic sector is estimated to range between 100 and 170 EJ by 2050.136

    If biofuels are to contribute to decarbonisation, Germany and Europe must pass legislation that ensures a large reduction of greenhouse gases, adherence to sustainability criteria and the elimination of ILUC. It is doubtful whether the new EU directive currently under discussion to promote renewable energy use (Renewable Energy Directive, RED II) will provide adequate incentives to achieve the needed level of fuel decarbonisation while meeting sustainability requirements.

    Whether biofuels, carbon-neutral fuels or hydrogen, none of these potential propulsion energies is without its problems. For each one, questions about infrastructure, technology promotion, import dependencies, volume potential and economic costs must be answered. These issues must also be analysed as part of the energy transition in transport in order to identify comprehensive strategies and to minimise the societal costs of switching to climate-neutral fuels.


    133. See BMWi (2016b).
    134. See BMVBS (2013).
    135. See IEA (2016b).
    136. See INFRAS, Quantis (2015), p. 16.

  • Government policies will shape the phase-out of oil and natural gas

    In the long run, fossil fuels need to be replaced by electricity and climate-neutral fuels. But achieving this will require a more coherent regulatory framework. Take energy taxation policies. As they have developed historically, they have come to serve mixed objectives. In fact, fuel taxes are not primarily geared towards the decarbonisation of the transport sector.

    They primarily serve other aims – e.g. fiscal policy or competition policy. But these aims can conflict with one another. For instance, the energy tax is an important source of state revenue. Nevertheless, competition policy aims to ensure that the German haulage industry is not disadvantaged relative to its European competitors. This has led to tax cuts for diesel fuel, depriving the state of almost 8 billion euros of annual revenue.137

    Tax on diesel is 18.41 euro cents less than tax on gasoline, even though the combustion of 1 litre of diesel emits more CO2 than a litre of petrol (2.65 kg versus 2.37 kg). The oft-cited benefits of diesel for the climate are entirely because diesel engines are more efficient than petrol engines. A uniform taxation of diesel and petrol based on its energy and CO2 levels would be a first step towards the complete replacement of fossil fuels with climate-neutral electricity.

    137. See UBA (2016b).

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