India could triple its biofuel use and accelerate global deployment

India has quickly joined the ranks of major biofuel producer and consumer thanks to a set of coordinated policies, high-level political support, and an abundance of feedstocks. Over the next five years it has the potential to nearly triple consumption and production by removing roadblocks to higher ethanol blends and diversifying biofuel use to replace diesel and jet fuel. However, it will need to keep an eye on costs, feedstock sustainability and deploy supportive policies to other biofuels beyond ethanol.

India has another opportunity to boost global biofuel deployment as well through the Global Biofuels Alliance, which it launched in 2023 with leaders from eight other countries. Last year the IEA released “Biofuel Policy in Brazil, India and the United States: Insights for the Global Biofuel Alliance” to support the GBA’s development. In it the IEA recommends the GBA focus on developing new and existing markets since over 80% of production is concentrated in four regions: the United States, Brazil, Europe and Indonesia, which account for only half of global transport fuel demand. We also recommend accelerating technology deployment and commercialisation, and seeking consensus on performance-based sustainability assessments.

In this brief commentary we consider the global status of biofuels, India’s domestic potential and what the GBA can do to help accelerate sustainable biofuels use globally.  

Over the next five years biofuel demand is set to expand 38 billion litres, a near 30% increase from the last five-year period. In fact, total biofuel demand rises 23% to 200 billion litres by 2028, with renewable diesel and biojet accounting for almost half of this growth with the remainder coming from ethanol and biodiesel. 

Most new biofuel demand comes from emerging economies, especially Brazil, Indonesia and India. All three countries have robust biofuel policies, rising transport fuel demand and abundant feedstock potential. Ethanol and biodiesel use expand the most in these regions. Although advanced economies including the European Union, the United States, Canada and Japan are also strengthening their transport policies, biofuels growth is constrained by factors such as rising electric vehicle adoption, vehicle efficiency improvements, technical limitations and high blending costs in some markets. Renewable diesel and biojet fuel are the primary growth segments in these regions.

India is now the world’s third largest producer and consumer of ethanol thanks to nearly tripling production over the past five years. It has potential to expand further with the right policies, keeping costs in check and securing sustainable feedstocks. In 2018 India released its National Policy on Biofuels which set blending targets for ethanol (20% blending by 2030) and biodiesel (5% by 2030), feedstock requirements for different fuels and laid out the responsibilities of 11 ministries to coordinate government actions. Beyond blending targets, India established guaranteed pricing, long-term ethanol contracts, and technical standards and codes. Financial support for building new facilities and upgrading existing ones was also provided. Buoyed by its success, the Government moved the 20% volume blending target for ethanol forward by 5 years to 2025-26, which was enshrined in an updated National Policy on Biofuels in 2022.

Supported by these policies, ethanol for blending in gasoline production and demand nearly tripled between 2018 and 2023 and now stands at near 12% (7% on an energy basis). Sugar cane provides most ethanol production with the remainder from food grains such as maize and surplus rice stocks determined by the Food Corporation of India. To diversify feedstocks beyond sugar cane, India provides separate pricing for maize-based ethanol and includes ethanol produced from agricultural residues such as cotton stalks, wheat straw, rice straw, bagasse and bamboo.

Achieving 20% ethanol blending on average across India will require increasing the fleet of vehicles capable of accepting higher ethanol blending levels. India is encouraging flex-fuel vehicles and retrofits are possible for older vehicles, including two wheelers. In addition, a greenhouse gas (GHG) measurement and reporting requirement would help India assure and improve GHG reductions from biofuel use in the transport sector. India will also need to continue to diversify feedstocks to help avoid shortages as it experienced at the end of 2023. New cellulosic ethanol plants, one completed last year, and three others under development, will help.

India has other opportunities to expand biodiesel for use in diesel vehicles and biojet fuel as a replacement for jet fuel. The government has already established a 5% biodiesel target by 2030 which would require almost 4.5 billion litres of biodiesel per year according to IEA estimates. Mobilising production will require a similar mix of policies as provided for ethanol including production support, guaranteed pricing and feedstock support, especially for mobilising residue oils like used cooking oil and vegetable oils grown on marginal land.

Biojet fuel is another growth area. On 25 November 2023, the Ministry of Oil, Petroleum and Natural Gas announced indicative blending targets of 1% by 2027 and 2% by 2028 for international flights leaving India. We estimate this would require near 100 million litres of biojet fuel per year, likely to come from residue or vegetable oils grown on marginal land. However, future growth could come from other technologies such as alcohol-to-jet using ethanol and gasification technologies whereby agricultural, forestry and municipal solid waste can be converted into jet fuel. 

World leaders left COP28 this year with clear priorities to triple global renewable capacity, double progress on energy efficiency, drive down methane emissions by 2030 and transition away from fossil fuels – four of the five key priority areas for success indicated by the IEA well before the COP28 gathering. Biofuels are one of the keys to transitioning away from fossil fuels as a complementary measure to electric vehicles and vehicle efficiency improvements. They are also compatible with existing vehicles and over the medium-term play a significant role in reducing emissions from long-distance road, air and maritime transport. In the IEA’s net zero scenario, biofuels production nearly triples from current levels by 2030, but the world is not on track for this. 

In the IEA’s accelerated case strengthening existing policies, establishing new targets and raising biojet fuel doubles annual historical growth rates to 8% through 2028. Nearly half of this additional growth, 29 billion litres of new demand, results from strengthened policies in existing markets such as the United States, Europe and India (for ethanol), and an additional 21 billion litres comes from new markets (biodiesel in India and ethanol in Indonesia). Biojet fuel offers a third growth avenue, expanding to cover nearly 3.5% of global aviation fuels – up from 1% in the main case.

However, even this level of growth falls short of a net zero scenario. To align with a net zero pathway, biofuels production from new processing technologies to access a large agricultural and forestry residue base must also quintuple by 2030, necessitating significant developmental support, as most remain pre-commercial. To address GHG emissions intensity, technologies such as CCUS applied to biofuel projects can very effectively reduce GHG emissions, with lower feedstock demand. Finally, biofuel production must expand significantly outside of the United States, Brazil, Europe and Indonesia that dominate production and use today. In all cases, predictable long-term policies with clear sustainability requirements are crucial to minimise uncertainty and stimulate investment. 

On the 9th of September 2023, India launched the Global Biofuels Alliance with the leaders of Singapore, Bangladesh, Italy, the United States, Brazil, Argentina, Mauritius and the UAE on the sidelines of the G20 summit. As of January 2024, the GBA now has 22 member countries alongside 12 international organisations. The GBA aims to accelerate the deployment of sustainable biofuels. The Alliance is a welcome addition to international and domestic efforts to expand sustainable biofuel supplies in line with a net zero trajectory. Despite the urgent need to increase the production of sustainable biofuels to cut transport emissions and ensure energy security, current growth is lagging what is required to achieve global net zero emissions by mid-century, according to the IEA’s Net Zero Scenario. However, with the right policies and practices, rapid sustainable biofuel deployment is achievable. The GBA can help get sustainable biofuels on track by focusing on three main areas:

• Identify and help develop markets with high potential for biofuels production: Over 80% of sustainable biofuels production and use is in the United States, Brazil, Europe and Indonesia. However, total transport fuel demand from these countries accounts for less than half of global transport fuel demand. Expanding sustainable biofuels use will therefore require expansion into new markets and expanded production in existing markets. Augmenting sustainable supplies in each market requires enhancing measurement and monitoring for sustainable supplies, assessing mixed technology deployment pathways and developing regional-specific policy packages, while learning from existing experiences.
• Accelerate technology deployment to commercialise advanced biofuels: Advanced biofuels must grow 11 times by 2030 from 2022 levels in the IEA’s Net Zero Scenario, doubling total biofuels production over the same period. However, planned investments to date remain well below this level of growth.
• Seek consensus on performance-based sustainability assessments and frameworks: More consistent and internationally recognised sustainability frameworks would help improve measurement and reporting, improve GHG reductions, encourage sustainable biofuels trade and help new markets incorporate lifecycle GHG accounting into their biofuel policies. 

India has already demonstrated how to quickly accelerate biofuel use. It now has an opportunity to extend those lessons learned to other biofuel types. Its leadership with the Global Biofuels Alliance is a welcome addition to international efforts to accelerate sustainable biofuels demand.