CO₂ pricing and eFuels

The eFuel Alliance welcomes the revision of the ETD as an important step towards reducing CO₂ emissions and achieving Europe's ambitious climate targets. However, it would be better to levy a tax based on the CO₂ emissions of the energy sources and not, as proposed by the EU Commission, on their energy content. This would allow the carbon footprint of energy carriers to be better reflected in the ETD and clearly distinguish renewable from fossil fuels. On a positive note, we strongly support the proposed alignment of tax rates for electricity and fuels. This will ensure fair competition and a level playing field between the different mobility options. The low minimum tax rates for eFuels and the clear distinction between them and the tax rates for fossil fuels are positive. Such a tax distinction between renewable and conventional fossil fuels is essential to achieve a steering effect away from fossil fuels, incentivize large-scale production of renewables and accelerate their price competitiveness with their fossil counterparts.

We also welcome the revision of the ETS and its extension to transport and buildings as an technology-open and market-based policy. The inclusion of electrolysis of hydrogen into the scope of the ETS was a welcome step to provide free allowances for the production of hydrogen by electrolysis instead of on the basis of natural gas. This is an important signal for defossilization, as these free allowances can be sold to compensate for the higher operating and investment costs compared to hydrogen production from fossil fuels. In addition, the ETS establishes a Zero Emission Factor for eFuels to reflect their carbon neutrality in line with the sustainability and GHG criteria of the Renewable Energy Directive. Therefore, the ETS incentivizes the use of eFuels and the production of green hydrogen. We recommend to further develop the ETS to integrate negative emissions to incentivize the capturing of carbon. As carbon becomes a tradeable resource, this paves the way to a circular carbon system.

Last but not least, the ETS uses revenues to fund eFuel projects. This is the case via the Innovation Fund but also via dedicated schemes for the aviation and maritime industries as well as the European Hydrogen Bank. The eFuel Alliance welcomes those programs. We recommend targeting the price difference of renewable and fossil energy carriers to increase competitiveness of the renewable fuel sector. We further recommend the prolonging as well as increase of the budget of those schemes. In addition, the European Commission should establish a dedicated mechanism for imports of eFuels from third countries, building on the experience of the H2Global scheme.