Formula 1 is inching towards an agreement on a new engine design to be used from 2026 – and it looks increasingly likely that its introduction will tempt at least one of the Volkswagen Group’s brands to join the grid.

They are a simplification of the hybrid engines, levelling the playing field for a new entrant competing with others who have been in the sport for decades, and a commitment to adopt sustainable fuels.

The VW Group has been involved in discussions over the new engine formula in the past months, and senior F1 insiders say they are increasingly certain that at least one VW brand – mostly likely Audi or Porsche – will enter in 2026.

From F1’s point of view, that would be a vote of confidence from the world’s second largest car company in a direction of travel based on the premise that electrical power is not the only answer to a sustainable future for motive transport.

Talks are not finalised, but a broad agreement on the way the future will look has been reached, with smaller details still to be resolved.

What’s changing on the engines?

The key difference between the engines F1 will use from 2026 and the current ones will be the removal of a device called the MGU-H.

This is the part of the hybrid system that recovers energy from the turbo-charger. It is at the heart of the revolutionary levels of efficiency F1 engines are able to achieve, but it has some key downsides – it is incredibly complex and expensive to perfect, and it has proven not that relevant to application in standard road-car engines.

VW has made it clear it will not enter F1 if the engines retain the MGU-H, because it would have been next to impossible for them to catch up to the levels of expertise built up over the past seven years by F1’s current suppliers, Ferrari, Honda, Mercedes and Renault.

Abandoning the MGU-H was not an easy sell to a group of major car companies who had invested many millions in perfecting it, and particularly not to Mercedes, who have dominated F1 since these hybrid engines were introduced in 2014. But all have now agreed to do so – with caveats.

The first is that the engines remain hybrids. They will retain levels of performance similar to the existing engines by a major scaling up of the power produced by the other part of the hybrid system, the bit that recovers energy from the rear axle, the MGU-K.

This helps secure the key aims of the new engine formula – that the engines be both simpler, and much less expensive.

What other debate points are there?

As the MGU-H is central to the operation of current F1 power-units, getting rid of it effectively requires all manufacturers to design brand new engines.

But in accepting a change that is a prerequisite of VW entering F1, the existing manufacturers are only prepared to go so far.

Part of the new rules governing engines from 2026 will be a budget cap and other limitations on development. It had been proposed that any new manufacturer – eg a VW brand – be given a leg-up by allowing them higher levels of spending and/or development either as they geared up to entry, or when they first started in F1.

But the existing manufacturers – particularly Ferrari – have refused to accept this. Negotiations are ongoing, but as Ferrari have said no, this is unlikely to be agreed.

Another area of disagreement is over Red Bull. They are setting themselves up as an independent engine manufacturer following partner Honda’s decision to quit F1 at the end of this season. From next year, Red Bull will run their existing Honda engine design, but maintained by their own, brand new factory.

The other manufacturers have obvious concerns about a potential link-up between Red Bull and VW, and there are arguments about whether Red Bull should be considered under the new rules as an existing manufacturer or a new one – for which both financial and sporting benefits are being debated.

An agreement on these and other details is not yet finalised. And getting there will require compromise. But the sport is said to be “in a good place” and talks moving in the right direction.

Another pointer on VW’s involvement in F1 might be seen coming from an unusual direction – the latest race to be added to the calendar.

Qatar’s new deal with F1, for a race this November and then a 10-year contract from 2023, is the biggest the sport has ever done with a race promoter. In other words, the Gulf state’s commitment to F1 is reflected in the fact that is paying more money for its race than anyone else.

Qatar, as it happens, also holds a 14.6% shareholding in the VW Group.

What are these sustainable fuels?

The introduction of sustainable fuels is a key part of a strategy for the whole of F1 to be net-zero carbon by 2030.

The sport has taken a small step in this direction this year, with the introduction of so-called E10 fuels, 10% of which are made from biofuels, exactly like the new fuel introduced on UK garage forecourts this summer.

But plans for 2026 are far more ambitious. They are to introduce what F1 claims will be a fully sustainably fuel that is net-zero carbon.

There are two main approaches: fuels made from biomass and so-called synthetic e-fuels.

Both are ‘drop-in’ replacements for standard fossil fuels in an internal combustion engine. But at a time when the world is trying to reduce its carbon emissions both have a similar issue – just like standard gasoline, they do release CO2 into the atmosphere.

The key claim to their sustainability, though, is that they create vastly reduced carbon emissions over the life cycle of the fuel.

What’s the difference between them?

One is made from biomass – for example feedstocks, waste oil from animals or plants and other bio-waste from homes or businesses. This is considered to be carbon neutral because the product gives off the same amount of carbon when burned that its source absorbed while growing.

Synthetic e-fuels are made using an industrial process that captures CO2 from the atmosphere, and combines it with hydrogen to make fuel. In this case, the CO2 generated from burning the fuel is the same gas that was directly taken from the atmosphere to make it.

The big downside with synthetic fuels is that making them requires a lot of energy. And if that energy is not provided by sustainable sources, then the fuel is no longer very ‘green’.

F1’s current position is that it is agnostic on which type of sustainable fuel it will use from 2026, partly because its fuel providers are themselves split on which route they consider optimal.

The hope is that competition between fuel providers to produce the most environmentally friendly petrol replacement will decide which way F1 ends up going.

Meanwhile, down in southern Chile, just north of the port of Punta Arenas, a new plant is being built to manufacture synthetic e-fuel. Among the companies investing in it? VW-owned Porsche.

Why the push for sustainable fuel?

At a time when the road-car market is increasingly moving towards electrification, you might ask why F1 is not simply going electric, and why all these car companies are interested in pushing a replacement for petrol that still produces CO2?

The answer is that it is not currently possible to have a car with F1 levels of performance powered by electricity – the technology is simply not advanced enough. And the same applies to other forms of transport, too.

The key issue is energy density. Batteries simply don’t have enough of it compared to fossil fuels. An airliner powered by a battery with sufficient capacity to Australia, for example, would be many times too heavy to take off.

So it will be many years before batteries could power passenger aeroplanes, or ocean-going ships, or combine harvesters, and so on, if they ever could.

At the same time, while some western governments are heading towards phasing out petrol- and diesel-powered cars by banning their sales within a few years, millions of cars with internal-combustion engines are likely to be on the roads around the world for decades to come.

The hope is that sustainable fuels could provide a way of dramatically reducing carbon emissions from them.

What about the longer term?

F1’s move towards sustainable fuels makes sense on a number of levels – it cuts emissions, and as symbolism it also goes some way to safeguarding the sport’s future in a world in which reducing carbon emissions is of critical necessity as humanity seeks to tackle the climate crisis.

It provides F1 with a way of keeping the performance levels required to generate the ‘wow’ factor that is so critical to its appeal, while also taking environmental issues seriously.

But it’s not a long-term solution. It’s a stepping stone to a more sustainable, genuinely zero-carbon future, while the car industry and the wider world gets closer to working out what that future looks like.

Is it solid-state batteries? Is it, as some senior figures within the sport have already hinted, using hydrogen fuel cells, which emit only water? Or some other technology that has not yet appeared on the horizon?

No-one yet knows, but already there are whispers that the next engine formula, due for introduction in the early 2030s, could be based on hydrogen.