Low-carbon fuels are essential where direct electrification is difficult, especially in aviation, shipping and the chemical industry. But they are not automatically clean, cheap or secure. Their climate benefit and supply depend on where they are produced, which electricity powers them, how and how far they are transported. Drawing on our recent research, this post explains why geography matters for LCFs, and how regional conditions shape both the economic and environmental performance of different fuel pathways.
What low-carbon fuels are, and why we need them
Direct electrification should come first in decarbonization wherever it is technically and economically feasible. It is usually more efficient to use renewable electricity directly than to convert it into hydrogen and then into liquid fuels. Yet some activities still need molecules rather than electrons: aircraft need energy-dense liquids, ships may need storable fuels for long-distance routes, and parts of the chemical industry need carbon- or hydrogen-based feedstocks.
Therefore, deep decarbonisation of hard-to-electrify sectors demands a rapid shift to low-carbon fuels (LCFs). LCFs are chemical energy carriers that can use renewable electricity or recycled carbon source to reduce greenhouse gas (GHG) emissions over their whole life cycle. There is a variety of LCFs, with different use cases and constraints. Figure 1 shows the broader LCF landscape. In this blogpost, we focus on three mainstream fuel families that are central to current policy debates on aviation, shipping and chemicals: biofuels, hydrogen/ammonia, and power-to-liquid (PtL) fuels. Table 1 summarises the three main fuel families and their constraints.
Biofuels can help in the near term, especially for sustainable aviation fuel. Our assessment shows that several bio-based routes are cost-competitive in the near term. Yet their scale is limited by sustainable biomass availability, land-use pressure, competing demand and supply-chain development. Hydrogen and ammonia can serve industry and selected shipping routes but need new infrastructure. Power-to-liquid fuels are attractive for aviation but require very large amounts of low-carbon electricity and CO2 sources.
Figure 1. Main low-carbon fuel pathways and carbon flows. Low-carbon fuels can be produced from biomass, renewable electricity, nuclear energy, fossil carbon with carbon capture, or recycled carbon sources. The diagram distinguishes energy flows from carbon flows and shows whether carbon is biogenic, atmospheric, fossil-derived, captured, or stored.
| Fuel family | Best use | Main constraint |
| Biofuels | Near-term sustainable aviation fuel where sustainable biomass is available | Limited feedstock, land-use pressure and competing demand |
| Hydrogen / ammonia | Industrial feedstock, fuel intermediate, selected shipping routes | Storage, transport, infrastructure and low-carbon electricity needs |
| Power-to-liquid fuels | Drop-in aviation fuels and carbon-containing chemicals where liquid hydrocarbons remain necessary | High electricity demand, credible CO2 sourcing and cost-emission trade-offs |
Good production regions are not just the sunniest regions
Because each fuel family depends on different inputs, geography becomes part of the technology choice. For biofuels, sustainable biomass availability is decisive. For hydrogen, ammonia and PtL fuels, renewable resource quality matters because electricity is a major input. Across all pathways, however, production cost also depends on financing conditions, infrastructure and the ability to certify the fuel as genuinely low carbon.
To quantify these differences, we conducted a global techno-economic assessment comparing 21 low-carbon fuel pathways across countries and future scenarios. The assessment shows that LCFs are likely to remain scarce and unevenly distributed. Technology learning and cleaner power systems can lower costs by 2050, but they do not make every pathway viable everywhere.
For PtL fuels, the clearest lesson is that good renewable resources are necessary but not sufficient. A sunny or windy region can still produce expensive fuel if investment risk is high, because electrolysers, direct air capture units, storage and synthesis plants are capital-intensive. Conversely, a country with moderate renewable resources may become important if it has reliable infrastructure, low financing costs, port access and credible certification systems.
This creates a geography of roles. North Africa, Iberia, Chile, Australia and parts of the Middle East may have strong potential for hydrogen and e-fuel production. Countries such as Germany, Switzerland and the Netherlands are more likely to act as demand centres, import hubs and standard-setting markets, where imported fuels must prove their life cycle GHG savings, renewable electricity sourcing and traceability before they can count toward EU climate targets.
Recent events underline the strategic value of this perspective. In spring 2026, conflict in the Middle East and disruptions in the Strait of Hormuz sent jet fuel prices to multi-year highs, putting airlines under cost pressure, pushing up airfares, and exposing vulnerabilities in aviation fuel supply chains. It does not make sustainable aviation fuels cheap overnight, but it can narrow the cost gap and reminds us that fossil fuel dependence also exposes aviation to price shocks. Where renewable resources, infrastructure and certification systems are available, LCFs could help diversify future fuel supply chains.
Cheap e-fuels are not always low-carbon
Our life-cycle assessment of power-to-liquid fuels adds a second warning: cheap e-fuels are not automatically climate-friendly. Synthetic fuel production needs electricity for hydrogen, for direct air capture of CO2, and for fuel synthesis. If that electricity comes from a carbon-intensive grid, the final fuel can lose most of its climate benefit. As Figure 2 shows, the low cost and low GHG regions do not neatly overlap.
Our result makes this condition concrete. In our analysis, Fischer-Tropsch synthetic aviation fuel loses its climate advantage when grid carbon intensity exceeds roughly 0.13 kg CO2e/kWh. Methanol-to-jet fuel crosses the fossil benchmark at about 0.08 kg CO2e/kWh. These values are below the EU average electricity generation intensity of about 0.21 kg CO2e/kWh in 2024 and far below coal-heavy grids. The policy question is therefore not simply whether a fuel is synthetic, but whether its electricity is verifiably low carbon.
Low carbon electricity must come before e-fuels
Policy is already moving beyond simple mandates. ReFuelEU Aviation creates demand by requiring SAF blending at EU airports to rise from 2% in 2025 to 70% by 2050, including a synthetic aviation fuel sub-mandate from 1.2% in 2030 to 35% by 2050. But the RED/RFNBO framework determines whether hydrogen-based fuels can actually count as renewable: producers must document renewable electricity sourcing, life-cycle GHG savings and supply-chain traceability.
For Switzerland, the implication is pragmatic. Domestic renewable electricity is limited and valuable for direct electrification and power-system needs, so Switzerland is unlikely to become a mass producer of e-fuels. Its role is more likely to be that of a demanding buyer, aviation market and infrastructure-connected import hub. Following Switzerland’s adoption of ReFuelEU Aviation, Zurich and Geneva airports enter the same requirements as EU airports from 1 January 2026.
Low carbon fuels need a map, not just a mandate. Geography decides whether they are affordable. Electricity decides whether they are climate credible. Infrastructure and certification decide whether they can be delivered reliably and counted as genuinely low carbon. Policy should therefore prioritise low carbon electricity expansion, stringent certification of electricity and fuel GHG intensity, and deployment strategies that explicitly balance cost, infrastructure and wider environmental impacts.
