Biofuel usage expands despite rising costs

Global biofuel demand is expected to be 6% or 900 million litres per year (MLPY) higher in 2022 than the previous year.
Renewable diesel makes up the largest share of this year-on-year expansion, thanks to attractive policies in the United States and Europe.
Blending requirements and financial incentives support demand growth in India and Brazil, and Indonesia’s 30% biodiesel blending requirement also boosts biodiesel use in that country.
The International Energy Agency (IEA) has revised year-on-year growth downwards 25% from its 2021 forecast, with price and market developments in Brazil, Finland and Sweden responsible for 80% of this downward revision.
While high biodiesel prices led the Brazilian government to reduce its biodiesel blending requirements for 2021/22, in Finland high fuel prices prompted the government to temporarily lower its renewable distribution obligation for 2022/23. Sweden froze 2023 greenhouse gas targets for transport fuels at 2022 levels. However, 2030 targets remain unchanged.
Total global biofuel demand expands by 35 000 MLPY or 20% over 2022-2027 in the main-case forecast. Growth in renewable diesel and biojet fuel consumption is almost entirely in advanced economies.
Here, policies designed to reduce GHG emissions are driving demand because these fuels can be produced with low GHG emissions, blended at high levels and made from wastes and residues. In fact, nearly 70% of renewable diesel and biojet fuel came from wastes and residues in 2021.
Meanwhile, rising ethanol and biodiesel use occurs almost entirely in emerging economies aiming to reduce oil imports while also maximising the use of indigenous resources to benefit the local economy.
Plus, biofuel use helps reduce GHG emissions in these countries.
The United States, Canada, Brazil, Indonesia and India make up 80% of global expansion in biofuel use, as all five countries have comprehensive policy packages that support growth.
In Brazil, Indonesia and India, rising gasoline and diesel use also accelerates demand for biofuels, while in the United States and Canada declining gasoline and diesel demand slow biofuel growth and even reduce the use of some fuels.
In Europe, falling transport fuel demand nearly stalls volume growth even though state-level policies are increasingly stringent. Globally, the biofuel share in transport fuel consumption climbs from 4.3% to 5.4% during 2022-2027.