Transport Biofuels

Replacing fossil fuels with biofuels is one of the primary ways to decarbonise the transport sector. In fact, biofuels make up 64% of the sector’s renewable energy consumption in 2030 in the Net Zero Emissions by 2050 Scenario. Biofuel consumption triples between 2019 and 2030 to 12 EJ in the scenario, equivalent to 12% of global transport fuel demand in 2030.  

Today, however – accounting for just 3% of transport fuel demand – biofuels are not on track to attain the Net Zero trajectory, and high commodity prices present a near-term obstacle. Nevertheless, a number of significant policy actions under discussion could accelerate demand for sustainable biofuels in the decade ahead. 

Biofuel demand fell 8% from 2019 to 2020, largely due to mobility constraints resulting from the Covid-19 pandemic. The pandemic also prompted some governments to delay policy implementation. Although demand is expected to return to the 2019 level in 2021, rising commodity prices in 2021, including for feedstocks such as soy and corn, have prolonged policy delays in several key countries: 

• In Brazil, the National Petroleum agency reduced GHG targets for the transport sector by 50% in 2020 due to fuel disruption concerns caused by the Covid-19 crisis and reduced its biodiesel blending mandate to 10% from 13% in 2021 in response to rising feedstock and biodiesel costs.  
• Indonesia delayed introducing its 40% biodiesel blending mandate (B40) from 2021 to 2022/23.  
• Colombia and Argentina have also delayed implementing biofuel policies because of high feedstock prices.  

Despite challenges arising from the Covid-19 crisis and high feedstock costs, a number of new policies that could accelerate sustainable biofuel demand are being discussed in large biofuel markets.  

Between 2010 and 2019, global biofuel consumption expanded 5% on average per year. Although achieving the Net Zero Scenario’s 14% average annual growth between 2021 and 2030 will require considerably stronger policies, similar expansion has been achieved in some countries and regions in the past. 

In fact, Europe, North America and several countries in Asia are considering or implementing policies that could accelerate biofuel demand.  

• Europe: Fit for 55. The proposed Fit for 55 package targets a 13% decline in the GHG intensity of transport fuels by 2030, which the European Commission estimates would result in a 28% share of renewables in transport fuels by 2030, double the current 14% share targeted. It also proposes a 2.2% minimum target for advanced fuels by 2030.  
• North America: the US Renewable Fuel Standard and Canada’s Clean Fuel Standard. In the United States, the Environmental Protection Agency is expected to provide details on new targets for 2023 starting in December 2021 for its Renewable Fuel Standard. The US government has also launched a Sustainable Aviation Fuel Challenge targeting 11 billion litres of sustainable aviation fuel by 2030. Meanwhile, Canada’s Clean Fuel Standard is slated to come into force in 2022 to reduce the GHG carbon intensity of transport fuels to 13% below the 2016 level in 2030. The government estimates this will more than double biofuel demand in the country by 2030.  
• Asia: India’s 20% ethanol blending mandate and China’s 14th Five Year Plan. In Asia, India is targeting 20% ethanol blending by 2025, a target originally slated for 2030. It therefore proposes to more than double its ethanol production capacity. China plans to peak GHG emissions before 2030, but has not yet released biofuel targets as part of its 14th Five Year Plan. According to IEA analysis liquid biofuel demand would need to more than triple by 2030 to help peak GHG emissions.  
• Latin America: RenovaBio. Launched in 2019, Brazil’s RenovaBio programme aims to reduce GHG emissions associated with biofuel use in the country. This and other programmes are expected to raise ethanol demand 25-50% by 2030.  

Biofuels produced from wastes, residues and dedicated crops that do not compete with food crops (such as crops grown on marginal land) make up 45% of biofuels consumed in 2030 in the Net Zero Scenario, up from an estimated 7% in 2020.  

Today, used cooking oil and waste animal fats provide the majority of non-food-crop feedstocks for biofuel production. Given that these feedstocks are limited, however, new technologies will need to be commercialised to expand non-food-crop biofuel production. For instance, cellulosic ethanol and biomass-to-liquids technologies use non-food feedstocks to produce low-carbon biofuels for use in the transport sector. While the average production cost is still double to triple that of fossil fuel equivalents, it could decline by as much as 27% over the next decade. 

Biofuel demand and production are expanding globally, but not at a pace consistent with the Net Zero Scenario. National governments can employ a combination of regulatory measures such as mandates, low-carbon fuel standards and GHG intensity targets, combined with carbon pricing and financial incentives, to help raise biofuel demand. In all cases, policies should include rigorous sustainability criteria and promote lifecycle GHG emissions reductions. 

Sustainability governance is essential to ensure that higher biofuel consumption provides tangible social, economic and environmental benefits, including lifecycle GHG emission reductions.  

Policymakers must establish frameworks to ensure that only sustainable biofuels receive policy support. Adherence to sustainability criteria should be verified by third-party certification of biofuel supply chains.  

The European Union, the United States (through minimum GHG thresholds in the RFS programme and the incorporation of indirect land-use change into California’s LCFS) and Brazil have established frameworks to codify some aspects of biofuel sustainability, but other countries must also ensure that rigorous sustainability governance is linked to biofuel policy support. 

Most biofuels are currently consumed through blending at low percentages with fossil fuels (typically less than 10% by volume or unit of energy). 

Policymakers should therefore find ways to encourage the use of flexible-fuel vehicles and drop-in biofuels to allow higher shares of sustainable biofuels to replace gasoline or diesel.  

Flexible-fuel vehicles are adapted to run on high biofuel blend levels or even on unblended biofuel, while drop-in biofuels can be used unblended or at high blend shares without modifications to engines, maintenance regimes or fuel supply infrastructure. 

Novel advanced biofuel investment and production costs are currently high, so policies are needed to facilitate the technological learning and production scale-up necessary to reduce costs. 

Relevant policies include advanced biofuel quotas and financial de-risking measures (e.g. loan guarantees from development banks). These would be particularly effective in Latin America and China as well as ASEAN countries, as these regions possess significant feedstock resources. 

Furthermore, governments should introduce policies that aim to reduce the lifecycle carbon intensity of fuels (such as California’s Low Carbon Fuel Standard). Advanced fuels with lower carbon intensities are rewarded financially under such policies.