The International Fight over EFuels, Internal Combustion’s Would-Be Savior

eFuels promise to be a zero-carbon, drop-in alternative to gasoline and diesel. But production costs and regulatory questions need to be answered before those promises can be realized.

February 11, 2025

Jim Motavalli

Porsche invested $75 million in Chilean eFuels company HIF Global in 2022. (HIF Global)

Efuels, synthetic gasolines made from captured carbon dioxide and renewable energy (usually wind and solar power) are“ a valuable part of the solution” said Aston Martin CEO Adrian Hallmark at a press briefing in New York on January 31. He described the process of creating the fuel as “really clean,” but also cited a rather off-putting price: $31 a gallon in the U.S.

Still, Hallmark thinks eFuels could be a way for Aston to continue producing at least a few V12-powered cars in the coming electric future. Other automakers agree, but the battle over eFuels has by no means reached a cease-fire.

In 2022, Porsche invested $75 million in a Chilean company called HIF Global, which is producing eFuel at a wind power-connected plant in Patagonia. Interest in eFuel has been growing since 2023, when the German contingent began a successful push for the European Union to add an eFuel loophole into the 2035 regulations restricting ICE vehicle sales.

Europe hosts the eFuel Alliance, which counts Porsche, Mazda and Suzuki as members (with BMW a recent addition), as well as airline Lufthansa and supplier Bosch. Tobias Block, the Alliance’s chief strategy officer, told SAE Media that his group is in “close discussions” with other automakers about joining.

Block described Europe’s current rules for 2035 and eFuels as “quite a mess,” basically banning ICE vehicles that produce any tailpipe emissions, even those that are 100% powered by eFuels. But those eFuel rules remain in flux. Block said that the initial proposals were tightly restrictive, requiring eFuel to be 100% carbon neutral across the whole product cycle. Under those rules, “a 100% reduction in emissions is nearly impossible,” the Alliance’s managing director, Ralf Diemer, said in 2023.

Oliver Zipse, chairman of BMW’s board of management, said last June that the EU might not be serious about allowing eFuels. “We see a significant risk of eFuels being politically instrumentalized in the debate about the ban on combustion engines from 2035,” he said.

“There are currently many indications that the EU Commission is striving for a bogus solution in which the ban on combustion engines is relaxed simply by ostensibly opening up to eFuels. However, if it then does nothing to accelerate the ramp-up of low-CO2 fuels and make their use practicable, this would be a deliberate ban on combustion engines through the back door. We continue to believe that a categorical ban on combustion technology is wrong.”

A categorical ban is just what some environmentalists are after. The group Transport & Environment, based in Brussels, said that allowing eFuel cars would permit them to “still emit around five times more CO2 emissions than equivalent EV models. Additionally, e-petrol cars emit air pollutants, including toxic nitrogen oxides (NOx) and carcinogenic particles…. Efuel cars should not be designated as zero-emission for the purposes of regulatory compliance given they still emit toxic air pollutants.” Block said T&E’s goal is to get all ICE vehicles off the road. “They’re quite effective with lobbyists in Brussels,” he said.

Similarly, Greenpeace described eFuels as “incredibly dirty and extremely expensive” in a recent report. It said “fossil fuel producers like Repsol and ExxonMobil have an interest in keeping fossil fuels on life-support, as do carmakers like Audi, Porsche and Ferrari. They are trying to hold on to the internal-combustion engine and postpone the transition to electric vehicles by promoting synth-fuels.”

Efuels still have a very low profile in the U.S., despite firms like HIF Global building a plant in Texas. Texas Governor Greg Abbott described the forthcoming $6 billion Matagorda plant as “an excellent addition to the Texas economic juggernaut” in 2022. The plant will create 4,000 construction jobs (with 140 full-time positions) and produce 200 million gallons of eFuel annually (enough for 400,000 vehicles) when it is at full capacity in 2027.

Of course, U.S. politics matter, too. Block described President Biden’s Inflation Reduction Act (IRA) as a “Christmas gift” for eFuels, providing subsidies for CO2 reduction and making plants like Matagorda economically feasible. But President Trump has vowed to dismantle the IRA and other green car subsidies, such as the $7,500 income tax credit for EVs.

A dramatically increased volume of eFuel production is necessary to bring down the current high price, which is based on limited production at pilot plants such as HIF Global’s operation in Patagonia, Block said. “We need to see mass production and economies of scale,” he added. “It can’t be one windmill and one small plant.” The Alliance thinks that if eFuels get into high gear, a $7-a-gallon diesel equivalent could be achievable in Europe by 2030.

Porsche, in a report, recognized 430 eFuel projects around the world, representing investments of 90 billion euros by 2030, based on public announcements. China is the current market leader. And many of the new players are focusing on green methanol (with current maritime applications) in addition to a gasoline equivalent, including Matagorda. Block said many of those projects will end before they begin if the EU’s eFuel regulation goes the wrong way.

Some eFuel companies, such as U.S.-based Twelve, with an announced $645 million in funding, are focusing on jet engine solutions. Twelve says its E-Jet, produced in Washington State, is “is a drop-in sustainable aviation eFuel made from CO2 and renewable energy, with up to 90% lower emissions compared to traditional jet fuel. Its production uses 1,000 times less water and 30 times less land than biofuels.” The company has also promoted maritime uses and a diesel substitute. Some opponents of eFuel in wheeled vehicles think it makes sense for aviation and shipping, where batteries aren’t practical.

The Alliance also sees eFuels and electric powertrains existing together. A 2024 report from a working group joined by VW, BMW, Bosch and others describes eFuels as “a complement to battery electric and hydrogen-powered vehicles with the potential of accelerating the decarbonization of road transport.” Block doesn’t envision the U.S.’s nearly 200,000 gas stations all offering eFuels, but instead a smaller number of stations that supply perhaps 20% of the fleet, with the rest going electric.

“We have 1.4 billion cars and trucks with internal-combustion engines on the world’s roads, and these legacy vehicles need a solution,” Block said. BMW added, in a statement, “Especially when it comes to reducing CO2 emissions of the existing fleet, climate-neutral fuels can play an important role in decarbonizing transport.”

Porsche said something similar in a statement to SAE Media: “The e-fuels project is important to us in terms of the double-e-strategy: electromobility and complimentary e-fuels to provide a more CO2-reduced solution for the more than 1.4 billion existing vehicles with combustion engines worldwide than they currently have with conventional fuel.”

“Efuels are a really interesting solution that offer a number of advantages and some downsides,” said Sam Abuelsamid, vice president for market research at Telemetry. “On the plus side, it’s a drop-in replacement for fossil fuels, which means it can use existing distribution infrastructure. And existing vehicles, especially classic cars, can keep running. It has all of the technical advantages of liquid fuels, such as high energy density and the ability to avoid the cost of batteries. For low-volume brands like Aston Martin, Ferrari and even Porsche, it allows them to avoid a huge investment in electrification.”

The downside? A high cost in both dollars and power. “Producing eFuel requires the production of hydrogen as an intermediate feedstock,” Abuelsamid said. “While this can certainly be done with renewables, it remains unclear if the total net energy use and emissions are a positive rather than just using the electricity directly to charge a battery. There’s also the question of whether burning any sort of hydrocarbon, even if it is produced as an eFuel from direct air extraction, will actually reduce the amount of greenhouse gasses we put into the atmosphere.”

In the interim period, eFuel has seen some limited use in European racing. Porsche’s Mobil 1 Supercup, with up to 32 cars in 2024, used eFuels exclusively.“We are currently the exclusive off-taker of the e-fuel from the pilot plant, which is used in lighthouse projects such as the Mobil 1 Supercup and test drives with classic cars at highlight events (including the Goodwood Festival of Speed) to demonstrate that the use of e-fuels require no changes in existing combustion engines and the existing infrastructure,” Porsche said.

There’s a practical side to eFuels for classic car owners, who see a way to keep their vehicles on the road. Rob Sass, the editor of the Porsche Club of America’s Panorama magazine, said he envisions a $10- to $12-a-gallon fuel that the owner of a 1967 Porsche 911S can use on weekend jaunts in, say, 2040. “It will be a boutique fuel to continue operating our cars,” he said. “Without that, they’ll be behind velvet ropes in a museum.”