Sustainable Biofuels & E-Fuels Market 2025-2035: Technologies, Players, Forecasts

The global transportation sector is a significant contributor to greenhouse gas emissions, accounting for around 25% of energy-related CO₂ emissions worldwide. Hence, the decarbonization of transport has become a critical priority. Many solutions exist, including electric vehicles (EVs) as well as fuels like low-carbon hydrogen, methanol and ammonia. Advanced biofuels and e-fuels are also emerging as a promising solution to reduce the carbon footprint of transport sectors where electrification faces significant challenges, including aviation, shipping, and heavy-duty road transport.

 

One of the most significant advantages of sustainable hydrocarbon fuels is their drop-in capability. This means they can be used in existing engines and infrastructure without requiring major modifications. This characteristic is particularly crucial for sectors like aviation and shipping, where the transition to alternative propulsion systems is more complex, costly and time-consuming.

 

In this report, IDTechEx provides an in-depth analysis of advanced biofuels (second generation and beyond) and e-fuels. The analysis covers production processes, relevant policies, key technological innovations, technology providers, and project developers. It also explores the techno-economic challenges and opportunities in the sector. The report focuses on key fuels such as renewable diesel, sustainable aviation fuel (SAF), and renewable methanol, amongst others.

 

 

 

 

First-generation biofuels, such as bioethanol and biodiesel, made from food crops like corn, sugarcane, and vegetable oils, have long led the sustainable fuel market. However, concerns over competition with food production, lifecycle emissions, and land use are pushing key regions like Europe and the US to adopt more advanced alternatives. Second-generation biofuels, derived from lignocellulosic biomass, agricultural residues, and non-food crops, are gaining attention for their greater sustainability and reduced competition with food resources. Third and fourth generation biofuels use microalgae or other microorganisms for biofuel production, which despite all their challenges could become a viable production route in the future.

 

Meanwhile, e-fuels, also known as power-to-liquid (PtL) fuels, represent a promising development in the sustainable fuel industry. Produced by combining green hydrogen (from water electrolysis using renewable electricity) with captured CO₂, e-fuels offer a potential path to carbon-neutral fuels. Examples include e-methane, e-methanol, and liquid e-fuels like e-gasoline, e-diesel, and e-kerosene / e-SAF (sustainable aviation fuel). Market activity is highest in the second gen biofuel space, but e-fuels are quickly picking up due to the promise of theoretically unlimited feedstocks for production, potential for carbon neutrality and a push from regulators and large corporations in Europe and the US.

 

 

 

This report provides a comprehensive analysis of second-generation biofuel technologies, such as cellulosic ethanol production, pyrolysis, gasification, Fischer-Tropsch (FT) synthesis, hydrothermal liquefaction (HTL) and alcohol-to-jet/gasoline, along with key innovations, project case studies, and technology suppliers. It also extensively covers the e-fuel landscape, focusing on production pathways, key players, and advancements in syngas generation, offering valuable insights into this rapidly evolving sector.

 

Renewable diesel, also known as hydrotreated vegetable oil (HVO) or green diesel, is a direct replacement for conventional fossil diesel. It is produced primarily through the hydroprocessed esters and fatty acids (HEFA) pathway, which involves hydrotreating and upgrading feedstocks such as vegetable oils, animal fats, and waste oils. HEFA is also the dominant process for producing sustainable aviation fuel (SAF), a critical solution for decarbonizing the aviation sector. SAF offers a drop-in replacement for conventional jet fuel (Jet A-1), seamlessly integrating with existing aircraft engines.

 

While other production pathways for SAF and renewable diesel are emerging, such as gasification followed by Fischer-Tropsch (FT) synthesis, alcohol-to-jet, and power-to-liquids (e-fuels), commercial uptake of these technologies is expected to remain limited through 2035. HEFA processes will continue to dominate due to their established scalability, efficiency, and compatibility with current refining infrastructure. In addition, all processes not only produce renewable diesel and SAF but also yield valuable by-products such as lighter fractions, including propane, butane, and naphtha. These by-products can be utilized in various industries, enhancing the economic viability of the production processes.

 

The IDTechEx report provides a comprehensive analysis of the renewable diesel and SAF markets, focusing on policy landscapes driving the market, production processes, notable technological innovations, key players, and project case studies. It highlights the different production technologies and routes for renewable diesel and SAF production, exploring emerging pathways, as well as providing insights into the unique challenges and opportunities within each sector.

 

 

 

Renewable methanol, including both biomethanol and e-methanol, is gaining attention as a versatile sustainable fuel option. It can be used in various applications, including as a marine fuel, hydrogen carrier and as a feedstock for other fuel production processes. Today, biomethanol from biogas reforming and biomass gasification dominate the renewable methanol landscape. However, e-methanol is expected to emerge in the later half of this decade, becoming the largest renewable methanol source by 2035. IDTechEx's report offers an in-depth analysis of the renewable methanol market, covering technology suppliers, key project developers, and announced project capacities, providing a detailed outlook on the future of renewable methanol.

 

 

 

The sustainable fuel market is poised for significant growth in the coming years with IDTechEx forecasting the global renewable diesel and SAF production capacity is forecast to exceed 57 million tonnes annually by 2035, growing at a CAGR of 8.5% between 2025 and 2035. This impressive growth trajectory underscores the increasing importance of sustainable fuels in the global energy mix.

 

The major drivers for this growth are policy developments, such as SAF fuel mandates in the EU and UK or the US' SAF Grand Challenge, as well as a push from vehicle fleet operators and airlines to reduce carbon emissions. Another major driver is the emergence of a wide range of production technologies and their commercial uptake in sustainable fuel production projects. However, the sector also faces significant challenges associated with overall energy efficiency (especially when comparing e-fuels to EVs for road transport), feedstock availability, project development issues (long development timelines and significant funding needed) and achieving cost parity with conventional fossil fuels. Together, these drivers and challenges are shaping this rapidly developing market.

 

The report provides detailed market forecasts for various sustainable fuel types, including renewable methanol, renewable diesel, and SAF. Detailed market forecasts are provided, broken down by production regions (Europe, North America, South America, and APAC) and technological pathways (e.g., HEFA/HVO, gasification-FT, and power-to-liquids/e-fuels) for renewable diesel, SAF, and renewable methanol. From detailed technology analyses to market forecasts and project case studies, this report provides the insights needed to understand and navigate the sustainable fuel landscape.

 

 

 

Introduction to the sustainable fuel market:

• Role of sustainable fuels in decarbonizing transport sectors

• Overview of global policies & regulation for sustainable fuels

 

Overview of the conventional (first generation) biofuel market:

• Bioethanol production technology, key feedstocks, key producing regions

• Biodiesel production technology, key feedstocks, key producing regions

• Discussions addressing sustainability concerns around biofuels (lifecycle carbon emissions, land use change, comparison to competing technologies like EVs).

 

Second generation biofuel production technologies. For each of the below, IDTechEx analyzed the production technologies, key innovations, project case studies, technology suppliers, challenges & opportunities:

• Overview of key pathways to advanced biofuels

• Cellulosic ethanol production

• Pyrolysis of biomass, plastic and mixed waste for pyrolysis oil production

• Gasification of biomass for syngas production

• Hydrothermal liquefaction of various biomass and plastic wastes for direct hydrocarbon synthesis

• Fischer-Tropsch (FT) synthesis for conversion of syngas to hydrocarbons

• Refining and upgrading technologies for biocrude oil

• Biomethanol production via biogas reforming or biomass gasification

• Alcohol-to-jet (ATJ) and alcohol-to-gasoline (ATG), focusing on methanol and ethanol

 

Third & fourth generation biofuel technologies:

• Overview of 3rd and 4th generation biofuel production, focusing on microalgae.

• Includes analysis of cultivation systems (photobioreactors & open systems), cultivation system suppliers

• Past commercial activities & current key players

• Commercial outlook on 3rd and 4th gen biofuels

 

E-fuel production landscape. For each of the below, IDTechEx analyzed the production technologies, key innovations, project case studies, technology suppliers, challenges & opportunities:

• Overview of e-fuel pathways, key opportunities and challenges

• Green hydrogen production for e-fuels: summary of the electrolyzer technology and market

• Carbon capture for e-fuels: summary of the point-source and direct air capture technologies and market

• Syngas production for e-fuels: review of RWGS, SOEC and alternative syngas generation methods and players

• E-methane production

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