What are biofuels?

Biofuels are biobased products, in solid, liquid, or gaseous forms, that are not fossil fuels. They are produced from cultivated crops or natural products, such as wood or agricultural residues, including molasses and bagasse. Biofuel is a renewable fuel produced from biomass, matter from deceased organisms, used for bioenergy production. Biofuel can be produced from renewable sources, like plants or from agricultural waste, domestic or industrial biodegradable waste, which includes an organic material that can be broken down into carbon dioxide, water, methane, compost, humus, and simple organic molecules by micro-organisms and other living things through composting, aerobic digestion, anaerobic digestion, or a similar process.

While mostly used as liquid fuels for transportation, liquid biofuels can also be used for electricity and heating. Biofuels are considered renewable energy sources, or energy derived from continuously occurring natural phenomena such as solar, wind, or hydropower. The International Energy Agency defines renewable energy as energy derived from natural processes that are replenished faster than they are consumed. Estimates of the climate impact of biofuel production vary widely by methodology and the specific situation examined.

Biofuels emit fewer greenhouse gas emissions when burned in an engine and are generally considered carbon-neutral fuels, as the carbon dioxide emitted has been captured from the atmosphere by the crops used in production. The use of biofuels has been subject to controversy over the "food vs fuel" debate, varied assessments of their sustainability, and ongoing deforestation and biodiversity loss as a result of biofuel production. Therefore, the climate change mitigation potential of biofuels varies considerably: in some cases, biofuel emissions are comparable to those of fossil fuels, and in others, biofuel emissions result in negative emissions.

Global demand for biofuels is predicted to increase by 56% from 2022 to 2027. By 2027, worldwide biofuel production is expected to supply 5.4% of global transport fuels, including 1% of aviation fuel, specifically renewable jet fuel and renewable diesel. Demand for aviation biofuel is expected to increase.

Biofuels: meaning and main types

Bioethanol and biodiesel are the two main biofuels. The U.S. leads global bioethanol production, followed by Brazil, while the EU is the largest producer of biodiesel. Both fuels are widely blended with petroleum products, offering investors exposure to growing renewable energy markets.

Bioethanol is an alcohol fuel produced by fermentation, mostly from carbohydrates derived from sugar or starch crops such as sugarcane or sweet sorghum. Cellulosic biomass, from non-food sources, such as trees and grasses, is also being produced as a feedstock for ethanol production. In biofuel production, the goal is to utilize feedstock, which is any biological material that can be used to produce ethanol and converted into fuel.

Unlike petroleum diesel fuel, which is a fossil fuel, biodiesel is produced from oils and animal fats, such as used cooking oil, through transesterification. It can be used as a fuel for vehicles in its pure form, but it is usually used as a diesel additive to reduce particulate, carbon monoxide, and hydrocarbon emissions from diesel-powered vehicles.

Conventional biofuels

Conventional biofuels, also called first-generation biofuels, are made from grown biofuel crops, including biodiesel produced from these sources and other first-generation biofuels. The sugar, starch, and oil in those crops are converted to biodiesel or ethanol through transesterification or yeast fermentation.

Advanced biofuels and aviation biofuels  

Second-generation biofuels and third-generation biofuels are called by several names: advanced biofuels or sustainable biofuels and also called drop-in fuels. No matter their name, advanced biofuels and other biofuels are made from feedstocks that do not directly compete with food or feed crops; instead, they come from such things as waste products to produce biofuels and energy crops.

Feedstocks from agricultural and forestry residues, including rice husk, rice stalk, wood chips, and even sawdust, can be used to produce advanced biofuels through biochemical and thermochemical processes. Feedstocks used to make fuels are grown on land that supports crops, but are byproducts of the main crop. Second-generation feedstocks include straw, perennial grasses, bagasse, jatropha, waste vegetable oil, and municipal solid waste, among others.

Aviation biofuel is a biofuel formulated to power aircraft, alongside other forms, including renewable gasoline. Sustainable aviation fuel, like aviation biofuel, is used instead of jet fuel to reduce carbon emissions for medium- and long-haul air travel. Aviation biofuel comes from plant or animal sources, including Jatropha, algae, tallows, waste oils, palm oil, Babassu, and Camelina. Aviation fuel can also be produced from correctly processed solid biomass.

Biofuel production: pathways and costs

The pathways of biofuel production are varied and include transesterification and ethanol fermentation. Specific equipment and technology are required, which influence production costs. Other cost considerations are the availability of feedstock, energy-intensive conversion, and complicated supply chains. A key determinant of commercial viability is production costs, as well as social costs associated with fiscal stimuli and regulations.

About 70% of total ethanol costs and 85-90% of first-generation biofuels costs, like corn-based ethanol and biodiesel, are primarily influenced by feedstock prices. Agricultural commodity volatility also contributes to higher biofuel prices. Second-generation biofuels, in lower supplies due to limited commercial production, also face technological and price uncertainties.

Environmental impact and lifecycle emissions

Sustainability assessments depend on monitoring environmental impacts and lifecycle emissions of energy generation technologies. The National Renewable Energy Laboratory is a national laboratory of the US Department of Energy Office of Energy Efficiency and Renewable Energy, which engages in technology transfer by working with private-sector partners to facilitate the application of renewable energy and energy efficiency research in practical settings. Life Cycle Assessment (LCA) methodologies provide a framework for evaluating the environmental impacts of products and services throughout their life cycles. These methodologies quantify and report on the environmental impacts of energy generation technologies, including greenhouse gas emissions.

Biofuel research and innovation pipeline

The biofuel research and innovation pipeline is a multi-tiered, interdisciplinary process that involves fields such as genetic engineering, advanced biocatalysis, integrated biorefinery design, and market deployment. Around the world, governments, government agencies, private and national labs, technology startups, and industry leaders all play a role in the ecosystem aimed at creating sustainable, cost-effective, and climate-friendly biofuel production solutions. The transition of biomass feedstocks to market-ready biofuels and bioproducts is facilitated by a holistic approach to renewable energy.

Using Energy Information Administration (EIA) data for planning

The Energy Information Administration (EIA), part of the Department of Energy, provides data and tools to help those in the energy sector plan and make decisions. Some of the key reports, resources, and tools include:

• Annual Energy Outlook (AEO): This report offers projections of energy consumption and supply trends in the U.S. through 2050, for insight into long-term energy changes.
• State and Local Energy Profiles: These profiles offer energy use and activity data for over 23,400 cities and 3,000 counties, providing a view into energy use for planning.
• LEAD Tool: An online platform that lets users create their own census tract profiles, offering estimated low-income household energy data.
• SLOPE Tool: This tool integrates planning-relevant data at the jurisdictional level to improve data-driven energy planning.
• EIA API: Provides access to various data sources and catalogs, enabling automated downloads and exports to Excel for further analysis.

Ethanol production from food crops  

Ethanol production involves converting the sugars or starches in crops into ethanol through fermentation. Biodiesel production, by contrast, uses vegetable oils, animal fats, or waste oils, which are chemically processed into biodiesel rather than derived from sugars.  

There are two processes to achieve this using ethanol feedstocks: fermentation or thermochemical conversion. In the fermentation process, yeast or genetically engineered microbes are introduced to metabolize plant sugars into ethanol. The process depends on the material type and quality, with feedstock coming from food production starch-based crops such as corn and wheat, sugar crops like sugarcane and sugar beet, and cellulosic biomass as the primary sources for ethanol production.

The process of producing biofuels can be batch or continuous. Batch processes are simpler to manage but less efficient, while continuous processes have more uniform output and are more energy efficient.

Flex fuel and petroleum fuels

Flex fuel, short for flexible fuel, is a type of fuel production that mixes gasoline and another fuel, which is most often ethanol. Flex-fuel vehicles can run on various blends of petroleum gasoline and ethanol. Compared to fossil fuels or conventional petroleum gasoline, gasoline-ethanol blend flex fuels offer several advantages, including potential cost savings and reduced emissions.

Cellulosic ethanol from cellulosic biomass

Cellulosic ethanol is a biofuel production process that produces energy from the fibrous material found in plants. It can come from many renewable biological sources, including grasses, wood, algae, and even municipal solid waste. Through a multi-step process involving pretreatment, hydrolysis, fermentation, and distillation. Cellulosic ethanol is considered a second-generation biofuel, since it does not compete with food crops for land or resources.

Biodiesel production and diesel fuel blends

The term “biodiesel” is often used interchangeably with “renewable diesel,” although there are some differences. Renewable diesel refers to biofuel produced from vegetable oils or animal fats, while biodiesel is derived from plant sources such as soybeans, rapeseed, palm oil, or jatropha.

In biodiesel production, there are three primary types of biodiesel blends: B0 (no biodiesel), B5 (up to 5% biodiesel), and B20 (6% to 20% biodiesel). Pure biodiesel is usually reserved for applications such as heating equipment, where it provides a cleaner-burning alternative to petroleum-based fuels. In addition, pure biodiesel is sometimes used in heavy-duty vehicles where its low viscosity makes it easier to inject into engines.

Diverse biodiesel feedstock options, from sustainable animal fats to innovative plant and waste-based sources, including sewage sludge, Jatropha curcas plants, microalgae, soybean oil, non-edible oils, waste cooking oils, and animal fats. It can also be produced from recycled greases and long-chain fatty acid methyl esters. Ulti-tiered, interdisciplinary process that involves fields such as genetic engineering, advanced biocatalysis, integrated biorefinery design, and market deployment.

FAQs

What is biofuel in simple terms?

Biofuels are biobased products, in solid, liquid, or gaseous forms, that are not fossil fuels. They are produced from cultivated crops or natural products, such as wood or agricultural residues, including molasses and bagasse. Biofuel is a renewable fuel produced from biomass, the matter of deceased organisms, used for bioenergy production.

What are examples of biofuels?

Diverse biofuel sources and alternatives showcasing renewable energy potential and sustainable solutions. Examples of these include biodiesel fuel, biogas, ethanol, methanol, renewable jet fuel, renewable heating oil, aviation biofuel, and renewable naphtha.

Are biofuels good or bad?

Biofuels have advantages and disadvantages, making them a complex energy source that ca be beneficial and problematic at the same time, depending on several factors. Advantages include renewability, lower emissions, waste reduction, energy security and economic opportunities. Disadvantages include land use competition, environmental concerns, economic viability and limited infrastructure. The overall assessment of whether biofuels are positive or negative depends on how the manner in which they are produced, managed, and integrated into the overall energy system, particularly in comparison to fossil fuels.

Who is the largest producer of biofuel in the world?

The largest producer of biofuels in the world is the U.S., accounting for nearly 38.8% of global biofuel production. In 2024, the U.S. produced approximately 1,917 petajoules of biofuel, making it the leading country in the biofuel market. Behind the United States, Brazil and Indonesia are second and third largest producers of biofuel producers.

What is the difference between biodiesel, renewable diesel, and diesel fuel?

• Biodiesel: Produced through the process of transesterification of vegetable oils and animal fats, it meets ASTM specifications and can be mixed with petroleum diesel fuel. More sustainable source due to its production process and cleaner emissions.
• Renewable diesel: Also called hydrotreated vegetable oil (HVO), renewable diesel is a drop in fuel that works in existing diesel engines without changes. It is chemically similar to petroleum diesel and can be blended with traditional diesel. Renewable diesel has a lower carbon intensity and can be used as a full replacement for regular diesel without modifications.
• Regular diesel: A traditional fossil fuel derived from crude oil through refining processes. It contains hydrocarbons and small amounts of sulfur, nitrogen, and oxygen impurities. Regular diesel is commonly used in engines designed for high torque and efficiency. Regular diesel is used widely throughout many industries including transportation, construction, agriculture, mining and the military. These industries use diesel fuel for its high energy density and efficiency, making it a crucial fuel source in various sectors.

Is cellulosic ethanol better for the environment than corn ethanol?

The quick answer is yes; cellulosic ethanol is considered more environmentally friendly than corn ethanol. This is due to cellulosic ethanol's lower carbon footprint and potential to reduce greenhouse gas emissions affecting climate change. It can reduce emissions by up to 86% vs gasoline, making it a more sustainable fuel option.

Cellulosic ethanol production is still in its early stages and faces some challenges such as high production costs, technical issues, feedstock variability, and infrastructure development. Regardless of these challenges, cellulosic ethanol has the potential to play a role in an energy sustainable future, offering a more dependable and cost-effective fuel supply supporting rural communities and reducing dependence on foreign energy sources.

How do biofuel hedges work for a fleet exposed to diesel fuel price volatility?

Fuel swaps are a financial agreement that allows you to exchange a floating fuel price for a fixed price over a defined period of time. This secures price certainty without purchasing the actual fuel. Swaps are appealing for companies that consume fuel daily, such as delivery fleets, as they align with how real-world gas is actually purchased. They provide a flexible and transparent way to manage exposure across the refined fuels markets.

Consider for example, a delivery fleet could enter into a two-month fuel swap contract to hedge against price fluctuations. If the market prices rise above fixed price, the hedger receives money. And if market prices fall below the fixed price, the hedger pays the difference.

This helps maintain budget predictability and protects against unexpected price swings. Fuel swaps are a critical tool for marketers, refiners, and traders, offering a way to hedge fuel sales at fixed prices, protect margins, and manage inventory value against market volatility.

Which advance biofuels qualify under the RFS?

The Renewable Fuel Standard (RFS) program is a national policy of the United States Environmental Protection Agency that requires a certain volume of renewable fuel be used to replace or reduce the quantity of fossil fuel in transportation fuel, home heating oil, or jet fuel. The RFS Program recognizes several advanced biofuels that qualify under standards:

• Biomass-based diesel: must be produced from qualifying renewable biomass and must meet a 50% lifecycle Greenhouse gas (GHG) reduction.
• Cellulosic biofuel: Produced from cellulose, hemicellulose, or lignin, these fuels must achieve at least 60% lifecycle GHG reduction. Examples include cellulosic ethanol and renewable natural gas.
• Advanced biofuel: Produced from qualifying renewable biomass (except from corn starch) and must meet a 50% lifecycle GHG reduction.
• Renewable fuel (or conventional biofuel): Typically refers to ethanol derived from corn starch and must meet a 20% lifecycle GHG reduction.

How do RIN values affect procurement strategy?

Renewable Identification Numbers (RIN) are credits representing renewable fuel. RINs are generated when a producer makes a gallon of renewable fuel. One RIN represents an ethanol-equivalent gallon of renewable fuel produced and used for transportation purposes within the U.S. RINs can be traded between parties, including non-obligated third parties (e.g., brokers, traders).

RINs can be used to demonstrate compliance for the year in which they are generated or the following year, after which they expire and are invalid. Obligated parties achieve compliance by obtaining and retiring for compliance enough RINs to meet their annual RVO for each renewable fuel category.

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This material is for informational purposes only and should not be considered as an investment recommendation or a personal recommendation.