BIODIESEL: WORLDWIDE

It is estimated that the global biofuels industry will have investments between $18.8 billion and $26.1 billion from 2013 to 2020 in the form of 301 to 418 biorefineries to fulfill mandates. Biofuel production, however, is unlikely to achieve its identified production levels necessary to restrict global temperature rises to 2 degrees Celsius.
 National and regional mandates, the drive for fuel security, and environmental sustainability continue to support the global biofuels industry centered on the United States, the European Union (EU), and Brazil as well as other countries such as China and India.

•         The industry is also maturing, with biorefineries as a market-based driver. Biorefineries offer shorter-term cash flow advantages and offer security by diversification for biofuels producers.

•          While biomass use for energy is set to increase, the latest International Energy Agency (IEA) World Energy Outlook downgraded expectations for future use. The lower expectations are the result of multiple complications faced by the industry such as investment, commitment to mandates, feedstock availability, realistic production levels, and competition between fuels.

•         Capital investment is the largest restraint to the industry and is influenced by many countries reviewing targets, definitions, and sustainable feedstock qualifications. The cost of renewables subsidies is a burden for national governments and is expected to increase from $88 billion in 2011 to $240 billion in 2030.

•         • This increase may generate ripple effects on investment and production levels as market participants adjust to future realities. Non Organisation for Economic Co-operation and Development (OECD) countries are expected to play a role as the industry matures and established countries slow investment.

•          The industry also faces broad realignments as new, sustainable feedstocks and second generation biofuels are pushed as the main source of future growth. First generation biofuels have lost favor because of their reliance on crop-based feedstocks, which compete with food availability and prices.

•          Second generation biofuel production; however, has been slow to take off. Next generation biofuels require a reevaluation of cost competitiveness, time for production volumes to reach critical mass, and time to reach a proof of concept.

•          The range of technology choices in second generation biofuels and cellulosic fuel production needs time to develop and build confidence. A blend of technologies may continue, however, as local market conditions influence specific production technology benefits.

•          The explosion in shale gas availability may compete and exacerbate the decline in funding for biofuels; however, shale gas is also a complementary fuel that will give the biofuels industry time to develop and drive biofuel processes such as hydro processing.

•          Mandates continue to drive the industry in North America, but this region faces the E10 blend wall, with practical difficulties in an upgrade to B15. The volume of vegetable oil availability is unlikely to match the need for biodiesel to make up for production gaps. Cellulosic production is needed for the region to hit mandated production targets.

•         The EU is redefining mandates and the levels of which sustainable feedstocks need to compose biofuel totals, which have large trade implications for Argentina, Indonesia, and the EU's own production of rapeseed for biodiesel production.

•         Brazil could benefit from a better sugarcane yield in 2013 and may reinstate its higher mandate for biofuels as a result. Future growth, however, may rely on export markets.

Drivers Explained

Biofuel Mandates are Key to Moving the Market Quickly
National mandates for the introduction of biofuels are the largest market drivers, offering regulatory pressure and subsidies to help the market develop solutions.

World Bank