Biofuels, particularly those derived from waste and non-food crops, are gaining traction as a renewable energy source to decarbonize hard-to-abate sectors like aviation and shipping.
The U.S. and India are leading the charge in biofuel innovation and investment, with the U.S. allocating $9.4 billion through the 2022 Inflation Reduction Act and India launching the Global Biofuel Alliance.
Despite their potential, biofuels face policy challenges within the EU, highlighting the need for a clear and consistent strategy to meet climate-neutrality objectives and ensure investment attractiveness.
Biofuels are expected to play a major role in the global green transition, helping to power and decarbonise planes, ships and industry. These low-carbon fuels can be used to fill the renewable energy gap as they are suitable for application in industries that cannot survive on electricity and batteries alone. Further, with greater innovation, more biofuels will likely be derived from waste plant materials, making them more sustainable.
Governments and private companies are investing heavily in the development of innovative biofuels that can be used to decarbonise transport and power hard-to-abate industrial activities. Biofuels are produced by heating biomass feedstocks (plant materials) rapidly at high temperatures (500°C–700°C) in an oxygen-free environment. The heat breaks down biomass into pyrolysis vapour, gas, and char. Once the char is removed, the vapours are cooled and condensed into a liquid “bio-crude” oil. Alternatively, they can be produced using gasification, hydrothermal liquefaction, or low-temperature deconstruction. Ethanol and biodiesel are the two most widely used biofuels today, but there is potential to develop a wide range of other fuels using different feedstocks.
Most biofuels are produced using conventional feedstocks, such as sugar cane, corn and soybeans. These fuels are low-carbon and many of them can be used in existing engines, reducing the need for expensive new equipment to decarbonise operations. However, there are concerns that continuing to use feedstocks that require widespread land use and can also be used as food could harm the environment and communities.
The International Energy Agency (IEA) expects the use of biofuels to increase significantly by the end of the decade, with a much bigger proportion of these fuels being produced using waste, residues and non-food crops, thereby making them more sustainable. Based on ambitious climate pledges in the transport industry, companies must invest heavily in biofuels to help researchers make major strides in the development of low-carbon fuels that can be used in trucks, ships and planes. The demand for biofuel rose to 4.3 exajoules (EJ) in 2022, surpassing pre-pandemic levels. To meet net-zero emissions aims by 2050, the global production of biofuel needs to increase to 10 EJ by 2030, requiring an average growth of around 11 percent per year, according to the IEA.
In the U.S., the 2022 Inflation Reduction Act (IEA) allocated $9.4 billion to the development of biofuels through 2031. In February this year, the U.S. Environmental Protection Agency (EPA) and the U.S. Department of Energy (DoE) released a Funding Opportunity Announcement to distribute the IRA funds to companies with high-impact biofuel technology projects to improve the performance and reduce the cost of biofuel production technologies.
Joseph Goffman, Assistant Administrator for EPA’s Office of Air and Radiation, stated, “This investment through the Inflation Reduction Act will spur innovation in the production of advanced biofuels, advancing this Administration’s goal to build a stronger clean energy economy.” Meanwhile, Jeff Marootian, U.S. Department of Energy Principal Deputy Assistant Secretary for Energy Efficiency and Renewable Energy, explained “Investing in bioenergy technologies provides a path forward to meet the growing demand for sustainable aviation fuel and other low-carbon biofuels… This joint DOE and EPA investment in a clean energy future is a great example of interagency partnership to further President Biden’s whole-of-government approach to tackling the climate crisis.”
In Asia, India is taking a leading role in biofuels development by launching the Global Biofuel Alliance. In October, The Indian G20 presidency established the Alliance, which includes major biofuels producers, Brazil and the U.S., as well as Singapore, Argentina, South Africa and the United Arab Emirates and 12 international organisations, including the World Bank, Asian Development Bank and World Economic Forum. Together, India, Brazil, and the U.S. produce 85 percent of the world’s ethanol.
India’s National Biofuels Policy, which was updated in 2022, includes specific targets such as achieving a 20 percent ethanol blending rate and developing 500 biogas plants across the country. India will lead the Alliance, while the group will help India to achieve its net-zero emissions target for 2070.
While some countries are making strides in biofuel development, the EU has fallen behind. The European Court of Auditors (ECA) is concerned that the EU’s approach to biofuels is too complex and lacks a long-term strategy, which could undermine the region’s transport decarbonisation targets. The EU has gone back and forth on its stance on biofuels. In the early 2000s, the European Commission supported the production of crop-based biofuels for transportation, aiming for these fuels to account for 10 percent of road transport energy use by 2020. However, after biofuels were found to be linked to deforestation abroad, the EC reduced these targets.
However, the EU is now realising the importance of biofuels in powering other modes of transport, such as ships and planes. Nikolaos Milionis from the ECA stated, “The EU framework for biofuels is complex and has changed frequently over the last 20 years.” He added, “Biofuels are meant to contribute to the EU’s climate-neutrality objectives and enhance its energy sovereignty. With its current biofuels policy, however, the EU is driving without a map and runs the risk of not reaching its destination.” Yet, “the lack of policy predictability may increase risks for private investments and reduce the attractiveness of the sector”, he explained.
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