This chapter describes market developments and medium-term projections for world biofuel markets for the period 2025-34. Projections cover consumption, production, trade and prices for ethanol and biomass-based diesel (including the classical biodiesel, which makes up for the largest share of the complex, renewable diesel and sustainable aviation fuel, the latter two being drop-in fuels that can replace petroleum-based fuels). The chapter concludes with a discussion of key risks and uncertainties which could have implications for world biofuel markets over the next decade.
OECD‑FAO Agricultural Outlook 2025‑2034
Abstract
Biofuels continue to play an important role as a renewable alternative to fossil transportation fuels. Global use of biofuels is expected to grow by 0.9% annually over the next decade, significantly lower than in the past.
In most high-income countries, biofuel growth is projected to slow due to stagnating fuel demand resulting from electric vehicle adoption and weaker policy support. In the United States the focus is expected to shift towards biomass-based diesel due to road and aviation fuel targets, with a projected 1% annual increase. Under Canada’s Clean Fuel Regulations, however, biofuels use is projected to increase by 6% per year while in the European Union biofuel use is expected to decrease under Renewable Energy Directive (RED III).
Middle-income countries are expected to offset the slowdown of demand growth projected in high-income countries. Biofuel consumption is projected to grow by 1.7% annually, driven by increasing transport fuel demand, domestic energy security, fiscal goals, and emissions reduction commitments, with Brazil, Indonesia, and India leading this growth.
Most biofuel markets are anticipated to be largely self-sufficient. Countries with strong domestic production capacity, such as India, Indonesia and Brazil, will likely meet their own rising demand, limiting the expansion of global biofuel trade. The global share of biofuel production that is traded is expected to remain at 15% for biomass-based diesel and 8% for ethanol.
First-generation biofuels will continue to dominate the market, with ethanol largely produced from maize and sugar and biomass-based diesel primarily from vegetable oils such as soybean, rapeseed, and palm oil.
The future of biofuel markets expansion depends on complex policies, with increasing interest in advanced biofuels and sustainable aviation fuel. However, expanding production capacities remains challenging due to high investment costs. Sustainable feedstock supply will be critical as biofuels integrate into circular economy models in agriculture.
Biofuel prices eased in 2024 due to lower oil prices and ample feedstock supply. Real prices are projected to decline, but government support will remain necessary to offset higher production costs of biofuels compared to fossil fuels.
The growth of global biofuel consumption has been solid over the past decade, averaging 3.3% per annum. In 2024, this upward trend continued steadily, following the temporary decline experienced in 2020 due to the global economic slowdown. The recovery and expansion of biofuel consumption have been facilitated by multiple factors, including the easing of biofuel prices worldwide. Next to changes in tax policies, this price reduction has been largely driven by lower crude oil prices which have stimulated demand for transport fuels, as well as a decrease in feedstock costs which has helped lower biofuel production expenses. These economic conditions have maintained strong incentives for the continued adoption and potential scaling up of biofuel usage.
Notably, India has experienced the highest growth in biofuel consumption, fuelled by government policies promoting energy diversification and sustainability. Meanwhile, in North America, demand for renewable diesel remains particularly strong, contributing to the region's overall biofuel expansion. Governments across the globe have continued to support biofuel adoption through favourable policies, subsidies, and mandates, viewing biofuels as a critical tool for enhancing energy security and reducing greenhouse gas (GHG) emissions. Additionally, technological advancements and increased investments in biofuel infrastructure have further contributed to market growth.
8.3.1. Consumption and production
Asian countries are driving biofuel supply and demand
Biofuel supply and demand projections are largely influenced by the future trajectory of overall fuel consumption, particularly because many biofuel mandates are set as a percentage of total fuel use. This Outlook relies on the IEA World Energy Outlook 2024 as the primary source for global fuel demand projections. These projections are primarily based on assumptions regarding how economic growth translates into transportation fuel demand and other oil-derived goods. They also account for substitution effects, such as the increasing prevalence of electric vehicles (EVs), improvements in vehicle fuel efficiency, and the impact of international competition in the petrochemical sector. However, broader policy impacts, such as the European Union’s Fit for 55 legislation, are not included in these projections. At the global level, these projections indicate that demand for gasoline‑type fuels will decline at an average annual rate of 0.8% over the next decade, while biomass-based diesel consumption is expected to grow modestly by 0.2% per year. The projected decline in total fuel consumption is mainly concentrated in high-income countries, whereas in most other regions, overall fuel demand is anticipated to rise (Figure 8.1).
This Outlook expects a slower growth rate of biofuel consumption and production globally, both projected at 0.9% p.a. during the projection period. This is a fifth of the pace observed in the previous decade, primarily as result of reducing support policies in developed countries for conventional biofuels and declining total fuels use in some of these countries. With nearly two-thirds of the anticipated growth in biofuel demand expected to take place in emerging economies (Figure 8.2), notably in India, Brazil, and Indonesia, shifts in market shares are anticipated. In 2024, 55% of ethanol supply and demand is located in high income countries. However, it is anticipated that over the next decade, this share will decrease to 51%, with middle-income countries gaining prominence. An exception in this shift towards middle income countries is the biomass‑based diesel development in North America, which accounts for two-thirds of global consumption growth.
Note: Shares calculated on demand quantities expressed in volume. The size of each bubble relates to the consumption volume of the respective biofuel in in the base period. Change in gasoline and diesel demand includes the biofuel components.
Source: OECD/FAO (2025), ''OECD-FAO Agricultural Outlook'', OECD Agriculture statistics (database), http://data-explorer.oecd.org/s/1hc.
Source: OECD/FAO (2025), ''OECD-FAO Agricultural Outlook'', OECD Agriculture statistics (database), http://data-explorer.oecd.org/s/1hc.
Global ethanol and biomass-based diesel production are projected to increase to 155 bln L and 80.9 bln L, respectively, by 2034. In the base period, ethanol’s total feedstock was made up of 60% maize, 22% sugarcane, 6% molasses and 2% wheat, with the remaining 10% being a mix of assorted grains, cassava, and sugar beets. Biomass‑based diesel’s total feedstock consisted of 70% vegetable oil and 24% used cooking oils and tallow which have recently gained importance (Box 8.1), with the other 6% being made up of non-edible oils and other waste.
Despite the increasing scrutiny of the sustainability of biofuel production witnessed in many countries, and notwithstanding significant variations in feedstock composition, conventional (or food-related) feedstocks are expected to remain predominant in the industry (Figure 8.3). While cellulosic feedstocks—such as crop residues, dedicated energy crops, or woody biomass—offer promising alternatives that avoid competition with food sources, these advanced feedstocks are not expected to experience a substantial increase in their share of total biofuel production.
United States
Biofuel policies in the United States are controlled by the Renewable Fuel Standard (RFS) programmes, the Inflation Reduction Act and various state policies. The programmes mandates a specific annual volume of renewable fuels to be blended into conventional transportation fuels. Current mandates were set for 2024 through 2026 by the Environmental Protection Agency (EPA). Due to the decline in gasoline consumption projected by the IEA, largely due to better vehicle efficiency and an increase in the number of electric vehicles, ethanol consumption is expected to decrease although the ethanol blend rate is expected to rise to 13% by 2034. However, petroleum refiner preference for renewable diesel in meeting EPA mandates and infrastructure limitations will constrain the expansion in use of fuels with greater ethanol inclusion. Furthermore, announced policies, if implemented as stated, could cause some disincentives to further growth of renewable diesel later in the projection period.
Maize is expected to continue as the primary feedstock for ethanol production, comprising 99% of production by 2034. Meanwhile, capacity for cellulosic ethanol production from non-food sources is assumed to grow gradually over the projection period, albeit from a low initial level. Despite the United States retaining its position as the largest ethanol producer globally, its share is projected to decline from 46% to 39%. Biomass‑based diesel production is projected to increase by 1.68% p.a., to account for 27% of global production in 2034. This growth is propelled by increased consumption of renewable diesel, driven by rising targets in federal and state renewable fuel programmes, notably the low carbon fuel standard (LCFS) in California.
The European Union
The Renewable Energy Directive (RED) serves as the legal framework governing the advancement of renewable energy across multiple sectors, including transportation, within the European Union. This directive has undergone three significant revisions: initially amended under Directive (EU) 2018/2001 (RED II), and subsequently under Directive (EU) 2023/2413 (RED III). Under the RED, specific targets are set for the share of renewable energy within total energy consumption of each European Member state. This target is set at a minimum of 42.5% binding at EU level by 2030 - but aiming for 45%. Regarding biofuels, the RED originally included mandates for the blending of biofuels into conventional fuels, aiming to reduce GHG emissions and dependency on fossil fuels. Since RED II, there are limits for using feedstocks from food and feed crops, which restricts the expansion of agricultural feedstocks to be used in biofuel consumption. Moreover, biofuels have faced stricter sustainability criteria in response to concerns regarding their indirect land-use change (ILUC) effects, with clear rules defined to categorise high-risk ILUC feedstocks. While palm oil is not explicitly mentioned and can be certified for low-risk ILUC, it is the only feedstock that falls under the high-risk category under the current regulation. Additionally, RED III has raised the target for advanced biofuels from 3.5% to 5.5% by 2030. Supporting measures to reach this target include limitations on certain feedstocks, such as food crops, while incentivising the utilisation of advanced biofuels derived from waste or residues.
The anticipated reduction in transportation fuel use, is expected to reduce ethanol and biomass-based diesel consumption by -1.4% p.a. The biomass-based diesel content of diesel fuel is expected to rise from 10% to 11%, while the ethanol share in gasoline is projected to remain largely unchanged, increasing only slightly from 6.5% to 6.6%. Biomass-based diesel production is expected decrease accordingly and the share derived from palm oil is projected to decrease from 18% in the base period to 3% in 2034, due to sustainability concerns. The share of biomass-based diesel production from used cooking oils and fats is projected to increase from 24% to 28%.
Brazil
For many years, Brazil has had a large fleet of flex-fuel vehicles capable of operating on gasohol (gasoline-ethanol blend) or pure hydrous ethanol. The ethanol blend rate in gasohol varies between 18% and 27%, influenced by the price relationship between domestic sugar (the main feedstock) and ethanol. Since 2015, the mandated ethanol percentage stands at 27%. Over the next ten years, this blending mandate is expected to increase to 40%. The growth of biomass-based diesel’s share in the Brazilian energy matrix has been driven by the mandatory blending with fossil diesel. Currently, the established percentage is 14%; which should increase to 15% in 2025—as approved by Brazil’s National Energy Policy Council. A 15% blending mandate is assumed throughout the outlook period.
Unlike the United States and the European Union, total fuel consumption of gasoline and diesel is expected to increase in Brazil over the next decade, suggesting potential growth in biofuel blendings. Brazil is expected to maintain its position as the world's second-largest producer and consumer of fuel ethanol over the next decade. Ethanol consumption and production in Brazil are both projected to increase by 2.1% p.a., driven by the National Biofuels Policy (RenovaBio) programmes. Launched in 2017, the programmes play a pivotal role in fulfilling Brazil’s commitments to reduce GHG emissions. While sugarcane is anticipated to remain the primary feedstock for ethanol production, maize usage has surged in recent years, rising from below 0.5 bln L before 2017 to almost 7 bln L in 2024. The Outlook projects that maize will continue gaining ground in the feedstock mix, reaching 9.6 bln L by 2034.
Indonesia
The implementation of B35 and B40 (Biomass-based diesel 35% and 40% blend) aims at reducing the country’s dependency on imported fossil fuels, stabilising palm oil prices, reducing GHG emissions and sustaining the domestic economy as it accounts for nearly half a million jobs in the country. In recent years, biomass-based diesel production has steadily increased due to a national biomass-based diesel programme, which provides support to biomass-based diesel producers. This programme is financed by levies imposed on exports of various products including CPO, UCO and palm olein among others. The level of the export levies imposed is revised according to global market conditions on a regular basis and depends on a reference price. While recently the CPO fund has been depleted, the Outlook assumes producer prices will stay above USD 1 000 per tonne in nominal terms, allowing the replenishment of the CPO fund which will continue to subsidise domestic biomass-based diesel production. However, that amount combined with CPO exports constrained by production, may be only sufficient to achieve a blending rate of 31% (B31) over the projection period, instead of the announced B35 and B40. Based on these assumptions, biomass-based diesel production in Indonesia is projected to increase to about 15 bln L by 2034. Achieving B35 or B40 would require increasing support to biomass-based diesel producers and technically modifying diesel engines. Renewable diesel could overcome current technical limitations, but it would require additional investments and support at the expense of the CPO fund.
India
India has accelerated its ethanol production expansion aiming to achieve E20 (Ethanol 20% blend) by 2025. Recently, ethanol production increased significantly with sugar cane and grains accounting for the bulk of the increase, rather than the traditional feedstock, molasses. The Outlook assumes sugar cane will consolidate as the primary feedstock, followed by molasses. Cereals, particularly from degraded stocks, will supplement domestic production although in the medium term their role may be constrained by actual stock levels. Given the expanding gasoline demand, the blending target of E20 could be met in 2026. Ethanol production is expected to reach 15 bln L in 2034. While the outlook assumes that demand is driven by the current target of E20, there is sufficient production capacity and feedstock availability to meet a higher blending rate. However, achieving this would require lower feedstock prices to ensure the competitiveness and profitability of ethanol producers. Moreover, motor vehicle engines would need to be adapted to higher blending rates. Recently, the Government of India has established a partnership with Brazil, aiming at adopting new technology to implement higher blends. The limited supply of vegetable oil, for which India is a net importer, combined with high international prices, will remain the main constraint to any significant increase in biomass-based diesel production.
The People’s Republic of China
This Outlook assumes that the ethanol blending rate which was around 1.6% in recent years and increased to 2% in 2024 will increase to 2.5% in 2034. This increase cannot offset the projected decline in total gasoline usage, leading to a 0.4% annual decline in ethanol consumption over the next decade. Biomass-based diesel consumption, however, is projected to grow by 2% p.a. The Outlook assumes that only domestically produced feedstocks will be used.
Canada
The Canadian Clean Fuels Standard (CFS) which became law in 2022 promotes further use of biofuel in Canada by increasing incentives for the development and adoption of renewable fuels, technologies, and processes. CFS aims at a 15% reduction (below 2016 levels) in carbon intensity of transport fuels by 2030. Effective January 2023, 10% renewable content in gasoline and 15% in diesel are required. Subsequently, biomass-based diesel consumption in Canada more than doubled between 2023 and 2024. Plans for multiple new or expanded liquid biofuel facilities that would use primarily agricultural feedstocks have recently been announced across Canada. If these projects are completed as proposed, this could result in additional 5 bln L of biofuel capacity by 2034 (mainly for renewable diesel and sustainable aviation fuel). This Outlook assumes a more conservative increase of biomass-based diesel production to 2 bln L but a strong consumption increase to 5.9 bln L which would increase the current deficit of 1.2 bln L to 3.9 bln L. Ethanol consumption is expected to increase by 2 bln L and this increase is projected to be mainly covered by imports.
Argentina
In Argentina, the Biofuels Law of 2021 mandated a biomass-based diesel blending rate of 5% which can be reduced to 3% if high feedstock prices would distort fuel prices. In June 2022, the government passed a resolution to increase the biomass-based diesel mandate from B5 to B7.5 but allowing it to be temporarily increased as high as B12.5 to be able to react to diesel shortages. The Outlook assumes B7.5 as the blending target. With limited additional export possibilities, biomass-based diesel production is projected to stagnate over the next ten years.
The ethanol blending target has been maintained at 12% despite a push from bioethanol producers to have it increased to 15%. The Outlook assumes the rate will remain fixed and ethanol fuel use is projected to increase by 1.7% p.a. following the increase in total gasoline use.
Thailand
Despite the targets set in the Alternative Energy Development Plan (AEDP) for sugar cane (and indirectly molasses) and cassava, limited domestic availability is expected to constrain biofuels production. In addition, stagnating demand for fossil fuels will limit increasing demand for ethanol. On average, blending is expected to be around 14% over the Outlook period and production is projected to remain stagnant around 1.7 bln L over the next decade. Biomass-based diesel demand is expected to be supported by the mandatory blending with demand increasing to 2.7 bln L by 2034.
Colombia
Ethanol demand is projected to increase over the Outlook period in line with the recovery of gasoline demand. Over the medium term, the blending rate is projected to remain around 11%. Sugarcane will continue to be the main feedstock and by 2034 biofuel production will consume about 12% of sugarcane production versus about 8% in the base period, thus establishing ethanol as an important element in sustaining the Colombian sugarcane sector. The biomass-based diesel blending rate has been above 13% and is expected to remain so over the projection period.
In recent years, waste oils (i.e. used cooking oils - UCO) and fats (i.e. tallow) (WLF) have gained significant importance as feedstocks for biomass-based diesel production. The growing demand for renewable diesel, particularly in regions with stringent environmental regulations, has driven this shift. Waste-based feedstocks are seen by some to offer several advantages over crop-based oils, including lower carbon intensity and reduced land-use impact, and have attracted greater policy support.
The rise in renewable diesel demand
One of the primary reasons for the increased use of WLF is the rapid growth in renewable diesel production. California is part of this transition, with its Low Carbon Fuel Standard (LCFS) playing a key role in incentivizing low-carbon fuels. Unlike traditional biodiesel, which has blending limitations, renewable diesel is a drop-in fuel that can replace petroleum-based diesel without modifications to engines or infrastructure. This has made it a preferred option for reducing emissions in the transportation sector. Policies such as the United States Renewable Fuel Standard (RFS) and the European Union’s Renewable Energy Directive III (RED III) have further accelerated the adoption of waste-based feedstocks.
Waste-based feedstocks vs. crop-based feedstocks
Crop-based feedstocks, such as soybean oil and palm oil, have been widely used for biofuel production. However, they carry higher emissions due to direct and indirect land‑use changes and they compete with food production. In contrast, waste‑based feedstocks like used cooking oils, tallow, and other animal fats are byproducts of food and agricultural industries. Many argue that since they do not require additional land or crops, their carbon intensity is significantly lower. Following this argument, they qualify for higher policy incentives, making them more economically attractive for biofuel producers.
Policy incentives and regulatory support
Several governments are promoting waste-based biofuels through subsidies, tax credits, and regulatory mandates. In the United States, tax incentives prioritize WLF over crop-based oils, while California's LCFS provides financial benefits for fuels with lower carbon intensity. The European Union is also taking measures to reduce reliance on high ILUC-risk biofuels. Under RED III, the European Union is phasing out palm oil-based biofuels by 2030, further boosting the demand for waste-based alternatives.
Challenges and market interconnections
Despite their advantages, WLF are not unlimited resources. Their availability is linked to the food industry, animal processing, and waste collection infrastructure. Additionally, competition exists between different uses of waste oils, such as in animal feed and industrial applications. Furthermore, the rising demand for WLF as biofuel feedstocks challenges the assumption that they are truly ILUC-free. As their value increases, it may incentivize greater production of the primary commodities they come from, such as vegetable oils and meat, indirectly driving higher resource use. This raises concerns that WLF demand could influence land use and agricultural production. Furthermore, concerns have been raised about fraudulent activities, such as mixing UCO with virgin palm oil to bypass sustainability regulations (Swanson, Arita, and Cooper, 2024) While data does not indicate widespread fraud, understanding these interconnections is crucial for balancing sustainability goals with economic feasibility.
Source: Swanson, A., S. Arita and J. Cooper (2024), "Controversies Surrounding US Imports of Used Cooking Oil for Biofuel Production", ARE Update 28(2), pp. 1-5, University of California Giannini Foundation of Agricultural Economics, https://giannini.ucop.edu/filer/file/1734628708/21199/.
Other countries
Other significant producers of ethanol include Paraguay, the Philippines, and Peru, where production is projected to reach nearly 0.8 bln L, 0.8 bln L and 0.3 bln L, respectively, by 2034. The blending rate in Paraguay is assumed to remain stable around 25% over the projection period given the limited supply of sugar cane, which cannot be entirely substituted by maize. Malaysia, the Philippines and Peru are also major biomass‑based diesel producers, where production projections reach 2.1 bln L, 0.6 bln L and 0.2 bln L, respectively, by 2034. Other Asian countries, particularly Singapore, could increase production to reach around 0.9 bln L of biomass-based diesel from UCO in 2034. Unlike most countries where biofuels are domestically used to reduce GHG emissions and to reduce national dependency on imported oil, production of biomass-based diesel in Singapore is largely for export.
8.3.2. Trade
Global biofuel trade is expected to remain nearly constant
World ethanol trade is projected to increase from 11 bln L to 11.9 bln L by 2034, with total share of production decreasing from 8.8% to 8.2% by the end of the projection period. The United States and Brazil are expected to remain the main exporters of maize‑ and sugarcane-based ethanol. The export share of both countries together is expected to even increase from 75% today to 79% in 2034.
Globally, biomass-based diesel trade accounts for 13.5% of production and this share is projected to increase to about 14.8%. Indonesian biomass-based diesel exports fell dramatically in 2020 and have remained low since. Reflecting high domestic demand and reduced export opportunities to the European Union, Indonesia is not expected to return to international markets with significant biomass-based diesel exports. The top five exporters of biomass-based diesel—China, the United States the European Union, Canada and Malaysia—are projected to maintain a combined market share of 79% (Figure 8.5).
8.3.3. Prices
Prices in real terms are expected to decrease
Following their peak in 2022, nominal prices for both biomass-based diesel and ethanol declined through 2023 and 2024 primarily attributed to lower feedstock and oil prices. Subsequently, projections indicate a gradual increase in nominal biofuel prices up to 2034 in line with energy and feedstock prices. However, in real terms, ethanol and biomass-based diesel prices are anticipated to decrease over the next decade (Figure 8.6).
Evolution of policies and relative prices are key
Uncertainties stem from the policy landscape, feedstock availability, and fossil fuel prices. Policy uncertainty includes fluctuations in mandate levels, enforcement mechanisms, investment in non-traditional biofuel feedstock, tax exemptions and subsidies for both biofuels and fossil fuels, as well as policies promoting electric vehicles (EVs) and sustainable aviation fuel (SAF) technology.
Fluctuations in fossil fuel prices directly impact the competitiveness of biofuels, often linked to subsidies for the sector. Volatility in oil markets tends to disrupt biofuels market structures as it may influence supporting policies, potentially leaving long‑lasting effects. Additionally, uncertainty surrounds feedstock supply, as countries typically prioritise surplus commodities for biofuel production to safeguard food availability and security. While blending mandates are anticipated to drive biofuel production in emerging economies, recent price surges in cereal and vegetable oil markets have reignited debates on the ethical implications of fuel versus food production. Exploring advanced biofuels presents opportunities beyond conventional crops with cellulosic feedstocks such as agricultural residues and energy crops offering potential for expanded production without compromising food supplies. Waste-based feedstocks such as municipal solid waste and used cooking oil also offer alternatives, providing additional benefits for waste management.
The global EV stock has steadily risen since the mid‑2000s, with over 20 countries committing to phase out internal combustion engine vehicle sales and eight countries plus the European Union pledging net-zero emission vehicles within the next 10-30 years. Governments worldwide have introduced EV deployment targets, purchase incentives, and supportive programmes to boost EV adoption and research. However, EV sales are currently stagnating in the United States compared to initial market reaction, possibly attributable to the slower than expected progress in infrastructure development. Moreover, recent discussions among countries concerning protection of domestic markets from imported EV to protect their domestic industry could increase the uncertainty about EV adoption. While SAF consumption and production are not modelled explicitly in the Outlook, any significant increase in their use in the long term may have an important impact on the use of advanced feedstocks, contingent upon technological advancements and supporting policies. Biofuels may also play an important role in the decarbonisation of the maritime shipping industry. Unforeseen technological advancements and regulatory changes in the transportation sector could significantly impact biofuel market projections. Countries are expected to implement policies promoting new technologies to reduce GHG emissions, introducing uncertainty into agricultural markets and influencing future biofuel demand. The private sector's response to these measures, particularly industries investing in EVs and SAFs, will shape biofuel usage trends over the coming decade and beyond.