Similarly, in Latin America, Brazil’s biofuel policies combined with growing gasoline and diesel demand drive up biofuel use. In both countries, growing transport fuel demand over the forecast period, in combination with mandates, accelerates biofuel demand. In Asia, India’s efforts to reach 20% ethanol blending by 2025 support global ethanol demand growth, while Indonesia’s 40% blending mandate planned for 2022 stimulates biodiesel expansion. It has a further benefit in that it can be blended at higher levels than biodiesel.Įthanol and biodiesel growth remains robust, however, thanks to demand in Latin America and Asia, and recovery from Covid-19 declines. In both regions renewable diesel competes well in a policy environment that values GHG reductions and places limits on some biofuel feedstocks, as it can be produced with a low GHG intensity using wastes and residues. The majority of renewable diesel growth is concentrated in the United States and Europe. However, in absolute volume, ethanol demand growth surpasses that of renewable diesel.
Renewable diesel demand nearly triples between 20, primarily thanks to policies in the United States and Europe. Biofuels recover in 2021 despite high costs Renewable diesel demand in the United States and Asian biodiesel demand are responsible for the majority of this growth. The combined demand for these fuels in 2021 is up 15%, or 7 billion litres, from 2019 levels. However, ethanol demand recovery in Brazil and growing demand in Asia eventually offset declines in the United States and Europe in 2023.īy comparison, in 2021 biodiesel, renewable diesel and biojet, expand well beyond 2019 levels, albeit from a low base for biojet. Lower gasoline demand reduces ethanol volumes under current policies. Increasing energy efficiency, surging electric vehicle sales and behaviour change all contribute to lower demand. By 2023 US and European gasoline demand has recovered from Covid-19 disruption, but remains well below 2019 levels (IEA, 2021c). High ethanol prices in Brazil and lower gasoline demand in the United States relative to 2019 levels are both driving lower ethanol volumes in 2021. Ethanol demand remains 4% below 2019 levels in 2021 and does not fully recover until 2023. While overall biofuel demand returns to 2019 levels this year even with slower growth, the recovery is uneven. For comparison, crude oil prices increased by 40% over the same time period. By August 2021 biofuel prices had increased by between 70% and 150% across the United States, Europe, Brazil and Indonesia, 2 depending on the market and fuel, from average 2019 prices. We estimate these actions to reduce demand by 3%, or 5 billion litres, in 2021 compared to a scenario where mandates remained unchanged or were increased as planned. Brazil, Argentina, Colombia and Indonesia are managing climbing feedstock and biofuel costs by temporarily reducing or delaying blending mandates. Rising prices are slowing biofuels’ growth, but according to our forecast, demand in 2021 nevertheless recovers from the lows seen in 2020 during the Covid-19 crisis. However, over the medium term, major policy discussions in the United States, Europe, India and People’s Republic of China (hereafter ‘China’) hold the promise of a more than doubling of biofuel demand growth in the accelerated case. For example, some governments have responded to the current high price of feedstock by relaxing or delaying biofuel blending mandates, with the effect of reducing demand. 1 The factors influencing biofuel demand are all subject to uncertainty.
Policies in the United States and Europe help demand for renewable diesel (also known as hydrogenated vegetable oil in Europe) to nearly triple. The combination of these influences pushes Asian biofuel production past that of Europe during the forecast period.
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Government policies are the principal driver of the remaining expansion, but other factors such as overall transport fuel demand, costs and specific policy design influence where growth occurs and which fuels grow quickest. The recovery to pre-Covid-19 demand levels accounts for one-fifth of this demand growth. Global demand for biofuels is set to grow by 41 billion litres, or 28%, over 2021-2026 in the main case.
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