BIOFUELS MARKET ANALYSIS

The global biofuels market size was valued at US$ 213.68 Bn in 2023 and is expected to reach US$ 390.62 Bn by 2030, growing at a compound annual growth rate (CAGR) of 9% from 2023 to 2030.

The market is driven by several factors, including the increasing demand for renewable energy sources, government regulations and incentives promoting the use of biofuels, and the need to reduce greenhouse gas emissions. Biofuels, such as ethanol and biodiesel, are derived from renewable biomass sources such as corn, sugarcane, soybeans, and vegetable oils. They are considered an attractive alternative to fossil fuels as they help mitigate climate change, reduce dependence on fossil fuel imports, and support rural development.

Advancements in biofuel production technologies, such as second-generation biofuels from non-food feedstocks like agricultural residues, algae, and dedicated energy crops, are expected to contribute to the market growth. These advanced biofuels offer increased energy efficiency, improved environmental sustainability, and reduced competition with food production.

Biofuels Market Regional Insights

• North America: The U.S. is one of the largest producers and consumers of biofuels in the world. Ethanol, derived mainly from corn, is the primary biofuel consumed in the region. The Renewable Fuel Standard (RFS) mandates the blending of biofuels with conventional fuels, driving the demand for ethanol and biodiesel. Canada is also a significant player in the biofuels market, with a focus on advanced biofuels and bioenergy technologies and this region holds a substantial percentage of the market share, accounting for approximately 35%.
• Europe: The European Union (EU) has been at the forefront of promoting biofuels as part of its efforts to reduce greenhouse gas emissions. The EU Renewable Energy Directive sets targets for the use of biofuels in transportation, stimulating the market growth. Countries like Germany, France, and Finland are actively investing in advanced biofuels, such as second-generation biofuels derived from agricultural residues and waste materials, and Europe holds around 25% of the market share.
• Asia Pacific: The Asia Pacific region is witnessing growing interest in biofuels due to the increasing energy demand, concerns over energy security, and environmental issues. Countries like China, India, Thailand, and Indonesia have been investing in biofuel production, primarily from non-food feedstocks like agricultural residues and waste oils. Japan and South Korea are also active in promoting the use of biofuels, particularly in the aviation sector and Asia Pacific accounts for approximately 20% of the market share.

Figure 1. Global Biofuels Market Share (%), by Region, 2023

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Biofuels Market Drivers:

• Renewable Energy Policies and Regulations: Government policies and regulations aimed at reducing greenhouse gas emissions and promoting renewable energy play a crucial role in driving the biofuels market. These policies often include mandates and targets for blending biofuels with conventional fuels, tax incentives, and subsidies for biofuel production and consumption. For instance, the European Union recently proposed its ReFuelEU initiative that mandates airlines use a minimum of 2% advanced sustainable aviation fuels by 2025 and 5% by 2030.
• Energy Security and Independence: Biofuels offer an opportunity to reduce dependence on fossil fuels and enhance energy security. Countries that rely heavily on imported fossil fuels may promote the use of biofuels as a means to diversify their energy sources and reduce reliance on foreign oil. For instance, as per a 2021 report by the US Department of Energy, the U.S. produced approximately 15 Bn gallons of biofuels in 2020, greater than the biofuel targets set under the Renewable Fuel Standard.
• Environmental Concerns: Biofuels are considered to be a more sustainable and environment-friendly alternative to fossil fuels. They have the potential to reduce greenhouse gas emissions and mitigate climate change. Biofuels can also help address local air quality issues by reducing emissions of pollutants such as sulfur and particulate matter. For instance, Brazil has a national blend mandate requiring a minimum of 27.5% ethanol blended with gasoline. The European Union EU too has set a target for renewable fuels to account for at least 13% of the energy used in the transportation sector by 2030.
• Technological Advancements: Advancements in biofuel production technologies, such as the development of more efficient conversion processes and the use of advanced feedstock, have contributed to the growth of the biofuels market. Technological innovations have increased the production efficiency of biofuels, making them more economically viable and competitive with fossil fuels. For instance, LanzaTech has developed a microbial technology that can convert waste carbon emissions into ethanol, preventing them from polluting the environment. Their first commercial plant started operations in Hebei Province, China in 2021, generating ethanol using LanzaTech's microbial fermentation technology. LanzaTech is a company that has developed a microbial technology to convert waste carbon emissions into ethanol, preventing them from polluting the environment.

Biofuels Market Opportunities:

• Advanced Biofuels: Advanced biofuels, also known as second-generation biofuels, offer significant opportunities for market expansion. These biofuels are produced from non-food feedstock such as agricultural residues, algae, and waste materials. Advanced biofuels have the potential to overcome some of the limitations associated with conventional biofuels such as competition with food crops and land use concerns. For instance, a 2021 report by the International Renewable Energy Agency, second-generation biofuels and bioelectricity have a larger greenhouse gas (GHG) abatement potential and stand the best chances (with an 80 to 90% probability range) of achieving a 50% reduction in emissions compared to fossil fuels.
• Aviation Biofuels: The aviation industry is actively exploring the use of biofuels as a means to reduce its carbon footprint. Aviation biofuels, also known as sustainable aviation fuels (SAF), can significantly reduce greenhouse gas emissions compared to traditional jet fuels. The growing demand for air travel and increasing environmental regulations in the aviation sector presents a significant opportunity for the biofuels market. For instance, Alaska Airlines has been using biofuels made from forest residuals since 2016 to reduce greenhouse gas emissions. In 2015, Alaska Airlines partnered with Washington State University to advance the use of aviation biofuels. Alaska Airlines has been actively working to reduce its carbon footprint and promote sustainable aviation biofuels. In 2011, Alaska Airlines became the first U.S. airline to fly multiple commercial passenger flights using a biofuel refined from used cooking oil.
• Marine Biofuels: Similarly, the maritime industry is seeking alternatives to traditional marine fuels to meet environmental regulations and reduce emissions. Biofuels can be used as a substitute for conventional marine fuels, offering a sustainable solution. The International Maritime Organization's (IMO) regulations on sulfur emissions from ships create a favorable market opportunity for biofuels in the marine sector. For instance, according to the World Bank, the sustainable harvesting of marine plants for fuel could potentially meet 15-57% of current liquid transport fuel needs.
• Co-processing and Co-refining: Co-processing and co-refining involve blending biofuels with conventional fossil fuels in existing refineries and fuel production processes. This approach allows for the incremental adoption of biofuels in the existing infrastructure, providing a market opportunity without requiring significant infrastructure investments.
• For instance, as per the International Renewable Energy Agency (IRENA) 2022, the global transport biofuel production in 2020 was anticipated to be 144 Bn liters, which is an 11.6% drop compared to 2019 levels due to the COVID-19 pandemic.

Biofuels Market Trends:

• Expansion of Advanced Biofuels: There is a growing focus on the development and commercialization of advanced biofuels such as cellulosic ethanol, biobutanol, renewable diesel, and renewable jet fuel. These advanced biofuels offer higher energy density, lower carbon emissions, and reduced competition with food crops compared to first-generation biofuels. Technological advancements and increasing investments in research and development are driving the expansion of advanced biofuels. For instance, as per the 2020 analysis by Argonne National Laboratory, using cellulosic ethanol provides an even greater benefit, with average emissions reductions compared to conventional gasoline ranging from 88%.
• Transition to Sustainable Feedstock: The biofuels market is increasingly looking towards sustainable feedstock that do not compete with food production or contribute to deforestation. Non-food feedstock, such as agricultural residues, algae, and waste materials, are gaining prominence. Additionally, the use of cover crops and dedicated energy crops with low input requirements and high biomass yield potential is being explored.
• Circular Economy Approach: The biofuels industry is embracing the circular economy concept by integrating waste and residue streams into biofuel production. By utilizing agricultural residues, food waste, and other organic waste materials, biofuel producers are reducing waste and maximizing resource efficiency. This trend aligns with the principles of a more sustainable and circular approach to resource management.
• Decentralized Biofuel Production: There is a shift towards decentralized biofuel production including small-scale and community-based biofuel plants. These facilities are often located closer to feedstock sources, reducing transportation costs and carbon emissions. Decentralized production can also provide economic benefits to local communities and reduce reliance on centralized fuel supply chains.

Biofuels Market Restraints:

• Feedstock Availability and Competition: The availability of sustainable and cost-effective feedstock for biofuel production is a significant challenge. There is competition for land and resources between food production, biofuel feedstock, and other agricultural commodities. Balancing feedstock availability while minimizing land use change and environmental impacts is a complex issue that needs careful consideration. For instance,As per a 2021 report by Organisation for Economic Co-operation and Development (OECD) and the Food and Agriculture Organization (FAO), high demand for biofuel feedstock negatively impact the global supply and trade of major crops like vegetable oils and cereal grains.

• Counter balance: Encouraging the use of various types of biomass can mitigate the risks associated with relying on a single feedstock. This includes both agricultural residuesand non-food crops.
• Land Use Change and Environmental Concerns: The expansion of biofuel production can lead to land use change, deforestation, and habitat destruction, especially if feedstock are sourced from sensitive areas. These environmental concerns, including biodiversity loss and soil degradation, must be addressed to ensure the sustainability of biofuel production. Additionally, the carbon footprint of biofuels needs to be carefully evaluated to ensure that they indeed result in greenhouse gas emission reduction compared to fossil fuels. For instance, as per a study published in the science magazine in 2021, biofuel cultivation in the U.S. contributed to 32% of deforestation in the Midwestern Corn Belt region during the same time period.
• Counter balance: Governments can develop and enforce strict land use policies that protect forests, grasslands, and wetlands from being turned into biofuel crop plantations.
• Technological and Infrastructure Challenges: Scaling up advanced biofuel technologies and integrating them into existing infrastructure can be a significant hurdle. The production processes for advanced biofuels, such as cellulosic ethanol, often require complex and capital-intensive technologies. Adapting existing refineries, transportation systems, and storage facilities to handle biofuels can also pose logistical and compatibility challenges. For instance, as per a 2020 report by the International Renewable Energy Agency (IRENA), infrastructure bottlenecks were hindering the scale-up of biofuel industries in developing nations including Indonesia and India. The report states that countries like Indonesia and India were unable to meet initial blending targets due to weaknesses in collection, preprocessing, and transport systems for non-food biomass.
• Counter balance: Continuous investment in R&D can lead to technological advancements that make biofuel production more efficient and cost-effective.

Biofuels Market- Analyst Viewpoint

Technological and infrastructure challenges pose significant hurdles for the growth of the biofuel market. Producing biofuels at a large, commercial scale requires sophisticated processes and facilities that do not yet exist in most parts of the world. Converting raw plant materials like corn, sugarcane, or soybeans into liquid transportation fuels is a complex undertaking that involves pretreatment, enzymatic hydrolysis, and fermentation. The technology for these processes is still developing and the equipment needed is expensive. While first generation biofuels like corn ethanol can leverage existing infrastructures, the shift towards more advanced feedstock will necessitate new infrastructure for harvesting, transporting, and storing novel biomass sources. For example, producing cellulosic ethanol requires collecting and handling diverse feedstock materials like agricultural residues and wood waste, for which supply chains are still immature in many countries.

Distribution infrastructure is another area that lags behind. Most biofuels cannot be transported using petroleum pipelines or ships. They need dedicated delivery infrastructure involving trucks and rail that are not set up in many markets globally. Building out biofuels supply chains from feedstock provision to fueling stations requires large capital investments and comes with execution risks. A 2020 report by the International Renewable Energy Agency stated that despite government support programs, infrastructure bottlenecks were hindering the scale-up of biofuel industries in developing nations. Countries like Indonesia and India were unable to meet initial blending targets due to weaknesses in collection, preprocessing, and transport systems for non-food biomass. These technological and infrastructural limitations have kept global biofuel production below its economic potential. Advancements are ongoing through public-private research partnerships but achieving commercial scale remains challenging. National policies need to address these constraints through coordinated strategies that develop national biofuel sectors in a holistic manner. Without concerted efforts to build advanced facilities and accelerate infrastructure development, biofuels will struggle to achieve widespread adoption and meaningfully reduce dependence on fossil fuels for transportation.

Recent Developments

New product launches

• Neste MY Renewable Jet Fuel: Neste, a leading producer of renewable diesel and sustainable aviation fuel, launched Neste MY Renewable Jet Fuel in 2021. The product is produced from 100% renewable waste and residue raw materials, offering a sustainable alternative for the aviation industry.
• Gevo's Net-Zero 1 Project: Gevo, a renewable chemicals and advanced biofuels company, announced its Net-Zero 1 project in 2021. The project aims to produce sustainable aviation fuel (SAF) and renewable gasoline from biomass feedstock using its proprietary technology.
• TotalEnergies' La Mède Biofuel Refinery: In 2020, TotalEnergies (formerly Total) launched the La Mède biorefinery in France. The facility converts 500,000 tons of feedstock, including vegetable oils and used cooking oil, into biofuels, including biodiesel and renewable jet fuel.

Acquisition and partnerships

• As per Exxon Mobil  report 2022 ExxonMobil is expanding its interests in biofuels that can help reduce greenhouse gas emissions in the transportation sector, acquiring a 49.9% stake in Biojet AS, a Norwegian biofuels company that plans to convert forestry and wood-based construction waste into lower-emissions biofuels and biofuel components. ExxonMobil is a multinational oil and gas corporation and the largest direct descendant of John D. Rockefeller's Standard Oil. The company is one of the world's largest publicly traded international oil and gas companies, with a market capitalization of $369.07 Bn as of 2022 .  ExxonMobil is vertically integrated across the entire oil and gas industry, with operations in exploration, production, refining, and marketing.
• Biojet AS is a Norwegian biofuels company that specializes in converting forestry and wood-based construction waste into sustainable biofuels. The company's goal is to contribute to the green shift by producing sustainable biofuel that can be used in traditional engines and distributed via established infrastructure.
• BP and Bunge Bioenergy: In 2020, BP and Bunge Limited formed a joint venture called BP Bunge Bioenergia. The partnership combines BP's Brazil-based biofuels and biopower businesses with Bunge Limited's sugarcane mills in Brazil, creating one of the world's largest sugarcane ethanol producers. Bunge Limited, a global agribusiness and food company, is incorporated in Geneva, Switzerland, and headquartered in St. Louis, Missouri, United States. The company operates as a holding company, engaging in the supply and transportation of agricultural commodities.
• British Petroleum, is a multinational oil and gas company headquartered in London, United Kingdom. It is one of the world's largest oil and gas companies, with operations in over 70 countries. BP has a long history of operating in the biofuels industry, with a 10-year history of operating a successful biofuels business in Brazil, the world's second-largest and most integrated market for ethanol as a transport fuel .
• Archer Daniels Midland (ADM) and BWCMA: Archer Daniels Midland (ADM) and Brazil-based, Bunge Limited announced a partnership in 2020 to create a joint venture called BWCMA. The joint venture combines the Brazilian and European biodiesel operations of both companies, creating a leading biodiesel producer in Brazil and a significant presence in the European market.
• The Archer-Daniels-Midland Company, commonly known as ADM, is an American multinational food processing and commodities trading corporation founded in 1902 and headquartered in Chicago, Illinois. The company operates more than 270 plants and 420 crop procurement facilities worldwide, where cereal grains and oilseeds are processed into products used in food, beverage, nutraceutical, industrial, and animal feed markets worldwide.
• Bunge Limited, a global agribusiness and food company, is incorporated in Geneva, Switzerland, and headquartered in St. Louis, Missouri, United States. The company operates as a holding company, engaging in the supply and transportation of agricultural commodities.

Figure 2. Global Biofuels Market Share (%), by  Fuel Type, 2023

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Top Companies in the Biofuels Market

• Archer Daniels Midland Company
• Cargill, Incorporated
• Neste Corporation
• Renewable Energy Group, Inc.
• Poet, LLC
• Valero Energy Corporation
• BP plc
• Royal Dutch Shell plc
• Chevron Corporation
• TotalEnergies SE
• Repsol S.A.
• Cosan Limited
• Wilmar International Limited
• Raízen
• Green Plains Inc.

Definition: Biofuels are renewable fuels derived from biomass such as plants, agricultural crops, or organic waste. They serve as alternatives to conventional fossil fuels and can be used in transportation, heating, and power generation. Biofuels are produced through various processes, including fermentation, transesterification, and thermochemical conversion, and offer the potential to reduce greenhouse gas emissions, enhance energy security, and promote sustainability in the energy sector.