Charting the Path to Climate Neutrality and Energy Resilience

A new 5-year term for the EU’s institutions opens new perspectives for policymakers, businesses, and citizens. While the specifics of these perspectives remain uncertain, some long-term certainties stand clear: the EU must achieve climate neutrality by 2050, ensure citizens have access to sustainable and affordable energy, and maintain a secure supply for critical infrastructure like hospitals and public transport. The European economy must rely on an internationally competitive, innovative and sustainable industry to create wealth, offer quality jobs, and support a multitude of small and large businesses and it must also become a society capable of overcoming future pandemics, international conflicts, and unforeseeable global crises.

Liana Gouta is the Director General in FuelsEurope.

Climate Neutrality: An Imperative Goal

Achieving climate neutrality by 2050 is non-negotiable. The EU economy must transition from fossil fuels in an equitable manner, as acknowledged by the COP28 climate change conference. This transition involves replacing fossil feedstocks with renewable, sustainable and circular alternatives without disrupting energy supplies or industrial value chains.

The fuel manufacturing industry is already reducing emissions from transportation and industry by progressively phasing out fossil feedstocks and increasing the production of renewable alternatives such as biofuels and synthetic fuels. Currently, 8.7% of transport energy in the EU comes from renewable liquid fuels, primarily in road transport, the most decarbonised transport mode so far.

The EU industry’s transformation has begun. As shown by the International Energy Agency (IEA), some EU fuel manufacturing companies are investing significantly in clean energy technologies, with 15-25% of their capital spending dedicated to these projects, surpassing the average of 2.7% of the global O&G sector.

Some European facilities have been converted to biorefineries, now using 100% sustainable biomass instead of petroleum, while others co-process fossil materials and sustainable biomass. To accelerate this transition, the EU fuel manufacturing industry needs a supportive policy framework that includes:

• A clear, predictable regulatory environment for renewable fuel markets.
• Temporary public support for clean molecule technologies, R&D, pilot plants, and scaling up.
• A technology-neutral legislative approach that allows various promising technologies to compete and complement each other based on their decarbonisation potential.

The industry aims at cooperating with the EU to unlock its full potential, replacing fossil molecules with renewable ones, reducing the carbon footprint of operations, and finding decarbonization synergies with other industries.

Enhancing Europe’s Energy Resilience

Europe’s energy system has faced significant shocks in recent years, including the pandemic, the war in Ukraine, and subsequent energy price surges. These events have underscored the need for a robust, diversified domestic energy industry. The EU’s fuel and products manufacturing sector, with its extensive distribution and storage infrastructure, is crucial for regional energy security. Even during recent upheavals, European fuel supplies were not disrupted. As fossil fuels are replaced with more sustainable, circular feedstocks, energy security will improve, as many of these feedstocks—such as municipal, agricultural, and forestry waste—are produced domestically, and new value chains will be created supporting local economies.

Producing renewable fuels and products at European facilities using feedstocks from Europe and trusted partners can enhance energy security, foster a circular economy, and create high-skilled jobs. The sector’s transformation into a producer of renewable fuels and products that can be used with existing infrastructure sustains the decarbonisation of transport and other critical industrial sectors.

Supporting Economies and Jobs

The EU faces the challenge of maintaining its industrial base amidst global competition. Essential industries are at risk of relocation due to more favourable subsidies and regulatory environments elsewhere, potentially leading to job losses and increased dependence on imports for strategic goods. The transition of EU industrial assets away from Europe could harm the environment, increase emissions, and reduce worker welfare if these moves are to regions with less stringent standards.

The EU has the opportunity to lead in advanced biofuels and synthetic fuels innovation, ensuring competitiveness and leveraging the technological expertise of its industry. This leadership can ensure a just transition that provides well-paid, high-quality and skilled jobs, while transforming existing assets to produce renewable fuels and industrial products. This transformation helps mitigate costs for citizens and businesses, expands consumer choices, and supports the circular economy.

The Need for a Comprehensive Strategy

For Europe to achieve its ambitious goals, it is crucial to design and implement a comprehensive EU Strategy for the Transition of Liquid Fuels and Products. This strategy should be part of the regulatory blueprint for the new EU Institutional Cycle and should complement other sectoral decarbonisation strategies under the Green Deal. Key elements of this strategy should include:

• A regulatory framework to unlock the necessary investments for sector transformation.
• Support for creating new value chains
• Access to finance and funding.
• Maintaining the international competitiveness of the industry.

FuelsEurope supports the Paris Agreement and the net-zero greenhouse gas (GHG) objective. To achieve these targets, significant policy improvements are needed to unlock investments and leverage a broad range of technologies. The industry is prepared to cooperate with the EU to assess the impact of regulations, suggest corrective actions, and unlock technological and investment potential.

In conclusion, by fostering collaboration between the EU, the fuel manufacturing industry, and other stakeholders, Europe can achieve climate neutrality by 2050, ensure energy resilience, and maintain a competitive, innovative, and sustainable industrial base that benefits all citizens.