To meet fuel mandates under the ReFuelEU Aviation and FuelEU Maritime regulations, the European Union (EU) estimates that around 20mn tonnes of sustainable alternative fuels by 2035 will be required. Of this, 13.2mn tonnes are expected to be biofuels and 6.8mn tonnes e-fuels, largely produced using renewable hydrogen. The EC estimates that scaling production to these levels will require around €100bn in investment over the next decade.

To bridge early financing gaps, the EC says InvestEU will mobilise at least €2bn for sustainable fuels production by 2027. The EC will also propose €300mn this year through the European Hydrogen Bank to support hydrogen-based fuels for aviation (SAF) and maritime shipping (SMF).

Additional funding includes €133mn for research and innovation projects under the Horizon Europe funding programme; €153mn and €293mn for synthetic aviation and maritime fuel projects respectively under the Innovation Fund; and the launch of an early investment coalition to raise at least €500mn for e-SAF development.

Looking ahead, the EC plans to design a longer-term market mechanism to provide revenue certainty for fuel producers and secure offtake agreements for airlines and shipping operators. The Commission says this will be essential to de-risk private investment and scale new production capacity.

The initiative forms part of a wider transport package, which also includes a new High-Speed Rail Action Plan aimed at creating a faster, more interoperable and better-connected European rail network by 2040.

Commissioner for Sustainable Transport and Tourism, Apostolos Tzitzikostas, comments: ‘Success will depend on close cooperation among Member States, industry, financiers and civil society to turn this challenge into a strategic opportunity for Europe.’

Transport & Environment (T&E) says the plan ‘diagnoses the problems’ for decarbonising planes and ships and contains promising steps to boost e-fuels production – but stresses the EU must now move faster to secure its leadership in the sector.

E-fuel projects in Europe have been slow to materialise due to high production costs and a lack of long-term offtake agreements. T&E says it welcomes the commitment to develop a double-sided EU auction mechanism to provide guaranteed prices and demand visibility – but suggests this tool should only apply to e-fuels, not biofuels.

In the short term, STIP relies on existing instruments such as the Hydrogen Bank and Innovation Fund, which T&E says have begun supporting e-SAF projects but remain insufficient to de-risk industrial-scale production. ‘The most impactful measures may arrive too late,’ the organisation warns, noting that decisive action is needed by 2026.