Approach to setting the attribution of CO2 reductions for CCU fuels – Toward a system counting fuel selection as an emission reduction effort

As economies move toward carbon neutrality, hydrogen produced from zero-carbon electricity and synthetic fuels derived from captured carbon dioxide (CO₂) and such hydrogen—hereafter referred to as carbon capture and utilisation (CCU) fuels—are expected to play a complementary role to electrification, particularly in hard-to-abate sectors. Despite their potential, market uptake of CCU fuels would remain limited, if we keep accounting and regulatory frameworks that fail to translate their climate value into economic incentives for fuel users, as well as their technological and economic immaturity. This paper examines CCU fuels through the lens of energy and climate policy rule design, focusing on the attribution of greenhouse gas (GHG) emissions and emission reductions across value chains and national borders. It reviews existing and emerging international and national schemes, including those developed by the Intergovernmental Panel on Climate Change, International Organisation for Standardisation, the EU and Japan, and identifies structural inconsistencies between conventional point-of-emission accounting and the economic characteristics of CCU fuels. The central contribution of this study is to demonstrate that user-side incentives would be enhanced or neutralised depending on near-future rules governing CO2 emission attribution, and to propose an attribution framework that promotes the consumption of CCU fuels and thereby induces greater investment in their production without undermining environmental integrity. The paper proposes treating CCU fuels as having a zero-emission factor at the point of use, combined with a simplified upstream accounting rule in which captured CO₂ used for CCU synthesis is not counted as CO2 removal or emission reduction. It then evaluates 3 policy implementation pathways—national GHG inventory rules linked to Nationally Determined Contributions (NDCs), domestic regulatory schemes, and international transfers via Internationally Transferred Mitigation Outcomes—highlighting their respective implications for market formation and cross-border trade. Key technical requirements, including certification of CCU fuel origin and baseline definitions, are also discussed. By explicitly linking accounting rules to economic incentives, this study provides a policy-relevant framework for harmonised rule-making that can facilitate investment, international trade, and the scalable deployment of CCU fuels in global decarbonisation strategies.