New paper: “Decarbonizing the aviation sector: Multiplier effects of power-to-liquid fuel produc-tion on the German economy”
Power-to-Liquid (PtL) fuels represent a promising pathway for decarbonizing the aviation industry, independent from range restrictions and new aircraft designs. However, they require novel supply chains with several activities and actors involved. This raises the question how the implementation of these supply chains affects existing industries and macroeconomic indicators, such as employment and national production levels.
This study integrates detailed supply chains analysis with multiplier models of different endogeneities to examine the broader effects of PtL fuel production in Germany. A scenario-based sensitivity analysis is conducted to reveal the influence of critical components’ costs and different supply chain setups.
The main findings are:
- High economic potential
PtL fuel infrastructure is highly integrated in German industrial value chains, with strong dependencies on key industries. High shares of domestic upstream activities translate into substantial economic multipliers. - Multiplier framework relevance
While input-output models capture inter-industrial linkages, social accounting matrix approaches incorporate additional income-induced feedback. Increased endogeneity reveals the broader macroeconomic footprint of PtL fuel infrastructure deployment. - Environmental trade-offs
PtL fuel production involves considerable resource demands. Emissions and water consumption are observable in maritime logistics for offshore wind and chemical products for DAC. In addition, using biomass as a carbon or electricity source significantly increases water use. - Sensitivity to techno-economic assumptions
While relative multipliers are robust to higher cost assumptions for individual components, they are more sensitive to the structural supply chain, particularly the choice of power source. Total effects, in contrast, are also driven by components’ cost assumptions.
Based on these findings, some policy implications are derived:
- Strengthening domestic supply chains
Policies should promote local manufacturing, secure key industries and support competitiveness across upstream sectors, particularly for novel technologies without established production clusters in specific regions, such as electrolysis and DAC. - Decarbonizing upstream activities
Holistic decarbonization is crucial to minimizing environmental side effects. PtL fuel production is dependent on several other activities and a sole focus on net-zero jet fuels while neglecting the decarbonization of other industries would just lead to a sectoral shift of emissions. - Pursuing RFNBOs for sub-quotas
While biogenic sources can serve as a transitional option during early ramp-up of SAF, they might lead to resource conflicts in the long term. Thus, the EU should maintain the sub-quotas of synthetic jet fuels that align with the rules for RFNBOs. - Creating long-term market incentives
Blending quotas are an important entry point, but further policies are needed to provide investment security and accelerate the adoption of PtL fuels. Additional instruments, such as tax incentives, auction schemes, and possibly a kerosene tax could support the market ramp-up.
Open Access Article: https://doi.org/10.1016/j.seta.2025.104478