AMF Annex 58 /IEA Bioenergy Task 41 Project 10
A Report from the Advanced Motor
Fuels TCP and IEA Bioenergy TCP

The Role of Renewable
Transport Fuels in
Decarbonizing Road Transport
Deployment Barriers andPolicy Recommendations
Dina Bacovsky
Andrea SonnleitnerBEST – Bioenergy andSustainable Technologies GmbH
Adam Brown
Energy Insights Ltd
November 2020

Edited by Dina Bacovsky
BEST — Bioenergy andSustainable Technologies GmbH

Summary / Abstract
This report constitutes Part 4 of the report on “The Role of Renewable Transport Fuels in
Decarbonizing Road Transport”. In this report the term decarbonization includes all
options to reduce GHG emissions and make road transport cleaner, including low(-fossil)carbon energy carriers such as biofuels, e-fuels, and renewable electricity. This part of thereport deals with barriers to the further implementation of renewable transport fuels and with
policies to overcome these.
In the light of climate change, there is an urgent need to decarbonize our societies. The
transport sector, and within it in particular the road transport sector, is specificallychallenging, as transport demand is growing, and so are the sector´s GHG emissions.
Decarbonization includes all options to reduce GHG emissions and make road transportcleaner, including low(-fossil)-carbon energy carriers such as biofuels, e-fuels, andrenewable electricity. None of these will be able to solve this grand challenge alone, andrenewable transport fuels have an essential role in bridging the gap between GHG emission
reduction targets and the prospected emission reductions.
Many low-carbon scenarios envisage an increase in the role of sustainable bioenergy. For
example, in the IEA’s 2°C Scenario (2DS), biofuels increase by a factor of 10 by 2060,
providing 30 EJ in the transport sector. In this scenario, biofuels provide some 30% oftransport energy, complementing increases in electricity and improvements in energy
efficiency in the sector. This scenario also sees a rapid increase in the level of biofuels in the
short term, with its contribution in the transport sector growing by a factor of 3 by 2030.
The IEA’s World Energy Outlook New Policy Scenario (NPS) takes account of current andplanned policy measures while the Sustainable Development Scenario (SDS) identifies apathway through which the main energy-related components of the Sustainable
Development Goals, as agreed by 193 countries in 2015, can be achieved. Comparison ofthese scenarios shows that current and proposed policies (as represented by the NPS
scenario) are only likely to stimulate around 70% of the deployment level needed in the SDS
scenario, even if proposed measures are actually put in place and effective. More ambitious
targets and policy measures will be essential if biofuels are to be developed in a way that iscompatible with scenarios such as the SDS.
Specific barriers to alternative transport fuels vary from country to country, depending on thepolicy and regulatory frameworks in place. Different fuels also face specific barriers
depending on their level of technical and commercial maturity and their feedstock demands.
Important barriers found through the assessments undertaken in this study, through theidiscussion at the project workshop on 18 November 2019 in Brussels, and also from existing
literature include:•

Well-established transport system to compete with•

Fluctuating policy drivers / lack of long-term stable policies•

Low public acceptance / perception of technical performance issues andsustainability concerns•

Incomplete set of policy measures•

The need to build up infrastructure for alternative fuels and alternative fuel vehicles
such as FFVs, EVs, FCEVs•

Risks associated with biofuels, such as technical issues, economic competitiveness,ease of integration of fuels, availability of appropriate feedstock and meetingsustainability requirements

Long term and stable policy frameworks are essential to foster growth of renewable transport
fuels. An appropriate policy portfolio would include measures to “level the playing field” byremoving fossil fuel subsidies and putting effective carbon pricing mechanisms in place.
Such a portfolio should also include specific targets for renewable fuels, and mechanisms toensure that the fuels are competitive in the transport market, along with a stringent,evidence-based sustainability governance regime.
Additional measures are needed to promote fuels which are not yet fully commercialized,
including mandatory obligations for deployment of emerging biofuels, dedicated financial
mechanisms and instruments to facilitate technological development and subsequent market
deployment, and targeted support for RD&D.
However, each government has to find the right alternative fuels and vehicles to go for, andto find the right set of policy measures for the particular national situation at a given time.
There are no one-size-fits-all solutions to decarbonize transport. The only constant is thatbold action needs to be taken now to reach decarbonization at the required level and speed.

iiAuthors
This report constitutes Part 4 of the report on “The Role of Renewable Transport Fuels in
Decarbonizing Road Transport”, a project that was initiated and carried out jointly by IEA
Bioenergy and the Advanced Motor Fuels (AMF) TCP, with financial support of the European
Commission. The project was Task 41 Project 10 under IEA Bioenergy and Annex 58 under
AMF.
Participants in this project were the Contracting Parties of IEA Bioenergy from Brazil, theEuropean Commission, Finland, and USA, the Contracting Parties of AMF from China,
Finland, Germany, Japan, Sweden, and USA, and AMF Annex 28 and AMF Annex 59. All
parties provided in-kind contributions, except for the European Commission that also
provided 80,000 USD to finance the work of experts. The overall project budget (in-kind plus
cash contributions) amounts to 200,000 USD.
Further to this part “Deployment Barriers and Policy Recommendations”, the following reportparts have been published:•

Key Strategies in Selected Countries•

Production Technologies and Costs•

Scenarios and Contributions in Selected Countries•

Deployment Barriers and Policy Recommendations•

Summary Report

This report part was written by Adam Brown (Energy Insight Ltd), Andrea Sonnleitner andDina Bacovsky (both BEST – Bioenergy and Sustainable Technologies GmbH).
The IEA Bioenergy TCP is an international platform of cooperation working in the frameworkof the IEA´s Technology Collaboration Programmes. IEA Bioenergy’s vision is to achieve asubstantial bioenergy contribution to future global energy demands by accelerating the
production and use of environmentally sound, socially accepted and cost-competitive
bioenergy on a sustainable basis, thus providing increased security of supply whilst reducing
greenhouse gas emissions from energy use.
www.ieabioenergy.com
The Advanced Motor Fuels (AMF) TCP also is an international platform of cooperation
working in the framework of the IEA´s Technology Collaboration Programmes. AMF´s vision
is that advanced motor fuels, applicable to all modes of transport, significantly contribute to asustainable society around the globe. AMF brings stakeholders from different continentsiii

together for pooling and leveraging of knowledge and research capabilities in the field ofadvanced and sustainable transport fuels.
www.iea-amf.org

iv

Content
Introduction ........................................................................................................................... 1
Biofuels deployment trends and ambitions ............................................................................ 2
Current status of biofuels deployment................................................................................ 2
Ethanol .......................................................................................................................... 2
Biodiesel (FAME) ........................................................................................................... 3
HVO ............................................................................................................................... 3
Biomethane.................................................................................................................... 4
Cellulosic ethanol ........................................................................................................... 4
Thermochemical production processes .......................................................................... 5
Biofuels ambitions in low-carbon scenarios ....................................................................... 5
IEA World Energy Outlook Scenarios............................................................................. 6
WEO – Biofuels in Transport .......................................................................................... 7
Biofuels Deployment Trends.............................................................................................. 9
USA ............................................................................................................................. 11
Germany ...................................................................................................................... 12
Sweden ........................................................................................................................ 13
Finland ......................................................................................................................... 14
Brazil............................................................................................................................ 15
Barriers to widespread deployment ..................................................................................... 16
Lessons learned from past market introductions of alternative fuels ................................ 16
Austria ......................................................................................................................... 17
Finland ......................................................................................................................... 17
Japan ........................................................................................................................... 18
Sweden ........................................................................................................................ 18
USA ............................................................................................................................. 18
Germany ...................................................................................................................... 19
Barriers generic to all countries .................................................................................... 19v

Barriers to advanced biofuels .......................................................................................... 20
Expert opinions expressed during the policy workshop .................................................... 22
Reflections ...................................................................................................................... 22
Well-established transport system to compete with ...................................................... 23
Fluctuating policy drivers .............................................................................................. 24
Public perception ......................................................................................................... 24
Incomplete set of policy measures ............................................................................... 25
Infrastructure requirements .......................................................................................... 25
Risks associated with the take-up of low-carbon fuels.................................................. 25
Policy requirements for increased renewable fuels deployment .......................................... 28
Enabling framework for low-carbon bioenergy technologies ............................................ 28
Additional measures for not fully commercialized technologies ....................................... 30
Policy best practice.......................................................................................................... 31
Established biofuels such as ethanol, biodiesel, HVO and biomethane........................ 31
Emerging biofuels ........................................................................................................ 32
Final remarks................................................................................................................... 33
Abbreviations ...................................................................................................................... 34vi

List of Figures
Figure 1: Global production levels of biofuels in 2019 (logarithmic scale), based on data in
REN21, GSR, 2020 ............................................................................................................... 3
Figure 2: Role of biofuels in transport – IEA 2DS Scenario ................................................... 6
Figure 3: Bioenergy use by region – NPS and SDS .............................................................. 8
Figure 4: Comparison of projected biofuels growth to 2025 with WEO Scenarios, Source:
IEA Renewables 2019 and WEO 2018 ............................................................................... 10
Figure 5: Bioenergy use in transport - USA ......................................................................... 11
Figure 6: Bioenergy use in transport - Germany .................................................................. 12
Figure 7: Bioenergy use in transport - Sweden.................................................................... 13
Figure 8: Overview of country-specific case studies in AMF Annex 59 ................................ 17
Figure 9: Barriers to the market introduction of alternative fuels, as found in AMF Annex 59........................................................................................................................................... 20
Figure 10: Multitude of stakeholders involved in the market implementation of alternative
fuels and vehicles ............................................................................................................... 24vii

List of Tables
Table 1: Trends in transport energy in IEA WEO Scenarios .................................................. 8
Table 2: Current and future road transport system .............................................................. 23
Table 3: Main risks for biofuels ............................................................................................ 27

viii

Introduction
In the light of climate change, there is an urgent need to decarbonize our societies. The
transport sector, and within it in particular the road transport sector, is specificallychallenging, as transport demand is growing, and so are the sector´s GHG emissions.
Decarbonization includes all options to reduce GHG emissions and make road transportcleaner, including low(-fossil)-carbon energy carriers such as biofuels, e-fuels, andrenewable electricity. None of these will be able to solve this grand challenge alone, andrenewable transport fuels have an essential role in bridging the gap between GHG emission
reduction targets and the prospected emission reductions.
As discussed in detail in parts 1-3 of the overall report, the countries assessed are aware of
the urgent need for decarbonizing their transport systems. However, the required level ofdecarbonization can only be reached with a set of measures, including biofuels, electricvehicles, and possibly e-fuels. There is sufficient feedstock available for the sustainableproduction of biofuels to be used in our vehicles to cover the demand of low-carbon
scenarios. But why is the production and use of biofuels not yet growing as needed?
The following sections look at the role of biofuels within low-carbon scenarios and how thesecompare with present and anticipated deployment patterns at global and regional scales.
Barriers to the widespread deployment of renewable fuels are discussed, and finally, policy
recommendations on how to support the deployment are provided.

1

Biofuels deployment trends and ambitions
The use of established biofuels has been growing, and new fuels such as HVO andbiomethane are beginning to reach significant levels. Future low-carbon scenarios depend
on substantial increases in the levels of sustainable biofuels, but current deployment levels
are not consistent with these scenarios. While a number of countries have well-developed
biofuels strategies, the trajectories associated with the low-carbon scenarios will not be
achieved unless more ambitious strategies are implemented in many more countries.

Current status of biofuels deployment
As is also described in detail in Part 2 of the overall report, “Production Technologies andCosts”, global production and use of biofuels is expected to continue to be dominated byestablished biofuels such as crop-based ethanol and biodiesel. However, there is a growing
trend towards waste-based biodiesel that is favored by a number of policy measures (suchas the EU’s Renewable Energy Directive and the Low-Carbon Fuel Standard in the USA)
since it provides better overall green-house gas balances and has lower associated land-use
change risks. Other biofuels are making a growing impact although the picture is very
different between the types of new fuels. The production and use of HVO has been growing
strongly, and biomethane use in transport has also grown, albeit from a low base. By
contrast the production of cellulosic ethanol biofuels from cellulosic materials and theexperience of producing biofuels from cellulosic materials by thermochemical routes is still ata low level due to technology and economic barriers. Production levels for ethanol are morethan three orders of magnitude higher than for cellulosic ethanol and biofuels fromthermochemical processes as illustrated by Figure 1 which shows production in 2019, butusing a logarithmic scale.
EthanolGlobal production of ethanol in 2019 amounted to 114 billion liters (2.4 EJ).1 Production anduse is dominated by the USA (corn) and Brazil (sugarcane), who between them produced
83% of global production, and were also the major users. China’s production has risen
rapidly in recent years, reaching an estimated 4 billion liters (85 PJ) in 2019. Productionlevels have also grown strongly in India (2 billion liters, 43PJ), overtaking Canada (1.9 billion
liters, 40PJ) and Thailand (1.6 billion liters, 34 PJ). EU production amounted to some 4.2
billion liters (89 PJ) in 2019.

1 REN21 Global Status Report 20202

Production PJ (logarithmic scale)

1000

100

10

1
Bioethanol

Bioethanol

Biodiesel

Biodiesel

HVO

HVO

Biomethane

Biomethane

Cellulosic
ethanol

Cellulosic ethanol

Thermalbiofuels

Thermal biofuels

Figure 1: Global production levels of biofuels in 2019 (logarithmic scale), based on data in REN21, GSR, 2020

Biodiesel (FAME)
Global production of FAME biodiesel amounted to 41 billion liters (1.4 EJ) in 2019.
Production of biodiesel is less geographically concentrated than ethanol, with the leading 5
countries between them contributing less than 60% of global production. In 2019, Indonesia
became the largest producer with 17% of production, followed by the US (14%), Brazil(12%), Germany (8%) and France (6%).
HVO
HVO production has been growing rapidly, reaching around 6 billion liters (200 PJ) in 2018
and is expected to continue to grow rapidly over the next 5 years reaching between 13 and17 billion liters (400-600 PJ), with some 5 billion USD of investment scheduled, mostly basedon waste. The rapid growth can be put down to:•

successful and low risk technology, in some cases integrated with existing oil
refinery operations,•fuels which score highly in low-carbon based incentive schemes, when basedon waste feedstocks such as UCO.

•

fuels which can be easily integrated into existing fuel delivery and infrastructure
system (“drop-in” fuels), offering advantages compared to FAME biodiesel,•

the prospect of making fuels for aviation (although production in 2018 wasestimated at only 15 million liters)•

the increasing use of waste-based materials
3However future growth may be constrained by the availability of suitable low-cost waste
streams, although efforts are under way to develop alternative feedstock sources, forexample from energy crops produced in ways which avoid negative land-use impacts.
Biomethane
Biogas is widely produced by anaerobic digestion of a wide range of wastes, residues andcrops, with an estimated 150,000 largescale plants worldwide as well as some 50 million
small-scale digesters used to provide energy for cooking in developing countries. Most
biogas is still used directly to produce electricity or heat but there is a growing trend to refine
the gas to biomethane by taking out the CO2 and other components and producing apipeline quality gas, with some 8.5% of biogas now treated in that way in over 700 plants
worldwide.2 The purified methane can then be used for heating or for transport, often being
injected into the natural gas grid. The policies and incentives in place determine whether thefuel is used for heating or for transport where it can be used in cars and in vans and trucks.
The USA and Europe (notably Sweden) are the major markets for biomethane in transport,
but there is growing interest and activity in other areas, notably in China and India. Total
current use in transport is estimated at only around 30 PJ in 2018.3
Biomethane shares many positive characteristics with HVO, with low-risk technology,
producing a fuel which can score highly in incentive schemes especially when made fromwastes. It is more suited to dedicated transport fleet use, since adapted vehicles and fuelinginfrastructure is needed, but also provides fuels which can offer local emission benefits
compared to fossil diesel fuels, making it attractive for city delivery vehicles.
Cellulosic ethanol
Despite much investment in R&D and in demonstration plants, and high levels of support
available for the fuels, the level of cellulosic ethanol production is still low (around 200 million
liters/year, 4 PJ) with globally only four large scale plants in operation, although these are
not so far reaching design capacity due to ongoing technical bottlenecks. Some further
investments have been announced, and the IEA estimates that once the plants are built this
could lead to production of some 1.7 billion liters.
By contrast with HVO and biomethane, technical barriers seem to be the main barriers to
rapid progress with deploying cellulosic ethanol plants

2

IEA Renewables 20193

REN 21 GSR 20194

Thermochemical production processes
A range of thermochemical processes are under development which can produce a range of
biofuels from cellulosic feedstocks including timber and agricultural residues and municipal
solid wastes. These include processes based on gasification (and synthesis) and pyrolysis(and upgrading). They can produce a range of fuels including methanol and other alcohols,
methane, bio-gasoline and diesel and jet fuels. While many processes have beensuccessfully demonstrated at pilot and pre-commercial scale, production of these fuels iscurrently very limited (less than 100 million liters) and even if plants under construction anddevelopment are successful then production would only amount to less than 1 billion liters(some 34 PJ). 4
The main barriers to more widespread production of these fuels seems to be the need forsuccessful large-scale demonstration plants to show that the processes are technically
viable, and for sufficient financial support to make sure that these early plants can provide anadequate return in investment.

Biofuels ambitions in low-carbon scenarios
Bioenergy plays an important role in low-carbon scenarios, especially in the transport sector.
Comparison of the IEA’s NPS and SDS scenarios for biofuels in transport show that current
and proposed policies (as represented by the NPS scenario) are only likely to stimulate
around 70% of the deployment level needed in the SDS scenario, even if proposed
measures are actually put in place and effective. More ambitious targets and policy
measures will be essential if biofuels are to be developed in a way that is compatible withscenarios such as the SDS.
Many low-carbon scenarios envisage an increase in the role of sustainable bioenergy. For
example, in the IEA’s 2°C Scenario (2DS) of its 2017 edition of the Energy Technologies
Perspectives publication, which is consistent with a 50% chance of limiting future global
average temperature increases to 2°C by 2100, biofuels increase by a factor of 10 by 2060,
providing 30 EJ in the transport sector. In this scenario, biofuels provide some 30% oftransport energy, complementing increases in electricity and improvements in energy
efficiency in the sector as shown in Figure 2.5
This scenario also sees a rapid increase in the level of biofuels in the short term, with its

4

IEA Renewables 2019

5

IEA Technology Roadmap, Sustainable Bioenergy, 2017.

5contribution in the transport sector growing by a factor of 3 by 2030.

Figure 2: Role of biofuels in transport – IEA 2DS Scenario

In the International Renewable Energy Agency’s (IRENA) REMap scenario, an increase inrenewables and improvements in energy efficiency provide over 90% of the necessaryenergy-related CO2 emission reductions to 2050.6 In this scenario, bioenergy provides 22%of total global energy needs for transport.
If more stringent climate targets are to be achieved, then the important role of bioenergy islikely to be enhanced (particularly involving the production of bio-based fuels associated withcarbon capture and storage or reuse).
IEA World Energy Outlook Scenarios
The IEA’s World Energy Outlook (WEO) features three scenarios. These are the Current
Policies Scenario (CPS), New Policies Scenario (NPS) and Sustainable Development
Scenario (SDS). The main underlying features of these scenarios are as follows:•

The CPS is based solely on existing laws and regulations as of mid-2018, andtherefore excludes the ambitions and targets that have been declared bygovernments around the world. It provides a baseline for the WEO analysis.

•

The NPS provides an assessment of where today’s policy frameworks andambitions, together with the continued evolution of known technologies, mighttake the energy sector in the coming decades. The policy ambitions include
those that have been announced as of August 2018 and incorporates thecommitments made in the Nationally Determined Contributions under the Paris
Agreement, but does not speculate as to further evolution of these positions.

6

IRENA ReMap 2018

6

Where commitments are aspirational, this scenario makes a judgement as tothe likelihood of those commitments being met in full.
•

The SDS, introduced for the first time in the 2017 edition of the WEO, starts
from the assumption that selected key outcomes related to the main energyrelated components of the Sustainable Development Goals, agreed by 193
countries in 2015, can be achieved and then works back to the present to see
how they might be realized. The outcomes in question are:o

Delivering on the Paris Agreement. The Sustainable Development
Scenario is fully aligned with the Paris Agreement’s goal of holding theincrease in the global average temperature to “well below 2 °C”.

oAchieving universal access to modern energy by 2030.

oReducing dramatically the premature deaths due to energy-related air
pollution.

The Sustainable Development Scenario sets out the major changes thatwould be required to deliver these goals simultaneously. The 2018 edition
also incorporated linkages between energy and water.
The WEO provides a detailed analysis of energy production and use by sector and by region
for each scenario, looking out to 2040. The analysis here focuses on how the role ofbioenergy in the transport sector evolves over time in the scenarios presented in WEO 2018.
WEO – Biofuels in Transport
The three scenarios described above identify different pathways for energy in the transport
sector and for the role of biofuels within it, as summarized in Table 1. Total transport energy
continues to increase in both CPS and NPS scenarios until 2040, whereas in SDS growthslows to 2030 and declines by 3% by 2040. Biofuels use rises in all scenarios, but in the
SDS biofuels use more than doubles by 2030 and triples by 2040 reaching 11% of transportenergy needs by 2030 and 15% by 2040.
This implies that the current policy mix (as represented by CPS) and even the proposed
policies represented in NPS will not deliver the biofuels contribution consistent with the moresustainable future represented by the SDS.

7

Table 1: Trends in transport energy in IEA WEO Scenarios

Scenario

Overall transport energy
trend compared to 2017

Role of biofuels
Growth trend relative to
2017

CPS

NPS

SDS

% of total transportenergy by 2030 and
2040

2030: Increases by 22%

2030: Increases by 51%

2030: 4.5%

2040: increases by 38%

2040: Increases by 91%

2040: 5.0%

2030: Increases by 18%

2030: Increases by 87%

2030: 5.7%

2040: increases by 27%

2040: Increased by 156%

2040: 7.2%

2030: Increases by 5%

2030: Increases by 226%

2030: 11.1%

2040: Declines by 3%

2040: Increases by 308%

2040: 15.1%

Bioenergy in transport by region - SDS
Transport Energy EJ

12
10
8
6
4
2
0
North America2017
China
Other Asia Pacific
AfricaEurasia2025
Europe

2030

2040

India
South and Central America
Middle East

Figure 3: Bioenergy use by region – NPS and SDS

In the NPS, North America, Europe, South and Central America (notably Brazil), which today
consume around 90% of all biofuels, remain the largest users. 70% of all biofuels will be
consumed in these regions in 2040, and China will also become a major consumer of
biofuels (10% of the total).
8In the SDS scenario, biofuels use grows more rapidly, especially in China, India and otherparts of the Asian Pacific Region, as shown in Figure 3. By 2040, North America, Europe
and South America will make up just 54% of the world market, with China using 10% of thetotal biofuels and more significant uptake in other regions – notably in India and other partsof SE Asia.
On a global scale, even if all current policy commitments are fully implemented and effective,
biofuels deployment will only reach some 70% of the level estimated as necessary within the
SDS. To realize the levels needed within the SDS significantly more ambitious and effective
policies will have to be put in place.

Biofuels Deployment Trends
Current rates of deployment as represented by the IEA’s forecasts from now to 2024,
indicate that in fact the growth in bioenergy in the transport sector is likely to be around halfthat projected even in the NPS scenario, emphasizing the need for an urgent effort to step
up policy efforts in the biofuels sector.
Analysis of current and anticipated deployment trends for biofuels shows that while biofuels
production and use has been growing, the growth rate is well below the rate implied even in
the NPS, let alone the more ambitious trajectory required in any lower-carbon energy future.
The IEA publish an annual renewables market report which gives information on current
deployment trends and also provides projections for the growth of each technology, includingtransport biofuels, for the next five years.7 These projections are based on detailed bottomup analysis of market factors in all the main markets. Global biofuels production and use has
been growing at an average rate of around 5% since 2010, but at closer to 7% in 2018,
when production reached record levels in the USA and Brazil, the two major producers.
Figure 4 shows the anticipated trends in total global biofuels production to 2024, andcompares these to the 2025 figures in the WEO NPS and SDS scenarios. This shows thatgrowth in biofuels forecast will be some 23% between 2018 and 2024 (around 4%/year).
This compares unfavorably with the 45% growth anticipated in the NPS scenario and the
projected growth between 2018 and 2024 will be a factor of 5 lower than that required to bein line with the SDS by 2025. More ambitious policy measures are clearly needed if biofuels
are to play their full part in decarbonizing transport.

7

IEA Paris Renewables 2019 (October 2019)9

Figure 4: Comparison of projected biofuels growth to 2025 with WEO Scenarios, Source: IEA Renewables 2019and WEO 2018

As Figure 4 indicates, projected growth is concentrated in Asia, and especially in China
where there are plans to move towards a nationwide 10% blend of ethanol in gasoline (fromabout 2 % now) and for an increase in use of biodiesel. Growth is also expected in India
where the 5% blending target for ethanol in gasoline was reached in 2018 and a level of
20% is targeted for 2030, and in SE Asia, especially for biodiesel fuels. Biofuels use in SouthAmerica and especially Brazil is expected to be boosted by the RenovaBio program.
Growth in Europe is expected to be constrained by the limit on crop-based biofuels within the
RED-II, which is unlikely to be offset by growth in emerging biofuels. Similarly, growth in the
US will be constrained since the ethanol limit within the RFS has been reached and total
gasoline consumption is expected to decline with improving vehicle efficiency standards.
Biodiesel demand is expected to continuously grow in order to meet the more ambitious
overall RFS2 standards, along with state led initiatives such as the California LCFS.
This means that even the trajectory associated with the NPS scenario is unlikely to beachieved. The IEA also quote an accelerated forecast, which assumes more favorable
market conditions and enhanced policies. In this more supportive environment, total biofuels
production rises by some 47% by 2025, bringing the level close to that envisioned in the
NPS scenario by that date.
In Part 1 of the overall report (“Key Strategies in Selected countries”), the key strategies for
decarbonizing the transport sector has been described for a number of countries. The main10

aspects for USA, Germany, Sweden, Finland and Brazil are summarized in the following
section.
USA
In the US, biofuels growth accelerated significantly between 2002 and 2011 due to the RFS
and particularly the growth in the production and use of corn-based ethanol. More recently
ethanol use has stabilized as the maximum level provided for under RFS2 (Renewable Fuels
Standard) has been reached. Biodiesel production and use have been growing, promoted
under the RFS and state level provision such as California’s LCFS. (See Figure 5). Biogas
from landfills and many other sources is increasingly purified to biomethane for use inpipelines and transport use. The use of HVO has also been growing. “Other biofuels” –including cellulosic ethanol – so far make up a small overall percentage of fuel use. Biofuel
use is under pressure because of expected declines in US gasoline use, due to improved
vehicle efficiencies, and by “blending waivers” which allow smaller refiners to avoid the needto blend ethanol in gasoline.
12

1600
1400

10

1200

PJ

800

6

600

% biofuels

8

1000

4

400
2

200
0

0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Ethanol

Biodiesel

Other Biofuels% biofuels

Figure 5: Bioenergy use in transport - USA

The Renewable Fuel Standard has provided a long-term steady policy impetus which has
driven the growth in ethanol and biodiesel use, although the maximum level of corn ethanol
allowed under the policy has now been reached. Provisions for cellulosic ethanol within the
RFS has provided stimulus for other biofuels. The federal policy is being complemented bystate level policies, including the LCFS (Low-Carbon Fuel Standard) in California, which
provide additional impetus and which are designed to promote the most carbon efficient fuel11

options.
These market policies are complemented by a number of other measures, including asubstantial RD&D effort and measures such as loan guarantees which aim to help thedevelopment and financing of riskier novel technologies at scale.
Germany
In Germany biofuels make up 5-6% of total transport energy use, with the percentage notrising significantly since 2010 (Figure 6).8 71% of the biofuels used in 2018 was biodiesel,with ethanol making up most of the balance. Biomethane contributed 1.2%.
150

7

125

6

PJ

4
75
3
50

% biofuels

5

100

2

25

1

0

0
2010

2011

Biodiesel

2012

2013

2014

Vegetable oil

2015

Bioethanol

2016

2017

2018

Biomethane%

Figure 6: Bioenergy use in transport - Germany

In Germany, policies are aligned with those of the European Union Renewable Energy
Directive and the Fuel Quality Directive. The principal measure to meet the targets in these
Directives is the GHG-based quota system which was implemented in 2015. It obligates fuelsupplier companies to sell the respective biofuel together with its fossil counterpart gasoline
or diesel (which is usually done through blending), in order to produce a fuel mix which
achieves a 3.5% GHG mitigation (compared to fossil gasoline and diesel mix) for the entire
fuel sector from 2015, with increasingly stringent targets of 4% and 6% for 2017 and 20208

https://www.erneuerbare-energien.de/EE/Navigation/DE/Service/Erneuerbare_Energien_in_Zahlen/Zeitreihen/zeitreihen.html

12onwards. If these obligations are not met, penalties of about 47 EURct/kg CO2 equivalent
apply. Biofuels that are counted within the quota are subject to the full energy tax. Moreover,
the regulations provide for a maximum limit of established biofuels and minimum quotas foradvanced biofuels as well as counting electricity for transport.
Specific remaining barriers to widespread adoption of biofuels in Germany include thecomparably low prices for fuels and mobility in Germany, and sensitivity amongst
stakeholders to biofuels sustainability issues, coupled to a very strong push towards
electricity for transport and for e-fuels. This is coupled to uncertainties regardingtransposition of European REDII and ESR (effort sharing regulation) into national legislation.
SwedenIn Sweden biofuels use has grown strongly since 2010, rising from 5 to over 30% oftransport fuel use by 2018. The rise is due to increased use of biodiesel, and in recent years
to a growth in HVO use (Figure 7). These fuels provided 91% of the bioenergy used in
2018.9 Sweden is the largest user of biomethane in transport in Europe, and this provides
some 1.4% of transport energy needs. There was an earlier push to promote ethanol, bothas E10 and higher blends, but recently ethanol consumption has been declining.
120

35

100

30
25

80

PJ

20
60
15
40

10
20

5

0

0
2010
Bioethanol

2011

2012
Biodiesel

2013
HVO

2014

2015

2016

Other bioliquids

2017
Biogas2018% bio

Figure 7: Bioenergy use in transport - Sweden

9

Analysis based on date at https://www.energimyndigheten.se/en/facts-and-figures/statistics/

13

While consumption in Sweden has been rising strongly, there is very little indigenous
production of biofuels, although some projects are under discussion and development. Fuels
are imported – for example HVO from Finland. Policy uncertainty is seen as one of the major
impediments to investment.
The main driver for biofuels use in Sweden is energy and CO2 taxation, from which biofuels
are exempt. However, tax exemption for biofuels is governed by EU state aid rules. The EU
Commission has approved tax exemptions for biofuels in Sweden until 2020. The level of
support allowed is also governed by state aid rules and is unstable. At the moment, there are
no decisions on how the main policy instruments for biofuels will look 2021 and beyond andthis is clearly a source of uncertainty.
FinlandFinland has very few oil and gas resources but a longstanding tradition of using bioenergy,
based on its significant forestry resources and linked to its forestry industry sector. It has
three major producers of biofuels – Neste producing HVO, mostly from imported feedstocks,
UPM producing renewable diesel from tall oil and St1 producing ethanol. In addition,
biomethane is produced for transport use.
In 2018 biofuels provided some 9.4% of road transport energy needs, providing 11% of
diesel requirements, and 6% of gasoline requirements via E5, E10 and E85. In addition,
biomethane provided 59% of the methane used in transport (although this makes up only
0.2% of road transport energy use). While the level of renewable fuels within the gasoline
sector has remained fairly constant in recent years, the level of biofuels in the diesel sector
has varied significantly,
Finland has established a number of ten-year targets including the intention to reduce theuse of imported oil by 50% during the 2020s, and increasing the share of renewabletransport fuels to 40% by 2030 (including double-counting).
The 2016 Finnish national energy and climate strategy for 2030, calls for a 50%
reduction of CO2 emissions from transport by 2030, the reference year being 2005. Three
key measures to reduce emissions are:•

Improving the energy efficiency of the transport system•

Improving the energy efficiency of vehicles•

Replacing oil-based fossil fuels with renewable and/or low-emission alternatives

14

The main measures to drive this change are:•An increase in the biofuels blending obligation so that the physical share of biofuels(energy content) in road transport fuels will be increased to 30%, and there is aseparate sub target for advanced biofuels of 10%. In addition, a 10% biocomponent
obligation was set for light fuel oil.

•

CO2 based vehicle taxes: In 2019, the minimum purchase tax is 2.7% (BEVs) andmaximum 48.9% (WLTP CO2 >360 g/km)10. The progressive CO2 tax is a strong
indirect support to BEVs and PHEVs.

BrazilBrazil has a long experience of widespread use of biofuels, notably ethanol from sugar cane,
encouraged by a strong blending mandate and the ready availability of 100% ethanol. Most
cars in Brazil are flex fuel vehicles which can opt for either gasoline blends or pure ethanol
depending on the price at the pump, which depends on the relative costs of ethanol andgasoline. Biodiesel use has also been growing. There are two large-scale cellulosic ethanol
plants co-located with conventional sugar cane distilleries but these are still to reach design
output.
Overall biofuels use in transport has remained stable in recent years. Significant growth isexpected with the introduction in 2020 of the RenovaBio program. This introduces a
tradeable certificate scheme based on GHG reductions in the transport sector, which will
incentivize low-carbon fuels in the transport sector.

10 https://www.vero.fi/globalassets/henkiloasiakkaat/autoverotus/verotaulukko-1a_1365_2018.pdf

15

Barriers to widespread deployment
Specific barriers to alternative transport fuels vary from country to country, depending on thepolicy and regulatory frameworks in place. Different fuels also face specific barriers
depending on their level of technical and commercial maturity and their feedstock demands.
Analysis of the barriers experience suggests that the critical issues include: technical issues,
economic competitiveness, ease of integration of fuels, availability of appropriate feedstock,meeting sustainability requirements and perception of associated sustainability risks.
Barriers to the implementation of alternative transport fuels are multifold and differ from fuelto fuel and from country to country. While fuels at TRL 9 face barriers such as production
costs, stimulating policies, and mobilization of sustainable biomass feedstock, fuels at lower
TRL levels still face technical and economic challenges.
The current transport system has been optimized in the past 100 years, and offers
predictable income to the established stakeholders, while the infrastructure required for the
future transport system still has to be built, with higher costs and risks associated andunclear and risky business cases.
A multitude of fuel production pathways is under consideration for the future transportsystem, and they differ with respect to potential feedstock availability, production costs, GHG
emission reductions offered, and their compatibility with the existing fleet. Every country has
to find its own optimum fuel mix, depending on national demand of fuel types, national
biomass availability, national biofuel production capacity, and the possibility and cost ofimports.
Detailed information on policy measures can be found in Part 1 of the overall report, “KeyStrategies in Selected Countries”.

Lessons learned from past market introductions of alternative fuels
Another ongoing project with the Advanced Motor Fuels TCP is AMF Annex 59: Lessons
Learned from Alternative Fuels Implementation. It aims to identify barriers to the market
launch of alternative transport fuels from specific market launch examples of a couple ofcountries.
The examples of alternative fuels and vehicles market introductions that were assessed in
AMF Annex 59 are depicted in Figure 8.

16Figure 8: Overview of country-specific case studies in AMF Annex 59

Although at the time of writing, the AMF Annex 59 has not been finalized, preliminary
findings are described below. Findings from Germany – although not part of that project –have been added.
Austria
In Austria the introduction of E10 was stopped weeks before market entry. The main
implementation barriers were the public discussion on food/feed vs. fuel and a discussion onengine compatibility. In addition, initial negative reactions on the E10 market introduction inGermany influenced the opinion of the general public in Austria. This negative public
perception and motorist associations opposing the market introduction are perceived as themain barriers to the market introduction in Austria.
Another case study dealt with CNG vehicles. They were successfully introduced into themarket but, due to missing acceptance of the general public, the number of vehicles and gas
stations decreases. These two case studies indicate that the public opinion and acceptanceas well as the political will are essential for a positive market implementation.
FinlandIn Finland the main implementation barriers are a tax problem for renewable fuels and thelack of availability of FFVs (Flex Fuel Vehicles). On the EU level, minimum taxes are set in€/l. Finland has a transparent and fair tax system for liquid fuels consisting of energy tax,
CO2 tax and bonus for reduced local emissions. This system also considers heating value
and CO2 emission. The EU minimum tax is higher than the Finnish tax system sets and17therefore unfair for those biofuels with a low heating value. This tax problem makescommercial utilization of these kinds of biofuel impossible.
In Finland E85 is available in most parts of the country. However, sales of E85 has
stagnated, as there is no offering of new flex-fuel vehicles anymore.
Japan
The implementation barriers found in Japan could be divided into legal issues, consumer(market)-driven policies and external factors. In Japan the Quality Assurance Law andAlternative Fuel Law were enacted to spread biofuels in Japan since 2010. However, theselaws do not mandate the introduction of alternative fuels, they only create the possibility andset the framework and standards. If the introduction is not obligatory, incentives to attract
consumers to the introduction are necessary, but such incentives were missing for biofuels
for consumers.
The external factor was the nuclear accident in 2011, since when the top priority is on
securing electricity power and the spread of biofuels has a low priority. This shows how
important policy measures are and that they have to interlock to overcome the first big peakof implementation barriers.
SwedenThe reduction obligation in Sweden, which is described in detail in Part 1 of the overall
report, is very dependent on availability and price of drop-in fuels and sets both a floor androof on the use of biofuels for low blends. There are no incentives to go above the reduction
obligation. The fuel tax exemption for biofuels is not in line with EU regulation and therefore
very short-term and can only be given if biofuels are more expensive than fossil fuels.
For E85 the barriers are the small market for dedicated vehicles and negative public attitude
combined with reports on technical problems. This shows that knowledge and information
are important as well as long-term perspective of policy instruments.
USA
In the USA the changing priority of policies made a market implementation of biofuels inparticular and alternative fuels in general difficult. The societal benefit that the government
prioritized and that was in favor of biofuels has changed over the past several decades. In
the 1970s and 80s, in times of oil embargo, the main driver for biofuels was energy security
and energy diversity. In the 90s, the driver shifted to air quality benefits. In the 2000s and2010s the priority changed to GHG benefits, and most recently it changed again to economic
advantages. Any time that biofuels were seen as a solution to a problem, the established18

fossil fuel industry adapted: First, new oil and gas supplies were discovered and their prices
fell; then improved automotive technologies in terms of fuel quality, after-treatment systems,
and engine control delivered less-polluting vehicles; and finally, biofuels face competition
from other alternatives to reduce GHG emissions, such as BEVs (Battery Electric Vehicles
and PHEVs (Plug-in Hybrid Electric Vehicles). Also, current low crude oil prices diminish any
economic advantages of biofuels.
Germany
Barriers mentioned for Germany include comparably low prices for fuels and mobility,
uncertainties regarding the transposition of European RED II and ESR (effort sharing
regulation) into national legislation, the climate protection program that is focusing on
advanced biofuels based on residues and e-fuels, a push towards electro mobility, andacceptance issues from different stakeholders. It seems that in Germany sustainability is still
hardly driven by costs, but from a fuel perspective also the price impact of fuel specific GHG
mitigation could be seen with the implementation of the GHG quota system from 2015
onwards.
Barriers generic to all countries
The findings from the country case studies in the AMF Annex 59 project were clustered to 5groups of implementation barriers in an echo of the Argonne checklist11 categories. Many of
the implementation barriers are interconnected. Some of the listed points are influenced oreven caused by other listed implementation barriers from a different category. The multitudeof interconnections is very complex and therefore not shown here. The main implementation
barriers which could be found in most of the partner countries are listed in Figure 9:

11 Risch, C. E., Santini, D. J., and Johnson, L. R. Using Checklists to Assess Your Transition to

Alternative Fuels: A Technical Reference. United States: N. p., 2016. Web. doi:10.2172/1344887

19

Technical issues / Infrastructure•Assurance of technical performance and compatibility with the existing fleet•Availability of dedicated vehicles (e.g. FFV)
•Access to repair infrastructure and refueling infrastructure for dedicated vehicles

Politics / Authorities•Negative basic attitude of politics and push of electromobility•No obligation for alternative fuels•Inconsistent and changing policy and priorities•Lack of long term perspective in policy instruments

Costs / Economics•Missing incentives for consumers and unclear tax incentives/legislation in future•Investment costs for dedicated vehicles and second-hand value•Alternative Fuel infrastructure cost, production costs and capacity•Comparably low prices for fuels and mobility•Inertia in the market

Consumers / Public•Missing awareness and/or acceptance in general public•Negative perception in public and fundamental scepticism•Public discussion on Food/Feed/Fuel•Discussion and rumours on engine compatibility concerns•Missing incentives for consumers
Figure 9: Barriers to the market introduction of alternative fuels, as found in AMF Annex 59

Barriers to advanced biofuels
A recent study from the International Renewable Energy Agency (IRENA) (Advanced
Biofuels – What Holds Them Back12) analyses current barriers to investment in advanced
biofuels, based primarily on a survey of industry executives and decision makers. The study
focuses on cellulosic ethanol and HVO as fuels, and finds that different fuels face different

12 IRENA Advanced Biofuels – What Holds Them Back, November 2019,https://www.irena.org/publications/2019/Nov/Advanced-biofuels-What-holds-them-back20

barriers (as discussed above). The report highlights the following as main barriers to futureadvanced biofuels deployment.
•

Regulatory uncertainty stands out as the most important impediment to investment inadvanced biofuels given the long timescale associated with projects. This wasparticularly the case in Europe; now the provisions of RED-II are considered toprovide a sound basis for some further investment in advanced biofuels.

•

Transport sector decarbonization calls for accepting several fuel alternatives
simultaneously rather than resorting to a single, all-encompassing solution. The
specific barriers for the further development of different fuels differ, especiallybetween those affecting drop-in fuels and other fuels such as cellulosic ethanol,
which will may face uneven cost competition from first-generation ethanol producers
in a declining market. The creation of an enabling environment for advanced biofuel
deployment therefore requires much more nuanced and multifaceted regulation thanfor other forms of renewable energy.

•

Low subsidy levels, high financing costs and limited availability of finance are seen
by many executives as barriers in the current market.

•

Straight forward tax- or obligation-based regulatory systems can be effective andapplicable, particularly for countries just starting to promote advanced biofuels. For
example, in Sweden, the rapid switch from fossil fuels to biofuels was driven by tax
exemptions on biofuels, and high carbon and energy taxes on fossil fuels.
Technology-neutral fuel standards, such as those in California (US) and thoseplanned for Brazil, are also favored by most industry executives. The Californian
experience has been a positive one, in that state legislation has created continued
stability and project developer confidence. It has also clearly diversified transport fuelsources, such that there has been a substantial increase in the deployment of
ethanol, HVO, biomethane and electricity. A fuel-neutral carbon intensity-based
mandate system provides a fair platform for advanced biofuels to compete.

•

Many industry executives consider the introduction of sustainability standards andcertification schemes to have been a positive development, boosting markets foradvanced biofuels. However, they question the accuracy and reliability of common
methods for estimating GHG emissions, land-use change and indirect land-use
change. They would welcome a more harmonized certification system verifying thesustainability credentials of their products.

21

Expert opinions expressed during the policy workshop
On 18 November, 2019, the preliminary results of this project were presented at a workshop
in Brussels and discussed with stakeholders. Around 70 participants attended the event,representing mainly the biofuels industry and related research organizations, but alsoenergy- or climate-related authorities and the automotive industry. The fossil fuel industry,
however, was unfortunately not represented.
Barriers cited by these experts included:•

Lack of long-term stable policies•

Problems with conflicting details in regulations, e.g. EU state aid rules conflicting with
biofuel taxation•

Technological risk of biofuel technologies

They also provided ideas for adapting the policy framework. The main requests were:•to install some sort of carbon price•to focus on the carbon intensity of renewable fuels•

to get the oil majors involved,•

to establish a requirement to phase out fossil fuels in the transport sector, and•to allow the automotive industry to count the GHG emission reductions offered by theuse of renewable fuels against their CO2 fleet targets (which could then be
strengthened).

The automotive industry made a strong statement that if accounting for the use of renewablefuels would be possible, they would be very motivated to issue guarantees for the use ofhigh blends or pure biofuels in their engines/vehicles. (The CO2 fleet targets would thenhave to be strengthened, as to still also support the goal of introducing electric vehicles.) In
fact, the penalties that automakers face from failing to comply with the CO2 fleet targets inthe EU are much higher than any carbon price under discussion nowadays.

Reflections
Reflecting the assessments carried out in this project, findings from AMF Annex 59, findings
from the IRENA study, the discussion at the project workshop, and also other existing
literature, the following barriers seem to be most important:•

Well-established transport system to compete with•

Fluctuating policy drivers / lack of long-term stable policies22•

Low public acceptance / perception of technical performance issues andsustainability concerns•

Incomplete set of policy measures•

The need to build up infrastructure for alternative fuels and alternative fuel vehicles
such as FFVs, EVs, FCEVs•

Risks associated with biofuels

Well-established transport system to compete with
What we are looking for if we are to reach the required level of decarbonization, is thetransition into a new transport system that uses multiple alternative fuels in a range ofvehicles. This new, complex system has to compete with the current system, which has
been established and optimized over the past 100 years and offers predictable income to theestablished stakeholders, while the infrastructure required for the future transport system still
has to be built, with higher costs and risks associated and unclear and risky business cases.
Table 2 lists features of the current and the future transport system.
Table 2: Current and future road transport system

Current road transport system

Future road transport system

Well-performing fuel/engine/after-treatment
combinations

Adaptation of fuel/engine/after-treatment
system required

Established material compatibility

Ev. lack of material compatibility

Many vehicle models available

Few models available

Robust vehicle repair infrastructure

New repair knowledge required

Good driving range

Sometimes lower driving range

Well-established fuel production

Fuel production infrastructure has to be
built

Limited number of fuel options provided

Large variety of alternative fuels

Ubiquitous refueling infrastructures

Refueling infrastructure has to be built andmight not be profitable

Existing fleet uses existing fuels

New fleet has to be built up

The system of stakeholders in the established transport sector (as depicted in Figure 10)
includes the fossil fuel industry and fuel marketers, the automotive industry and vehicle
23

marketers, and the consumers freight sector and private car owners. In the new system, newstakeholders come into the picture, such as biomass producers and biofuel producers, andexisting stakeholders are expected to adapt their businesses to produce alternative fuels andalternative vehicles. Doing so is not economic for any of these stakeholders unless policies
set regulations to offset the increased production and infrastructure costs. As a result, thebiofuels market depends on political interventions. Thus, it is of major importance that policy
sends strong signals and keeps up the support for renewable fuels over a long period oftime. Workshop participants even called for targets for renewable fuels in 2040 and 2050 tobe communicated already now.

Figure 10: Multitude of stakeholders involved in the market implementation of alternative fuels and vehicles

Fluctuating policy drivers
However, policy drivers are often fluctuating, as described earlier for the example of theUSA. Through improvements in the existing system, the driver towards renewable fuelsbecame weaker and ineffective, and the new fuels and vehicles, not yet fully established,vanished from the market again.
Public perception
Another very important aspect is the public perception of new fuels. The debate around theimplications that large-scale production of biofuels could have on GHG emissions throughdirect and indirect land use change (LUC and iLUC) has stalled the growth of establishedbiofuels production and use in Europe. And although EU policy has been adapted and now
includes measures to safeguard the sustainability of biofuels, the public image of biofuelsremains severely damaged.
24Incomplete set of policy measures
For the market introduction of alternative fuels and vehicles it is also important to provide a
set of carefully balanced policy measures that considers all stakeholders in the transportsystem and offers benefits to each of them. Also, the very details of regulations can create
serious problems, as currently is the case with EU state aid rules that are in conflict with tax
benefits for biofuels.
As to not forget any of the multiple stakeholders in the transport sector, Argonne National
Laboratory has developed a checklist that can be used to assess whether everyone´s needs
have been considered13. While it might be obvious to talk to the fossil fuel industry and also
to the automotive industry, a group that can rather easily be forgotten is private car owners.
While freight operators act based on economic considerations and this is their main
business, private car owners often lack sufficient insight into the pros and cons of themultitude of vehicle and powertrain/fuel options. Their knowledge is rather based on what isreported in the media, with magazines of motorist associations often playing a major role.
The influence of these advocates should not be underestimated, and they should be
involved in efforts to introduce alternative fuels and vehicles.
Infrastructure requirements
Renewable fuels can, depending on their chemical nature, be applied in engines as low
blends, high blends, or neat, as drop-in fuels or with the need for adapted engines orvehicles. Also they can be produced in stand-alone biofuel production facilities, or throughco-processing in refineries, or from CO2 and hydrogen in e-fuels facilities. The introduction ofrenewable fuels to the market always requires investment in some type of new infrastructure,
be it biofuel or e-fuel production facilities, adaptation of refineries, adaptation of engine andvehicle production systems, purchase of alternative fuel vehicles, or adaptation of fuelpumps. These investments will be made by different actors from within the broad range ofstakeholders involved, and they will only be made if the actors can define their businesscase. Policy makers should be aware of these multiple options and they need to find thesolution that works best for their country.
Risks associated with the take-up of low-carbon fuels
Different fuels face different barriers which need to be recognized in designing policy

13 Risch, C. E., Santini, D. J., and Johnson, L. R. Using Checklists to Assess Your Transition to

Alternative Fuels: A Technical Reference. United States: N. p., 2016. Web. doi:10.2172/1344887

25

portfolios to promote more widespread deployment. These relate to•Technical risk•

Economic competitiveness•

Ease of integration of fuels•

Availability of appropriate feedstock, meeting sustainability requirements•

Perception of associated sustainability risks

Technical risk
The production of ethanol, biodiesel, HVO and biomethane from a wide range of crops,
residues and wastes has been fully demonstrated and, with due care, technical risks areminimal. On the other hand, there are still few cases of successful production of cellulosic
ethanol and biofuels from thermochemical processes such as pyrolysis and gasification.
Economic competitivenessThe costs of producing ethanol, biodiesel, HVO and biomethane are understood and heavily
dependent on the feedstock costs, and in general are significantly higher than those of thefossil fuels that they aim to replace, in the absence of financial mechanisms designed tooffset the GHG and other environmental benefits associated with their production and use.
The costs of emerging biofuels are currently higher than those of established biofuels, butwith scope for reduction as deployment grows and experience develops. In the short- to
medium-term they will need higher level of support than established biofuels if theirdeployment is to grow.
Ease of integration
Ethanol and biodiesel can readily be blended with fossil fuels up to a certain level, but
beyond that vehicle modifications and specific distribution systems may be needed. Theseissues can be successfully addressed (as in Brazil for example). Biomethane also requires
specific vehicle fleets and distribution networks, whereas HVO and some products fromthermochemical processes can be tailored as “drop-in fuels” to replace diesel and other fuels
including jet fuel.
Sustainable feedstock availability
While in principle it would be possible to enhance production of feedstocks for ethanol andbiodiesel production, concerns about the land-use impacts of some established biofuels
feedstocks have led to constraints on their more widespread production and use of such
26

fuels in some regions (such as the constraint on “crop-based biofuels” within the EU RED-II).
While a clear evidence-based sustainability governance framework is important for all
biofuels, this is particularly so for these crop-based fuels, whereas there is less “in principle”
opposition to fuels based on wastes, residues and other cellulosic feedstocks so long as
they are sustainably produced and used.
The growth of HVO production is increasingly based on waste-based feedstocks such as
UCO and industry bioproducts, but there are limits to the extent that such materials can besourced. Future growth may have to be based on specifically produced materials.
Summary
Table 3 summarizes the points above, highlighting key barriers to more widespread
deployment.
Table 3: Main risks for biofuels
Technology risk

EconomicCompetitiveness

Ethanol
Biodiesel
HVO
Biomethane
Cellulosic ethanol
Thermochemical
biofuelsKey:
No significant barrier
Some barriers
Major barriers

27

Fuel integration

Sustainable
Feedstockavailability

Policy requirements for increased renewable fuels deployment
Long term and stable policy frameworks are essential to foster growth of renewable transport
fuels. An appropriate policy portfolio would include measures to “level the playing field” byremoving fossil fuel subsidies and putting effective carbon pricing mechanisms in place. The
portfolio also includes specific targets for low-carbon fuels, and mechanisms to ensure thatthe fuels are competitive in the transport market, along with a stringent, evidence-basedsustainability governance regime.
Additional measures are needed to promote fuels which are not yet fully commercialized,
including mandatory obligations for deployment of emerging biofuels, dedicated financial
mechanisms and instruments to facilitate technological development, subsequent market
deployment, and targeted support for RD&D.
Policies have been and will continue to be essential to foster the growth of renewabletransport fuels, as is discussed in more detail in Part 2 of the overall report (“Production
Technologies and Costs”).
Policies used include blending mandates, excise tax reductions or exemptions, renewable or
low-carbon fuel standards, as well as a variety of fiscal incentives and public financing
mechanisms. The countries that have achieved the most success in growing the production
and use of biofuels have used a mixture of market-pull and technology-push policies.
While the production and use of transport biofuels has more than doubled over the last
decade, progress in expanding biofuels production remains well below the levels required todecarbonize transport significantly. Several factors continue to impact the effectiveness of
biofuels policies such as relatively low petroleum and fossil fuel prices, uncertainty about
future policy and funding programs to support established and emerging biofuels, theinconsistent regulation of global trade of biofuels and continuing concerns related to foodsecurity, land use change and overall sustainability.

Enabling framework for low-carbon bioenergy technologies
An appropriate policy and regulatory environment is needed to support the expansion of
bioenergy in general, even for technologies which are mature. The features that aredesirable to provide a supportive enabling framework for low-carbon technologies in general,
and which can promote deployment at low cost, have been identified and apply especially to28

transport biofuel options.14 These are summarized below.
•

Level the playing fieldoAbolition of subsidies for the production and use of fossil fuels.

oWider introduction and improvement of ways of pricing-in theenvironmental externalities caused by fossil fuel use, through a carbon
pricing regime. To be effective this needs to cover all energy sectors
and scales of operation and reflect the real societal cost of carbon
emissions.

oSystematic removal of barriers to low-carbon energy production in the
taxation and wider regulatory system, which can be major barriers
slowing down low-carbon technology deployment. These include
unnecessarily strict state aid regulations, which can unnecessarily
prevent measures aimed at favoring low-carbon technologies, but whichhave no impact on international competitiveness.

•

A favorable enabling policy environment for bioenergy with the following
features:o

A long-term stable policy and regulatory framework that provides
certainty about the market for an extended period (10 to 15 years),sufficient to justify investment in a series of production plants.

o

Clear and specific targets for the use of sustainable bioenergy as part ofa national strategy, plan or roadmap and which cover transport fuels,
heat and electricity generation.

oEnsuring that bioenergy producers have access to the relevant markets(e.g. to be able to access the transport fuel market).

oAppropriate mechanisms to stimulate low-carbon energy production,
which provide sufficient revenue to offset the difference in costs
between biofuels and fossil fuels, taking into account carbon pricing andother such measures. There needs to be confidence that suchmechanisms will be sufficiently stable to attract finance at competitive
terms.

oMeasures to avoid non-financial barriers to deployment, such as
appropriate and clear regulations relating to planning, environmental
permitting and energy market access.

14

IEA Technology Roadmap: Sustainable Bioenergy, 201729

oStringent but stable and science-based sustainability governanceregimes, which are based on proven and globally accepted goodbioenergy practices.

o

Recognition of the social benefits of bioenergy, such as rural
employment and income, and the contribution that bioenergy can maketo energy security and diversity.

oAppropriate regulations relating to the integration of bioenergy (forexample, the regulations and standards that apply to biofuel/ gasoline
or diesel blends).

The general policy principles discussed above apply to both established and newly
commercializing technologies that will be needed to deliver low-carbon visions for biofuels intransport. However appropriate policy and regulatory measures will be needed to help the
new technologies to mature and avoid the “valley of death” between prototype or pilot plant
operation and full commercial deployment.

Additional measures for not fully commercialized technologies
Significant barriers stand in the way of the investment needed to demonstrate the necessary
new technologies at scale and to bring costs down. These include the technical risks
associated with scaling up to full-size commercial plants (for example, large-scale cellulosic
biomass-to-ethanol plants that have initially encountered problems scaling up). In addition,commercial and financial barriers result from early plants not having benefited fromtechnology learning, causing their outputs to be more expensive than both their fossil fueland other renewable energy competitors, and other more established bioenergy
technologies.
This means that technology-neutral measures (such as an increased price for carbon
emissions), while useful by discriminating against fossil options, are unlikely to promote thecommercialization of the technologies needed to meet longer-term needs, and on their own
may lock in less desirable technology choices (e.g. established rather than emerging
biofuels).
Bioenergy has specific characteristics that make a number of these barriers more significant
than for other new sustainable energy technologies. For example, most bioenergy
technologies are not modular (as they are for solar PV or wind), and so a relatively larger
investment is needed to demonstrate commercial-scale bioenergy and biofuel plants. The
sums involved are beyond the balance sheet capabilities of many energy companies andalso beyond the budget of many national RD&D programs.
30Additional measures are needed to promote the development of these fuels and processes,
since these will not initially be able to compete in a “technology-neutral” policy environment.
These can include:•

Mandatory obligations for deployment of emerging biofuels and for specificsubcategories that are at different stages of technical and market maturity.

•

Appropriate and dedicated financial mechanisms and instruments to facilitate
technological development and subsequent market deployment. These can
include loan guarantees, and ways of bridging the initial cost differences
between the novel energy sources and more established ones (fossil or otherbioenergy).

•

Support for RD&D focused on priorities identified in previous sections.

Policy best practiceThere is a well-established body of experience which has successfully led to the deploymentof established biofuels in a number of countries, while there is so far less experience of
successful promotion of emerging biofuels, particularly because there are not yet manysuccessful production plants which demonstrate that the technical challenges can beovercome. The following sections therefore look at the portfolios of policy measures for thetwo classes of biofuel separately.
Established biofuels such as ethanol, biodiesel, HVO and biomethane
The analysis of global and national trends above highlights that biofuels production and use
is still dominated by established biofuels, such as ethanol from corn, sugar and other starchand sugar-based crops, and biodiesel from oils and fats, where the technologies are wellproven. Expansion of the use of these fuels is possible but there are concerns in somecountries about the implications for land use in expanding production of the necessary
feedstocks. Significant expansion would also require measures to enable these fuels to be
used at higher blend levels in transport, although the possibility of doing this has alreadybeen demonstrated in Brazil.
The production and use of HVO is growing rapidly. HVO production is based on proventechnologies, and can produce “drop-in fuels”, so avoiding integration problems and opening
the way to the production of fuels for applications such as aviation and shipping. Biomethane
is being more widely used in the transport sector, but requires separate infrastructure andadapted vehicles.

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The main elements of policy portfolios which have been successfully adopted include:•

Blending mandates which make a percentage of biofuels mandatory. These arewidely in place but not always effective if there are insufficient penalties for
non-compliance, and arrangements to share any additional costs amongst
market players (such as a certificate scheme). The mandates also need to beconsistent with fuel specifications and blending regulations.

•

There is growing trend to move to systems which incentivize transport fuels
based on their GHG impacts (such as the Californian LCFS, the Brazilian
RenovaBio scheme and various programs in Europe). These provide asignificant incentive to move to higher biofuels blend levels and to encourage
the development of more GHG efficient fuels.

•

Strict but consistent sustainability guidelines are needed to ensure fuels meetnecessary environmental, social and economic goals.

Emerging biofuels
The range of emerging biofuels – including cellulosic ethanol and thermochemical fuels
based on gasification/pyrolysis – are important since they allow access to lignocellulosic
feedstocks for biofuels production. These are likely to be required in order to scale up
biofuels production to the levels consistent with their role in low-carbon scenarios.
Successful operation of these processes on a large scale is not yet well established,although a number of new plants have been announced and are in process of being
constructed.
While the initial production of these fuels will require high levels of support either for
producing or using the fuels, these higher incentives may not be enough in themselves toresolve the technical barriers involved. For example, in the US the support available forcellulosic ethanol from the RFS2 and LCFS values the fuel at nearly 3 times the price ofgasoline, but production and use of these fuels is so far restricted15. There will be no further
investment at scale until the technology is demonstrated commercially at scale.
Policy measures which can support the introduction of these processes include:•

Separate obligations for new fuels with high rewards to reflect likely high cost of
first successful plants (e.g. US RFS2 provision for cellulosic fuels)•

Continuing support for RD&D, recognizing especially the extended period likely

15 IEA Bioenergy Potential for Cost Reduction of Advanced Biofuels32

to be needed in order to commission novel plants and to solve problems which
inevitably arise when operation at commercial scale commences.
•

Risk guarantees such as those available within the US can help reduce thefinancial risk associated with constructing large scale first of a kind facilities.

Final remarks
Each government has to find the right alternative fuels and vehicles to go for, and to find theright set of policy measures for the particular national situation at a given time. There are noone-size-fits-all solutions to decarbonize transport. The only constant is that bold actionneeds to be taken now to reach decarbonization at the required level and speed.

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Abbreviations
2DS

AMF

IEA 2 Degree Scenario, compatible with the goal of limiting global heating to 2°C
by 2100
Model used by VTT to calculate the future composition of vehicle fleets in thisstudy
Advanced Motor Fuels

B5, B7,…

Diesel blends with x% FAME

BEV

Battery electric vehicle

CNG

Compressed natural gas

CPS

IEA Current Policies Scenario

E5, E10,…

Gasoline blends with x% ethanol

ESR

Effort Sharing Regulation

EUR

Euro

EV

Electric vehicle

FAME

Fatty acid methyl ester

FCEV

Fuel cell electric vehicle

FFV
FQD

Flex-fuel vehicle, capable of using either gasoline or high-blend ethanol (or purehydrous ethanol in the case of Brazil)
Fuel Quality Directive

GHG

greenhouse gases

HDT

Heavy duty truck

HDV

Heavy duty vehicles

HEFA

Hydrotreated esters and fatty acids

HEV

Hybrid electric vehicle

HVO

Hydrotreated vegetable oils

IEA

International Energy Agency

IRENAInternational Renewable Energy Agency

LCFS

Low-carbon Fuel Standard, Californian regulation

LDT

Light duty truck

LDV

Light duty vehicles

LPG

Liquefied petroleum gas (auto gas)

LUC

Land-use change

MDT

Medium duty truckNPS

IEA New Policies Scenario

PHEV

Plug-in hybrid electric vehicle

ALIISA

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PV

Photovoltaic

RED

Renewable Energy Directive, EU regulation

RED-II

Recast of the Renewable Energy Directive, EU regulation

RFS

Renewable Fuel Standard, US regulation

SDG

Sustainable Development GoalSDS

IEA Sustainable Development Scenario

SE AsiaSouth-East Asia

TCP

Technology Collaboration Programme (of the IEA)

TRLTechnology Readiness LevelTTW CO2emissions
UCO

Tank-to-wheel CO2 emissions, i.e. tailpipe emissions

USD

United States (of America) Dollar

WTT CO2emissionsWTW CO2emissions

Well-to-tank CO2 emissions, i.e. upstream emissions from fuel or electricity
production
Well-to-wheel CO2 emissions, i.e. WTT and TTW combinedused cooking oil

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