Electric vehicle factory

EU decision on e-fuels unblocks electric-vehicle targets

On March 28th EU approved legislation ending sales of new carbon-emitting cars by 2035, but made an exception for internal combustion engine (ICE) cars that run on e-fuels. The compromise was reached after lobbying from Germany, which wants to retain a role for carbon-neutral fuels. However, EIU research suggests that e-fuel vehicles will have higher carbon dioxide (CO2) emissions than battery electric vehicles (BEVs) over their full lifecycle unless the e-fuels are made entirely from electricity from renewable sources.

The EU exemption means that conventional ICE cars will continue to be available for sale after 2035, but will need to be fitted or retrofitted with technology called a “fuelling inducement system” to prevent the use of fossil fuels in the vehicle. Vehicles that run on e-fuel do emit CO2 and other emissions. However, e-fuels as a whole are carbon neutral because they are produced by capturing CO2, which offsets the emissions from usage. By contrast, hydrogen vehicles emit water vapour and warm air, while BEVs have zero tailpipe emissions.

E-fuel emissions depend on the electricity sources

To compare the environmental credentials of these vehicles, we used data sourced from a modelling tool developed by Transport and Environment (T&E), a Brussels-based environmental organisation. The above chart compares the lifecycle CO2 emissions released from a medium-sized car purchased in 2030, using two technologies: battery electric and ICE.

The configuration for calculating CO2 emissions from BEVs takes into account an EU average for battery manufacturing and driving and a standard supply chain of battery materials. Meanwhile, for ICE cars, we considered different fuel combinations—conventional or e-fuel. For e-fuel production, we used different combinations of electricity generation, with one using the Renewable Energy Directive (RED) II (which allows 15% from non-renewable sources) and the other using 100% renewable energy for e-fuel production. We also considered the impact of blending e-fuels with petrol.

Our conclusions suggest that, over the full lifecycle, using 100% e-fuel in cars and producing that fuel from 100% renewable electricity would have the lowest lifecycle emissions, averaging 35 grams of CO2 equivalent per kilometre (gCO2e/km). This compares with 46gCO2e/km from BEVs. However, it is highly unlikely that e-fuels can be produced solely with renewable energy by 2030. Pure e-fuel produced according to RED II, a more likely combination, will emit about 97gCO2e/km.

E-fuel production will be expensive

E-fuels or synthetic fuels are produced by synthesising captured carbon and hydrogen using clean energy. However, the technology is currently at a nascent stage, compared with that of electric vehicles and hydrogen vehicles. For e-fuels technology to be carbon neutral, the hydrogen needs to be generated by electrolysis of water using clean energy, while the carbon dioxide must be obtained from the atmosphere via emerging technologies like direct air capture.

Overall, it is an energy-intensive and costly procedure, at least as of now, although the technology will get cheaper and more efficient if investment continues. Even so, T&E forecasts that by 2030 e-petrol will cost about 50% more than conventional gasoline at the pump in Germany. For some manufacturers, however, the technology will avoid them having to invest money and resources into reengineering their models, production lines and supply chains to cater for a shift to electric vehicles. Some of these cost savings may be passed onto consumers.

Concession to Germany unblocks the 2035 target

Except for a few luxury carmakers such as Germany’s Porsche and Italy’s Ferrari, most other companies are expected to continue with their efforts towards electrifying vehicles. However, supercar manufacturers in particular have struggled to find the right fit with battery engines, which weigh on vehicle speed. Porsche has already invested in an e-fuel company in Chile, while BMW has invested in an e-fuel startup, Prometheus Fuels (US). E-fuel usage in hybrid vehicles could also help consumers who have to travel long distances in areas with few EV chargers, and who still face range anxiety with BEVs.

The German auto industry has a long history of developing ICE technology and the sector directly accounts for over 11% of manufacturing jobs in the country. Some of those jobs were at risk owing to the transition to electric mobility, which requires fewer suppliers and a smaller manufacturing workforce. The concession has already allowed the European Commission to move ahead with legislation to phase out high-emission vehicles by 2035. It now needs to announce details about how e-fuels will be included in that timeline.

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