Reports | Alternative Fuels: Integrating CO₂ Utilisation and Hydrogen for a Circular Carbon Economy

Alternative Fuels: Integrating CO₂ Utilisation and Hydrogen for a Circular Carbon Economy

At a glance

The UK stands at a pivotal moment in the evolution of its energy system, where the challenge of decarbonisation intersects with the opportunity for industrial transformation.

Amidst growing climate, resource and energy security pressures, alternative fuels such as synthetic fuels, hydrogen and biofuels have emerged as credible and increasingly competitive solutions for sectors where electrification is not feasible.

This report examines the role of alternative fuels, particularly those produced from biogenic CO₂ and hydrogen, in supporting the nation’s net zero ambitions and driving a more circular, resilient economy. It provides sectoral insights covering the technological readiness, economic viability and policy interventions necessary to ensure these fuels become a mainstream part of the UK’s energy mix.

Despite challenges around cost, regulation and coordination, growing policy certainty, innovation and investment are paving the way for rapid market growth. Repurposing existing infrastructure for alternative fuel production is a strategic route to accelerate the energy transition and unlock economic and environmental gains. With mature industrial hubs, expanding hydrogen and CO₂networks, and a strong research base, the UK is well placed to lead.

Four strategic actions to fully realise the UK’s alternative fuels opportunity:

Incentivise carbon utilisation over storage

Invest in integrated alternative fuels infrastructure

Accelerate innovation and reduce costs for synthetic fuels

Enhance regulatory frameworks for sustainable fuels

Incentivise carbon utilisation over storage

Invest in integrated alternative fuels infrastructure

Accelerate innovation and reduce costs for synthetic fuels

Enhance regulatory frameworks for sustainable fuels

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Summary of synthetic fuel demand per year in the maritime and aviation sectors

This opportunity is underpinned by the scale of demand and existing policy:

The demand for alternative fuels is set to increase significantly through 2050 and beyond, with the maritime and aviation sectors expected to lead the way. Government mandates and sectoral decarbonisation strategies are already shaping demand profiles — and provide a glimpse into what’s ahead.

By 2050, UK aviation and maritime could require up to six million tonnes of synthetic fuel
The UK Sustainable Aviation Fuel (SAF) Mandate sets ambitious targets: 10% of jet fuel must be sustainable by 2030, rising to 22% by 2040.
Meeting net zero will require 30–50 GW of hydrogen production capacity by 2050.
Currently, only two million tonnes of biogenic CO₂ is captured globally each year — highlighting a significant opportunity for UK leadership in scaling up CO₂-based fuel production.

With the right incentives, the UK could position itself as a global leader in clean fuel production, reducing emissions while creating high-value jobs, attracting private capital, strengthening supply chains and supporting long-term export growth.

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Recommendations

This report identifies that there is sufficient projected hydrogen production and biogenic CO₂ available within the UK to meet the aviation and maritime market demands to 2050, and pinpoints the critical steps required to unlock the potential of carbon utilisation and alternative fuel production:

1
Incentivise carbon utilisation over storage
Reform policies so that captured biogenic CO₂ is channelled into fuel production. Only two million tonnes of biogenic CO₂ are currently captured worldwide each year, highlighting the need to maximise the value of every tonne. Explore the economic, regulatory and deployment challenges.
2
Invest in integrated alternative fuels infrastructure
Accelerate deployment of new assets linking CO₂ capture, green hydrogen and fuel synthesis. Discover how the UK can unlock its infrastructure potential for alternative fuels.
3
Accelerate innovation and reduce costs for synthetic fuels
Support research and development and pilot projects to lower synthetic fuel prices, particularly in key feedstocks like green hydrogen production and carbon capture technologies. Early adoption incentives will be crucial for cost-competitive growth. Explore innovation opportunities.
4
Enhance regulatory frameworks for sustainable fuels
Ensure future mandates implemented by government actively support alternative fuels. The UK SAF Mandate and the Maritime Decarbonisation strategy are both excellent examples of successful advancements. Similar approaches need to be taken for other hard-to-abate sectors, including heavy industry and power generation. Review regulatory challenges and gain marketing insights.

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Explore Alternative Fuel Pathways

AUTHORS

Evidence-based pathways to net zero

The Alternative Fuels: Integrating CO₂ Utilisation and Hydrogen for a Circular Carbon Economy report was developed by NZTC’s team of experts, committed to advancing research, technology and infrastructure across hydrogen, alternative fuels, and carbon capture, storage and utilisation.