Climate change and energy security pressures are forcing a reassessment of how transport and industry are powered. These sectors remain heavily dependent on fossil fuels, with limited near-term electrification options. Aviation, shipping, and heavy road transport require energy-dense fuels that can perform reliably at scale.
Biofuels offer a practical decarbonization pathway for these hard-to-abate sectors. They provide lower-carbon liquid fuels that can be deployed using existing fossil fuel infrastructure. This compatibility distinguishes biofuels from many other clean energy technologies and enables faster deployment.
It is estimated that biofuel use must triple by 2050 to remain aligned with climate targets. Achieving this scale will require a significant expansion of sustainable biofuel production. This article examines what biofuels are, their role in decarbonization, and the challenges limiting wider adoption.
What are biofuels?
Biofuels are fuels produced from renewable biological material. They are derived from biomass such as plants, algae, animal fats, and organic waste streams. They are most commonly produced from waste oils, residues, and non-food crops, reducing pressure on food systems and making use of materials that would otherwise be discarded.
Depending on the production pathway, biofuels can be in solid, liquid, or gaseous state. When sourced and produced responsibly, biofuels can support energy security and contribute to decarbonizing sectors that are difficult to electrify such as transport, industry, heat, and power.
Feedstocks for biofuels span a wide range. Examples include soybean oil, used cooking oil, or tallow from meat-processing, to name a few. These feedstocks differ in availability, cost, and the technological maturity required to convert them at scale.
Types of biofuels by feedstock generation
The classification depends on feedstock type and production pathway. It also reflects how technology and sustainability considerations have evolved.
First-generation biofuels
First-generation biofuels are produced from food and feed crops. Common examples include corn, sugarcane, wheat, rapeseed, sunflower, and oil palm. They use established technologies such as fermentation, distillation, and transesterification. For this reason, they are often called conventional biofuels. Bioethanol is the most widely used product in this category.
Where land-use change is not involved, first-generation biofuels can emit less greenhouse gases than fossil fuels. However, they compete directly with food production. These crops are primarily grown for human or animal consumption. They may also drive land-use change and deforestation risks.
To reduce pressure from land-use change and food production, second- and third-generation biofuels use non-food feedstocks and waste streams. They also offer stronger emissions performance in many cases. By using these inputs, they improve resource efficiency and reduce environmental impact. For these reasons, they are also known as advanced biofuels.
Second-generation biofuels
Second-generation biofuels are derived from non-food biomass. Typical feedstocks include agricultural residues such as corn stover and wheat straw. They also use forest residues, woody biomass, and dedicated energy crops such as Miscanthus and switchgrass. Additional inputs include used cooking oil and municipal solid waste.
Production occurs through thermochemical or biochemical pathways. These include biomass-to-liquid processes and fermentation of cellulosic material. Where land-use change is avoided, second-generation fuels generally offer greater emissions reductions than first-generation options.
Third-generation biofuels
Third-generation biofuels are produced mainly from microalgae. These are cultivated in aquatic systems. Microalgae generate oils that can be refined into biodiesel through transesterification or hydro-treatment. The refining steps are broadly similar to those used for some second-generation feedstocks.
Image source: The future of fuel may be found in an unexpected place
Biofuels can be sustainable, but not all pathways deliver the same outcomes. Sustainable production must account for land-use impacts, food security, and protection of sensitive ecosystems. The section below outline key barriers to biofuel production and the major obstacles to scaling biofuel consumption.
Challenges to sustainable biofuel production
Feedstock availability
Feedstock availability remains a primary constraint on scaling biofuel production. Sustainable biomass supply is limited, while demand for waste oils and residues is rising sharply. Between 2022 and 2027, demand for the latter is expected to approach supply limits. This raises the risk of feedstock scarcity and higher procurement costs.
Conversion efficiency
Conversion efficiencies continue to limit commercial deployment. Biochemical routes face enzyme stability issues and complex biomass structures. Thermochemical pathways encounter incomplete conversion and energy losses. Variability in feedstock quality further affects yields and operating reliability. These technical constraints increase production costs and slow scale-up, even where pilot projects have demonstrated technical feasibility.
Price volatility
Biofuel prices remain sensitive to feedstock costs and global commodity markets. In many regions, biofuel prices have increased faster than gasoline or diesel. Feedstock costs often represent more than 80% of total production cost. Price swings reduce investor confidence and can slow adoption, leading some countries to delay planned increases in blending mandates to avoid higher consumer fuel prices.
Technology readiness and cost
Many biofuel pathways have reached advanced technology readiness levels, with some demonstrated at commercial scale. However, production costs remain higher than conventional fuels in most markets. Cost parity is unlikely in the near term without targeted incentives. Capital intensity, operating costs, and financing risks continue to constrain widespread deployment despite significant technical progress.
Food versus fuel competition
Expansion of biofuel production can compete with food and feed uses of crops such as corn, sugarcane and soybeans. Higher demand may raise food prices and encourage conversion of agricultural land to fuel production. These pressures increase concerns regarding food security, fertilizer and pesticide use, and associated environmental impacts. Moving toward advanced, non-food feedstocks is essential to reduce these risks.
Land-use change and associated emissions
Converting natural ecosystems to cultivate biofuel feedstocks releases stored carbon from soils and vegetation. This can create significant land-use change emissions. Resulting carbon losses may offset the climate benefits of biofuels for decades. Additional impacts include soil degradation, nutrient loss, higher water demand, and ecosystem disruption. Avoiding high-carbon and high-biodiversity land conversion is therefore critical.
Biodiversity loss
Land conversion for biofuel feedstocks can drive habitat loss and fragmentation. Expansion of monoculture plantations increases the risk of invasive species and declines in local biodiversity. Tropical forest loss linked to palm oil production illustrates this risk. Future biofuel expansion could intensify biodiversity impacts if not carefully managed through land-use safeguards and sustainable cultivation practices.
Nitrous oxide emissions
Nitrous oxide emissions arise from fertilizer application and decomposition of organic matter in soils. N₂O has a global warming potential far higher than CO₂. Emissions are significant for first-generation crops that require intensive fertilization. They can substantially affect the life-cycle greenhouse-gas balance of biofuels and reduce their climate benefits relative to fossil fuels.
Water usage
Biofuel feedstock cultivation can require large volumes of water, especially for irrigated first-generation crops. In water-stressed regions, this demand may compete with municipal and agricultural needs. Global water use could rise significantly with expanded biofuel production. Effective water management and careful feedstock selection are essential to limit environmental impacts.
Nutrient runoff and eutrophication
Expanded cultivation of biofuel crops can increase fertilizer application and nutrient runoff. Elevated nitrogen and phosphorus loss to rivers and coastal waters has already caused hypoxic zones in several regions. These impacts demonstrate that biofuel expansion can worsen water quality if not managed carefully, even when greenhouse-gas benefits are positive.
Limitations of algal biofuels
Microalgae offer advantages because they grow rapidly and do not require arable land. They can use saline or wastewater streams. However, algal biofuel production remains energy-intensive and costly. Current processes are not commercially viable at scale. Significant improvements in cultivation, harvesting, and conversion efficiency are required before widespread deployment is feasible.
Overcoming sustainability challenges in biofuels
Liquid biofuel production reached around 2.5 million barrels of oil equivalent per day in 2024 and is projected to rise significantly by 2035. Sustained biofuel production requires robust sustainability frameworks. Removing barriers to demand growth, improving conversion efficiency, and prioritising waste- and residue-based pathways are essential.
The pathway to sustainable biofuels is challenging but achievable. Innovation is advancing lower-emission fuels and expanding viable feedstock options, particularly from waste streams that avoid dedicated land use. Startups are playing a critical role in developing new feedstocks and production pathways.
Continued investment across the value chain is essential to move these solutions to scale. Commercial agreements are increasingly enabling adoption by aviation, shipping, and industrial users, supporting large-scale deployment in hard-to-abate sectors.
