Aviation and Shipping Drive Global Biofuel Investment Expansion
The biofuel sector is pivoting toward advanced feedstocks as aviation and shipping demand surges, while major oil firms adjust capacity plans.
Global biofuel investment is accelerating as demand from aviation and shipping outpaces growth in road transportation. The industry is shifting focus from conventional ethanol to hydrotreated vegetable oil and sustainable aviation fuel to meet stricter regulatory standards. This structural change is driven by the inability of electric vehicles to replace fuel in heavy transport sectors.
According to the International Energy Agency, biofuels are projected to account for 6.4% of total liquid transportation fuels by 2030, up from 5.6% in 2023. Annual global demand is expected to reach 215 billion liters. More than 75% of this new demand will originate from aviation and shipping, where consumption is set to grow by an average of 30% between 2023 and 2030.
Aviation and Shipping Lead Demand Growth
Policies in North America, Europe, and Japan are primary drivers for this sector-specific increase. The EU’s ReFuelEU Aviation regulation mandates that sustainable aviation fuel comprise at least 2% of fuel supplied at EU airports starting in 2025. This requirement rises to 6% by 2030 and targets 70% by 2050. These regulations create a guaranteed market for producers capable of blending SAF with conventional jet fuel.
The shift is also influenced by the expansion of electric vehicles, which limits biofuel growth in road transport. Consequently, the sector is turning to waste and residues to reduce reliance on food crops and limit land-use impacts. Hydrotreated vegetable oil, produced using hydrogen and various oils, has become a central technology in this transition.
Major Oil Firms Adjust Capacity Plans
Eni is expanding its biofuel production capacity through its Enilive unit, aiming to increase output from 1.65 million metric tons per year to over 3 million metric tons by 2028. The company plans to reach more than 5 million metric tons by 2030, including up to 2 million metric tons of sustainable aviation fuel. A new 500,000-metric-ton biorefinery in Italy’s Priolo area will produce either HVO or SAF based on market conditions.
bp is leveraging its existing refinery infrastructure to expand biofuel and SAF production, viewing hydroprocessed esters and fatty acids as a scalable technology. In contrast, Shell blended approximately 10.3 billion liters of biofuels in 2025 but halted construction of its Rotterdam plant due to economic competitiveness concerns. These divergent strategies reflect the varying cost structures and feedstock availability across major producers.
Sector Risks and Feedstock Constraints
Despite the regulatory tailwinds, the sector faces significant headwinds. High feedstock costs, policy uncertainty, and low producer margins remain critical risks. The IEA notes that while biofuels are essential for the energy transition, the economic viability of production depends on resolving these cost and supply chain issues. Companies must balance expansion with the financial realities of competing with conventional fuels.
