Are low-carbon liquid fuels part of the answer to Europe’s decarbonisation challenge?

Conventional fuels are sometimes perceived as part of the problem of global warming. But, as attendees at a recent dinner discovered, new liquid fuels could ultimately end up being part of the climate change solution.
Barbara Thaler MEP recently co-hosted a dinner in Strasbourg, to discuss how liquid fuels can be part of the climate change solution
TP Impact

By TP Impact

TP Impact is the award-winning content, research, and event studio at Total Politics Group

28 Nov 2022

Liquid fuels have powered Europe’s economy for over a century. They have transported goods and people across the continent, supported exports by air and sea, and helped to build the industries that have delivered economic growth.

But recent moves to electrify heat and power have led some to think liquid fuels are a technology that belongs to the past rather than to the future. However, with the fuels industry embracing carbon neutral technologies and energy security high on the political agenda, it appears that the critical importance of liquid fuels is once again being recognised by European policymakers.

The role that low-carbon liquid fuels can play in supporting the net-zero transition and ensuring energy security was the important topic under discussion at a recent policy dinner and discussion in Strasbourg. The focus of debate was the vital future role that liquid fuels might play in Europe’s energy mix.

“European energy needs to become cleaner, but what is also important is that European energy stays affordable and reliable”

Barbara Thaler MEP

The meeting was hosted by two key MEPs, Marian-Jean Marinescu and Barbara Thaler, both of whom sit on the European Parliament's influential Committee on Transport and Tourism (TRAN).

Marinescu opened the discussion by stressing the importance of encouraging a “balanced debate” on this issue. This plea for balance was echoed by his MEP colleague Thaler, who agreed that, when it comes to the future of the European transport sector, it is vital to be “open-minded”.

“European energy needs to become cleaner,” Thaler explained to attendees, “but what is also important is that European energy stays affordable and reliable.”

“To reach our common targets most efficiently, we need different technologies,” she argued. “I believe in a holistic, technology-neutral, and market-based approach. Biofuels, e-fuels, hydrogen, and battery power will all play their parts in the coming decades. “

John Cooper, Director General of FuelsEurope, the industry body that represents Europe’s fuel manufacturers, agrees with Thaler that low-carbon liquid fuels can play an important role in the continent’s future energy mix. However, enabling that requires a long-term strategy that will unlock the private sector investment needed to produce at-scale alternatives to conventional fuels.

“We need a whole embracing strategy for a European liquid fuels transition,” he explains. “The big elephant in the room is ‘what's the policy risk?’ You need a level of political certainty and commitment to enable you to make a billion-dollar commitment based around a new technology.”

Cooper believes that this lack of certainty means that businesses are currently unable to commit the resources to develop at scale new generations of fuel that could contribute to meeting EU’s climate objectives. In the long term, this will slow the low-carbon transition and undermine the goal of European energy security.

“Companies like ours can manage technology risk,” he explains. “They do that every day. They can manage market risk. They can manage interest rates risks and currency transaction risks. What they can't manage is policy risk.”

For Cooper, this “policy risk” stems from the absence of a long-term strategy, creating an uncertain operating environment for fuel producers.

“As an industry, we've been getting some very mixed messages,” Cooper explains. “We've been to a lot of meetings over the past months where the main sentiment is ‘we need you to close down as soon as possible….but in the short term, could you produce some more diesel please to replace Russian imports and help us to replace gas use?’”

Cooper is convinced that this lack of clarity on the nature of Europe’s future energy mix could ultimately slow Europe’s transition to a low-carbon economy. He would like to see the argument moving on from seeing liquid fuels as part of the problem and instead seeing them as part of the solution.

Cooper points to the significant progress made in developing sustainable biofuels from interseasonal crops, as an example of how sector innovation is entirely compatible with longer-term goals around carbon reduction and energy security.

However, as with other emerging technologies, such as hydrogen and battery technology, unlocking this potential will require significant private sector investment in R&D. That will only come if there is the certainty that encourages fuel producers to commit billions of Euros in investment.

For René Neděla, Czech Deputy Minister for Transport, Industry and Trade Investment, flexibility of approach will be essential if Europe is to successfully balance sustainability, affordability, and energy security.

“We cannot switch from one dependency to another dependency,” Neděla cautions. “That's why we need more flexibility, not only in the transport sector but also in other sectors, to reach the target of climate neutrality.”

The liquid fuels industry stands ready to play its part in that flexible approach. It is now up to policymakers and legislators to shape an operating environment that unlocks sector innovation to deliver environmental, economic, and social benefits for the European businesses and citizens.

 

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