Sustainable fuels can provide GHG reductions comparable to BEVs and are applicable in multiple sectors
Reaching ambitious decarbonization targets is projected to require multiple decarbonization measures. One such measure — sustainable fuels — could help reach those decarbonization targets. Sustainable fuels include biofuels such as hydrotreated vegetable oil (HVO), or bioethanol, and synthetic fuels (synfuels) such as ammonia or methanol. They can be used as drop-in fuels in conventional internal combustion engines (ICE). Even though the costs of using sustainable fuels are projected to be higher than alternatives in the long term, the use of 100 percent renewable diesel, such as HVO, can achieve comparable life-cycle greenhouse-gas (GHG) reduction to the use of electric vehicles (EVs), allowing for faster decarbonization of existing fleets in the short term.
The demand for sustainable fuels is expected to triple over the next 20 years
Across scenarios, sustainable fuels are expected to play an increasingly important role in the transportation sectors, including hard-to-abate sectors such as aviation and heavy-duty road transport.
By 2050, the share of sustainable fuels in transportation’s energy demand could land between 7 percent and 37 percent, depending on net-zero ambition levels across countries.
Growth in sustainable fuels until 2035 is driven primarily by road transport, reaching 290 Mt in the Further Acceleration scenario, while aviation plays an increasingly important role thereafter.
Sustainable fuels are needed to meet 2030 decarbonization targets
Even in a world with fast EV uptake — where EVs account for around 75 percent of total vehicle sales by 2030 — reaching regulatory GHG reduction targets for transportation could require significant contribution from sustainable fuels. While the uptake of battery electric vehicles (BEVs) in the passenger vehicle segment is strong, commercial heavy transportation, such as trucks and buses, is expected only to see electrification in the longer term. Before electrification is complete, meeting GHG reduction targets in most countries will require the use of sustainable fuels (both bio-based and synthetic) directly in existing fleets with ICE engines.
In aviation, sustainable aviation fuels as a blend-in with kerosene in conventional engines may be the only viable option to limit GHG emissions. Aircraft design limitations constrain the decarbonization potential of alternative propulsion technologies like battery electric and hydrogen.
New advanced feedstocks will likely be necessary to meet the growing demand for sustainable fuels
After 2035, the projected increase in EV penetration of the transport market may cause a decline in the use of ICE vehicles and a corresponding decline of liquid fuels, and thus sustainable fuels, in road transport. On the other hand, increasing mandates in aviation could outweigh the decline, resulting in further growth of the total demand for sustainable fuels, reaching almost 400 Mt by 2050 in the Further Acceleration scenario.
Growth in edible oils and sugar feedstocks must carefully balance the need to satisfy food consumption, especially given the current food shortage amidst the conflict in Ukraine.
However, since the availability of waste oil feedstocks is highly constrained, the global supply cap (30 Mt) is projected to be reached in the late 2020s, unless purposely grown volumes of low indirect land use change (ILUC) / cover crops are rapidly scaled . Indeed, meeting the growing demand for sustainable fuels will require significant growth in the use of other feedstocks beyond oils and sugars, including renewable fuels from nonbiological origin (RFNBO) (CO₂ and H₂ for synthetic fuels) and lignocellulosic materials.
Investments in sustainable fuels are gaining momentum
With a pipeline of $ 40 billion to $ 50 billion of total investment planned (of which about 70 percent is already post-final investment decision), 46 Mt of sustainable-fuels capacity is projected by 2025.
However, further investments of between $ 1 trillion and $ 1.4 trillion are needed by 2040 to meet decarbonization commitments and regulated demand.
In the coming decades, business cases may need to consider integrated production logic with volumes shifting from road to aviation, where profitability of production is projected to depend on supply – demand balance, feedstock availability, and consumer attractiveness.