Advanced BioFuels USA

by Mahmood Ebadian, James D. McMillan, Jack (John) N. Saddler and Susan van Dyk (University of British Columbia, Canada/National Renewable Energy Laboratory, USA/IEA Bioenergy) Global production and use of transport biofuels

Global biofuels production has continued to increase over the last decade, from over 37 million tonnes oil equivalent (Mtoe) in 2007 (~64 billion liters) to over 84 Mtoe in 2017 (~145 billion liters). It increased 3.5% from 2016 to 2017, which is well below its annual growth rate of 11.4% over the past decade however the most growth in three years. The highest growth was observed in the Asia Pacific region, which realized an annual growth rate of 20.1% over the period 2006-2016 and a 6% increase from 2016 to 2017. The Americas and Europe still continue to have the highest shares of biofuels production. In 2017, North America, South and Central America and Europe had world shares of 45.5%, 26.9% and 16.8%, respectively.

The main biofuels being produced are ethanol, biodiesel (fatty acid methyl ester or FAME), and renewable diesel fuels produced by hydrogenating (hydrotreating) animal and vegetable oils and fats (also known as hydrotreated vegetable oil (HVO) or hydrotreated esters and fatty acids (HEFA) fuels), as well as a growing amount of biomethane in some countries such as the United States (US), Sweden, and Germany. In energy terms, in 2017, an estimated 65% of biofuel production was ethanol, 29% was FAME biodiesel and 6% was HVO/HEFA fuels; while growing rapidly as a transport fuel, biomethane contributed less than 1% of total biofuel use.

Global biofuels production is forecast to grow at a modest annual growth rate of 3% over the next five years, with most growth expected to come from Latin America and non-OECD countries in Asia1. In Brazil, the drivers for biofuel demand remain strong and it is anticipated that the new RenovaBio policy will accelerate new investment to increase biofuel production capacity. China intends to roll out 10% ethanol blends in gasoline nationwide, which will require a six-fold increase in national output, and this is simulating new investment in ethanol production capacity. The growth prospects for conventional biofuel production in Europe and North America are more limited. The recent announcement in the European Union (EU) of a specific target for advanced biofuels and biogas of at least 0.2% in 2022, 1% in 2025 and at least 3.5% in 2030, however, is stimulating interest from large oil companies as they develop their strategies to achieve these targets. The cellulosic and advanced biofuels targets under the Renewable Fuel Standard (RFS) program in the US also continues to stimulate interest in establishing and increasing advanced biofuel production in North America.

Although conventional biofuels (i.e., sugar/starch-based ethanol and FAME biodiesel) comprised more than 93% of global biofuels market share in 2017, worldwide efforts continued to demonstrate production and use of drop-in and other advanced biofuels. This is largely in response to the growth in policies requiring or promoting biofuels that demonstrate improved sustainability attributes, especially lower life cycle net carbon emissions (lower carbon intensity) and less potential to exacerbate undesirable land use change; for example, fuels produced from agricultural, forestry, industrial or municipal wastes and residues. In 2017, the growth of advanced biofuels was led by HVO/HEFA fuels, followed by ethanol from cellulosic materials such as corn fibre, and by fuels from thermochemical gasification- or pyrolysis-based processes. Demand for HVO/HEFA biofuels is expected to continue to grow because of their “drop-in” properties and low carbon intensities, especially when produced from waste and residue oleochemical feedstocks such as tallow and used cooking oil, which account for an increasing share of HVO/HEFA feedstocks. These fuels are now primarily produced in Europe, Singapore and the US, and production is expected to continue to grow as new facilities come on line and new investments are made to increase existing plant capacities.

Production of advanced biofuels from cellulosic feedstocks, including cellulosic ethanol, has so far only been demonstrated at relatively small scales globally due to slower than forecast progress in scale up and commercial deployment. Most cellulosic ethanol is now being produced in the US and EU. In 2017, total production in the US was 38 million liters, mainly from corn kernel fibre and corn stover. A number of pilot, demonstration and pre-commercial advanced biofuels plants in other countries such as Canada, Brazil, Austria, China, India and Italy are also producing or have produced advanced biofuels from lignocellulosic biomass feedstocks ranging from agricultural and forest residues and the cellulosic portion of municipal waste streams, however large volume commercial production remains to be proven. Policy interest in advanced biofuels remains strong.

The Biofuture Platform, a 20-member country collaboration initiated by Brazil, has advocated an increase in low-carbon biofuel consumption. India aims to deliver twelve advanced biofuel plants, several of which are in development, and China intends to vigorously develop cellulosic ethanol.

EU policy support for advanced biofuels after 2020 is also expected to strengthen, building on an increasing number of quota policies announced by member states.

Global biofuels trade
In recent years, the international trade of biofuels has increased to meet the global demand for renewable fuels. Ethanol and biodiesel constitute much of this trade because they are the most established and largest volume biofuels, but there is potential for more trade of drop-in biofuels such as HVO/HEFA fuels. Ethanol has been traded for decades and has developed into a largevolume global market. In contrast, biodiesel trade is less established and has been encouraged by policies and incentives that promote biofuels, particularly in the EU. The current major participants
in liquid biofuels trade are the US, the EU, Brazil, and Argentina. The volume and direction of biofuel trade depends on many factors, including policies, tariffs, crop yields, feedstock availability and biofuels supply and demand within individual countries. Some of the most significant policies influencing where biofuels are imported and produced are the EU’s Renewable Energy Directive (RED and REDII), the US’s Renewable Fuels Standard (RFS) and California’s Low Carbon Fuel Standard (LCFS). International import/export tariffs also play an important role.

Transport biofuels policies
Policies and fossil fuel prices are the main factors driving the rate of biofuels growth in specific countries and world regions. Many forms of policy instruments are being used, including blending mandates, fuel and carbon taxes and renewable or low carbon fuel standards, as well as a variety of fiscal incentives and public financing mechanisms.

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Biofuels policies for aviation and marine sectors
Policies to promote renewable energy in the transport sector continue to focus primarily on road transport, especially at the national level. Other important sub-sectors of transport such as rail, aviation and shipping have until recently drawn comparably less policy attention despite also being large energy consumers and GHG emitters. Transport policies and industry efforts are increasingly focusing on deploying biofuels for all long-haul transport sectors (i.e., road, rail, aviation and shipping), where electrification is much more challenging. The aviation industry recognises the
need to address climate change by decarbonizing and has adopted a number of targets, including a 50% reduction in net aviation CO2 emissions by 2050 (compared to 2005 levels). Few direct support policies now target the use of renewable fuels in the aviation sector. Indonesia introduced a 2% renewable jet fuel mandate in 2017, which is set to increase to 5% by 2025. EU’s new REDII allows aviation biofuels as an opt-in to count more highly (using a multiplier of 1.2) in the contributions towards the region’s renewable transport target. In 2018, in addition to new policy
developments, the Netherlands, Norway, UK and US re-committed to promoting alternative jet fuel production. As of year-end 2017, five renewable jet fuels, plus 5% co-processing of bio-crude, were certified for blending with fossil-based jet fuels (at levels ranging from 10% to 50%).

Shipping is another long-distance transport sector that is under increasing pressure to reduce its
carbon and sulfur emissions.   READ MORE

1 This region groups together all Asian countries apart from China, India, Japan and South Korea. The region ranges
from Afghanistan through Mongolia, to Southeast Asia and the islands of the Pacific.

IEA Bioenergy Task 39 – Implementation Agendas: 2018-2019 Update xvi
Table of Contents
Executive Summary ……………………………………………………………………………………………………….iv
1. Global production and use of biofuels………………………………………………………………………..1
Introduction ……………………………………………………………………………………………………………………1
Biofuels production and use ……………………………………………………………………………………………..3
Global biofuels trade ……………………………………………………………………………………………………….8
Future growth of biofuels industry …………………………………………………………………………………….9
Sources ………………………………………………………………………………………………………………………..11
2. Australia …………………………………………………………………………………………………………………13
Introduction ………………………………………………………………………………………………………………….14
Main drivers for biofuels policy ………………………………………………………………………………………17
Biofuels policy………………………………………………………………………………………………………………18
Biofuels obligations……………………………………………………………………………………………………18
Excise duty reductions………………………………………………………………………………………………..19
Fiscal Incentives………………………………………………………………………………………………………..20
Investment subsidies…………………………………………………………………………………………………..20
Other measures stimulating biofuels implementation ……………………………………………………..20
Promotion of advanced biofuels………………………………………………………………………………………21
Market development and policy effectiveness …………………………………………………………………..22
Sources ………………………………………………………………………………………………………………………..24
3. Austria ……………………………………………………………………………………………………………………26
Introduction ………………………………………………………………………………………………………………….27
Main drivers for biofuels policy ………………………………………………………………………………………27
Biofuels policy………………………………………………………………………………………………………………28
Biofuels obligations……………………………………………………………………………………………………29
Excise duty reductions………………………………………………………………………………………………..30
Fiscal incentives………………………………………………………………………………………………………..30
Investment subsidies…………………………………………………………………………………………………..30
Other measures used to stimulate the production and use of biofuels ……………………………….30
Promotion of advanced biofuels………………………………………………………………………………………31
Market development and policy effectiveness …………………………………………………………………..32
Sources ………………………………………………………………………………………………………………………..36
4. Brazil………………………………………………………………………………………………………………………37
Introduction ………………………………………………………………………………………………………………….38
Main drivers for biofuel policy………………………………………………………………………………………..40
Biofuels policy………………………………………………………………………………………………………………40
Biofuels obligations……………………………………………………………………………………………………41
IEA Bioenergy Task 39 – Implementation Agendas: 2018-2019 Update xvii
Excise duty reductions………………………………………………………………………………………………..41
Fiscal incentives………………………………………………………………………………………………………..42
Other measures used to stimulate the production and use of biofuels ……………………………….42
Promotion of advanced biofuels………………………………………………………………………………………44
Market development and policy effectiveness …………………………………………………………………..45
Sources ………………………………………………………………………………………………………………………..49
5. Canada ……………………………………………………………………………………………………………………51
Introduction ………………………………………………………………………………………………………………….52
Main drivers for biofuels policy ………………………………………………………………………………………52
Biofuels policy………………………………………………………………………………………………………………53
Biofuels obligations……………………………………………………………………………………………………53
Excise duty reductions………………………………………………………………………………………………..54
Fiscal incentives and Investment subsidies……………………………………………………………………54
Other measures stimulating the implementation of biofuels …………………………………………….56
Promotion of advanced biofuels………………………………………………………………………………………59
Market development and policy effectiveness …………………………………………………………………..60
Sources ………………………………………………………………………………………………………………………..63
6. Denmark …………………………………………………………………………………………………………………65
Introduction ………………………………………………………………………………………………………………….66
Main drivers for biofuels policy ………………………………………………………………………………………67
Biofuels policy………………………………………………………………………………………………………………67
Biofuels obligations……………………………………………………………………………………………………67
Excise duty reductions………………………………………………………………………………………………..67
Fiscal incentives………………………………………………………………………………………………………..68
Investment subsidies…………………………………………………………………………………………………..68
Other measures stimulating the implementation of biofuels …………………………………………….68
Promotion of advanced biofuels………………………………………………………………………………………68
Market development and policy effectiveness …………………………………………………………………..69
Sources ………………………………………………………………………………………………………………………..72
7. European Union………………………………………………………………………………………………………73
Status of the biofuels industry in the EU…………………………………………………………………………..74
Policies driving the production and use of biofuels…………………………………………………………….75
RED II………………………………………………………………………………………………………………………75
Sustainability criteria in RED II…………………………………………………………………………………..75
Advanced biofuels…………………………………………………………………………………………………………76
Caps and multipliers………………………………………………………………………………………………………78
Flexibility …………………………………………………………………………………………………………………….79
IEA Bioenergy Task 39 – Implementation Agendas: 2018-2019 Update xviii
Translation and implementation ………………………………………………………………………………………79
Advances and challenges in biofuels technologies……………………………………………………………..79
Biochemical conversion routes…………………………………………………………………………………….80
Thermochemical conversion routes………………………………………………………………………………81
Oleochemical conversion routes ………………………………………………………………………………….83
Broad indicator of funding by technology routes……………………………………………………………….84
Conclusions ………………………………………………………………………………………………………………….85
Sources ………………………………………………………………………………………………………………………..86
8. Germany …………………………………………………………………………………………………………………87
Introduction ………………………………………………………………………………………………………………….88
Main drivers for biofuels policy ………………………………………………………………………………………88
Biofuels policy………………………………………………………………………………………………………………88
Biofuels obligations……………………………………………………………………………………………………91
Excise duty reductions………………………………………………………………………………………………..91
Fiscal incentives………………………………………………………………………………………………………..91
Investment subsidies…………………………………………………………………………………………………..92
Promotion of advanced biofuels………………………………………………………………………………………92
Market development and policy effectiveness …………………………………………………………………..96
Sources ………………………………………………………………………………………………………………………..99
9. Japan…………………………………………………………………………………………………………………….102
Introduction ………………………………………………………………………………………………………………..103
Main drivers for biofuels policy …………………………………………………………………………………….104
Biofuels Policy ……………………………………………………………………………………………………………104
Biofuels targets………………………………………………………………………………………………………..104
Excise duty reductions………………………………………………………………………………………………106
Incentives, subsidies and other measures to promote biofuels………………………………………..107
Other measures stimulating the implementation of biofuels …………………………………………..108
Promotion of advanced biofuels…………………………………………………………………………………….108
Market development and policy effectiveness …………………………………………………………………110
Sources ………………………………………………………………………………………………………………………114
10. The Netherlands…………………………………………………………………………………………………….116
Introduction ………………………………………………………………………………………………………………..117
Main drivers for biofuels policy …………………………………………………………………………………….118
Biofuels policy…………………………………………………………………………………………………………….118
Biofuels obligations………………………………………………………………………………………………119
Excise duty reductions…………………………………………………………………………………………..121
Fiscal incentives…………………………………………………………………………………………………..121
IEA Bioenergy Task 39 – Implementation Agendas: 2018-2019 Update xix
Investment subsidies……………………………………………………………………………………………..121
Other measures stimulating the implementation of biofuels ……………………………………….121
Promotion of advanced biofuels…………………………………………………………………………………….122
Market development and policy effectiveness …………………………………………………………………122
Sources ………………………………………………………………………………………………………………………124
11. New Zealand………………………………………………………………………………………………………….126
Introduction ………………………………………………………………………………………………………………..127
Main drivers for biofuels policy …………………………………………………………………………………….127
Biofuels policy…………………………………………………………………………………………………………….128
Biofuels obligations………………………………………………………………………………………………128
Excise duty reductions…………………………………………………………………………………………..128
Fiscal incentives…………………………………………………………………………………………………..129
Investment subsidies……………………………………………………………………………………………..129
Other measures stimulating the implementation of biofuels ……………………………………….129
Promotion of advanced biofuels…………………………………………………………………………………….129
Market development and policy effectiveness …………………………………………………………………129
Sources ………………………………………………………………………………………………………………………131
12. South Africa ………………………………………………………………………………………………………….133
Introduction ………………………………………………………………………………………………………………..134
Main drivers for biofuels policy …………………………………………………………………………………….135
Biofuels policy…………………………………………………………………………………………………………….135
Biofuels targets…………………………………………………………………………………………………….136
Excise duty reductions…………………………………………………………………………………………..136
Fiscal incentives…………………………………………………………………………………………………..136
Investment subsidies……………………………………………………………………………………………..136
Promotion of advanced biofuels…………………………………………………………………………………….136
Market development and policy effectiveness …………………………………………………………………137
Sources ………………………………………………………………………………………………………………………138
13. South Korea…………………………………………………………………………………………………………..140
Introduction ………………………………………………………………………………………………………………..141
Main drivers for biofuels policy …………………………………………………………………………………….142
Biofuels policy…………………………………………………………………………………………………………….142
Biofuels targets…………………………………………………………………………………………………….142
Excise duty reductions…………………………………………………………………………………………..143
Fiscal Incentives…………………………………………………………………………………………………..143
Investment subsidies……………………………………………………………………………………………..143
Other measures stimulating the implementation of biofuels ……………………………………….143
IEA Bioenergy Task 39 – Implementation Agendas: 2018-2019 Update xx
Promotion of advanced biofuels…………………………………………………………………………………….144
Market development and policy effectiveness …………………………………………………………………144
Sources ………………………………………………………………………………………………………………………147
14. Sweden ………………………………………………………………………………………………………………….148
Introduction ………………………………………………………………………………………………………………..149
Main drivers for biofuels policy …………………………………………………………………………………….150
Biofuels policy…………………………………………………………………………………………………………….150
Biofuels obligations………………………………………………………………………………………………150
Excise duty reductions…………………………………………………………………………………………..151
Fiscal incentives…………………………………………………………………………………………………..151
Investment subsidies……………………………………………………………………………………………..151
Other measures stimulating the implementation of biofuels ……………………………………….152
Promotion of advanced biofuels…………………………………………………………………………………….153
Market development and policy effectiveness …………………………………………………………………154
Sources ………………………………………………………………………………………………………………………156
15. United States………………………………………………………………………………………………………….157
Introduction ………………………………………………………………………………………………………………..158
Main drivers for biofuels policy …………………………………………………………………………………….159
Biofuels policy…………………………………………………………………………………………………………….159
Biofuel obligations………………………………………………………………………………………………..160
Excise duty reductions…………………………………………………………………………………………..165
Fiscal incentives and investment subsidies……………………………………………………………….165
Other measures stimulating the implementation of biofuels ……………………………………….166
Promotion of advanced biofuels…………………………………………………………………………………….167
Market development and policy effectiveness …………………………………………………………………171
Sources ………………………………………………………………………………………………………………………174
16. China…………………………………………………………………………………………………………………….177
Introduction ………………………………………………………………………………………………………………..178
Main drivers for biofuels policy …………………………………………………………………………………….178
Biofuel Policy……………………………………………………………………………………………………………..178
Biofuels obligations………………………………………………………………………………………………179
Excise duty reductions…………………………………………………………………………………………..182
Fiscal incentives and investment subsidies……………………………………………………………….184
Other measures stimulating the implementation of biofuels ……………………………………….185
Promotion of advanced biofuels…………………………………………………………………………………….185
Market development and policy effectiveness …………………………………………………………………188
Sources ………………………………………………………………………………………………………………………192
IEA Bioenergy Task 39 – Implementation Agendas: 2018-2019 Update xxi
17. India ……………………………………………………………………………………………………………………..194
Introduction ………………………………………………………………………………………………………………..195
Main drivers for biofuels policy …………………………………………………………………………………….195
Biofuel Policy……………………………………………………………………………………………………………..196
Biofuels obligations………………………………………………………………………………………………196
Excise duty reductions…………………………………………………………………………………………..197
Fiscal incentives and investment subsidies……………………………………………………………….198
Other measures stimulating the implementation of biofuels ……………………………………….199
Promotion of advanced biofuels…………………………………………………………………………………….200
Market development and policy effectiveness …………………………………………………………………201
Sources ………………………………………………………………………………………………………………………203
18. Compare and contrast transport biofuel policies…………………………………………………….204
Policy landscape on a global scale …………………………………………………………………………………205
Compare and contrast biofuel policies for the transport sector …………………………………………..206
Biofuel blending mandates …………………………………………………………………………………….206
Fuel/CO2 tax excise reduction/exemption or zero tariff ……………………………………………..213
Low Carbon Fuel Standards…………………………………………………………………………………..214
Other measures stimulating the implementation of biofuels (Technology-push instruments)
216
Biofuels sustainability criteria………………………………………………………………………………..219
Biofuels policies in the aviation and shipping sectors………………………………………………..223
Barriers to the further growth of biofuels markets…………………………………………………….224
Conclusions ………………………………………………………………………………………………………………..225
Sources ………………………………………………………………………………………………………………………227
Appendix I: Implementation agendas Questionnaire …………………………………………………….230

Executive Summary: Implementation Agendas: 2018-2019 Update Compare and Contrast Transport Biofuels Policies (IEA Bioenergy)