A bright outlook for biofuels

The German Federal Cabinet has proposed legislation under which biofuels will compete with other low carbon pathways to comply with exponentially increasing emission reduction quotas in the coming decade.
Electric vehicle (EV) penetration is expected to grow, so biofuel producers fear this could come at the expense of their product demand.
Stratas Advisors does not share this outlook. Even if ambitious EV, low carbon power and green hydrogen targets are met, biofuel consumption will still need to grow to comply with the mandate.
As the greenhouse gas (GHG) reduction quota only increases every other year while non-biofuel compliance pathways grow each year, biofuel demand looks set to be higher in even years and lower in odd years. Technical blending limits in the fatty acid methyl aster (FAME) segment mean most of the yearly variation will be observed in hydrotreated vegetable oil (HVO) and ethanol demand.
GHG reduction targets
Under the proposal, GHG reduction obligations for transport fuels increase from 6% currently to 22% by 2030 (compared to the fossil baseline).
Any savings reached through road electricity can be counted three...