Alternative Fuels

In the future, electricity and other alternative fuels will power zero-emission vehicles. Which fuel is used will depend on its associated costs and level of public acceptance.

The clean-energy transition in the transport sector depends on the adoption of vehicles that run on carbon-neutral energy instead of petroleum fuels. Right now, only a small fraction of vehicles on the road use electricity, but things won’t remain this way for long. At the same time, the decarbonisation of the transport sector will require enormous amounts of energy from wind and solar power. It is important to project exactly how much power will be needed so policy-makers can calculate the costs and gauge the public response ahead of time. Among other things, future power demand will depend on the options available for the configuration of future transport systems as well as on the drivetrains and fuel types that dominate tomorrow’s markets.

From a purely technical standpoint, other alternative energies can be used to power vehicles, including bio fuels, carbon-neutral synthetic fuels and natural gas. But all alternative fuels raise questions regarding infrastructure requirements, technology subsidies, potential production capacities and economic costs. These questions must be analysed with an eye to climate-friendly transport. It is crucial to identify systematic strategies that minimise the costs of switching to carbon-neutral energies while nevertheless meeting sustainability targets.


Core results

  1. 1

    Technology openness is a prerequisite for a successful and cost-efficient achievement of a sustainable transport sector.

    This means switching to new drive trains and fuels in an undistorted competitive field factoring in all economic costs and benefits of the various technologies.

  2. 2

    Technology openness does not mean technology neutrality.

    Technology-neutral regulations do not discriminate against available technologies. They generate technology openness only when technologies compete against each other under undistorted conditions. However, in practice technology-specific regulations are needed as well to overcome path dependencies in the transport sector and to guarantee technology openness.

  3. 3

    Technologies that harm the climate must be curbed to make space for new climate ­friendly ones.

    Path dependencies and external costs bias technology competition towards combustion engines and fossil fuels. A key approach for correcting these distortions and supporting the market exit (exnovation) of fossil fuels is an effective carbon pricing. Other supplementary instruments are a carbon-based vehicle tax and strict fleet-wide emission limits for new cars.

  4. 4

    Technology-specific policies are needed to promote infrastructure for new drive systems.

    To find acceptance, drive systems require a sufficiently tight-knit and user-friendly energy supply infrastructure network. But the private sector can profitably build infrastructure only when the technology is widely used. Accordingly, the state should temporarily promote the expansion of infrastructure and create a regulatory framework that enables the simple usage of this infrastructure.

  5. 5

    Support new technologies’ competitiveness.

    In order to overcome remaining barriers, targeted and temporarily limited support programmes can facilitate the market entry and ramp-up of innovative technologies. The programmes should consider the state of development of technologies and their projected contribution to decarbonisation. More­over, it seems desirable that the necessary financial means are raised in the transport sector itself, e. g., by the means of a bonus-malus system.

  6. 6

    Generate investment security by a long-term political commitment to sustainable transport and ambitious policy measures.

    Effective political commitment requires setting and ­achieving explicit sector targets. Moreover, the state should signal the inevitability of a transition towards a sustainable transport system by making targeted public investments and enacting a broad instrument mix for the reliable achievement of the transport sector emission target. Furthermore, it must seek to build the broadest political consensus possible.

  1. 1

    Synthetic fuels will play an important role in decarbonising the chemicals sector, the industrial sector, and parts of the transport sector.

    Synthetic fuels will play an important role in decarbonising the chemicals sector, the industrial sector, and parts of the transport sector. Synthetic fuel production technologies can be used to manufacture chemical precursors, produce high-temperature process heat, as well as to power air, sea and possibly road transport. Because synthetic fuels are more expensive than the direct use of electricity, their eventual importance in other sectors is still uncertain.

  2. 2

    To be economically efficient, power-to-gas and power-to-liquid facilities require inexpensive renewable electricity and high full load hours. Excess renewable power will not be enough to cover the power demands of synthetic fuel production.

    Instead, renewable power plants must be built explicity for the purpose of producing synthetic fuels, either in Germany (i.e. as offshore wind) or in North Africa and the Middle East (i.e. as onshore wind and/or PV). The development of synthetic fuel plants in oil- and gas-exporting countries would provide those nations with a post-fossil business model.

  3. 3

    In the beginning, synthetic methane and oil will cost between 20 and 30 cents per kilowatt hour in Europe. Costs can fall to 10 cents per kilowatt hour by 2050 if global Power-to-Gas (PtG) and Power-­to-Liquid (PtL) capacity reaches around 100 gigawatts.

    The aimed-for cost reductions require considerable, early and continuous investments in electrolysers and CO2 absorbers. Without political intervention or high CO2 pricing, however, this is unlikely, because the cost of producing synthetic fuels will remain greater than the cost of extracting conventional fossil fuels.

  4. 4

    We need a political consensus on the future of oil and gas that commits to the phase-out of fossil fuels, prioritises efficient replacement technologies, introduces sustainability regulations, and creates incentives for synthetic fuel production.

    Electricity-based fuels are not an alternative to fossil fuels but they can supplement technologies with lower conversion losses, such as electric vehicles and heat pumps. Application-specific adoption targets and binding sustainability regulations can help to ensure that PtG and PtL fuels benefit the climate while also providing a reliable foundation for long-term planning.

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