IEA boosts biofuel blending outlook amid steady gasoline demand

Stickier-than-expected fossil demand could bolster short-term biofuel growth for road transport after signs of slower-than-expected electric vehicle uptake in Europe and the US, the International Energy Agency said Oct. 9.

Once the dominant source of renewable transport demand growth, biofuel consumption for road use is expected to stall with the rise of EVs, making harder-to-decarbonize segments such as maritime and aviation more prominent growth markets.

Annual global biofuel demand for road transport could slow to just 0.3% by 2030, while growth in the US and Europe could come to a halt before the end of the decade, the IEA said in its Renewables 2024 report.

S&P Global Commodity Insights has maintained more ambitious growth estimates, expecting a 4% year-on-year increase in global road fuel demand for biofuel in 2030, expecting total demand volumes for the segment to peak in 2033. Increasingly, however, the bulk of demand is expected to come from India, Indonesia and Brazil due to high blending rate plans and slower electrification potential than Europe and the US.

The slowdown marks a key pivot from the last six years, with biofuel accounting for 90% of growth in renewable transport demand globally, according to the IEA. From 2024 through 2030, that share is expected to drop to just 33%, surpassed by renewable electricity with a 50% share and followed by aviation and maritime biofuels with a 10% share, the agency said.

Ambitious forecasts for US and European electric vehicle uptake remain a key swing factor, however, and the IEA was forced to revise up its 2030 global biofuel demand growth forecast for the automotive segment by 13% from its 2023 estimates as EV sales appeared to underperform expectations in 2024.

“A slightly slower decline in gasoline demand in the United States and Europe drives most of this increase, as greater transport fuel demand requires larger quantities of biofuels to meet blending requirements,” the IEA said.

Signs of weak EV performance has tested expectations of exponential growth in key markets, with European carmakers expressing concern around slumping EV sales that left turnover in Germany 70% down on the year this summer. EVs appeared to fare worse than other vehicle types amid sluggish economic growth, while lobbyists have warned of a lack of public trust in infrastructure availability.

The IEA's latest estimates project global road biofuel demand to climb 27 billion liters (around 169.8 million barrels) from 2024 levels to 205 billion liters (roughly 1.29 billion barrels) by 2030, based on assumptions that policy measures in the US and Europe will wipe out10%-20% of diesel and gasoline demand over the same period.

Growth remains sensitive to policy rollbacks and trailblazer markets, as recently evidenced by watered-down emission reduction targets in Sweden in 2023. According to the IEA, Sweden’s decision to drastically reduce its emissions reduction targets in 2023 from among the most ambitious in Europe slashed its renewable diesel demand by almost 90% in contributing to a 20% decline across Europe, though it has since planned to strengthen its targets slightly in 2025.

New markets

With peak biofuel use in the automotive segment on the horizon, aviation and shipping uptake will increasingly propel growth.

According to the IEA, the two sectors will be responsible for more than 75% of biofuel demand growth in 2030, and almost all growth in the US and Europe.

Policy support from the aviation sector has continued to gain momentum, prompting the IEA to revise its 2024 forecast 20% higher to reach 9 billion liters (roughly 56,600 barrels) by 2030.

Stronger policy from the US could offer the most significant demand stimulus, with the potential to add another 9 billion liters supply if measures such as a stronger Renewable Fuel Standard and extended IRA credits are introduced.

While sustainable aviation fuel commands a hefty premium to fossil jet fuel, tougher mandates and carbon compliance costs are set to narrow the discount. Citing planned penalties under the ReFuelEU aviation initiative and the value of renewable fuel credits in the US, among other measures, the IEA said said existing policies are “sufficient to close the cost gap and drive biojet demand."

In contrast, the maritime sector suffers from a lack of “substantial new demand drivers” beyond EU ReFuelEU measures and faces a 40% deficit in biofuel consumption relative to the its Net Zero by 2050 projections, the IEA said.

According to IEA forecasts, marine biodiesel use rises to 1.8 billion liters by 2030, comprising around 0.8% of international shipping, though decisive policy measures from the IMO in 2025 such as an emission pricing mechanism could drive the share to 1.4%.

Platts, part of Commodity Insights assessed bio-bunkers with a 30% FAME blend and 70% VLSFO content at $725.75/mt on Oct. 9, pricing at a $180/mt premium to pure VLSFO.