A report prepared by ISIS (Institute of Studies for the Integration of Systems – Italy) together with Tecnalia (Spain) for the European Parliamentary Research Service (EPRS) discusses the technological, environmental and economic barriers for producing methanol from carbon dioxide, as well as the possible uses of methanol in car transport in Europe.

The study evaluated costs and benefits from a life cycle perspective in order to compare various raw materials for producing methanol and in order to reflect the potential benefits of methanol obtained from CO₂. The report concluded that benefits in the medium- and long-term can be anticipated since the obtaining of an alternative fuel using a residual greenhouse gas would allow European dependence on conventional fossil fuels to be cut, and that way the risks in supply security to be minimized.

Noting that it is “evident that considerable and sustained research efforts are necessary to turn CO₂ into an efficient and competitive prime materials, which would be attractive not only for the transport sector, but also other industries,” the study proposes a series of policy options to promote the use of CO₂ captured from flue gases for the production of methanol and its subsequent use in transport.

The conclusions in the form of policy options suggest possible answers on how to overcome the technological and economic difficulties presently associated to CO₂ capture and conversion processes, as well as the opportunities which may arise from greater fuel variety in transport, among them methanol, and from putting recycled CO₂ to use by turning it into a potentially valuable prime material.

… However, long-term trends in energy consumption for transport in Europe show that the potential for CO₂ abatement and the need for greater fuel flexibility are also extremely relevant for diesel road transport and aviation, and, in terms of enhanced security of supply, for the European economy and society at large. Methanol blends, hydrogen, biofuels, electric and hybrid cars, along with different powertrain technologies could find their place into the most suitable markets as the total cost of ownerships tends to converge over time, but both policy-makers and consumers should be able to make their choices based on exhaustive and comparative well-to-wheel analysis of different fuels and technologies, which are hard to conduct with the data presently available.

Issues that are particularly critical for the future competitiveness of CO₂-derived methanol, according to the report, include:

• The level of priority awarded in transport policy to environmental considerations—first of all CO₂ abatement—and to security of supply concerns.
• The uncertainty of future technology developments in the transport sector and the need to avoid stranded investments in the medium and long-term.
• The need for bringing down the costs of captured CO₂ and stimulating its potential uses, among them methanol production.
• Improving the competitiveness of methanol fuel cells while respecting the free market rules.
• Considering the need for diverse solutions for different types of transport fleets and the high likelihood of competition for fuels between all transport sectors

The report’s authors presented four policy options: (1) market-driven approach; (2) regulatory push for carbon capture and utilization; (3) “methanol islands”; and (4) scenario-driven transition strategies.

Market-driven approach. The market-driven approach—the “level playing field”—leaves the decision on the type of car and fuel used to the final customer. This approach, supported by the promoters of the Open Fuel Standard Act in the US, would oblige the car industry to put a substantial number of vehicles in the market, which can run on natural gas, hydrogen, biodiesel, methanol, as well as flexible fuel or plug-in electric drive vehicles, among others. While US methanol producers support this initiative, the report authors noted that there are shortcomings to this approach.

The first critical issue is since both hydrogen and methanol produced from CO₂ are still far from being price-competitive, they are unlikely to gain market shares in the next decades unless there is a drastic increase in prices for gasoline and conventional diesel. Further, open standards could increase the “food or fuel” dilemma associated to the use of first generation biofuels, i.e. biocrops, and the competition for land and water resources. It is also unclear how other environmental impacts of the production and use of different fuels would be accounted for.

The second issue is enabling consumers to make informed choices.

This has considerable implications for policy making, since the numerical evidence for comparing different fuels and car performance is not presently available, as the second interim report of this study has shown. Even values given by car makers for CO₂ emissions from cars and fuels already in the market have been questioned repeatedly. Getting the right values directly affects consumer purchases and calculations, as CO₂ emission levels are frequently used by authorities to define the taxes to be paid by the vehicle owner.

Regulatory approach.European rules for competition between different types of fuels and vehicle technologies based on a comprehensive and comparable well-to-wheel life-cycle analysis and considerations of security of supply would favor CO₂ recycling, the report concluded. Such an approach would also imply embracing the idea of CO₂ as an important future prime material and setting up a powerful carbon capture and utilization (CCU) industry, similar to the Chinese approach, once CO₂ capture costs can be brought down to a competitive level (estimated at around 20€/t of CO₂ captured) and once the environmental and energy balance of methanol production from CO₂ has been considerably improved.

Advantages to this approach are the opportunity of exploring additional potential markets for captured CO₂ and the chance for European technology leadership and exports. Risks associated with this strategy include the need for sustained investment in R&D and the uncertainties about the time to market of CO₂-derived and competitive products.

Methanol islands. There is an interesting potential for circular economy and industrial symbiosis concepts, which could be explored in large-scale demonstration sites, the report finds. Both the IRENA experts and the methanol industry agree that under very specific circumstances, such as in Iceland with its very low electricity prices, methanol produced from CO₂ is already competitive with gasoline.

Further key elements for bringing down production cost for methanol from CO₂ include the use of electricity from wind farms that cannot be evacuated to the grid or employing solar electricity generated in isolated, but sun-rich regions for hydrogen and methanol production. Another key factor is proximity of the CO₂ emission source to the hydrogen and methanol production sites, in order to avoid the elevated costs of transporting both types of gas.

This policy option would therefore combine smart strategies for bringing down the cost of methanol produced from CO₂ with the support of market innovations requiring the use of methanol fuel cells, matching growing demand with increased supplies. The advantage of such a strategy consists in limited initial investment needs and a greater independence from developments in the transport sector, which would allow for bridging the time necessary for bringing down the costs of methanol produced from CO₂ and improving the fuel cell technologies. Policy measures would have to respect free market rules, though, and implementation may therefore be complex.

Scenario-driven strategies. This policy option basically implies putting a price on energy security, which can be defined by evaluating the direct and indirect macroeconomic effects of rising transport prices throughout Europe. Higher fuel prices increase the price levels of all types of goods and affect the competitiveness of export-oriented companies, as well as especially vulnerable regional economies and consumer groups.

Putting a price on energy security does, however, not invalidate the need for finding more efficient conversion processes for alternative fuels, including hydrogen and methanol, nor for promoting the most suitable uses of all types of energy sources, recycled CO₂ included, so that energy remains affordable for all economic players.