Understanding BioFuels – Promises and Pitfalls
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Understanding BioFuels – Promises and Pitfalls

Second-generation biofuels are the poster-child products of the circular economy. Biorefineries offer efficient utilization of biomass, represent a low-carbon transportation fuel solution by reducing greenhouse gas (GHG) footprint by up to 90% versus fossil fuels, and help tackle the challenge of reducing our dependence on fossil fuels.

Regulatory demand drives growth in the global biofuel industry as aggressive clean energy policies are implemented in Europe and the US. In Europe, for example, the new Renewable Energy Directive, RED II, set the target for the share of renewable energy used in transport to 14% by 2030. Discussions are underway to increase the overall target to 45% and the GHG intensity transport target to 16%.

Low-carbon fuels could be essential in the transportation industry sectors with hard-to-abate emissions: aviation/shipping requiring fuels with high energy intensity. Electrification of transport is currently happening in the light-duty vehicle segment. Before electrification is complete, meeting 2030 emissions reduction targets could require using sustainable fuels directly in existing fleets with internal combustion engines.

Oil majors are accelerating investments in biofuels. Last year, one of the more significant transactions in the energy sector was a major oil producer's $3bn cash deal for the largest biodiesel producer in the US. Competitors in Europe and the US announced similar moves in the biofuel space.

In the context of global commercial and political tensions, access to a secure source of feedstock will be critical to run biorefineries economically and sustainably. 92% of the new capacity that should be operational in the next four years is driven by the same technology consuming used cooking oil (UCO) & animal fats and producing the same output: SAF & Hydrotreated Vegetable Oils (HVO) for RD. As new capacity ramps, pressure on the feedstock market could affect prices and producer margins.

@Kevin Kerdoudi

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