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The global biofuels market is experiencing robust growth, driven by the need for cleaner, renewable energy sources and the increasing focus on reducing carbon emissions. In 2023, the market was valued at USD 99.53 billion and is expected to grow at a compound annual growth rate (CAGR) of 11.3% from 2024 to 2030. This expansion is propelled by governmental policies and regulations aimed at desulfurizing petroleum products and decreasing reliance on fossil fuels. Biofuels, derived from plants, animal waste, or algae, offer a renewable alternative as their feedstock can be replenished faster than fossil-based resources.
Market Size and Growth (2024-2030)
With the growing demand for cleaner fuels, the biofuels market is forecasted to continue its expansion. A significant portion of this growth is expected in regions with stringent regulatory frameworks and tax incentives promoting biofuel usage, particularly in the transportation sector. North America, led by the United States, is a key contributor, thanks to its policies supporting environmental goals and energy independence. However, challenges such as the rising cost of raw materials and food security concerns may pose obstacles.
Key Drivers and Opportunities
According to the International Organization of Motor Vehicle Manufacturers (OICA), global automotive production was 89.8 million in 2023. In addition, the growing trend for reducing GHG emissions and emphasis on biofuel production is boosting the growth scope in the biofuel market. The major disruption caused by the COVID-19 outbreak impacted the growth of the biofuel market due to disturbance in manufacturing, supply chain disruption, falling demand from major end-use industries and other lockdown restrictions. However, significant recovery is boosting the demand for biofuel for a wide range of applicability and utilization in the automotive transportation sector.
- Government Regulations: Countries like the U.S., Brazil, and several European nations have implemented tax incentives and blending mandates to boost biofuel production and reduce greenhouse gas (GHG) emissions. For example, the U.S. government has rolled out regulations to reduce reliance on conventional fossil fuels, offering political, environmental, and economic support for biofuels.
- Technological Advancements: Innovations in biofuel production, especially in second and third-generation biofuels, are creating new opportunities. Microalgae, for instance, are being tested as a biofuel feedstock due to their high energy content and low environmental impact. However, technological advancements are needed to scale production and make these options commercially viable.
- Energy Security: Biofuels offer a renewable alternative to fossil fuels, helping nations alleviate energy security risks. The growing pressure to meet international climate agreements, such as the Paris Agreement, is also encouraging businesses to adopt biofuels as part of their energy strategies.
- Rural Development: Biofuel production can stimulate rural economies by creating jobs in agriculture and renewable energy sectors, particularly in developing regions where raw materials like sugarcane, corn, and vegetable oils are plentiful.
The biofuel market is witnessing a surge in advanced biofuel innovation, marked by the development of next-generation biofuels derived from non-food feedstocks. Advanced biofuels, such as cellulosic ethanol and algae-based fuels, are gaining traction due to their higher energy efficiency, reduced greenhouse gas emissions, and potential to overcome challenges associated with traditional biofuels.
A key trend shaping the biofuel market is the integration of circular economy principles. Companies are increasingly adopting circular approaches, utilizing waste and by-products from various industries as feedstocks for biofuel production. This not only addresses environmental concerns by reducing waste but also enhances the overall sustainability of biofuel production. A notable trend in the biofuel market is the increasing emphasis on the development and commercialization of advanced biofuel technologies.
As the global focus on sustainable energy intensifies, advanced biofuels, derived from non-food sources such as algae, waste biomass, and cellulosic materials, are gaining prominence. These next-generation biofuels offer several advantages over traditional biofuels, including higher energy efficiency, reduced greenhouse gas emissions, and minimized competition with food crops for resources.
Technological advancements, research investments, and supportive regulatory frameworks are propelling the scale-up and integration of advanced biofuels into mainstream energy markets. This trend not only addresses environmental concerns but also contributes to diversifying the feedstock base, enhancing energy security, and fostering a more sustainable and resilient biofuel industry in the global energy landscape. Thus, the Biofuel industry is anticipated to grow rapidly and contribute to the Biofuel market size during the forecast period.
Challenges and Restraints
Despite the promising outlook, several hurdles could impede biofuel market growth:
- Food Security Concerns: Large-scale biofuel production from food crops like corn, sugarcane, and soybeans can drive up food prices and exacerbate food security issues. This may deter some countries from fully embracing biofuels as a primary energy source.
- Lower Energy Return on Investment (EROI): The energy yield of biofuels like biodiesel is lower than that of petroleum-based fuels. For example, biodiesel from soybeans has an EROI of 5.5, compared to 16 for petroleum-based fuels. This means biofuels may not always be as cost-effective or energy-efficient.
- Technical and Performance Issues: In industries like automotive and aviation, performance concerns related to biofuel usage, such as engine clogging and lower fuel efficiency, still need to be addressed. Moreover, while biofuels reduce carbon emissions, they may increase nitrogen oxide emissions, presenting an environmental trade-off.
- High Production Costs and Industrial Pollution Associated with Biofuel: The costs of production of Biofuel are relatively high. In addition, the burden on agricultural feedstock such as sugarcane, corn, cassava and other biomass increases the burden on the biofuels market. Furthermore, the industrial pollution arising from the production of biofuels and small-scale water pollution from biofuel manufacturing plants are hampering the growth prospects for biofuels. The nitrogen oxide level released in the atmosphere is also high, which is leading to industrial pollution. Thus, due to such complexities, the biofuel market anticipates a slowdown.
Biofuel Segments: Form, Product, and Feedstock Insights
- Form Insights: The liquid segment held a significant share of the Biofuel Market in 2023 and is projected to grow at a CAGR of 7.0% during the forecast period 2024-2030. The demand for liquid biofuel types is high compared to solid and gaseous types due to high utilization in flexible-fuel vehicles and focus on energy security. The liquid biofuels are derived from renewable sources
uch as domestic wastes, commercial waste and others, thereby reducing the concern regarding resource scarcity. In addition, the growing applicability of liquid type as a transportation fuel in the automotive transportation sector is fueling the demand for biofuels. Thus, owing to the high demand for liquid biofuels such as ethanol, biodiesel and others, the liquid type segment is anticipated to grow rapidly in the Biofuel market during the forecast period.
- End-use Industry: The automotive segment held a significant share of the Biofuel Market in 2021 and is projected to grow at a CAGR of 7.5% during the forecast period 2024-2030. Biofuels such as ethanol, biodiesel and others are increasingly utilized as a transportation fuel in the automotive sector. The lucrative growth scope for automotive is high due to growth factors such as rising demand for fuel-efficient vehicles, vehicle electrification and urbanization. According to the Federal Chamber of Automotive Industries, the new vehicle registration in Australia showed an increase of 1.2% with 101,233 units in March 2022 compared to March 2021. With the rapid growth scope and production trend in the automotive transportation sector, the demand for biofuel as transportation fuel or vehicle engine fuel is increasing. This, in turn, is projected to boost its growth scope in the automotive industry during the forecast period.
- Product Insights: The “Others” segment, which includes propanol, butanol, methanol, and biogas, dominated the market in 2023. Biogas, in particular, is becoming an increasingly important fuel for electricity generation and transportation, driven by the need to reduce fossil fuel dependency.
- Feedstock Insights: Feedstock sources like corn, sugarcane, and vegetable oils form the backbone of biofuel production. The “Others” category, which includes rice and potatoes, accounted for the largest revenue share in 2023. Ethanol derived from sugarcane is gaining traction as companies set up production facilities around this renewable resource.
Applications of Biofuels
- Transportation: Accounting for over 71% of the market share in 2023, transportation remains the largest application for biofuels. The suitability of biofuels for vehicles, combined with favorable government regulations, drives this demand.
- Aviation: The aviation sector is poised to experience the fastest growth, with initiatives like the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) encouraging the use of biofuels to meet emission targets.
Regional Market Insights
- North America: North America held the largest share of up to 39.5% in the Biofuel Market in 2023. The U.S. leads the region due to its supportive regulatory framework and investments in second and third-generation biofuels.The lucrative growth scope for biofuel in this region is influenced by the established base for biofuel utilization, the presence of large biofuel feedstock and supportive government policies for renewable energy. The lucrative growth of the automotive sector in North America is influenced by rising public transportation, demand for fuel-efficient vehicles and strict regulations for particulate emissions. According to Statistics Canada, around 26.3 million new vehicles were registered in Canada in 2023. According to the International Organization of Motor Vehicles Manufacturers (OICA), automotive production in the U.S. rose to 10.8 million units in 2023 compared to 10.47 million 2022. With the rising automotive production, the utilization of biofuels such as ethanol gas, biodiesel and others in vehicles is growing, which, in turn, is projected to boost its growth prospects in the North America region during the forecast period.
- Europe: Europe is experiencing significant growth, driven by advancements in biofuel production technologies and increasing investments in biofuel refineries. Countries like Germany and Spain are leading the charge, with initiatives aimed at reducing emissions and enhancing energy security.
- Asia-Pacific: This region is expected to witness the fastest growth from 2024 to 2030, as countries like China and India increase their investments in biofuel technologies. China, with its growing ethanol production capacity, and India, with its ethanol blending mandates, are emerging as key players in the market.
Industry
The biofuel market is dominated by a few major players with significant regional reach. Key companies in the market include ADM (US), Chevron (US), Valero (US), Neste (Finland), and Cargill, Incorporated (US). From 2018 to 2023, these industry leaders have employed strategies like new product launches, contracts, agreements, acquisitions, and expansions to increase their market share and strengthen their positions in the biofuel sector.
In 2016, Nissan became the first automotive company to develop a vehicular propulsion system powered by a solid oxide fuel cell (SOFC) running on bio-ethanol. Leveraging this expertise, Nissan is now applying SOFC technology to stationary power generation systems. The company has committed to achieving carbon neutrality across its operations by 2050 and has begun trials at its Tochigi plant in Japan, aiming for full-scale operations by 2030.
SOFCs offer high power generation efficiency (70%) and can be paired with reformers to generate electricity from fuels like ethanol, natural gas, and LP gas. Nissan is also developing metal-supported cells for improved durability and flexibility in fluctuating power demands, potentially integrating SOFC systems with renewable energy in the future.
The stationary power system will be fueled by bio-ethanol made from sorghum, developed with Binex Inc. By 2025, this fuel will be sourced from Binex. Although SOFC power generation emits CO2, the CO2 is offset by the sorghum’s growth process, contributing to a carbon-neutral cycle.
Conclusion
The global biofuels market is set for a decade of growth as governments, businesses, and consumers increasingly prioritize renewable energy solutions to combat climate change and enhance energy security. While the market faces challenges related to food security, technological limitations, and lower energy returns, the rising demand for cleaner fuels and ongoing innovations are likely to propel the industry forward. As countries continue to invest in biofuel technologies, the market will play an essential role in shaping the future of sustainable energy.
References and Resources also include:
https://www.industryarc.com/Report/18518/biofuel-market-research-report-analysis.html
