IEA (2022), Renewables 2022, IEA, Paris https://www.iea.org/reports/renewables-2022, Licence: CC BY 4.0
Biofuel use expands in 2022 despite rising costs
Global biofuel demand is expected to be 6% or 9 100 million litres per year (MLPY) higher in 2022 than in 2021. 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.
Nevertheless, we have revised year-on-year growth downwards 25% from our 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.
Robust growth over the next five years will help meet climate and energy security goals
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.
Biojet fuel to make up 1-2% of jet fuel globally by 2027
Biojet fuel demand expands to 3 900 MLPY in our main-case forecast – 37 times the 2021 level – to account for nearly 1% of total jet fuel consumption. Recent US and EU policies prompt most of this growth. In the United States, tax credits included in the IRA and measures in the Sustainable Aviation Fuel Grand Challenge Roadmap boost consumption, while in Europe we expect the ReFuelEU target of 2% by 2025 to come into force during the forecast period.
Planned capacity additions in Europe and the United States meet most of this increased demand, with additional supplies coming primarily from Singapore. Biojet fuel production depends primarily on the availability of waste and residue oils and fats (52%) and vegetable oils (36%). Ethanol, woody residues and wastes provide the remainder. In Europe, the European Commission is likely to limit the amount of eligible feedstocks available to produce sustainable aviation fuel (SAF), while vegetable oils such as soybean oil will support SAF manufacturing in the United States. In our accelerated case, demand swells to 8 100 MLPY (2% of global jet fuel use) if existing policies as well as those under discussion drive faster growth.
The United States, China, Europe and India account for 80% of biofuel consumption growth in the accelerated case
Total biofuel demand reaches 240 000 MLPY in the accelerated case, up 25% from the main case. This level of growth is premised on China, Europe, India and the United States implementing more stringent policies to drive demand, and also assumes that efforts to increase ethanol blending in the United States and India are successful. Furthermore, all four countries must enlarge their supplies of feedstocks, especially wastes and residues, to expand renewable diesel, biojet fuel and biodiesel production.