The Auto Sector’s Side Bet |
Hello. It’s River Davis in Toyko here with you this Tuesday.
Imagine there’s a virtually carbon-neutral version of gasoline. You could keep running your old gas guzzler for years more, top it up at a regular filling station and still enjoy a climate-friendlier drive.
Even as an electric future is assured for most mainstream transport, several of the world’s leading auto giants and Big Oil are working on plans to extend the lives of combustion engine vehicles and aircraft.
Toyota and Audi are among the carmakers exploring the potential of e-fuels, or synthetic fuels, while Porsche and energy giant Exxon Mobil plan to start some production as soon as next year. Japan, meanwhile, is working to establish large-scale manufacturing technologies by the end of the decade and to deliver synthetic fuels in commercial volumes by 2040.
Toyota’s President Akio Toyoda is among the most vocal advocates for the fuels. As chairman of the Japan Automobile Manufacturers Association, he frequently argues the nation’s goal of a carbon-neutral transport sector by 2050 can’t be achieved simply by banning sales of new gasoline-powered cars.
E-fuels could be deployed to curb emissions from existing ICE vehicles, which will continue to be in circulation for decades, he says. That’s a logic that could hold true in other markets like the U.K., Germany and Canada, which are among the dozen or so countries that have set deadlines to phase out sales of new combustion engine models.
A diesel engine in Stuttgart, Germany.
Photographer: Krisztian Bocsi/Bloomberg
Harder-to-electrify segments of the transport sector like planes, ships and large commercial vehicles also could be served by the synthetic products. A February flight from Amsterdam to Madrid operated by Air France-KLM’s Dutch arm was the first to use so-called sustainably derived synthetic aviation fuel, according to the airline.
E-fuel is made when electricity is used to split water into hydrogen and oxygen. That hydrogen is then combined with carbon dioxide and converted into a liquid product that’s similar to petrol or diesel and yet essentially emissions free. One key drawback is the process is hugely expensive. E-fuels today cost about $5.28 per liter, according to a study by German energy agency Dena. That’s about five times the cost of a liter of gas in the U.S.
Companies including Siemens Energy, Mazda and Robert Bosch are among those backing further development of synthetic fuels and seeking support from governments and regulators. Most current work is centered on pilot projects or prototypes, according to industry group eFuel Alliance.
Investments are being made to bring costs down, and developers will benefit from refinements in technology for green hydrogen — produced using a similar process — and advances by the carbon-capture industry. Japan is aiming to make synthetic fuels as cheap as, or cheaper than, gasoline by mid-century.
Cutting the price of a climate-friendly gasoline is one challenge. Securing long-term demand in a world that’s turning away from fossil fuel-powered transport may prove harder.
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