Carbon-neutral fuel is fuel which produces no net-greenhouse gas emissions or carbon footprint. In practice, this usually means fuels that are made using carbon dioxide (CO₂) as a feedstock. Proposed carbon-neutral fuels can broadly be grouped into synthetic fuels, which are made by chemically hydrogenating carbon dioxide, and biofuels, which are produced using natural CO₂-consuming processes like photosynthesis.

The carbon dioxide used to make synthetic fuels may be directly captured from the air, recycled from power plant flue exhaust gas or derived from carbonic acid in seawater. Common examples of synthetic fuels include ammonia and methane, although more complex hydrocarbons such as gasoline and jet fuel have also been successfully synthesized artificially. In addition to being carbon neutral, such renewable fuels can alleviate the costs and dependency issues of imported fossil fuels without requiring either electrification of the vehicle fleet or conversion to hydrogen or other fuels, enabling continued compatible and affordable vehicles. In order to be truly carbon-neutral, any energy required for the process must be itself be carbon-neutral or emissions-free, like renewable energy or nuclear energy.

If the combustion of carbon-neutral fuels is subject to carbon capture at the flue, they result in net-negative carbon dioxide emission and may thus constitute a form of greenhouse gas remediation. Negative emissions are widely considered an indispensable component of efforts to limit global warming, although negative emissions technologies are currently not economically viable for private sector companies. Carbon credits are likely to play an important role for carbon-negative fuels.

Synthetic hydrocarbons can be produced in chemical reactions between carbon dioxide, which can be captured from power plants or the air, and hydrogen. The fuel, often referred to as electrofuel, stores the energy that was used in the production of the hydrogen.

Hydrogen fuel is typically prepared by the electrolysis of water in a power to gas process. To minimize emissions, the electricity is produced using a low-emission energy source such as wind, solar, or nuclear power.

Through the Sabatier reaction methane can then be produced which may then be stored to be burned later in power plants (as a synthetic natural gas), transported by pipeline, truck, or tanker ship, or be used in gas to liquids processes such as the Fischer–Tropsch process to make traditional fuels for transportation or heating.

There are a few more fuels that can be created using hydrogen. Formic acid for example can be made by reacting the hydrogen with CO₂. Formic acid combined with CO₂ can form isobutanol.

Methanol can be made from a chemical reaction of a carbon-dioxide molecule with three hydrogen molecules to produce methanol and water. The stored energy can be recovered by burning the methanol in a combustion engine, releasing carbon dioxide, water, and heat. Methane can be produced in a similar reaction. Special precautions against methane leaks are important since methane is nearly 100 times as potent as CO₂, regarding the 20-year global warming potential. More energy can be used to combine methanol or methane into larger hydrocarbon fuel molecules.