The maritime and aviation sectors are pillars of California’s economy but are also significant sources of greenhouse gas (GHG) emissions.
There are currently no affordable and scalable low-GHG alternatives to the use of fossil fuels in these sectors. In the long run, the most promising scalable alternative fuels for these sectors are ultra-low-carbon hydrogen-based fuels produced from renewable electricity. However, these fuels are currently at an early stage of development and are expensive to produce, meaning further innovation is required before widespread replacement of fossil fuels becomes possible.
This report examines how California drive down shipping and aviation emissions through targeted support for hydrogen-based ultra-low-carbon fuels in-state. While California’s GHG inventory already includes emissions from intrastate flights and near-coast maritime activity, existing incentives and regulations do not directly address these sources. This policy gap presents an opportunity for California to advance decarbonization in two of the hardest-to-abate sectors while reinforcing its broader climate objectives.
This report comes to the following conclusions:
Hydrogen-derived e-fuels are likely to play a greater role in addressing shipping and aviation fuel demand than direct use of liquefied hydrogen in 2045.
Current policies are unlikely to drive the production or use of renewable hydrogen-based shipping and aviation fuels in California.
Revenue certainty policies could support the production of ultra-low-carbon hydrogen-derived fuels for aviation and shipping.
A new credit-based funding mechanism could provide revenue certainty by requiring jet fuel and marine fuel providers, which are currently exempt from California’s existing climate programs, to help fund the transition.