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Global biofuels market to gain momentum

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Hydrocarbon Engineering,

The global biofuels market is expected grow at a CAGR of nearly 6% during the 2016 - 2020 period, according to Technavio’s latest report, which covers the market outlook and growth prospects of the global biofuels market. The market is categorised into two fuel type segments, including ethanol and biodiesel, of which the ethanol segment dominated the market, with almost 70% of the overall market share in 2015.

Biofuels are one of the fastest growing alternative fuels across various parts of the world, as they help to diversify the energy mix and reduce the dependency on global petroleum markets. This reduces dependency on crude imports, which helps countries to utilise the money to improve their economy and lessen the threat to their national security. One of the main reasons for the shift to biofuels is that they are made from locally available feedstocks, such as rapeseed, soybean and corn. These feedstocks can be grown within the country, which can be controlled, and this boosts the economy by providing jobs.

“With favourable incentives and policies by governments worldwide driving the demand, cultivators and farmers are also encouraged to produce the feedstocks for biofuels. This will mainly be beneficial for countries that are highly dependent on agriculture for income, boosting their economy,” said Thanikachalam Chandrasekaran, a lead oil and gas research expert from Technavio.

Technavio’s research study segments the global biofuels market into the following regions: Americas, APAC and EMEA. In 2015, with a market share of almost 44%, the Americas dominated the global biofuels market, followed by EMEA with around 41% and APAC with about 15%.

The biofuels market revenue in the Americas was US$32.5 billion in 2015 and is expected to reach US$40.3 billion in 2020, growing at a CAGR of over 4%. The Americas has the highest share of the global biofuels market. The region’s top producers are the US, Brazil and Argentina, which produced more than 70% of the biofuels share in 2015. This is mainly due to the extensive support extended by countries in the region and the land area available to produce the feedstocks. The US government supports the producers of feedstock, manufacturers of biofuels, and R&D through its special category loans, funds and grants. Such support has led to extensive research in new technology and processes, increasing the quality of biodiesel over the years.

“Since the market price of biodiesels is still high, they are heavily subsidised to make it competitive compared to regular fuels. The government also provides US$1 tax credit per gallon in an attempt to encourage the use of biodiesel blend fuels,” added Thanikachalam.

The biofuels market revenue in EMEA is expected to reach US$41.6 billion in 2020, growing at a CAGR of above 6%. Germany, the Netherlands and France are the major contributors in this region. Regulatory policies, such as RED, have laid out the sustainability requirements from biofuels, thus helping countries in the EU to set up individual strategies to reach the set goal.

Domestic consumption of energy in the Middle East and Africa is rising exponentially due to urbanisation and infrastructure development. The heavy dependence on fossil fuel for energy production has forced the governments to diversify energy mix, thus pointing the scope toward the use of renewables and biofuel.

The biofuels market revenue in APAC is foreseen to reach US$17.3 billion in 2020. China, Thailand, Singapore and Indonesia are the major contributors to biofuel production in this region. Growing concerns regarding volatile crude oil prices, population density and energy consumption have led to major energy insecurities of many countries in the region. Energy insecurity is highly prioritised by the governments, as the region depends highly on crude imports.

India is the leading country in the APAC region for biofuel production. The government has taken an aggressive approach and has a target of blending 20% biofuels, both for bioethanol and biodiesel, by 2017, when compared to 2007. Currently, 400 types of trees bearing non-edible oilseeds are being explored for biodiesel production, and the plantation will be undertaken by the government on wasteland in the forest and non-forest areas.

Adapted from press release by Rosalie Starling

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