This chapter describes market developments and medium-term projections for world biofuel markets for the period 2026-2035. Projections cover consumption, production, trade and prices for ethanol and biomass-based diesel (including classical biodiesel, which accounts 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 the key risks and uncertainties which could have implications for world biofuel markets over the next decade.
OECD‑FAO Agricultural Outlook 2026‑2035
Abstract
Biofuels continue to play an important role as a renewable alternative to fossil fuels in transport, with global demand for biofuels expected to grow 1.4% annually over the next decade.
Growth in biofuel production is projected to originate mainly in middle-income countries. The 3% annual growth will be driven by increasing transport fuel demand, energy security considerations, fiscal goals, and emissions reduction commitments, with Brazil, Indonesia, and India leading the expansion.
In high-income countries, biofuel growth is projected to slow due to decreasing fuel demand as electric vehicle (EV) adoption speeds up and policy incentives are weakening. This holds particularly for the European Union, where biofuel use is expected to decrease. In the United States, the focus has shifted towards biomass-based diesel linked to fuel and aviation fuel targets and a 1.5% annual increase in demand is projected. Under Canada’s Clean Fuel Regulations, biofuels use has experienced strong increases in the recent past and is projected to increase further by 2% per year.
Biofuel trade is expected to remain well under 10% of the global market volume. Countries with strong domestic production capacity, such as Brazil and Indonesia, will likely meet their own rising demand, limiting the expansion of global biofuel trade, but the E20 target against rising total fuel demand might lead to an increase of the net deficit of ethanol in India.
First-generation biofuels will continue to dominate the market, with ethanol largely produced from maize and sugar and biodiesel primarily from vegetable oils such as soybean, rapeseed and palm oil. The use of waste oils and tallow as feedstock for biomass-based diesel boomed in the recent past, and is expected to continue to grow, but its share, which peaked at 25% in 2024, is projected to decrease over the next 10 years.
The future of biofuel market expansion depends on complex policies, with increasing interest in advanced biofuels and sustainable aviation fuel. However, achieving commercial production quantities remains challenging due to high investment costs. Sustainable feedstock supply will be critical as biofuels integrate into circular economy models in agriculture.
Biofuel prices were still low in 2025, but higher than in 2024, particularly biomass-based diesel, as vegetable oil feedstock prices were strong. In real term, ethanol and biomass-based diesel prices are projected to decline, wherefore government support will remain necessary to offset higher production costs of biofuels compared to fossil fuels.
Global biofuel consumption has recorded solid growth over the past decade, averaging 3.5% p.a. dominated by the growth of biomass-based diesel with an annual growth rate of 8%. In 2025, this upward trend continued, but more evenly distributed between ethanol and biomass-based diesel. Indonesia, where a B35 blending rate was reached in 2025, contributed the most to global growth of biomass-based diesel demand.
The United States recorded a drop in biomass-based diesel demand in 2025, mainly due to a large amount of granted small refinery exemptions as well as the transition from biomass-based diesel tax credit to the generally less valuable 45Z tax credit in 2025.1
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
Bulk of additional biofuel supply and demand located in Asian countries
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 main-case scenario in the International Energy Agency’s World Energy Outlook 2025 as the primary source for global fuel demand projections, which are primarily based on assumptions regarding how economic growth translates into transport fuel demand and other oil-derived goods. They also account for substitution effects, such as the increasing prevalence of 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 0.31% over the next decade, while diesel consumption is expected to grow modestly by 0.9% a year. The projected decline in total fuel use is 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 1.4% p.a. during the projection period. This is three fifth of the growth observed in the previous decade, primarily as a result of declining total fuel use in high-income countries. While high-income countries have accounted for 40% of the growth in biofuels over the past ten years, this share is expected to drop to 10%, with 80% of the anticipated growth in biofuel demand expected to take place in emerging economies (Figure 8.2), notably India, Brazil and Indonesia. In 2025, 51% of ethanol supply and demand was located in high-income countries. However, it is anticipated that over the next decade, this share will decrease to 43%, with middle-income countries gaining prominence. A different pattern is observed for global biomass‑based diesel, where consumption is primarily driven by the United States and Indonesia.
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.
Global ethanol and biomass-based diesel production are projected to increase to 162.5 billion litres (bln L) and 99.0 bln L, respectively, by 2035. In the base period, ethanol’s total feedstock will be made up of 61% maize, 22% sugar cane, 5% molasses and 2% wheat. The remaining 9% will be a mix of assorted grains, cassava and sugar beets. Biomass‑based diesel’s total feedstock consisted of 69% vegetable oil and 23% used cooking oils and tallow, which have recently grown in importance. The other 8% is 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 federally by the Renewable Fuel Standard programme, the Inflation Reduction Act and various state policies. The programme mandates a specific annual volume of renewable fuels to be blended into conventional transportation fuels. In 2025, the Environmental Protection Agency proposed the level for renewable volume obligations for 2026 and 2027. As the final decision was still pending at the time this Outlook was produced, this proposal was taken into account.2 Due to the decline in gasoline consumption projected by the International Energy Agency, due to better vehicle efficiency and an increase in the number of EVs, ethanol consumption is expected to decrease although the ethanol blend rate is expected to rise to 11% by 2035. However, petroleum refiner preference for renewable diesel in meeting the Environmental Protection Agency’s mandates and infrastructure limitations will constrain the expansion in use of fuels with greater ethanol inclusion.
Maize is expected to continue to be the primary feedstock for ethanol production, comprising 99% of production by 2035. 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 44% to 37%. Biomass‑based diesel production is projected to increase by 1.55% p.a. to account for 26% of global production in 2035. 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 in California.3 Sustainable Aviation Fuel projects, however, have recently been stalling and since SAF targets are not binding, this Outlook assumes only limited growth in that segment.
The European Union
In the European Union, the Renewable Energy Directive (RED) serves as the legal framework governing the advancement of renewable energy across multiple sectors, including transport. Initially ratified in 2009, this directive has undergone two significant revisions: Directive (EU) 2018/2001 (RED II), and subsequently Directive (EU) 2023/2413 (RED III). Under the RED, specific targets are set for the share of renewable energy within total energy consumption for 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. RED II and RED III impose 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. Palm oil is the only feedstock that falls under the high-risk category under the current regulation but can be certified for low-risk ILUC under specific circumstances. Additionally, RED III raises 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 use of advanced biofuels derived from waste or residues.
The anticipated reduction in transport fuel use is expected to reduce ethanol and biomass-based diesel consumption by -0.71% p.a. The biomass-based diesel content of diesel fuel is expected to rise from 11% to 15%, while the ethanol share in gasoline is projected to slightly increase from 6.8% to 7.5%. Biomass-based diesel production is expected to decrease according to the reduction in total transport fuel and the share derived from palm oil is projected to decrease from 12% in the base period to 2.4% in 2035 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 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 relative prices of sugar and ethanol, which influence the allocation of sugarcane between sugar and ethanol production. The mandated ethanol percentage has been set at 30% since 2025. Over the next ten years, this blending mandate is expected to increase to 35%. Including ethanol use in high blends, more than 50% of total gasoline fuel is covered by ethanol today and the Outlook expects this share to increase to 60% by 2035. 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 2026, 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 blending. 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 2.9% p.a., driven by the National Biofuels Policy (RenovaBio) programmes. Launched in 2017, these programmes play a pivotal role in fulfilling Brazil’s commitments to reduce GHG emissions. While sugar cane is anticipated to remain the primary feedstock for ethanol production, maize usage has surged in recent years, rising from less than 0.5 bln L before 2017 to almost 8.2 bln L in 2025. The Outlook projects that maize will continue gaining ground in the feedstock mix, reaching 14.5 bln L by 2035.
Indonesia
The envisaged implementation of the B35 and B40 biomass-based diesel blends is intended to decrease national reliance on imported fossil fuels, stabilise palm oil prices, reduce greenhouse gas emissions, and reinforce the domestic economy by offering nearly half a million jobs within the sector.4 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 crude palm oil (CPO), used cooking oil and palm oil. The level of the export levies imposed is revised on a regular basis according to global market conditions and depends on a reference price. Recently, the CPO fund has been depleted. However, the Outlook assumes that producer prices will remain above USD 1 000 per tonne in nominal terms, enabling a partial replenishment of the fund. This replenishment would help subsidise domestic biomass‑based diesel production, but it would also lead to higher consumer prices. Based on these assumptions, biomass-based diesel production in Indonesia is projected to increase to about 27.4 bln L by 2035.
India
India has accelerated its ethanol production expansion aiming to achieve E20 (ethanol 20% blend) by 2025. Ethanol production has increased significantly recently, with sugar cane and grains accounting for the bulk of the increase, rather than the traditional feedstock of molasses. The Outlook assumes sugar cane will consolidate as the primary feedstock, followed by molasses. Given the expanding gasoline demand, the blending target of E20 could be met in 2026. Ethanol production is expected to reach 19.2 bln L in 2035. The Outlook assumes that demand is driven by the current E20 target, but there is sufficient production capacity and feedstock availability to meet a higher blending rate. However, achieving this would require continuing support in the form of minimum support prices based on the feedstock, as well as tax credits. Moreover, motor vehicle engines would need to be adapted to higher blending rates. The government of India has recently established a partnership with Brazil to adopt innovative 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.
People’s Republic of China
This Outlook assumes that the ethanol blending rate, which had been around 1.6% in recent years and increased to 2% in 2025, will increase to 2.5% in 2035. This increase offsets the projected decline in total gasoline usage leading ethanol consumption to increase modestly. Biomass-based diesel consumption, however, is projected to grow by 1.68% p.a. The Outlook assumes that only domestically produced feedstocks will be used.
Canada
The Canadian Clean Fuels Standard, which came into law in 2022, promotes further use of biofuel in Canada by increasing incentives for the development and adoption of renewable fuels, technologies and processes. The Clean Fuels Standard aims at a 15% reduction (below 2016 levels) in carbon intensity of transport fuels by 2030. Starting in January 2023, 10% renewable content in gasoline and 15% in diesel are required. Subsequently, biomass-based diesel consumption in Canada more than doubled between 2022 and 2025. Canada’s third, and largest, renewable diesel plant began operation in July 2025, bringing capacity up from 1 bl L in 2024 to over 2 bln L in 2027. This Outlook assumes that this capacity will be fully utilised throughout the projection period, but that no additional capacity will be developed. Biomass-based diesel production surpassing 2 bln L is projected to lack behind consumption increase to 3.5 bln L. Ethanol consumption is expected to increase by 1.0 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 distort fuel prices. In June 2022, the government approved a resolution raising the biomass‑based diesel mandate from B5 to B7.5, while also permitting temporary increases of up to B12.5 in the event of diesel shortages. Although biodiesel consumption fell to a record low in 2025, the Outlook assumes that Argentina maintains the B7.5 mandate throughout the projection period. 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 increase it to 15%. The Outlook assumes the rate will remain fixed and ethanol fuel use is projected to increase by 1.8% p.a. following the increase in total gasoline use.
Thailand
Despite the targets set in the Alternative Energy Development Plan 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. Blending is expected at 11% over the Outlook period, corresponding to a production increase to 1.6 bln L over the next decade. Biomass-based diesel demand is expected to be supported by the mandatory blending, with demand increasing to 2.1 bln L by 2035.
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 9%. Sugar cane will remain the principal feedstock, and by 2035, biofuel production is projected to use 23% of total sugarcane output, compared with 14% in the base period, thereby reinforcing ethanol’s role as a key driver of the Colombian sugar cane sector. The biomass-based diesel blending rate has been about 12% and is expected to remain so over the projection period.
Other countries
Other significant producers of ethanol include Paraguay, the Philippines and Peru, where production is projected to reach 0.7 bln L, 0.6 bln L and 0.3 bln L, respectively, by 2035. The blending rate in Paraguay is assumed to remain stable around 22% 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 1.6 bln L, 0.6 bln L and 0.2 bln L, respectively, by 2035. Other Asian countries, particularly Singapore, could increase production to reach around 0.9 bln L of biomass-based diesel from used cooking oil in 2035. Unlike most countries where biofuels are domestically used to reduce GHG emissions and 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 constant
World ethanol trade is projected to marginally decrease from 12.8 bln L to 12.3 bln L by 2035, with total share of production decreasing from 8.9% to 7.6% by the end of the projection period. The United States and Brazil are expected to remain the main exporters of maize‑ and sugar cane-based ethanol. The export share of these two countries combined is expected to even increase from 75% today to 80% in 2035.
Globally, biomass-based diesel trade accounts for 10% of production, and this share is projected to decrease to about 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, Argentina and Malaysia – are projected to maintain a combined market share of 82% (Figure 8.4).
8.3.3. Prices
Prices in real terms are expected to decrease
Following their peak in 2022, nominal prices for biomass-based diesel and ethanol declined through 2023 and 2024, primarily attributed to lower feedstock and oil prices. In 2025, both prices recovered and, subsequently, projections indicate a gradual increase in nominal biofuel prices up to 2035 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 8.5).
Evolution of policies and relative prices are key
Uncertainties in the biofuel sector originate from the policy environment, feedstock availability and fossil fuel price movements. Policy‑related uncertainty encompasses fluctuating mandate levels, varying enforcement mechanisms, shifts in investment toward non‑traditional feedstocks, changes in tax exemptions and subsidies affecting biofuels and fossil fuels, and the influence of policies promoting EVs and sustainable aviation fuel (SAF) technologies. These factors collectively shape the stability and predictability of future biofuel demand.
Fluctuating fossil fuel prices play a direct role in determining the competitiveness of biofuels, often interacting with subsidy schemes that support the sector. Oil market volatility can disrupt established biofuel market structures by influencing related policy decisions, potentially creating enduring impacts. At the same time, emerging trade alliances and structural changes in the energy sector may generate new market premiums that affect biofuel pricing and competitiveness.
Feedstock supply uncertainty remains significant, as governments typically reserve surplus agricultural commodities for biofuel production to protect food security. Although blending mandates are expected to stimulate biofuel production in emerging economies, recent spikes in cereal and vegetable oil prices have renewed concerns about the ethical implications of diverting crops towards fuel. Consequently, feedstock eligibility towards reaching biofuel targets is uncertain. For example, a recent proposal of the European Union classifies soybeans as high-risk ILUC feedstocks. Advanced biofuels offer an alternative pathway, drawing on cellulosic feedstocks such as agricultural residues or energy crops that compete less with food production. Waste‑based feedstocks, including municipal solid waste and used cooking oil and tallow, also provide viable options while contributing to improved waste management.
Global EV adoption has increased steadily since the mid‑2000s, with more than 20 countries committing to phase out internal combustion engine vehicle sales and several, along with the European Union, aiming to achieve net zero emissions vehicles within the next 10-30 years. Governments continue to support this transition through deployment targets, purchase incentives and programmes that encourage research and innovation. However, in the United States EV sales grew rapidly through 2023 and 2024, surpassing one million units in 2023 and reaching a 10% share of all new light‑duty vehicle sales in 2024. However, growth slowed in 2025 following the expiration of federal incentives, with EV market share dropping to 6% in towards the end of 2025. The EV-market outlook remains uncertain as the industry adjusts to the absence of federal tax credits and increasing competition between EV producers. In the European Union, however, EV sales increased by 30% in 2025, meaning that every fifth car that is sold today is fully electrical. At the same time, emerging discussions around protecting domestic EV industries from imported vehicles may add further uncertainty to global adoption trajectories.
While the Outlook does not explicitly model SAF production and consumption, substantial long‑term increases in SAF use could significantly influence demand for feedstocks, depending on technological development and policy support. Biofuels are also expected to contribute to emissions reductions in the maritime shipping sector. Nonetheless, unexpected technological advances or regulatory changes across transport modes could alter future biofuel market projections. Countries are likely to introduce policies promoting innovative technologies to reduce GHG emissions, thereby influencing agricultural markets and shaping biofuel demand. The private sector’s response, particularly investments in EV and SAF technologies, will play a decisive role in determining biofuel usage patterns over the coming decade and beyond.
← 1. Section 45Z of the United States Internal Revenue Code, created by the Inflation Reduction Act, is the Clean Fuel Production Credit. It provides a performance-based, technology‑neutral tax credit to domestic producers of transportation fuels with low lifecycle greenhouse gas (GHG) emissions. It applies to fuel produced after 31 December 2024, and sold through 31 December 2029.
← 2. The final decision was published on 27 March 2026, and suggest that projections for biomass-based diesel would be slightly higher compared to the numbers published in this Outlook.
← 3. However, California has already reached a blending rate of 80% for BBD. This segment might be close to saturation.
← 4. Recent discussions about extending the mandate to B50 have been paused.