Low-Emission Fuel Supply

Liquid and gaseous biofuels are largely compatible with existing fossil fuel-based transport infrastructure and end-use technologies. These fuels cover 7% of final energy demand by 2030 in the Net Zero Scenario (compared with 1% in 2021). But, with a share of 15% in the final energy demand of the transport sector, biofuels are particularly important for decarbonising long-distance transport modes. Low-emission hydrogen attracts much attention, but with a share of around 1% in total final energy consumption, it plays a limited role by 2030. Still, scaling up the production of low-emission hydrogen, developing the necessary transport and storage infrastructure and readying the end-use technologies will be critical over the coming years to ensure that hydrogen can contribute to emission reductions after 2030.

Low-emission fuels can also be grouped into gaseous fuels (biogases, hydrogen and synthetic methane) and liquid fuels (liquid biofuels, ammonia and synthetic liquid hydrocarbon fuels). The supply of gaseous fuels is dominated today by natural gas, accounting for 99% of the gas consumed in end-use sectors in 2021. 

By 2030 in the Net Zero Scenario, low-emission gases meet 15% of global final gas demand, with 60% being biogases and 40% hydrogen.

Low-emission fuels met almost 3% of liquid fuel demand in end-use sectors in 2021, entirely in the form of liquid biofuels. By 2030 in the Net Zero Scenario, low-emission fuels meet 12% of global liquid fuel demand. Low-emission liquid fuels meet 18% of the energy needed in road transport, 15% in shipping and 7% in aviation by 2030. Biofuels continue to dominate low-emission liquid fuel supply by 2030, with a share of 95%. Still, it will be critical to develop the supply chains and infrastructure for hydrogen-derived liquid fuels (ammonia and synthetic kerosene), which will be critical for decarbonising long-distance transport after 2030 and reducing the pressure on sustainable bioenergy supplies.

Low-emission fuels will be needed to decarbonise parts of the energy system where direct electrification is more difficult or more expensive, such as elements of heavy industry and long-distance transport. Many countries have developed or are working on policy frameworks to support the production and use of low-emission fuels. Around 109 countries have policies in place to support biofuels. For hydrogen, 25 countries and the European Union have adopted hydrogen strategies and roadmaps, with several other countries in the process of preparing their strategies.

Global investment in low-emission fuels experienced strong growth in 2021, reaching USD 16 billion. A large part of this investment was in liquid biofuels (USD 8 billion) and biogases (USD 7 billion). Investment in hydrogen is much lower, but growing rapidly. For example, a fourfold increase was observed in investment in electrolysers in 2021 compared with 2020, reaching USD 0.2 billion.

The development of standards and certification schemes ensuring a sustainable supply chain will be critical for scaling up the production of both biofuels and hydrogen, while avoiding potentially harmful environmental, economic and social impacts. The development of international markets and trade in these fuels will also depend on internationally agreed methods and certification processes to guarantee the sustainability of traded fuels.

With the use of low-emission fuels still in most cases being more expensive than unabated fossil fuels, policy measures will be needed to close this cost gap and support the use of low-emission fuels. Policy instruments can include: penalties for unabated fossil fuels, such as CO₂ prices; quotas and standards for low-emission fuels in different sectors; and incentives to reduce the cost of low-emission fuels or end-use technologies using these fuels. Such policy instruments need to be complemented by regulatory frameworks ensuring that the fuels are being sustainably produced.