EU REFINING INDUSTRY PROPOSES A POTENTIAL PATHWAY TO CLIMATE NEUTRALITY BY 2050

2nd Generation biofuels, Advanced biofuels (such as algae), Waste, Solar, Wind Table of contents

EU refining industry proposes a potential pathway 4 to climate neutrality by 2050.

By 2050, at the latest, every litre of fuel for transport could be net climate neutral, enabling so the decarbonisation of aviation, maritime 6 and road transport.

To meet the 2050 climate-neutrality goal, we believe Europe and its consumers need a plan where low-carbon liquid fuels and electrification/ 8 hydrogen in road transport sit side by side.

Our proposed pathway is ambitious. The good news is our transformation 10 has already begun.

12 Policy principles

14 Annexe - EU : a story of transformation

Copyright © FuelsEurope 2020, editor John Cooper Photo credits iStock: radebg , borchee, ChiccoDodiFC, panaramka, greenleaf123, NYC Stock Photo. Design by purebrand.be EU refining industry proposes Clean fuels for all a potential pathway to climate neutrality by 2050.

The ambition of the European Union is to Our LCLF pathway shows how a 100 Mt CO2/y be climate neutral by 2050. The European reduction could be delivered in transport by

refining industry supports the same ambition. 2035, equivalent to the CO2 savings of 50 million Battery Electric Vehicles (BEVs) on the road, Our industry is transforming, and we have and how it could contribute to EU’s climate developed a comprehensive potential pathway1 neutrality by 2050. of how we, together with our partners, can contribute to meeting the 2050 climate LCLF will play a critical role in the energy tran- neutrality challenge. sition and in achieving carbon neutrality in all transport modes, as the global demand for In concrete terms, based on the current competitive liquid fuels is expected to progres- technology knowledge and cost estimate, we sively increase. Alongside electrification and outline a potential pathway to 2050 to develop hydrogen technologies, LCLF will remain es- low-carbon liquid fuels (LCLF)2 for road, sential even beyond 2050, bringing important maritime and air transport. To deliver such benefits to the European economy and society. pathway an investment estimated between €400 to €650 billion will be needed. Major We stand ready to enhance our collaboration investments, in addition to those already with policymakers, our value chains and deployed, could start in the next years, with other partners to create the right conditions first-of-a-kind plants at industrial scale and policy framework for investments in new potentially coming into operation at the latest technologies to address the climate challenge. by 2025.

1 This pathway is based on the Commission Clean Planet for All 1.5 Tech scenario. 2 Low-carbon liquid fuels are sustainable liquid fuels from non-

origin, with no or very limited net CO2 emissions during their production and use compared to fossil-based fuels.

SOLAR: Low-carbon liquid fuels made from solar renewable energy are sustainable liquid fuels with no or very limited net CO2 emissions during their production and use compared to fossil-based fuels.

4 5 By 2050, at the latest, every litre of Outlined below is the pathway to enable by plants that could produce up to 30 MToe/y in 2050 all new and old road transport vehicles, 2030, with the first-of-a-kind biomass-to- including hybrid or ICE, to be climate neutral, liquid and e-fuel plants coming into operation liquid fuel for transport could be and aviation and maritime transport to no later than 2025. achieve 50% GHG emissions reductions. net climate neutral, enabling so the By 2050, availability of 150 Mtoe of LCLF would

Based on the work of our industry to date, cut over 400 Mt CO2/y. Add Carbon Capture & decarbonisation of aviation, maritime we are ready to hit the ground running. This Storage (CCS) and the capture of emissions in pathway will require an estimated €30 to €40 biofuel production, and, in combination with and road transport. billion investment over the next ten years and electrification and hydrogen technologies, road the creation of a number of biofuel and e-fuel transport reaches climate neutrality.

In concrete terms, our potential pathway includes:

EU refining industry 2050 potential scenario AVIATION & ROAD MARITIME TRANSPORT (% GHG red. vs 100% fossil) TRANSPORT

-100 Mt -50% -100% CO2/ year REDUCTION CO EMISSIONS CO EMISSIONS

2020 2030 2035 2050 2031 2033 2037 2039 2041 2043 2045 2047 2049

Up to 30 Mtoe Total volume LCF Investment Cumulative Up to 150 Mtoe 30 to 40 B€ Billion € (Transport) Total investment B€ 400 to 650 B€

700 14 Mtoe 15 Mtoe Biofuels 0 B€ INCREASING UTILIZATION RATE 600 1st generation 15 Mtoe 500 5 Mtoe 10 Mtoe Hydrotreated 2.5 to 3 B€ 400 Vegetable Oils Up to 10 Mtoe

4 Mtoe 300 Lignocellulosic 25 B€ residues + waste Up to 4 Mtoe 200

1 Mtoe 100 efuels 3.3 B€ Up to 1 Mtoe 0

Lignocellulosic Refining 6 to 7 B€ HVO Estimated share * Installed CCS plants capturing emissions from CCS, Clean H 2 efuels of production levels renewable fuels processes would add negative emissions, which will allow to reach ~net zero CCS and Clean H2 emissions.

6 7 To meet the 2050 climate-neutrality Clean fuels for all goal, we believe Europe and its consumers need a plan where low- carbon liquid fuels and electrification/ hydrogen in road transport sit side by side.

LCLF will smooth the deployment cost of LCLF will provide strategic security of supply, electric energy distribution and fast charging with typically 90 days of energy supply stored infrastructure in road transport, by providing within European facilities, since these fuels flexibility and alternative sources of low- can be stored in exactly the same manner as carbon energy using mainly existing facilities. fossil fuels.

They will reduce the pressure and cost of Once the lead market of road transport achieving complete fleet turnover to ensure has spearheaded the development and climate neutrality, also supporting a just deployment of low-carbon technologies, the transition across Europe. new fuels will be available for the progressive decarbonisation of aviation and shipping, LCLF will give customers a choice between enabling the groundwork for cutting up to 50%

low-carbon technologies, ensuring that carbon of CO2 emissions in aviation and maritime fuels neutrality is accessible to all, as LCLF will, by 2050. for the foreseeable future, provide a low-cost compared to the alternatives. Importantly, our pathway will also help maintain European industrial strength and jobs EU citizens demand more options in the in the automotive sector. We see our future transition to carbon neutral mobility, a in a transformation of our manufacturing 2019 survey with responses from 10,000 processes that will create European leadership European citizens has shown, and call on their in critical low-carbon technologies that will be governments to support the development of exported around the world. Essential industrial multiple clean vehicle technologies. including green and blue hydrogen and CCS can also be advanced and scaled up for the benefit of many other industries.

WIND: Low-carbon liquid fuels made from wind renewable energy are sustainable liquid fuels with no or very limited net CO2 emissions during their production and use compared to fossil-based fuels.

8 9 Our proposed pathway is ambitious. Clean fuels for all

The good news is our transformation A combination of critical technologies must 2. Support mechanisms for investors, both be deployed in many plants across Europe to in terms of access to public and private has already begun. deliver LCLF at scale. funds, and of favourable fiscal treatment, as well as very low or zero taxation for These include sustainable 1st Generation low-carbon fuels, to facilitate fuel pricing biofuels, advanced biofuels, biomass-to- that is both socially acceptable and able liquid, hydrogenation of vegetable oils/waste & to make a business case for investments.

residues, and e-fuels, to replace fossil CO2 by This also implies that the EU taxonomy

biogenic or recycled CO2, as well as CCS and for sustainable activities must fully green hydrogen applied in refineries, to reduce recognise the strategic importance of the the carbon footprint of fuels manufacturing. transformation of the refining industry.

The EU refining industry is already engaged 3. The mitigation of investor risk in a low-carbon transition. We are uniquely through robust, stable, science-based positioned to keep driving the development of sustainability criteria for all feedstock and these technologies, but we will not be able to processes, as well as ensuring the stability achieve this alone. of the regulations impacting feedstock availability, demand of LCLF, and capital Realistically, the success of our journey and operating costs. will also depend on investor confidence and political vision and engagement. Notably, Meanwhile, we are in close dialogue with with a view to building the necessary market multiple industries to build the necessary demand and start rolling out our investments value chains and assets. in the next years, we call on EU policymakers to launch a high-level dialogue in 2020 with a view Agriculture, chemicals, forestry, waste to creating a policy framework that enables: and recycling, including many SMEs, will participate in these value chains. Academia, 1. The creation of a market for LCLF, providing car and truck industries, aviation and an incentive to fuels with a lower carbon maritime, and customer groups will all have a footprint with respect to conventional role in developing the markets with the right

ones. The CO2 standards in vehicles would definitions and parameters. Civil society at

need to factor-in the actual CO2 benefits large will have to be engaged through an open, provided by LCLF compared to fossil fuels. transparent and fact-based dialogue.

With low-carbon liquid fuels, European refiners are ready to contribute to climate-neutral transport. WASTE: Low-carbon liquid fuels made from waste are sustainable liquid fuels with no or very limited net CO2 emissions during their production and use compared to fossil-based fuels.

10 11 Policy principles Clean fuels for all The EU refining industry stands ready to step potential to provide climate-neutral up collaboration with other industries and with mobility with Internal Combustion EU policymakers, to take bold climate action Engine (ICE)-based vehicle platforms; together. In order to deliver climate neutral transport by 2050, we urge EU policymakers 2. Consumers to access a more accurate

to establish a high-level dialogue in 2020 representation of the CO2 intensity of with all concerned stakeholders to create the their mobility choices. necessary policy framework. The following key policy principles are central to delivering • All overlapping fuel policies should be our 2050 climate –neutral ambition and should reformed or simplified, such as Fuel serve as a starting point for discussion: Quality Directive (FQD) which regulates the GHG intensity of fuels brought into • The creation of a market for low-carbon the market, and the Renewable Energy fuels, with a significant carbon-price signal, Directive (RED) which mandates a share of is a prerequisite to unlock investments in renewable content in transport fuels. low-carbon technologies and fuels. In road transport, this could be achieved through: • Fuel taxation should be revised by accounting for the carbon-intensity, to 1. Either a dedicated cap and trade incentivise investments in advanced mechanism on emissions from road renewable fuels. Zero or very low tax for

fuels, with biogenic and recycled CO2 low- carbon fuels would achieve the double counting as zero, with the fuel supplier objective of keeping fuel prices socially as obligated party; acceptable and making a business case for investments. 2. Or a Well-to-Wheel (WTW) carbon intensity standard for fuels, with the • Investors should be put in the best fuel suppliers as obligated party and conditions to risk their capital, by: the possibility to trade credits between them. 1. Ensuring regulatory stability for the economic life-time of their investment.

• The CO2 standards in vehicles must be This can be achieved by adopting amended, whereby the actual Tank-to- robust, science-based sustainability Wheel (TTW) approach currently in place criteria for feedstocks and processes is corrected by taking into account the in the first place. When, however,

CO2 footprint of fuels. The responsibility new regulations come into force, of Original Equipment Manufacturers investments already in place must be (OEMs) and of fuel suppliers should protected from detrimental effects remain separate on the respective targets through grandfathering measures. (in particular, OEMs will retain a TTW

BIOMASS: Low-carbon liquid fuels made from biomass are sustainable liquid target), but the overall CO2 reduction in 2. Protecting the investments from fuels with no or very limited net CO2 emissions during their production and use road transport should be a combination of carbon-leakage, resulting from compared to fossil-based fuels. the two. This is essential in that it would competition with less regulated non- enable: EU industry.

1. The technology strategy of the European 3. Allowing access to public and private automotive industry to benefit from the funds for climate-related investments as well as favourable fiscal treatment.

12 13 Annexe Annexe

EU Refineries: a story of transformation

The petroleum refining industry and the into a hydrocarbon mixture that can • Several refineries are engaged in projects • Another important example of the distribution network of oil products have been be used to produce second-generation aimed at using or producing so-called contribution that refineries can provide operating in Europe for well over 100 years. biodiesel and bio-jet fuel (see BioTfuel “green hydrogen”, i.e. hydrogen produced to a low-carbon society is waste heat We have continuously evolved, adapting project). from renewable electricity (see REFHYNE from refineries used for civil heating (so- to market and regulatory demands, while project and relatedly ReWest100 project, called “district heating”) (MiRO project). providing reliable and affordable energy, as 2. The Waste-to-Fuel technology is a supplying green H2 and e-kerosene for Many oil companies are also researching well as many other products and services that promising area for accomplishing Hamburg Aiport Additional projects and planning the implementation of are essential to society. one of the objectives of the circular include the H2 Nukleus by BP, Gigastack CCS systems, where CO2 emitted from economy. The industry is engaging in by Phillips66, and HyNet Consortium by industrial activities (including refineries) Early R&D examples and some cases of relevant R&D activities to contribute Essar). This provides the double advantage is collected and stored in safe and deployment show the industry’s engagement effectively to this goal (see BP/Fulcrum of lowering emissions from fuels and other permanent reservoirs (usually depleted and capabilities at different stages of the value and ReOil/R-crude projects). Similarly, refining products, while at the same time oil or gas reservoirs). Amongst those are chain: the FORGE Hydrocarbons project, allowing the storage of excess renewable the Northern Lights project (Equinor, financed by Shell, transforms waste electricity generated when supply exceeds Shell, Total), as well as the CCUS Net Zero • Companies with EU refining operations are fats and oils into renewable jet fuel, demand. One such project, established by Teeside project (Shell, Total, BP, ENI). blending biofuels into road transport fuels diesel and naphta, with a 90% lower Shell in the Port of Rotterdam, transform

according to EU regulations and internatio- CO2 footprint compared to conventional green electricity into renewable H2 to be • In product distribution, some service nal specifications. In many cases, they are fuels (see also: ENI’s bio- in used to lower the GHG footprint of fuel stations are making available a wide also currently engaged in the production or Gela, home to a waste-to-fuel plant). produced in the nearby Pernis Refinery. range of alternative fuels and energy co-processing of “drop-in” biocomponents Hence, this technology also has the to drivers. They are also using self- for blending beyond regulatory mandates. 3. There are examples of very significant potential to strengthen the EU refining generated renewable energy to make This will improve the quality and sustaina- and promising R&D projects for the industry’s leadership position in the the service stations themselves energy- bility of the fuels. Different hydrotreated development of third-generation deployment of future low-carbon solutions and carbon-neutral. These are likely to

(HVO) processes, all based on biofuels. These have superior such as PTL and H2 for mobility. increase significantly, as new products are petroleum refining know-how, have been sustainability credentials both in terms developed. developed by oil companies and technolo- of reducing GHG emissions and their • The development of alternative fuels for gy providers (Axens-IFP, Honeywell-UOP, impact on land use and ecosystems production and for distribution is also • Joint innovative business approaches in Neste, Haldor Topsoe, Eni). (see ExxonMobil/Synthetic Genomics an area of high interest for companies transport: the refinery and distribution project). operating in the downstream petroleum industries are contributing jointly, together • The next generation of advanced biofuels industry. A project to produce methanol with other stakeholders, to several is already being developed, and some 4. Conventional refineries (whose is being developed by Eni/Fiat Chrysler initiatives that could have an impact on refining companies are already involved in feedstock is crude oil) can be project. The alternative fuel is made from consumers’ lifestyles. An example is R&D projects exploring different pathways: transformed into “biorefineries” for methanol from natural gas (15 %v/v) and initiatives in urban car-sharing (see Eni the production of a different range ethanol from renewable sources, which are Enjoy project). 1. Lignocellulosic biomass (straw, forest of biofuels and other products from then blended with streams) and residues) can be transformed into biomasses. There are real examples of the deployment of a hydrogen refuelling These low-emission technologies are at biofuel in different ways. For example, potential routes that could be followed station in Germany are notable examples different readiness levels. They will generate thermochemical conversion is being (see Eni and Total projects). (see Shell/ITM Power project). demand for sustainable raw materials, explored as a process to convert increase their process efficiency, and bring biomass first into syngas and then costs down through economies of scale.

14 15 FuelsEurope, Boulevard du Souverain 165, 1160 Brussels www.fuelseurope.eu