Synthetic fuels, or e-fuels, could support decarbonization objectives across numerous sectors. We think aviation and shipping will be the main users of future e-fuels. Policy moves in Europe will likely create a market for these fuels, but huge investment will be required to supply the inputs that make them a low-carbon solution.

Economic models for e-fuels remain uncertain for now. High input-energy requirements present a significant cost barrier for both producers and consumers. There are material technological hurdles still to overcome and, beyond carbon, e-fuels still emit other pollutants. Other environmental exposures could persist.

We see limited credit impact in the next decade given modest regional ambitions regarding e-fuel use. They will have time to plan, but aviation and shipping companies in Europe might need to make difficult choices in the next decade as regulations take effect.