Sustainable fuels: A key player in decarbonizing hard-to-abate sectors

Achieving global decarbonization requires sector-specific solutions, especially in applications that cannot rely on electrification or green hydrogen. Sectors such as aviation, shipping and long-haul transportation, for example, demand energy-dense fuels and together account for approximately 24% of global greenhouse gas emissions. Without targeted interventions, they could contribute up to 8 gigatons of CO₂ annually by 2050.12 Some “drop-in” sustainable fuels – compatible with existing infrastructure – offer an alternative to fossil fuels in these sectors.

While green hydrogen holds potential as a future fuel, it is still relatively expensive to produce, and it requires new infrastructure and significant equipment modifications.3 Similarly, while electrification is suitable for light-duty and short-range transport, it remains challenging for applications that demand sustained high energy levels. For immediate impact, sustainable fuels – particularly sustainable hydrocarbons, such as advanced biofuels and synthetic e-fuels – offer a practical pathway to reduce emissions by integrating smoothly into current systems. This article examines sustainable hydrocarbons in terms of their applications, benefits and the policies required to support their role in decarbonizing key industries.

What are sustainable fuels, and where do they come from?

Sustainable fuels are designed to reduce greenhouse gas emissions over their lifecycle. Sustainable hydrocarbons are a key subset of sustainable fuels; they include biofuels from biological sources, and synthetic fuels produced through power-to-liquid (PtL) processes. PtL involves using electricity (from renewable sources) to product liquid fuels, such as hydrogen or its derivatives. Sustainable hydrocarbons are especially suited for high-energy-demand applications, such as aviation and heavy transport, where compatibility with existing infrastructure is essential.

Biofuels by generation

• First-generation biofuels, normally used in blends, include:
  • Bioethanol: Produced by fermenting sugar- or starch-rich crops, used in gasoline blends for light-duty vehicles.
  • Biodiesel: Derived from vegetable oils or animal fats, suitable for diesel engines.

First-generation biofuels are widely applied but pose sustainability challenges due to land and water use, deforestation and competition with food production. They are viable in regions with extensive agricultural resources, but sustainable practices and regulatory frameworks are essential to address environmental impacts and indirect emissions.4 

• Second-generation biofuels: These biofuels use non-food sources such as agricultural residues and waste oils, which improves their sustainability profile. Examples include:
  • Advanced bioethanol: Produced from lignocellulosic materials (i.e. plant dry matter).
  • Hydrotreated vegetable oil (HVO): A drop-in diesel substitute produced by hydrogenating vegetable oils or fats.
  • HEFA-SAF (hydroprocessed esters and fatty acids for sustainable aviation fuel): A drop-in jet fuel substitute designed for aviation, made from waste oils and fats.

• Third-generation biofuels: Using fast-growing organisms, like microalgae and engineered microorganisms, these advanced biofuels don’t compete with food production and are efficient in CO₂ fixation.5 This means they capture and convert atmospheric CO₂ into organic compounds through biological processes like photosynthesis, effectively integrating the carbon into their biomass. The production process is costly and energy-intensive, but there is ongoing research to move these biofuels closer to viable, scalable and sustainable options.6

Advanced sustainable fuels

In addition to biofuels, other types of sustainable fuels offer advantages in specific applications:

E-fuels: These synthetic fuels are drop-in technologies produced through PtL processes using captured CO₂ and green hydrogen. E-fuels include:

• E-diesel: Designed for heavy-duty transport applications, such as trucks and industrial machinery.
• E-gasoline: Intended for use in light vehicles, including cars and motorcycles.
• E-SAF: An e-fuel specifically formulated for the aviation sector, compatible with current aviation infrastructure and engines.

Green ammonia: Primarily used in the marine sector, ammonia features carbon-free combustion and high energy density, making it suitable for engines and fuel cells. It is also relatively easy to store and transport, given its established production infrastructure and moderate-pressure liquefaction.78 There are challenges, however: ammonia’s high ignition temperature and low flame speed complicate stable combustion, and incomplete combustion can produce nitrogen oxides (NOₓ), requiring emissions control.9 Additionally, ammonia’s toxicity demands careful handling. While it holds significant potential for clean energy, advances in combustion, emissions mitigation and safety are essential for ammonia to become a viable mainstream fuel.

Key impacts and challenges of sustainable fuels

Sustainable fuels play a crucial role in the decarbonization of hard-to-abate sectors like aviation, shipping and heavy industry. These fuels can reduce emissions by 60–90% (20–70% for first-generation biofuels) through CO₂ capture in biofuel feedstocks, or through synthetic fuel production.10 As drop-in technologies, they minimize operational changes while enabling substantial emissions reductions.

In addition to emissions reductions, sustainable fuels foster local development and energy security. By decreasing dependence on imported oil, they stimulate regional economies. Policies like the European Union’s Renewable Energy Directive (RED II) and Japan’s Green Growth Strategy exemplify how mandates and incentives can support sustainable fuel production while strengthening energy resilience. Furthermore, reducing pollutants like SOx (sulfur oxides), NOx (nitrogen oxides), and particulate matter from fuel combustion improves public health, decreasing respiratory disease rates.1112

Sustainable fuel production also has significant potential for job creation and technological innovation, potentially generating millions of jobs by 2050 across feedstock production, biofuel processing and synthetic fuel development. Investments in PtL technologies in Germany, and in SAF refineries in Singapore, illustrate how advances in sustainable fuel technology can drive economic growth, helping regions transition away from fossil fuel dependence.13 In South America, Chile’s Haru Oni project, which produces e-fuels using wind energy and captured CO₂, showcases a scalable model for SAF production. Similarly, Argentina’s proposed reactivation of the San Lorenzo refinery for SAF highlights the region’s capacity to leverage existing infrastructure for sustainable aviation solutions.1415

Despite these benefits, high production costs – particularly for SAF and e-fuels – currently limit widespread adoption, though prices may decrease as the technology matures. Scaling up infrastructure, especially for fuels like green ammonia and hydrogen, will require specialized storage and distribution networks.

Scaling up sustainable fuels: A call to action

Unlocking the potential of sustainable fuels requires coordinated action from governments and industries. Effective policies, such as carbon pricing to make fossil fuels more expensive, blending mandates and financial incentives like subsidies or tax credits, are essential to make sustainable fuels economically viable. These measures, complemented by regulatory frameworks like blending requirements or emissions standards, create a comprehensive approach to fostering demand for sustainable fuels. Examples from Norway and California’s Low Carbon Fuel Standard (LCFS) show how targeted measures can drive low-carbon fuel adoption.

International collaboration, such as the harmonization of fuel standards across Asia-Pacific countries, can lower trade barriers and encourage global growth in sustainable fuels. Public–private partnerships, demonstrated by Germany’s PtL facilities and Singapore’s SAF production,16 play a pivotal role in advancing fuel infrastructure and technology. Investment in education and workforce training is equally important, equipping workers with skills in biofuel, synthetic fuel and hydrogen technologies – particularly in regions transitioning away from fossil fuels.17

As emissions reduction becomes increasingly urgent, sustainable fuels offer a viable pathway to decarbonize sectors beyond the reach of electrification and hydrogen. With the right policies, collaborations and workforce support, sustainable fuels can contribute significantly to building a resilient, low-carbon future.