Disconnect Between Biofuel Mandates & Demand?

A new study, Global Biofuels Outlook to 2025, authored by Hart Energy, finds a disconnect between mandates established in the U.S. Renewable Fuels Standard (RFS) and Renewable Energy Directive in the European Union, and actual market demand. While many have speculated this to be the case, it has not been highly discussed.

The study, focused mostly on biodiesel and ethanol, analyzes local and global drivers, public and fiscal policy developments, production capacity, feedstocks, and supply and demand projections through 2015, 2020 and 2025. Both first generation biofuels, as well as advanced biofuels along with ethyl tertiary butyl ether (ETBE) were included in the analysis.

The study focused on four key regions:

  • North America: the United States, Canada, and California (U.S. state)
  • EU-27: Finland, France, Germany, Italy, the Netherlands, Poland, Spain, Sweden, and the United Kingdom
  • Latin America: Argentina, Brazil, Colombia, and Peru
  • Asia Pacific: China, India, Indonesia, Japan, Malaysia, the Philippines, South Korea, and Thailand

Biofuel demand in all regions combined is estimated to be 5.4 percent by energy content by 2025 (110 million toe). Total ethanol demand is projected to reach over 35 billion gallons and biodiesel over 14 billion gallons. In terms of energy, market demand is estimated to increase by 23 percent from 2015 to 2020 and another 16 percent from 2020 to 2025. The projections, however, may not be met if supply is not available, and supply will depend on feedstock and capital availability.

“The U.S. vehicle market simply cannot accept more ethanol,” said Tammy Klein, assistant vice president of Hart Energy. “It’s not a matter of lack of supply or lack of commercial development of cellulosic ethanol.”

Maelle Soares Pinto, director of Hart Energy’s Global Biofuels Center, said the situation in Europe is similar. “The vehicle pool cannot use the amount of ethanol or biodiesel necessary to meet the Renewable Energy Directive. The European Union’s sustainability criteria also constrain the type of biofuels that can be used to meet the mandates and the situation could get worse if the EC’s proposal for ILUC factors is approved in its current form.”

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