Last week, the European Commission published the results of the third Innovation Fund Hydrogen Bank auction — and the dedicated aviation and maritime window, with a budget of EUR 300 million, attracted only three bids. Not a single one concerned eSAF, the synthetic aviation fuel produced from green hydrogen. The two winning Norwegian projects (Gen2-LH2 and RogalandH2) target the maritime sector — shipping, not aviation. The aviation/maritime window was undersubscribed by roughly EUR 137 million, while the other two auction baskets were seven times oversubscribed.

The Commission has asked the eFuel Alliance for its views on why this outcome turned out so disappointing. The answer, already foreshadowed in an earlier position paper, is uncomfortable: the auction is delivering exactly the result that the regulatory architecture prescribes. Structural mismatch between project financing requirements and the realities of aviation offtake contracts, regulatory uncertainty, weak demand signals, restrictive production criteria, and support mechanisms whose logic is misaligned with investment timelines — all of this makes eSAF projects practically impossible to qualify for the Hydrogen Bank. The framework does not sufficiently address the uncertainties surrounding eSAF production costs and the absence of bankable long-term offtake agreements, and project developers therefore shy away from the effort of preparing applications.

SPIN Perspective: The Contradiction Nobody Wants to Own

This is the cat biting its own tail in plain sight. For years, lobby organisations pushing the combustion-engine phase-out in the passenger-car sector have leaned on one argument repeatedly: it is right to keep eFuels out of road transport, because the supposedly small production volumes will be needed for aviation and shipping — sectors with no battery-electric alternative. Strict regulation of green hydrogen and its downstream products, the argument goes, is not a problem but part of the solution.

The outcome of the third Hydrogen Bank auction is an uncomfortable reckoning with that promise. The volumes are indeed small — but they are small precisely because the regulatory requirements for RFNBO hydrogen (additionality, temporal and geographic correlation, narrow definitions, tight deadlines for financial close and entry into operation), combined with the absence of binding demand signals and bankable offtake structures, prevent the very investments that should ramp up those volumes. If you push a technology out of one market by arguing it is needed more urgently elsewhere, you have to make sure it can actually emerge in that “elsewhere”. That is precisely what is not happening here.

A Familiar Pattern: The Swiss CHF 100 Million CCS Call

The pattern is uncomfortably familiar to anyone watching Swiss climate policy. In January 2025, the Federal Office of Energy (BFE) launched the first thematic call under the new Klima- und Innovationsgesetz (KlG): CHF 100 million for projects on CO₂ removal and storage, including sector coupling. It was the flagship instrument meant to kickstart a sector that everyone agrees Switzerland desperately needs in order to reach net zero by 2050. Industry observers report that the call attracted only a handful of submissions — a result widely attributed to unrealistic thresholds, overly strict eligibility criteria, and conditions that did not match the actual maturity and economics of CCS and negative-emissions projects in Switzerland today.

The parallel to the Hydrogen Bank aviation window is striking. In both cases, the political goal is correct and the budget is real. In both cases, the design of the call — minimum capture volumes, narrow definitions of eligible measures, tight timelines, financing structures detached from project bankability — translated political ambition into a barrier rather than an enabler. And in both cases, the post-mortem will likely conclude that “the market wasn’t ready” — when in fact the regulator wasn’t neutral.

The Greenwashing Reflex That Burns Fossil Fuels

There is a common thread running through all of these regulatory failures, and it deserves to be named: the fear of greenwashing and double-counting has hardened into a reflex that is now blocking the very technologies that would actually reduce emissions. Worried that someone, somewhere, might claim a CO₂ reduction twice, or use a little bit of fossil energy in an otherwise renewable production chain, regulators have piled additionality clauses, correlation rules, exclusion lists for Carbon Capture and Utilisation, narrow definitions of “permanent” storage, and ever-tighter chain-of-custody requirements on top of every credible Power-to-X, CCS, and CCU pathway. The intent is honourable. The result is fewer projects, less invested capital, and a clean-tech sector that spends more time on legal opinions than on engineering.

Meanwhile, the molecule that nobody disputes — the tonne of CO₂ that comes out of the exhaust of a kerosene-powered aircraft, a diesel truck, or a gas-fired industrial boiler — keeps being emitted, every day, in fully measurable, fully regulated, fully accepted form. The fossil baseline is the cleanest accounting in the entire energy system. It is also the most destructive. By tightening the rules around the alternatives until those alternatives cannot get built, the regulator is in effect choosing fossil emissions over imperfect synthetic ones. A theoretically airtight climate accounting framework that delivers zero real-world reductions is not a victory over greenwashing — it is greenwashing of the regulatory process itself.

This is not an argument against rigorous standards. It is an argument for asymmetric proportionality: the bar for a new clean technology should not be higher than the bar for the fossil status quo it would replace. A tonne of synthetic aviation fuel that displaces a tonne of fossil kerosene reduces emissions even if the accounting around its carbon source is not philosophically perfect. A direct-air-capture project that locks away CO₂ for a few decades is still better than the same CO₂ remaining in the atmosphere indefinitely. Pretending otherwise — and writing regulations that assume otherwise — is how a continent ends up with empty auction baskets and rising aviation emissions at the same time.

We want to stay honest: the results in the other Hydrogen Bank baskets are mixed too. The RFNBO basket was massively oversubscribed, which signals interest, but the experience from the second auction (only 6 of 15 originally selected projects reached grant signature) is a reminder for caution — the real test is not selection, it is delivery. The low bids in the general basket (down to EUR 0.44/kg in Finland) also show that hydrogen will be produced where power and site conditions are right — an important data point for the Swiss debate about import strategies. eSAF, by contrast, is a different business model: capital-intensive, with long lead times and an offtake market (aviation) that is only just beginning to commit to binding quotas under RefuelEU Aviation.

What Follows from This

For the Power-to-X discussion in Switzerland and Europe, these auction outcomes draw three lines very clearly:

First, regulatory design is not a side issue. Setting ambitious climate targets for aviation (RefuelEU Aviation with binding RFNBO sub-quotas) while simultaneously tightening the investment conditions for those same molecules to the point where no eSAF project finds a support instrument attractive enough to apply, produces a gap that no market will close. The same logic applies to Swiss CCS: ambition without workable design produces empty auction baskets, not defossilisation.

Second, the debate about eFuels in road transport deserves to be re-examined in light of these numbers. If the “small volumes for aviation” do not emerge because the regulatory architecture prevents them, then the argument that eFuels in passenger cars would compete with this use is empirically void — as long as the regulatory bottlenecks remain unresolved.

Third, support instruments must match the bankability of projects, and the rulebook around them must accept that a workable second-best beats a flawless never-built. Hydrogen Bank auctions with a fixed premium per kilogram of hydrogen are a workable model for RFNBO production in sectors with established demand (industry, partly shipping). For eSAF, whose cost curve is flatter and whose offtake market is only just being constructed by regulation, complementary instruments are needed: Carbon Contracts for Difference, binding long-term offtake guarantees, or a support logic that intervenes closer to the actual value chain. The same diagnosis applies to Swiss CCS — and it is a diagnosis that the responsible federal offices should take seriously before the next call.

The Commission has rightly recognised that the result is a signal and asked the eFuel Alliance for analysis. What matters now is whether that analysis leads to concrete adjustments — or whether the next auction, played by the same rules, produces the same empty space. The Swiss federal administration faces exactly the same question with its next KlG calls.

Sources