Synthetic fuels Synthetic fuels offer large long-term scale-up potential where low-cost clean electricity is abundant and alternative high-value uses of electricity are limited, but the technology and wider supply chain is less mature. Electrolyser technology is advancing, but full systems for fuel production remain in early commercialization. Scalability depends on access to reliable biogenic CO2 from high-concentration sources. Direct air capture (DAC) technology can provide a feedstock of high-purity CO2 with the flexibility to decouple the emission source from the point of capture. Currently, while first-of-a-kind DAC projects have a high cost and limited track record, technology improvements and deployment at scale are expected to drive cost reductions in subsequent projects. Emerging interest in naturally occurring geologic hydrogen could complement synthetic fuel pathways by providing a potentially low-cost, low-emission hydrogen source if scalable extraction proves viable.40 Infrastructure readiness varies by fuel type; for instance, e-ammonia and e-methanol require engine modifications for use, whereas e-methane, e-SAF and e-diesel have the advantage of (post- production) compatibility with existing infrastructure, such as engines, pipelines and storage.Low-carbon fossil fuels Other lower-carbon fossil fuel options, such as fossil fuels combined with carbon capture, can help reduce emissions in transition. The core technologies are relatively mature, but scalability depends on reliable CO2 transport and storage systems, sustained high capture rates and rigorous methane management in gas supply chains. These solutions can deliver near-term emission reductions, often at more limited cost – for example, low-carbon aviation fuel is estimated to deliver around 6-13% emissions reduction versus conventional jet fuel, by implementing practices such as emission management and carbon capture at refineries and use of lower-carbon electricity and hydrogen.41 Similarly, carbon capture integrated with fossil fuel extraction by injecting captured CO2 into mature oil and gas reservoirs, where the injected CO2 becomes securely stored, can create potential for emission reductions and in some cases exceed the emissions associated with the fossil fuel, depending on storage efficiency and lifecycle emissions.42 The relatively high willingness to pay for such solutions based on higher yields from existing reservoirs can support early CCS scale-up opportunities around important emission clusters. Competitiveness Clean fuels are typically more expensive than fossil equivalents due to capital intensity, feedstock and logistics expenses, market risks and technology immaturity. Costs vary significantly across technology pathways, feedstocks and regions. Mature biofuels such as corn ethanol, biodiesel and HVO renewable diesel are currently the most economically viable, with potential for cost parity with fossil fuel alternatives in certain regions and with optimal production set-up (see Figure 8). Today, production costs for new HVO plants range from $20-40/GJ,43,44 versus $17-25/GJ for diesel equivalents.45 Feedstock limits and more mature technologies restrict opportunities to lower costs further. In some markets, however, costs and ultimately prices can come down by reducing feedstock bottlenecks. For example, for certified used cooking oil (UCO) or tallow, a significant share of profits is captured at the feedstock stage. Vertically integrated refineries that source these feedstocks internally benefit from lower production costs by avoiding the full market margin on feedstock purchases and, as a result, can potentially capture a larger share of overall value when selling the final fuel. Emerging pathways, such as advanced biofuels and synthetic e-fuels, are significantly more expensive (see Figure 9). Costs will come down with scale, increased process efficiency and standardization, lower financing costs and more competitive markets. Yet in most cases, due to inherently higher operating expenses, their costs are estimated to remain higher than fossil fuels in most situations, in the near to medium term. Policy incentives that capture both positive and negative societal impacts are needed to allow cleaner fuels to compete effectively based on their abatement profile. Refineries rarely produce a single product;46 processes such as HEFA yield a mix of fuel types, with ratios shaped by plant design, feedstocks and market choices. Businesses must balance production costs with maximizing the yield of the highest value products, considering the full product slate rather than a single fuel. Optimizing for the most profitable mix is key to viable and scalable clean fuel projects and can make even more expensive fuels relevant to support a profitable business case. Blending strategies – physical mixing or virtual blending through credits – are critical to drive early market adoption and emissions reductions, while mitigating the impact on consumer energy prices. Ensuring competitive energy costs over time also requires well-designed policy incentives that balance supply and demand, preventing bottlenecks and price volatility. Fuelling the Future: How Business, Finance and Policy can Accelerate the Clean Fuels Market 16

Fuelling the Future 2026