Alternative Fuels: Integrating CO₂ Utilisation and Hydrogen for a Circular Carbon Economy
Overcoming barriers to alternative fuel deployment
Despite growing momentum around synthetic and low-carbon fuels, significant deployment barriers remain. These challenges are especially pronounced in the use of biogenic CO₂ and hydrogen – two essential components in synthetic fuel production. From high capture and conversion costs to infrastructure gaps and fragmented regulations, the road to commercial viability is far from straightforward.
The following challenges must be addressed to support scalable, cost-effective fuel alternatives.
Economic and technical challenges of biogenic CO₂ utilisation
Biogenic CO₂ from sources like anaerobic digestion, fermentation, or biomass power—forms a vital input to sustainable fuels. Yet, commercial-scale utilisation faces significant obstacles.
High capture costs and purity requirements
CO₂ capture remains expensive, with high capital and operating costs, especially for low-concentration and impure sources. Additional conditioning to meet purity specs for transport or commercial use makes costs rise further.
However, high-purity CO₂ streams from biogenic sources (such as biomethane or ethanol production) are more economical, with capture costs sometimes dropping below €50/tonne—compared to €50–100/tonne for other low-concentration sources.
Logistical and infrastructure limitations
Even when cost-effective capture is possible, transport and integration into fuel value chains is a major hurdle. Emitters outside CO₂ clusters face particular difficulty connecting to end users. As demand grows and sources become more scattered, lack of pipeline and renewable energy access will further constrain markets.
Regulatory and policy barriers to biogenic CO₂ deployment
The existing policy landscape for CO₂ is fragmented, and most frameworks still focus on fossil-based emissions. Programmes and carbon markets continue to favour permanent geological storage of CO₂—which is “carbon negative”—over utilisation for fuels, which is currently only “carbon neutral.”
Incentives favour storage over utilisation
Captured CO₂ can either be used in synthetic fuel production or permanently stored underground. Current policies and business models often favor storage, which results in a carbon-negative outcome. Utilisation, which re-emits CO₂ during fuel combustion, is often seen as less attractive.
As a result, many biogenic CO₂ projects remain undecided on their path forward, waiting for more clarity in carbon markets and regulatory support. Without clear incentives and standards for CO₂ utilisation, a significant portion of available biogenic CO₂ may be lost to storage or left unused.
The regulatory landscape is highlighted by an assessment of the 192 global biogenic CO2 projects identified in the below graph.
The data shows that out of the active and potential projects there is an even split between those which have assigned captured CO2 to either storage or utilisation but there are a significant number that are undecided.
Hydrogen: A critical bottleneck for synthetic fuels
Hydrogen is a key feedstock for many synthetic fuels. However, the production and deployment of low-carbon hydrogen face serious economic and technical barriers.
High costs
Electrolysis — the main method for producing green hydrogen from renewables — has gained momentum, with 1.4 GW of global capacity by the end of 2023 and 20 GW in final investment decisions. Despite this, production remains expensive and highly dependent on the availability of affordable, reliable renewable energy.
Performance challenges in renewable-based electrolysis
Electrolysers suffer performance degradation under intermittent renewable power, especially from solar and wind. Issues such as reduced efficiency and durability lead to higher costs and longer payback periods, discouraging large-scale investment.
Infrastructure and material compatibility issues
The availability and suitability of infrastructure for alternative fuels is a critical deployment factor.
Existing infrastructure gaps
Some fuels, like methanol, benefit from existing port infrastructure and are being actively supported by major ports and EU-backed initiatives. Others, like hydrogen, face major compatibility issues. Hydrogen causes embrittlement in steel pipelines and storage systems, requiring costly upgrades and safety measures.
Repurposing challenges
Repurposing existing assets for new fuel types is not always viable. Many older systems may have pre-existing wear, corrosion or material limitations. Comprehensive technical and economic feasibility studies are needed before any asset can be safely converted for alternative fuel use.
Discover the demand, opportunities and strategic recommendations that will position the UK as a global leader in alternative fuels.
Related
Subscribe for the latest updates