Biofuel demand in road transport to fall as electrification gathers pace

The decarbonisation of EU road transportation will increasingly impact the demand for fossil and biofuel in the decades to come, according to a new study by Rabobank.

The long-term outlook for biofuels, beyond 2045, does not look promising, as the expected decline in demand is likely to encourage biofuel companies to look for alternative uses for their products, according to the research.

“The road transport sector is by far the biggest contributor of GHG emissions, representing 22% of the total share of emissions of the entire industry in the EU,” said Maria Afonso, senior analyst – Sugar, Grains & Oilseeds at Rabobank. “This explains the need for tighter policies in this sector, especially for passenger cars, which account for 61% of road transport emissions. The proposed reduction target for the transport sector is 13%.”

“By 2030, we expect diesel demand to be 10% below its 2020 levels, and bioethanol to be down by 5%. By 2050, biofuel demand will be more than half lower than 2020 levels,” she added.

The path toward decarbonisation in road transportation in the EU will require a multifaceted approach including biofuels, renewable electricity, green hydrogen and other advanced biofuels.

Along with regulations banning the sale of internal combustion engine cars by 2035, this will slowly replace the vehicle fleet and negatively impact the demand for fossil fuel and biofuel as early as 2025, with a bigger impact after 2030.

On the other hand, the report added that petroleum and bioethanol demand is expected to grow by 5% until 2025, as the replacement rate of petrol engines will take longer to have an impact.

Afonso said that unless policies change to allow these biofuels to be used directly as fuel, it is unlikely that there will be additional investments to expand capacity of conventional biofuels even with the positive short-term outlook and considering that there is existing idle capacity available.


Tags: Biofuels, Decarbonisation, Diesel, Electrification, Road Transport
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