EU adopts massive funding plan to scale biofuels and e-fuels for ships and planes
The European Commission aims to roll out at least €2.9 billion ($3.4 billion) in subsidies by 2027 to accelerate production of low- and zero-emission fuels in the EU.
IMAGE: Model of a cargo ship with a European Union flag. Getty Images
The European Commission has adopted its Sustainable Transport Investment Plan (STIP), outlining measures to scale low- and zero-emission fuels across aviation and maritime.
The plan does not immediately mobilise new funding, but it sets a framework for how existing EU instruments will be steered over the coming years.
The Commission estimates that ships bunkering in the EU will require around 6.4 million mt/year of biofuels and 4.6 million mt/year of green hydrogen-based e-fuels to meet FuelEU Maritime’s 14.5% greenhouse gas intensity reduction target by 2035.
FuelEU also includes a potential 2% sub-target for uptake of e-fuels from 2034, which will be triggered if the market share of e-fuels is less than 1% by 2031. This could add another 560,000 mt/year of e-fuels demand.
Delivering sufficient fuel supply will require investments of €35–47 billion ($40-54 billion) by 2035, the Commission projects.
But financing remains constrained. High upfront capital costs, technology risk and a persistent lack of long-term agreements continue to delay final investment decisions.
“Fuel producers need long-term commitments to secure financing, while airlines, shipping companies and other fuel users are reluctant to sign long-term offtake agreements because they fear being at a competitive disadvantage as early adopters,” the Commission notes.
“The inability of the market to sign offtake agreements creates a significant barrier for final investment decisions in the EU.”
To address this, the STIP aims to mobilise at least €2.9 billion ($3.4 billion) in subsidies by 2027 through several EU financing streams.
It will allocate €446 million ($513 million) via the Innovation Fund for e-fuel production projects, of which €293 million ($337 million) is earmarked for the maritime sector.
A further €300 million ($345 million) will be channelled through the European Hydrogen Bank for projects with aviation and maritime off-takers.
The plan also earmarks €2 billion ($2.3 billion) through InvestEU to support bio- and e-fuel production fuels between 2026-2027 and provides an indicative budget of €133 million ($153 million) for research and innovation via the European Hydrogen Bank over the same period.
The Commission will also work to establish a double-sided auction mechanism for low- and zero-emission bunker fuels at the EU level during the 2028–2034 budget cycle.
“The Commission deserves credit for taking concrete steps to finance and de-risk e-fuel production – especially through the creation of a double-sided auctioning system that can finally bridge the price and contract gaps between fossil and e-fuels,” said Aurelia Leeuw, EU policy director at the SASHA Coalition.
"But the STIP still falls short where ambition matters most. An extension of the ETS is still missing, and without it, we won’t generate the revenues needed to truly accelerate decarbonisation in aviation and maritime. And while it’s positive to see recognition of zero-emission aircraft and hydrogen’s role, support for zero-emission technologies across the board remains limited,” she added.
The World Shipping Council has called for robust fuel certification frameworks and strategic port infrastructure planning to complement the STIP, with further detail expected in the Commission’s upcoming EU Port Strategy.
By Konica Bhatt
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