Potential and limitations of hydrogen- based e-fuels in climate change mitigation

E-fuels are unique in that they can tap into low-cost renewable electricity, while directly replacing fossil fuels in transport, industry and buildings, which would minimize transformation requirements on the energy demand side. However, there are contrasting views on the future role of e-fuels. In this Perspective, we examine their potential and limitations by synthesizing knowledge on their techno-economic characteristics, life-cycle greenhouse gas emissions and system-level implications. E-fuels’ versatility is counterbalanced by their fragile climate effectiveness, high mitigation costs and uncertain large-scale availability. We calculate current e-fuel mitigation costs to be ~690 €/tCO2 for liquids and ~920 €/tCO2 for gases, while technological learning could reduce costs to ~30–200 €/tCO2 until 2050. E-fuels may develop to a backstop technology in the long term, yet we deem it unlikely that they become cheap and abundant early enough to broadly substitute fossil fuels. Hence, a merit order that prioritizes where to establish hydrogen and e-fuels end-uses can guide policy decisions. From a carbon-neutrality perspective, e-fuels should be targeted on sectors that are inaccessible to direct electrification (aviation, shipping, primary steel, chemical industry feedstocks). Neglecting end-use transformation instead threatens to lock in a fossil fuel dependency if the envisaged widespread availability if e-fuels fails to materialize. Sensible climate policy supports the market introduction of e-fuels, and steers e-fuel flows towards no regret applications, while hedging against the risk of their unavailability at large scale.