Vision 2050: A pathway for the evolution of the refining industry and liquid fuels

The EU established a goal in the framework of the Paris Agreement to lead the world in addressing global climate change. The European refining and distribution industry is committed to contributing to the achievement of this objective.

The global demand for liquid hydrocarbons – as fuels for transport, as petrochemical feedstock and for other uses – is expected to increase until at least 2040. These products have an unrivalled energy density and are easy to transport, making them an ideal means to carry and store energy. While alternatives are being developed for some of their current uses (e.g. in passenger cars, where electrification is expected to play a major role), liquid hydrocarbons remain difficult to replace in heavy-duty and marine transport, in aviation and as a feedstock for the petrochemical industry. 

It is therefore of great importance for the EU’s energy and industrial value chain, as well as for its citizens, that the carbon emissions of liquid hydrocarbons be progressively reduced. The EU refining industry is well placed to evolve its business model consistently with this objective, by increasingly using combinations of new feedstocks – such as biomass and vegetable oils, waste and captured CO₂ in very efficient manufacturing. It can also expand its use of renewable electricity and hydrogen on-site and further exploit synergies with other industries in integrated clusters. The flexibility and resilience of the refining industry infrastructures, including those for the distribution of products, will allow this transformation to occur at a comparatively low cost and with immediate benefits in terms of CO₂ reduction.

The EU refining industry is already engaged in a low-carbon transition, through investments in R&D projects and the early deployment of new technologies. These technologies, which have already been proven at different technology readiness levels (TRL), need to be implemented at scale. Innovative solutions will allow the use of new feedstocks and will cut greenhouse gas (GHG) emissions from refineries as well as from the use of their products. In the process, the EU will develop and reinforce its global leadership in low-carbon technologies, which will be exported around the world where they are needed.

A view of the potential low-carbon pathways for the EU refining system has been developed by Concawe. It shows that the adoption of technologies for reducing GHG emissions from refineries may achieve CO₂ savings by 2050 of close to 80% of their 1990 levels, at a minimum cost of €50,000 million. This view is not intended as a roadmap, as the CO₂ efficiency of existing facilities coupled with local and structural constraints will determine individual refineries’ routes and implementation costs. But the low-carbon pathways still show the industry’s potential contribution to the low-carbon transition.

A study prepared by Ricardo for Concawe, focusing on light-duty road transport in the EU, assesses, among others, the potential effects of the widespread use of low-carbon liquid fuels in highly-efficient conventional vehicles in a 50/50 combination with electrically-powered vehicles. It concludes that by 2050, GHG life-cycle emissions could potentially be reduced to less than 13% of their 2015 values. In Tank-to-Wheel terms, life-cycle emissions could be 90% lower than in 1990. When compared with a high electric vehicles (EVs) scenario (100% of vehicle registrations battery electric from 2040), Ricardo concludes that the two cases are approximately equivalent both in terms of GHG reductions and in their costs to end-users and society.

To unlock investments in low-carbon technologies, the policy framework should enable investors to be remunerated for their risk capital. The current regulations in energy and climate lack long-term predictability and stability, are sectoral rather than holistic and deviate too often from technology neutrality.

The following measures for an evolutionary trajectory of the regulations on fuels and vehicles could be proposed:

• In the short-term (until about 2030), regulatory adjustments or corrections to the existing regulatory framework (particularly the Renewable Energy Directive – RED II, and the Thank-to-Wheel-based (TTW) vehicle emission standards) should be made. These would stimulate the development and deployment of technologies for low-carbon fuels and efficient vehicles;
• In the medium-term (post 2030), a cross-sectoral approach across the economy with a single cost of carbon should be created. A move to a single CO₂ market within road transport would be a first step in this direction;
• In the longer term, a common CO₂ market across the whole economy should be taken in a cross-sectoral approach based on a single carbon price.

During the low-carbon transition, due to the high cost of innovative technologies, appropriate measures should be taken to safeguard the international competitiveness of EU industries and avoid the offshoring of manufacturing activities.