Why Electrofuels Are Becoming a Business Priority for Aviation and Shipping

Aviation and shipping can’t run on batteries. That’s a problem regulators are done waiting on.

Electric cars can absorb a big share of road transport emissions, but a battery pack heavy enough to power a long-haul flight would never get off the ground. The same goes for container ships crossing oceans on dense fuel. These sectors need a liquid fuel, and that fuel needs to stop adding new carbon to the atmosphere.

That’s where electrofuels come in: synthetic fuels made by combining renewable hydrogen with captured CO2. They’re not a niche experiment anymore. They’re the backbone of a binding EU fuel mandate, and increasingly, a line item in corporate decarbonization budgets.

What Are Electrofuels?

Electrofuels are synthetic fuels made by combining renewable hydrogen with captured carbon dioxide.

• Hydrogen is produced using renewable electricity (solar, wind, nuclear, or hydro) through electrolysis of water.
• Carbon dioxide is captured from industrial processes, power plants, or even directly from the air using Direct Air Capture (DAC).

When combined, these elements form a liquid hydrocarbon fuel that can substitute for conventional fossil fuels like kerosene, gasoline, or diesel, but with far lower net emissions.

In short, electrofuels recycle CO2 that would otherwise pollute the atmosphere, turning it into usable energy.

Why Electrofuels Matter

Global energy-related CO2 emissions hit a record 38.4 billion tonnes in 2025, according to the International Energy Agency, with emerging economies now driving most of the growth. Aviation and shipping emissions are rebounding as travel and trade recover, and neither sector has a scalable low-carbon alternative to liquid fuel yet.

That’s exactly the gap electrofuels are built to fill.

Unlike traditional fossil fuels, burning electrofuels doesn’t add new carbon to the atmosphere. Since the CO₂ used in their production is already captured, they are considered near net-zero fuels.

This makes electrofuels especially valuable for sectors where decarbonization is difficult, such as:

• Aviation – Batteries are too heavy for long flights, but liquid electrofuels are compatible with jet engines.
• Shipping – Heavy maritime transport relies on dense fuels; e-fuels can replace bunker fuel.
• Heavy industry & heating – Electrofuels can substitute oil and gas in industrial furnaces and even residential heating.

Why Electrofuels Could Outcompete Other Low-Carbon Fuels

What sets electrofuels apart isn’t novelty, it’s compatibility. They drop straight into existing engines, pipelines, and storage tanks, which means airlines and shipping companies don’t need to wait for new infrastructure to start using them. That single trait is why they’re getting serious investment while other alternatives are stuck waiting on entirely new supply chains.

They also solve two problems at once: recycling CO2 instead of adding new emissions, and giving renewable electricity somewhere useful to go when there’s more of it than the grid can use. That second point matters more than it sounds. Solar and wind produce power in bursts, and electrofuels are one of the few uses for that surplus that doesn’t require batteries.

Which Businesses Should Watch Electrofuels?

This isn’t only a topic for airlines. Every stage of the e-fuel ecosystem creates opportunities for different industries, from renewable energy developers to infrastructure operators.

• Airlines – Face the SAF mandate directly, making long-term fuel contracts a strategic necessity rather than a sustainability initiative. Early supply agreements could become a competitive advantage as demand grows.
• Airports – Need to invest in blending, storage, and fuel distribution infrastructure to comply with regulations like ReFuelEU Aviation, creating new opportunities for infrastructure providers.
• Shipping companies – Face increasing pressure from IMO decarbonization targets. While multiple fuel pathways remain under consideration, electrofuels are emerging as one of the viable options for long-distance maritime transport.
• Fuel producers and refiners – Are leading investment in commercial e-fuel production facilities. As policy support strengthens and production scales, they are positioned to capture much of the value created across the supply chain.
• Renewable energy developers – Supply the low-cost electricity that makes green hydrogen production economically viable, linking renewable power projects directly to future e-fuel demand.
• Industrial hydrogen companies – Sit at the center of the supply chain, since hydrogen cost is what determines whether this entire market works.
• Direct Air Capture (DAC) companies – Supply the CO2 that e-fuels are built from.
• ESG investors – Are increasingly viewing electrofuels as a long-term, policy-backed investment theme. Unlike many emerging climate technologies, demand is already being supported by binding regulations rather than voluntary corporate commitments.

If your business touches any of these categories, electrofuels aren’t a future trend to monitor. They’re already shaping procurement and investment decisions.

The Electrofuel Supply Chain

Understanding where the money moves helps clarify where the business opportunity actually sits:

Renewable electricity → Electrolyzers → Green hydrogen → Carbon capture → Fuel synthesis → Distribution → Airlines / Shipping

• Renewable electricity has to be cheap and abundant, since it’s the single biggest cost driver in the entire chain
• Electrolyzers split water into hydrogen and oxygen using that electricity – this is where hydrogen equipment manufacturers compete
• Green hydrogen is the core feedstock, and its cost largely determines whether e-fuels can compete with fossil fuels
• Carbon capture supplies the CO2, either from industrial exhaust or directly from the air via DAC
• Fuel synthesis combines hydrogen and CO2 into a usable liquid fuel – this is where most current e-fuel plants sit, and where most projects haven’t yet reached final investment decision
• Distribution moves the finished fuel to airports and ports, which requires existing fossil fuel infrastructure to adapt
• Airlines and shipping companies are the end buyers, and increasingly, the ones locking in supply contracts years in advance

Each link in this chain represents a different type of business opportunity, from equipment manufacturing to project development to long-term offtake agreements.

The Regulatory Push Making Electrofuels Unavoidable

Since January 2025, the EU’s ReFuelEU Aviation mandate has required a minimum 2% sustainable aviation fuel (SAF) blend at EU airports. That share rises to 6% by 2030 and 70% by 2050, with a dedicated sub-mandate specifically for synthetic e-fuels, separate from biofuels.

The sub-mandate matters more than the headline number. It guarantees demand for e-fuels specifically, regardless of how the broader biofuel supply develops. That’s the kind of policy certainty that unlocks investment.

The economics are still catching up. E-kerosene currently costs roughly 10 to 13 times more than fossil jet fuel. That gap is projected to narrow to around 2.5 times by 2050 as production scales and renewable electricity gets cheaper.

For businesses, this translates into a few concrete signals:

• Airlines and shipping operators face higher fuel costs today, but a clearer long-term cost trajectory than they had five years ago
• Investors are looking at a market backed by binding EU law, not just voluntary net-zero pledges
• Fuel producers and industrial suppliers now have a multi-decade demand floor to build a business case around
• Corporates with net-zero commitments can treat e-fuel offtake agreements as a credible lever for the emissions they can’t electrify away

Why Electrofuels Haven’t Scaled Yet

Electrofuels aren’t a silver bullet. Not yet, anyway. Producing them means running electricity through several conversion steps before you get usable fuel, and every step loses energy along the way. That’s why e-kerosene currently costs 10 to 13 times more than fossil jet fuel. The process itself is expensive, not just the technology.

Infrastructure is the other bottleneck. Dozens of e-fuel plants are in development across Europe, but almost none have reached final investment decision, which means the supply everyone’s counting on for 2030 mandates mostly doesn’t exist yet.

Where Electrofuels Aren’t the Right Fit

Electrofuels get a lot of attention, but they’re not a universal decarbonization tool. They’re unlikely to become the preferred solution for:

• Passenger cars – direct electrification is already cheaper and more energy-efficient
• Urban buses – battery-electric fleets are a mature, lower-cost option
• Residential heating – heat pumps generally beat e-fuels on both cost and efficiency
• Small businesses – the infrastructure and cost premium don’t make sense at small scale
• Most consumer products – this is an industrial and transport-sector solution, not a consumer one

The reason comes down to energy efficiency. Producing e-fuels involves multiple conversion steps (electricity to hydrogen to fuel), and each step loses energy along the way. Where it’s possible to run something directly on electricity, that route is almost always cheaper. Electrofuels earn their place specifically where direct electrification isn’t realistic, which is why aviation, shipping, and select heavy industry remain the sectors worth watching.

Electrofuels Are Part of a Much Bigger Energy Transition

Transportation is the second-largest contributor to global CO2 emissions. While electric cars are handling the roads, aviation and shipping still need a scalable liquid fuel alternative. That’s where electrofuels shine, but they don’t exist in a policy vacuum.

Electrofuels sit inside a much larger decarbonization framework that’s already shaping corporate strategy:

• Net-zero commitments from corporates and governments are creating structural, long-term demand for credible offset and abatement options in hard-to-electrify sectors
• RE100, the corporate initiative committing member companies to 100% renewable electricity, is pushing exactly the kind of cheap, abundant renewable power that green hydrogen production depends on
• The EU Emissions Trading System (ETS) puts a rising price on carbon for EU industry, making e-fuels comparatively more competitive as fossil fuel allowances get more expensive
• The Carbon Border Adjustment Mechanism (CBAM), now in force, applies a carbon price to imported hydrogen, electricity, and other carbon-intensive goods, which raises the cost of importing fossil-based alternatives and strengthens the case for EU-produced green hydrogen and e-fuels
• Sustainable Aviation Fuel (SAF) policy is the direct regulatory vehicle carrying e-fuels into the market, since e-kerosene is legally defined as a category of SAF under EU law

Together, these policies are building a market structure where electrofuels aren’t competing purely on cost. They’re competing inside a system that’s increasingly designed to favor them.

Over the next decade, electrofuels are unlikely to replace fossil fuels across every sector. Their biggest role will be enabling industries that cannot realistically electrify, particularly aviation, shipping, and parts of heavy industry.

As production costs fall and policy support expands, companies positioned across the e-fuel value chain, from renewable power developers to fuel producers to airlines locking in early offtake agreements, could benefit from one of the fastest-growing segments of the clean energy transition.