ETHANOL MARKET ANALYSIS

The ethanol Market size is valued at US$ 104.3 Bn in 2024 and is expected to reach US$ 148.9 Bn by 2031, growing at a compound annual growth rate (CAGR) of 5.2% from 2024 to 2031.

 Ethanol Market Regional Insights:

• North America: The ethanol market is conquered by North America owing to favorable government policies for the production and use of ethanol as a biofuel, along with growing awareness regarding environmental pollution control caused due to the use of conventional fuels in the countries of the region.
• Asia Pacific: Asia Pacific is expected to register the fastest growth rate, on account of the expanding ethanol manufacturing capacity coupled with the presence of leading companies in the countries of Asia Pacific.
• Latin America: The ethanol market in the region is expected to grow at a significant CAGR from 2024 to 2031 This is due to the plentiful supply of raw materials and the growing demand for products from the automotive sector. It is anticipated that the regional environmental restrictions will improve ethanol consumption in end-use industries such as Automotive , Alcoholic Beverages. Moreover, the ethanol market in Brazil held the largest market share.

Figure 1. Ethanol Market Share (%), by Region, 2024

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Ethanol Market- Analyst’s Views:

The ethanol market continues to be driven by the environmental regulations mandating the use of biofuels in the transportation sector. Ethanol production helps reduce greenhouse gas emissions and improves air quality. Brazil and the U.S. remain the dominant producers with favorable policies supporting sugarcane and corn-based ethanol respectively. However, high production costs and availability of cheap oil remain near-term restraints for the ethanol market growth.

Asia Pacific is expected to be the fastest growing regional market for ethanol in the coming years led by China. Many Asian countries are implementing ethanol blending mandates to curb their oil import dependence and pollution levels. Trade issues like imposition of tariffs remain a key risk that can hamper the growth opportunities. Technological advancements in cellulosic ethanol production can further boost the market growth if commercialized successfully within the forecast period.

Driven by increasingly stringent emission norms, ethanol is finding new applications beyond fuel oxygenate in industrial solvents and chemicals. This opportunity can help diversify demand away from the volatile transportation segment. South America outside Brazil is also emerging as a high growth region backed by investments in new distilleries. However, the market potentially faces challenges if crude oil prices continue plunging in the long run.

In summary, while regulatory support keeps driving ethanol consumption globally, availability of cheaper alternatives and high production costs warrant a cautious outlook for sustained growth over the next five to 10 years.

 Ethanol Market Drivers:

Government subsidies and tax rebates: Government subsidies and tax rebates are significantly contributing to the adoption of ethanol as a biofuel and driving the growth of the ethanol market. Various governments around the world are providing production subsidies and investment tax credits to support the local ethanol industry. For instance, the U.S. government supports ethanol producers by offering a tax credit of U.S $0.45 per gallon of ethanol blended into gasoline. This subsidy lowers the input costs for biofuel producers and makes ethanol price-competitive with conventional gasoline. As a result, ethanol production in the U.S. has more than quadrupled since 2000 and currently stands at over 16 billion gallons annually according to the Renewable Fuels Association.

In addition, many countries offer generous blender tax credits to oil companies or importers that blend ethanol with gasoline. For example, in Brazil, the government exempts ethanol blenders from paying federal and state fuel taxes, which makes ethanol blends more cost-efficient than gasoline. Due to this rebate, flex-fuel vehicles that can use any blend of gasoline and ethanol now constitute over 90% of new car sales in Brazil. The country has thus emerged as the second largest producer of ethanol after the U.S. Such tax rebates and production incentives help offset the slightly higher costs associated with ethanol compared to gasoline and its infrastructure, thereby encouraging higher blending rates. For instance, the Renewable Fuel Standard (RFS) is a federal program in the U.S. that requires the blending of renewable fuels into transportation fuel. The program mandates the blending of 36 billion gallons of ethanol into gasoline by 2022.

Rising fossil fuel prices: Rising fossil fuel prices have significantly impacted the growth of the ethanol market in recent years. As the prices of gasoline and diesel continue to climb higher due to global factors like supply constraints and geopolitical issues, ethanol is emerging as a more economically viable and sustainable alternative fuel source for the transportation sector.

Ethanol is mainly produced from corn and sugarcane, which are abundant and renewable resources. It can be blended with gasoline up to certain percentages and used as fuel without requiring infrastructure changes to vehicles. This makes ethanol appealing as it helps displace the need for pure fossil fuels on one hand while being compatible with existing engines on the other. Furthermore, ethanol burns cleaner than gasoline and has substantially lower greenhouse gas emissions over its full lifecycle. For instance, According to the U.S. Department of Energy's Argonne National Laboratory, U.S. corn ethanol has been found to have 44%–52% lower greenhouse gas (GHG) emissions than gasoline. A study published in Biofuels, Bioproducts and Biorefining, also revealed a 23% reduction in corn ethanol's GHG emission intensity (CI) between 2005 and 2019.

Ethanol Market Opportunities:

Developing charging infrastructure: Developing charging infrastructure presents a great opportunity for the ethanol market to expand. As concerns over climate change intensify, governments and automakers are actively promoting the adoption of electric vehicles which require charging stations. This growing electric vehicle market means that demand for efficient renewable energy to power these charging points will also rise in the coming years. Ethanol produced from sustainable sources like agricultural waste has the potential to meet some of this increasing energy demand.

Several countries and states have already established plans to build out public fast-charging networks along major roadways and in cities/towns to encourage electric vehicle use. For example, the Biden administration has earmarked US $7.5 billion for developing a national electric vehicle charging network as part of the 2021 infrastructure bill passed in the U.S. Additionally, the European Union recently proposed rules requiring member countries to install public charging points every 60 kilometers on major roads by 2025. As more charging plugs come online, opportunities will open up for ethanol and other renewable fuels to provide clean electricity and power these chargers. Utilities and fuel retailers and looking adapt their existing infrastructure e.g. gas stations to accommodate electric vehicles. Ethanol produced from sources like corn stover or sugarcane waste offers a sustainable drop-in replacement for gasoline that could work in today's engines and distribution networks with minimal modifications. For instance, as per the International Energy Agency's 2021 report, clean energy investment needs to increase by almost 50% annually until 2030 in order to put the world on a path towards net zero emissions by 2050.

New product launches: New product launches in the bioethanol space could provide significant opportunities for growth in the future. As concerns around sustainability and carbon emissions continue to increase, consumers and business alike are looking for lower-carbon alternatives to fossil fuels, especially in the transportation sector. Ethanol already plays an important role as a gasoline additive and octane booster and is blended into fuel in many countries around the world. However, the market remains dependent on corn and sugarcane as primary feed stocks which raises concerns about land use. Second-generation technologies that utilize agricultural residues, municipal solid waste or purpose-grown energy crops provide options to alleviate these pressures while still expanding ethanol production. Several firms have pilot and commercial-scale facilities coming online in the next few years that will produce cellulosic ethanol made from non-food biomass. For instance, according to recent data released by the Department of Energy, greater blend rates like E30 can provide meaningful carbon reductions of around 35-50% compared to traditional gasoline and help meet ambitious government targets for lowering emissions from the transportation sector.

Ethanol Market Trends:

Increasing investments in charging networks: Increasing investments in electric vehicle charging networks around the world are expected to have a significant impact on the ethanol market in the coming years. As more charging options become available for electric cars, it will encourage more consumers to choose EVs over conventional gasoline vehicles. Since ethanol is mostly used as a gasoline additive or replacement in the current transportation sector, a transition towards electric mobility will directly reduce the demand for ethanol over time.

Several studies show that the sales of battery electric and plug-in hybrid vehicles grew substantially between 2020 and 2022. For example, the International Energy Agency reported that global EV stock exceeded 16 million in 2021, up from around 8 million in 2019. In Europe, new registrations of EVs rose by 63% year on year to over 1 million vehicles in 2022. The growth has been fueled by supportive government policies around consumer incentives, investments in public charging networks by automakers as well as charging companies. Countries like China, Germany and South Korea have emerged as leaders in expanding their charging capabilities nationwide.

The thriving EV market poses challenges as well as opportunities for the ethanol industry. On one hand, lower gasoline demand will negatively impact ethanol consumption for blends. However, advanced biofuels made from renewable sources like ethanol have the potential to reduce emissions in other transportation sectors that are harder to electrify like aviation, marine and heavy-duty trucks. Some airlines are already collaborating with biofuel producers to encourage the use of sustainable aviation fuel (SAF) blends on selected flights. If production of these biofuels is amped up to meet the growing needs of “hard to abate” sectors, it can help offset at least partially the losses expected from less ethanol blending in gasoline.

Growing demand for utility electric vehicles: The increasing demand for electric vehicles is having a significant impact on the ethanol market in both direct and indirect ways. As more consumers switch to electric cars, which do not require gasoline, the consumption of gasoline and demand for ethanol as a gasoline additive is declining. According to the U.S. Energy Information Administration, gasoline consumption in the U.S. peaked in 2006 and has been falling gradually since then. This downward trend is projected to accelerate as more electric vehicle models become available and prices become competitive with gasoline cars.

While the immediate impact is the reduced consumption of ethanol for blending into gasoline, there are also longer term implications. With the prospect of lower future gasoline demand, oil companies are hesitant to invest in expanding distribution infrastructure for higher ethanol blends like E15 and E85. They are also reluctant to install more E85 pumps at gas stations. This creates uncertainty around the market growth for advanced ethanol fuels. Some national governments are also reconsidering policies meant to require increasing usage of biofuels. For example, the European Commission proposed revisions in 2021 to its renewable energy directive that could decrease the mandated share of renewable fuels in the transport sector in the future.

Ethanol Market Restraints:

High cost of EVs: The high cost of electric vehicles (EVs) is significantly restraining the growth of the ethanol market. Ethanol is a biofuel that is produced from plant materials like corn and sugarcane, and it is blended with gasoline to power traditional internal combustion engine vehicles. However, as EVs emerge as a more viable and environment-friendly alternative to gasoline vehicles, consumer demand for ethanol blended fuel is expected to decline steadily over time.

Most EVs currently offer superior driving range and performance compared to similar gasoline counterparts, but their upfront costs are substantially higher. For example, according to the United States Department of Energy database, the average price of a new electric car in 2022 was around US$66,000 compared to US$48,000 for a similar gasoline-powered car. The higher battery costs and lack of economies of scale in EV production continue to keep prices elevated at the consumer end. While tax credits and other incentives are helping bridge the price gap to some extent, EVs will remain relatively more expensive for the average consumer in the near future. For instance, according to the United States Energy Information Administration, the U.S. doubled its market share to 20% by the end of the decade as recent policy while Europe maintains its current 25% share. The share of electric cars in total sales has more than tripled in three years, from around 4% in 2020 to 14% in 2022.

Counter balance: Encourage the development and adoption of flex-fuel vehicles (FFVs) that can run on high-ethanol blends like E85. Lobby for incentives that promote FFVs, which could maintain or even increase demand for ethanol-blended fuels.

Low charging infrastructure: The lack of widespread charging infrastructure is one of the major bottlenecks restraining the growth of the ethanol market. With insufficient public charging stations available, consumers are hesitant to switch to ethanol-powered vehicles because of range anxiety. This mismatch between evolving consumer demand and slow expansion of fueling options continues to limit the adoption of new ethanol-based technologies.

While the number of electric vehicles on roads is steadily rising globally, the charging infrastructure development has failed to keep pace. Several studies show that consumers will not switch to new fuel technologies until charging is as convenient as refueling gasoline.

On the manufacturer side as well, lagging charging infrastructure poses business risks. Automakers are reluctant to heavily invest in new ethanol models due to uncertainty over fuelling needs being adequately met. The protracted timelines for building out nationwide public networks have discouraged both consumers and businesses from committing to this alternative pathway, stifling the industry's transformation. According to the U.S. Department of Energy, studies estimate that the U.S. will need about US$40 billion of infrastructure investment to support 15 million EVs expected on roads by 2030 under the current policy scenarios. However, private capital alone may not be sufficient to achieve these targets in time. Unless governments proactively focus on accelerating the roll-out of charging amenities through incentives and mandates, it will be challenging to unlock ethanol's potential to revolutionize transportation.

For instance, according to the International Energy Agency, in 2021, there were approximately 1.2 million public EV chargers globally. However, this network needs to grow exponentially to meet the target of 50% of new car sales being EVs by 2030 in many countries.

Counterbalance: Invest in and advocate for the expansion of ethanol blending infrastructure at existing fuel stations, making it more convenient for consumers to choose ethanol-blended fuels.

          Recent Developments:

• January 2022: ADM, a global provider of nutrition, agricultural origination, and processing solutions, announced a partnership with Wolf Carbon Solutions to advance the de-carbonization of ethanol production. ADM is a global provider of nutrition, offering a wide range of products and solutions for both animal and human nutrition. In the animal nutrition sector, ADM is a leader in providing high-quality feed products, supplements, premixes, custom ingredient blends, and specialty feed. They also offer value-added solutions for livestock, aquaculture, and pet nutrition. Additionally, ADM is dedicated to enabling sustainable growth and has unparalleled nutritional expertise in this field. In the human nutrition sector, ADM transforms naturally sourced products into ingredients and solutions that enrich people's lives, providing food, beverage, and supplement ingredient portfolios.
• Wolf Carbon Solutions is an organization that is involved in carbon capture and storage, particularly in the context of ethanol production. The company aims to advance decarbonization of ethanol production through state-of-the-art carbon capture technology. Wolf Carbon Solutions has been in the spotlight due to its proposal for a controversial 260-mile carbon dioxide pipeline in Illinois and Indiana, which is intended to transport captured carbon dioxide from ethanol plants. The company has faced regulatory and operational challenges, including the need to secure agreements with landowners and ethanol plants, as well as addressing concerns raised during the regulatory review process.
• In December 2022, CropEnergies' announced to build a plant for the production of renewable ethyl acetate from sustainable ethanol. The plant will be located in the Zeitz Chemical and Industrial Park in Elsteraue, Germany. The investment, approved by CropEnergies' supervisory board, is estimated to be between US $129.2 and US $140.0 million. This move marks CropEnergies' diversification into the biobased chemicals business and represents a step towards its goal of transforming into a supplier of innovative, sustainable products made from biomass.
• CropEnergies  is a leading European manufacturer of sustainably produced bioethanol, neutral alcohol, and food and animal feed. The company is committed to sustainable production and is diversifying into the biobased chemicals business, with plans to build a plant for the production of renewable ethyl acetate from sustainable ethanol. The plant will be located in the Zeitz Chemical and Industrial Park in Elsteraue, Germany.
• In October 2021, Clariant, a focused, sustainable and innovative specialty chemical company, announced the official completion of its sunliquid cellulosic ethanol plant in Podari, Romania. The completed construction is an important next step for the commercial deployment of sunliquid technology and thus supports Clariant’s sunliquid licensing business strategy.
• Clariant  is a Switzerland-based  multinational specialty chemical company, formed in 1995 as a spin-off from Sandoz. Headquartered in Muttenz, Switzerland, Clariant is one of the world's leading specialty chemical companies, contributing to value creation with innovative and sustainable solutions for customers. The company has made significant advancements in the manufacture of bioethanol, particularly in the production of second-generation biofuels using its sunliquid process, which reduces greenhouse gas emissions by around 95% compared to fossil fuels. Clariant has also been involved in setting up a new sustainable business ecosystem, including the production of cellulosic ethanol from agricultural residues.

Acquisitions and partnerships

• In October 2021, ADM a global leader in nutrition and agricultural origination and processing, announced that it has reached an agreement to sell its ethanol production complex in Peoria, Illinois, to BioUrja Group.
• ADM (Archer Daniels Midland) is a global leader in human and animal nutrition as well as agricultural origination. The company, founded in 1902 and headquartered in Chicago, Illinois, operates more than 270 plants and 420 crop procurement facilities worldwide. It is a major player in food processing and commodities trading, with a focus on processing cereal grains and oilseeds into products used in food, beverage, nutraceutical, industrial, and animal feed markets globally. ADM's net sales for 2020 were $64 billion, and it is ranked No. 35 in the 2023 Fortune 500 list of the largest United States corporations. The company's breadth, depth, insights, facilities, and logistical expertise give it unparalleled capabilities to meet the needs for food, beverages, health, and wellness on a global scale.
• The BioUrja Group is a global company that operates in the energy and agricultural commodities sector. It owns and operates multiple businesses across the globe, with facilities in Mexico, Singapore, India, Dubai, the United Kingdom, and 20 locations across the United States. The group supplies and trades physical commodities, including biofuels, petroleum products, natural gas liquids, metal alloy tubing, grain, and animal feed products. BioUrja Trading, LLC is the largest and oldest company within the BioUrja Group, initially founded to supply physical bioethanol to the U.S. refining industry and has since evolved into a leading supplier of refined petroleum products and natural gas liquids, in addition to maintaining its strong presence in the bioethanol supply and trading sector.

Figure 2. Ethanol Market Share (%), By Process, 2024

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Top Companies in the Ethanol Market:

• Cargill Inc
• Archer Daniels Midland Company
• Grain Processing Corporation
• Ace Ethanol LLC
• Advanced Bio Energy LLC
• MGP Ingredients,
• Flint Hills Resources
• Marquis Energy

Definition: Ethanol commonly known as ethyl alcohol is a colorless and flammable chemical compound with an agreeable odor and taste. It is renewable, and can be produced by the fermentation of starch and sugar based biological materials and cellulosic feedstock, such as sugarcane, wood, wheat, corn, and barley. Corn and starch based crops are majorly used for the production of ethanol. Ethanol is highly soluble in water and most of the organic solvents, due to this it is widely used as a solvent in various industries. Further, it is extensively used as a preservative in pharmaceutical industries and it is a major component in producing alcoholic beverages.