EU refiners call for action to unlock low-carbon investment

The EU Green Deal is at the heart of the EU economic recovery. Industries have an enormous opportunity to take bold climate action to meet society’s expectations and future-proof their businesses.

For one thing, EU refiners share the EU’s climate neutrality objectives and have confidence in their ability to develop low-carbon technologies at scale, to enable the progressive decarbonization of transport by 2050. But do investors, consumers and decision-makers share our confidence?

European business and consumer confidence hit rock bottom during the first wave. Despite a rebound, investments and consumption are forecast to be durably affected by what increasingly looks like a structural crisis, especially as a second wave has now overwhelmed most of the EU’s member states and some of Europe’s main trading partners.

‘We need a plan’ is what we often hear, and what we see in practice today, with stimulus packages being finally approved in Brussels and across Europe. Typically, with such plans, governments hope to restore confidence; but confidence is complex. It requires not only vision, but also an open dialogue, policy action and regulatory certainty.

We, EU refiners, have a plan of our own to deploy large-scale green investments to reach climate neutrality by 2050. Low-carbon liquid fuels can decarbonize transport, enabling all new and existing vehicles in road transport, aviation and maritime to be climate neutral by 2050.

Low-carbon liquid fuels are sustainable fuels from non-petroleum origin, with no or very limited net CO2 emissions during their production and use. At first blended with conventional fuels, they will progressively replace fossil-based fuels, living side by side with electrification, hydrogen and other emerging technologies.

The future of the refining industry is very different from what it is today. We see our future in a transformation of our manufacturing processes that will drive European leadership in critical low-carbon technologies, such as transesterification, thermochemical conversion, water electrolysis, pyrolysis and hydrothermal liquefaction.

Our ambitious plan will require investment of an estimated €30 billion to €40 billion until 2030, and the total investment needed is estimated between €400 billion and €650 billion by 2050.

Low-carbon liquid fuels will play a critical social and economic role in the EU. They will help maintain Europe’s industrial strength and jobs in the automotive sector, but also ensure social inclusiveness by enabling European citizens to access sustainable mobility throughout the EU. Consumer confidence is essential for this transition.

These measures will give customers a choice between low-carbon technologies, making carbon neutrality accessible to all.

We have an ambitious plan, based on robust data, building on R&D investments made by our industry, and setting a long-term trajectory enabling FuelsEurope’s member companies to put forward their own strategies to deploy low-carbon liquid fuels at scale.

Our success will however depend on multi-stakeholder dialogue and regulatory certainty — in short, on confidence.

Investors will only commit resources to support the development of disruptive low-carbon liquid fuel technologies if there is a business case and prospects for a profitable market. Today though, our regulatory framework does not permit this.

Urgent targeted policy action is needed to boost investor confidence and thus create the conditions for a recovery led by private investment.

To unlock investments, Europe needs the creation of a lead market for low-carbon fuels, with a significant carbon-price signal and multiple regulations must be amended to that extent. For instance, we must shift from outdated energy taxation to carbon taxation.

Zero or very low tax for low-carbon fuels would achieve the dual objective of keeping fuel prices socially acceptable and making a business case for investments.

In essence, investors must be given the best conditions to risk their capital, with confidence. This means ensuring technology neutrality, regulatory stability for the economic lifetime of their investment, protecting their investments from carbon leakage, and allowing access to public and private funds for climate-related investments.

This also means EU decision-makers must be pragmatic and inclusive when crafting their sustainable finance agenda. We have seen a real temptation to go for a binary view on what should be labelled as green and what should not.

But if a small refinery decides to invest in, say, a carbon capture facility, representing a real climate change mitigation value from that firm’s perspective, who says that investment does not merit support?

The EU taxonomy for sustainable activities must adopt a transitional, evidence-based approach, which reflects technological development, available renewable and low-carbon solutions, energy mixes and existing infrastructure. This is vital.

Low-carbon liquid fuels have a strategic role to play in the transition to a climate-neutral economy. We call on EU policymakers to launch a high-level dialogue, in order to create a policy framework that will drive confidence, build the necessary market demand and incentivize investments as soon as possible.

There is no time to waste. The next couple of years will be critical as policymakers work on legislation that will determine whether or not industries will be encouraged to unlock significant investment and accelerate climate action.

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