The economics and greenhouse gas emissions of renewable hydrogen and e-fuels imported in the European Union

The decarbonization of aviation and maritime transport in the European Union (EU) will depend to a great extent on the availability of alternative fuels. Renewable hydrogen and e-fuels are critical alternative fuels to achieve deep decarbonization.

Major EU transport policies, including the Renewable Energy Directive (RED) III and ReFuelEU Aviation, set transport-wide or sector specific targets for renewable synthetic fuels. However, the climate benefit of these fuels will only materialize if they are produced using 100% renewable electricity and do not lead to indirect emissions.

This study assesses the economic costs and climate impacts of importing renewable hydrogen and e-fuels into the European Union. We focus on Brazil and Egypt, where the European Union has recently expanded engagement to facilitate renewable hydrogen and e-fuels imports.

Our findings show that:

• Importing renewable hydrogen as ammonia may be more expensive than producing it within Europe. Renewable-abundant countries such as Brazil or Egypt may produce renewable hydrogen at a lower cost than the European Union. Still, the costs of shipping—including converting hydrogen to ammonia, transporting it over a long distance, and then “cracking,” or reconverting the ammonia back into hydrogen—can be as high as the production cost itself. For example, even in a scenario that assumes mid-level technology costs and current Brazilian government incentives, the cost of importing renewable hydrogen from Brazil in 2030 is nearly 50% higher than the ICCT’s projected EU average when assuming pessimistic technology costs.

• E-diesel produced in any country will likely remain substantially more expensive than fossil diesel until 2030. We anticipate that the price of e-diesel, either imported from Brazil or Egypt or produced within the European Union, will likely not be lower than €2 per liter in 2030. The 2023 wholesale diesel cost in the European Union (excluding taxes and carbon price) was €0.9 per liter. Even when considering carbon pricing, we do not expect e-fuels to be cheaper than diesel in the near term. Yet, importing e-diesel from Egypt or Brazil could be about 20% cheaper than producing it in the European Union on average.

• The European Union has additionality and geographic and temporal matching requirements to help prevent indirect emissions when sourcing renewable electricity for hydrogen production. To ensure imported renewable hydrogen and e-fuels effectively decarbonize transport, these fuels must be properly certified by third parties as meeting these requirements. Otherwise, their greenhouse gas emissions could be significantly higher than those of fossil fuels, particularly in regions with a high share of fossil in the power grid, such as Egypt.

Our estimated renewable hydrogen and e-fuels production costs are within the range of existing studies. For more details, read our factsheet.