“Fit for 55” – FuelsEurope’s contribution to the debate on decarbonisation of transport

Executive Summary:

In the framework of EU policy debate on the 2030 GHG reduction target and the 2050 climate neutrality objective, the decarbonisation of transport – a sector of the economy with far reaching implications and unique challenges – is a precious opportunity for the EU economy to:

  • Develop and deploy innovative low-carbon technologies in vehicles and in fuels/energy;
  • Create economic value for the transport ecosystem and to help the relevant EU industries achieve world-leadership.

At the same time, the transition should carefully address the societal aspects deriving from changes in employment pattern, skills requirements and inequalities between EU regions and sectors of society. No one should be left behind, and access to affordable mobility should be protected as one of the fundamental rights of all citizens.

FuelsEurope representing the EU refining industry supports the EU objective of net climate neutrality in 2050.

In 2020, FuelsEurope published the Clean Fuels for All” (CF4A) describing the strategy of the refining industry’s transition. The progressive adoption of low-carbon technologies using low-carbon and sustainable, renewable feedstocks, has the potential to substantially cut GHG emissions from refineries and fuels. Low-carbon liquid fuels, in particular, could supply energy to all transport modes, in close complementarity with renewable electricity, hydrogen and gaseous fuels. This strategy provides an alternative pathway to achieve the transport decarbonisation target in the 1.5 C “Tech” scenario of the EU Commission’s “Clean Planet for All”.

There is a widespread recognition of the fact that Low-Carbon Liquid Fuels are a key instrument for the decarbonisation of aviation, maritime and long-distance road transport. However, road transport at large, including passenger cars and vans, is an essential trigger for unlocking the production of these fuels at industrial scale. The uptake of electrification will require time to turn over the vehicle fleet and to put in place the distribution infrastructures. During the transition of passenger cars and vans to EVs, low-carbon liquid fuels are the most efficient way to cut emissions from vehicles with an internal combustion engine and to allow the optimisation of the implementation plan of infrastructures for electricity and hydrogen. This is a no-regret option: the build-up of production capacity for low-carbon liquid fuels will progressively reduce their cost, through the creation of economies of scale and through the repayment of the capital cost. Over time, the reduction of demand for fuels from road transport will free-up growing volume for aviation and maritime, at an affordable price.

The purpose of this paper, building on the recommendations of the CF4A and in view of the upcoming EU Commission’s “Fit for 55 Package”, is to make specific regulatory proposals for the decarbonisation of transport.

These are the pillars of FuelsEurope’s contribution to the debate:

  1. The upcoming revision of the Renewable Energy Directive creates the best opportunity to make it the primary regulatory instrument to drive the effective and efficient decarbonisation of road transport fuels. Section 1 of this paper presents the recommendations of FuelsEurope in view of this revision, including a recommendation to express RED target in GHG terms.
  2. While theoretically one policy objective should call for one regulation, to avoid overlaps and unintended, contradictory consequences, we acknowledge the EU Commission’s intention to propose a cap and trade system for the decarbonisation of road transport. In Section 2 we present our recommendations on the ETS for road transport.
  3. The RED for road transport expressed in GHG terms and the possible addition of an ETS for road transport make the Fuel Quality Directive art. 7a redundant and we call for its discontinuation.
  4. Another regulatory tool of key importance, which can effectively complement the RED, is the upcoming revision of the Energy Taxation Directive. Our recommendations in Section 3 aim at allowing the ETD to contribute, together with the RED and possibly with an ETS for transport, to the creation of a carbon price signal capable to create the business case for investments in low-carbon liquid fuels.
  5. Finally, for the upcoming EU Commission proposals on decarbonisation of Aviation and Maritime transport, we offer our recommendations in Section 4 and Section 5.
  6. To complete the picture, we should mention also the upcoming revision of the CO2 standards in cars and vans and the one for Heavy Duty Vehicles. They offer an opportunity not to miss for opening this regulation to technology inclusiveness by accounting for the CO2 reduction from fuels with low and net-zero CO2 emissions. This may take the form of credit certificates from fuels as a complementary compliance mechanism for vehicle manufacturers (as in the Frontier Economics proposal and in Cerulogy study on heavy duty road transport). This may also consist of customer-side benefits when a new ICE/Hybrid vehicle is guaranteed a long-term supply of low-carbon liquid fuels. FuelsEurope, in close cooperation with other industrial associations of the automotive supply chain, of the commercial transport and of various renewable, sustainable fuels suppliers, is ready to contribute to the design of such regulatory provisions.