E-fuels are central to Europe’s maritime decarbonisation strategy
Commercial shipping is among the hardest sectors to decarbonise, despite being a critical pillar of the global economy. With the introduction of the FuelEU Maritime Regulation and the extension of the EU Emissions Trading System (EU ETS) to shipping, the European Union has established a clear pathway for reducing emissions from vessels calling at European ports. The strategy is built around e-fuels, renewable fuels of non-biological origin (RFNBOs), together with green hydrogen produced through renewable-powered electrolysis. Turning that vision into reality, however, remains a major challenge.
According to the latest analysis by Transport & Environment’s Shipping E-Fuels Observatory, a significant gap separates Europe’s political ambitions from current market developments. T&E assessed 69 European green hydrogen and e-fuels projects that could supply the maritime sector, representing a potential production capacity of around 4.09 million tonnes of oil equivalent by 2033, equal to approximately 14% of Europe’s projected maritime fuel demand. Yet only six projects are currently operational, with Spain leading the way, followed by Denmark, Finland and France, highlighting the difficulties Europe faces in bringing large-scale projects online.
Investment remains the biggest obstacle for e-fuels
T&E’s assessment presents a mixed picture. If every announced European project were completed on schedule, e-fuels could meet almost 4% of the European maritime sector’s energy demand by 2030.
The challenge lies in project financing. At present, projects that have secured both funding and a final investment decision (FID) account for only 0.24% of expected maritime energy demand. Most announced developments therefore remain at the feasibility stage or have yet to move beyond initial announcements.
Why e-fuels are essential for long-distance shipping
Unlike passenger cars, heavy-duty trucks or short-sea ferries, large ocean-going container vessels cannot realistically rely on battery-electric propulsion. The weight and volume of battery systems would significantly reduce cargo capacity and operational efficiency.
E-fuels offer the potential to reduce lifecycle greenhouse gas emissions by more than 70% compared with conventional fossil fuels, while allowing ships to operate over long distances using energy-dense liquid fuels.
Producing e-fuels and green hydrogen, however, requires vast amounts of renewable electricity together with large-scale electrolysis infrastructure, making them substantially more expensive than conventional marine fuels.
China is scaling up faster than Europe
China is also moving rapidly in this emerging market. T&E identified three operational projects in China, which together produce ten times more than Europe’s currently operating facilities.
This ability to scale production more quickly could allow China to gain a significant competitive advantage. Without stronger European investment, Chinese production could increasingly dominate future supplies to the European market.
“While Europe hesitates, China is actively developing e-fuels. If Europe wants to become a leading producer of e-fuels, it must close the price gap between EU-produced e-fuels and fossil fuels, while encouraging shipping companies to adopt these fuels instead of relying on LNG or imported biofuels,” said Constance Dijkstra, Shipping Policy Manager at Transport & Environment.
Within Europe, Spain is emerging as the leading producer, with planned output reaching 2.5 million tonnes annually. The country’s Green Hydrogen Valley project in Andalusia, which reached its final investment decision (FID) in February, alone is expected to produce 474,000 tonnes of oil equivalent of e-ammonia and e-methanol each year.
T&E calls for stronger policy support
To avoid a shortage of clean maritime fuels from 2030 onwards, Transport & Environment is urging both European and national policymakers to take additional action.
The organisation’s main recommendation is to reinvest revenues generated through maritime emissions pricing into financial support schemes that bridge the still considerable cost difference between fossil fuels and sustainable e-fuels. Such measures would provide greater certainty for investors and help accelerate commercial deployment.
T&E also calls for a regulatory requirement obliging European coastal countries to ensure that at least 1.2% of the fuels supplied in their ports consist of e-fuels by 2030.
Finally, the organisation argues that investors need greater certainty over the EU’s long-term decarbonisation trajectory. Clear emissions reduction targets for 2040 and 2050 would provide the confidence needed to unlock large-scale investment across the sector.