Biofuel investment hits record high, but remains minority of global energy spending: IEA

Despite a record-high surge in global investment in low-emission fuels, biofuels still account for only a small fraction of the overall energy investment landscape, the International Energy Agency revealed in its latest World Energy Investment report.

The agency forecast global investment in biofuels to rise 13% in 2025, surpassing $16 billion for the first time. But even at this record level, biofuels and other low-emission fuels will represent only around 3% of total energy investment this year.

The report, published June 5, highlights a broader trend of rising investment in cleaner fuel alternatives.

Total global spending on low-emission fuels -- including liquid biofuels, biogases and low-emission hydrogen -- is expected to climb nearly 30% on the year in 2025 to reach close to $25 billion.

This builds on a 20% increase in 2024 and reflects growing momentum driven by climate policies, regulatory mandates and rising demand in hard-to-decarbonize sectors such as aviation and shipping.

Regional gaps widen as US, Brazil lead in liquid biofuels

While investment is growing across the board, regional patterns diverge significantly.

The US and Brazil continue to dominate in liquid biofuels such as biodiesel and ethanol. Together, the two countries account for the majority of global spending in this segment.

The US in particular remains the center of growth in hydrotreated vegetable oil and sustainable aviation fuel, contributing half of the 40% projected increase in HVO and SAF output in 2025, which is expected to reach 800,000 b/d.

Brazil, meanwhile, is poised for a potential investment breakthrough. Although biofuel spending in the country has grown only marginally in recent years -- reaching around $3 billion in 2025 -- the "Fuels of the Future" law that passed in September 2024 could unlock up to $4 billion in annual investment over the next decade.

A notable example is Raízen, the joint venture between Shell and Cosan, which has already committed $2 billion to construct nine second-generation ethanol plants by 2035.

Europe prioritizes biogas, lags in liquid biofuels

Europe, despite leading in overall clean energy spending, has focused more on biogas than on liquid biofuels.

The region accounted for 60% of global investment in biogas in 2024, but it lagged well behind the US, China and Brazil when it came to biodiesel and ethanol investment.

Several European refineries were transforming as demand declines and as older infrastructure shuts down. To comply with increasingly stringent emissions targets, some of these refineries are blending biofuels or incorporating carbon capture and storage technologies.

Energy firms in Europe and Asia are also entering strategic partnerships to expand their biofuel and hydrogen portfolios.

For instance, Eni partnered with LG Chem to launch a new biorefinery in South Korea, while also moving forward on a facility in Malaysia in collaboration with Petronas and Euglena.

Shipping sector pushes biofuels into new territory

The outlook for biofuels in maritime transport received a major boost in April when the International Maritime Organization finalized new carbon reduction rules.

These include a global carbon levy and mandatory fuel standards, which are expected to drive demand for low-emission fuels in global shipping. Refiners and energy companies are increasingly eyeing this sector, which until now had seen relatively little use of bio-based fuels.

In the US, for example, Phillips 66 has converted its Rodeo refinery in California into a dedicated biofuels facility capable of producing 50,000 b/d, the report said.

The $1.3 billion project, which had a budget over $400 million, was impacted by rising material costs, labor shortages and permitting delays, highlighting the complexities still facing large-scale conversion projects.

Policy remains linchpin

While the numbers point to a historic surge in clean fuel investments, the IEA noted much of this growth remains dependent on government policy.

Mandates, quotas, tax incentives and regulatory frameworks have been crucial to unlocking investment in key markets, the report said. Without consistent policy support, investment momentum in biofuels and low-emission fuels could easily stall, according to analysts.

As the world shifts toward a cleaner energy future, 2025 appears to be a turning point for biofuels and other emerging low-emission technologies. But despite record-high figures, their role in the broader energy transition is still in its early stages, underscoring just how far there is left to go.