Biofuels Take Center Stage: Emerging Economies Drive Demand Surge

The global biofuels market is revving its engine for a significant growth spurt. Demand is projected to surge by 30% over the next five years, reaching a staggering 200 billion liters by 2028. This exciting rise is being fueled primarily by a wave of enthusiasm from developing economies like Brazil, Indonesia, and India.

Emerging Economies Lead the Biofuels Charge

These countries are perfectly positioned to capitalize on biofuels. They boast robust biofuel policies that incentivize production and use. Additionally, they have a growing demand for transport fuels and an abundance of potential feedstocks, the raw materials used to create biofuels. As a result, ethanol and biodiesel consumption are expected to experience the most significant growth in these regions.

While advanced economies are also strengthening their biofuel policies, factors like electric vehicle adoption and vehicle efficiency improvements are limiting the overall volume growth. However, these economies are still expected to see significant expansion in the renewable diesel and biojet fuel segments, catering to sectors where electric alternatives are currently limited.

Biofuels: A Powerful Weapon in Reducing Oil Dependence

Biofuels are emerging as a game-changer in the fight against oil dependence. They are projected to work alongside renewable electricity to collectively reduce transport sector oil demand by nearly 4 million barrels of oil equivalent per day (mboe/d) by 2028. This translates to a significant 7% reduction in forecasted transport oil demand. When we consider electricity generation from non-renewable sources like nuclear, natural gas, and coal, this value climbs to almost 9%.

Here's a breakdown of the projected oil demand reduction by source:

• Renewable Electricity: Estimated to avoid an additional 1.3 mboe/d of oil consumption by 2028.
• Biofuels: Expected to contribute by avoiding an additional 0.7 mboe/d by 2028.
• **By 2028, Biofuels are projected to account for nearly 60% of avoided oil demand, with renewable electricity making up the remaining 40%.

This trend highlights the crucial role biofuels play in achieving emission reduction targets, particularly in sectors where electric alternatives are not yet widely available. Biofuels are especially effective in reducing oil demand for diesel and jet fuel.

Biojet Fuel Takes Flight

The future of aviation is looking greener with the projected rise of biojet fuel. Global biojet fuel demand is anticipated to reach nearly 5 billion liters by 2028, constituting almost 1% of global jet fuel supplies. This projection reflects a 20% upward revision due to recent policy announcements and a robust project pipeline. The United States, Europe, and Japan are leading the charge in this segment, driven by strong policy support.

• Biojet Fuel Demand and Capacity Additions: The report presents two scenarios – Main Case and Accelerated Case.The Main Case suggests moderate growth, but specific data is not provided.The Accelerated Case indicates significant growth, but again, specific data is not available

• Policy implementation and securing a diverse range of feedstocks are critical to unlocking the full potential of biojet fuel. The Accelerated Case scenario suggests biojet fuel demand could reach 15 billion liters by 2028, representing a substantial 3.5% of global jet fuel demand, if planned policies are implemented and new feedstock sources are established.

Biofuel Costs and Government Support

Biofuels typically cost more than their fossil fuel counterparts. However, the impact on fuel prices is relatively modest, with historical increases ranging from 0.01-0.04 USD per liter-equivalent of blended fuel over the past 13 years. Governments are actively involved in bridging the biofuel cost gap and stimulating production through various measures, including:

• Indonesia: Levies on palm oil exports are used to subsidize biodiesel costs.
• United States: Offers a biodiesel blending tax credit to incentivize production.
• India: Sets ethanol purchase prices to ensure producer viability and lowers taxes on ethanol-blended fuels.
• Europe: Employs a mix of tax benefits and cost-pass-through approaches depending on the country.

While biofuel blending costs are expected to rise with higher blending levels and increasing feedstock prices, governments are continuously evaluating and adapting support mechanisms to ensure affordability.

Stay Inspired,

Utkarsh Gupta

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