Biofuels in 2025: Market Outlook vs. Reality

The global energy transition has elevated biofuels from an alternative energy footnote to a central pillar in decarbonization strategies. As the world barrels toward 2030 climate targets, 2025 stands out as a pivotal year, offering a real-time glimpse into whether biofuels can meet high expectations or fall short under scrutiny.

This article explores the state of the biofuels market in 2025, beyond the press releases and policy promises. What’s working? What’s not? And where do we go from here?

Market Landscape: Growth, Demand, and Deployment

The global biofuels market reached an estimated $126 billion in 2024 and is projected to grow at a CAGR of 5.4%, hitting nearly $133 billion by the end of 2025 (Statista, 2024). Demand is being fueled by regulatory frameworks, carbon pricing mechanisms, and corporate sustainability goals.

However, the growth isn’t uniform:

Advanced biofuels (second and third generation) remain a small fraction of total production.
First-generation biofuels still account for over 75% of market share, raising ongoing concerns about food vs. fuel and land-use change.

Key regional developments:

EU: RED III mandates a 14.5% share of renewable fuels in transport by 2030, prompting member states to ramp up investment in sustainable biofuels.
USA: Renewable Fuel Standard (RFS) targets remain intact, with recent EPA rulings expanding support for biogas and SAF.
Asia: India and Indonesia continue aggressive mandates to reduce fossil fuel imports, though feedstock constraints persist.

Scaling Challenges: Feedstock, Technology, and Infrastructure

Despite growth, the sector faces structural hurdles:

Feedstock Constraints

According to the IEA (2024), 70% of biofuel production relies on just three feedstocks—corn, sugarcane, and used cooking oil. This narrow base limits scalability and increases price volatility.

Technology Bottlenecks

Advanced biofuels like cellulosic ethanol and algal biodiesel are still struggling with:

Low yields
High CAPEX
Complex supply chains

As of Q1 2025, fewer than 15 commercial-scale advanced biofuel plants are operational worldwide (IEA Bioenergy, 2025).

Infrastructure Gaps

Blending mandates are outpacing infrastructure readiness:

Many existing refineries are not optimized for advanced biofuel integration.
Logistics for SAF and maritime biofuels remain fragmented, especially outside OECD countries.

Spotlight on Sectors: Aviation, Maritime, and Road Transport

Sustainable Aviation Fuel (SAF)

Global SAF production is expected to reach 2.4 billion liters in 2025, up from 1.5 billion in 2023 (IATA, 2024). But this still meets only 0.5% of total jet fuel demand. Scalability remains an issue due to cost premiums and certification hurdles.

Notable developments:

EU mandates for 2% SAF blending by 2025.
U.S. Inflation Reduction Act SAF tax credits ($1.25–$1.75 per gallon).

Maritime Biofuels

The IMO’s revised GHG strategy is pushing shipowners to explore bio-based alternatives. Trials of marine bio-oils (e.g., HVO blends) are ongoing, but consistent availability and cost parity remain challenges.

Road Transport

Biodiesel and ethanol blends remain the mainstay, especially in Latin America. Brazil’s B15 mandate (15% biodiesel) continues to lead globally. Europe’s focus is shifting toward electric, but biofuels still fill a vital niche, especially in heavy-duty transport.

Investment Trends and M&A Activity

VC and private equity interest in biofuels has rebounded after a pandemic-era slump. According to BloombergNEF (2025), biofuels attracted over $4.2 billion in new investments in 2024.

M&A highlights:

Shell acquired Nature Energy’s biogas assets to expand its European SAF feedstock base.
TotalEnergies partnered with NextChem to convert refinery assets into advanced biofuel production units.

Institutional investors are showing greater interest in platforms with feedstock flexibility and integrated logistics rather than standalone plants.

Reality Check: Hype vs. Execution

Biofuels are not a silver bullet, but they are a necessary piece of the energy puzzle. Yet expectations must be grounded in reality:

Hype

Biofuels will eliminate fossil fuels
Advanced biofuels are ready to scale
Feedstock is abundant

Reality

Biofuels can reduce, not replace, fossil fuels use across key sectors
Technology readiness is still 3-5 years behind targets
Sustainable feedstock is limited, especially for SAF and maritime use

Still, momentum is building. The InventU Fuel Evolution Congress in Berlin this September will spotlight these pressing issues, bringing together leaders across aviation, maritime, road transport, and bioenergy. Expect grounded debate on what it really takes to scale sustainably.

Looking Ahead: What to Watch in 2025 and Beyond

Carbon intensity metrics will increasingly influence procurement. LCFS programs and carbon border adjustments will make CI scores a competitive differentiator.
Co-processing at existing refineries could drive early adoption without full infrastructure overhauls.
Waste-to-fuel technologies may gain traction, especially in regions with strong waste management ecosystems.
Geopolitical dynamics—from EU-U.S. alignment on SAF to Asian regional fuel security strategies—will shape investment flows.

Informed Optimism Required

2025 will not be the year biofuels take over, but it will be the year their future becomes clearer. Policymakers, producers, and end-users are all aligned on the need for cleaner fuels. Yet scale, economics, and sustainability must be balanced with pragmatism.

Attending the InventU Fuel Evolution Congress will provide a firsthand view of how companies and governments are turning ambition into execution.

Stay informed, stay realistic, and stay engaged.