What are biofuel costs and are they competitive?

Competitiveness: Conventional vs Advanced

Conventional biofuels have a lower production cost compared with advanced biofuels because:

  • Their processing technologies have been on the market for several decades
  • By-products such as corn oil, animal feed and co-generation of electricity help make them competitive against fossil fuels

Advanced biofuels may have an initially higher production cost, but the total direct and indirect costs can be lower than conventional biofuels as:

  • They can use lower cost, non-food biomass feedstocks
  • They can fit better with infrastructure and transport technology
  • Costs are reduced from the minimised impact on the agriculture and forest production systems

Competitiveness: Biofuels vs Petroleum-based fuels

Compared to biofuels, the refining of petroleum is less expensive as it is highly optimised and nothing is wasted. Projections of price and technology development that show that advanced biofuels could be competitive with fossil fuels on a volume basis, but timing ranges from 2020-2030 and at an oil price ranging from US$70-US$150/barrel. At a low price of US$60/barrel only conventional biofuels such as sugar cane ethanol can currently compete directly on a volume basis[10].

As technology advances, biofuels can come to the market at lower costs, with a lower environmental impact and higher GHG reductions. As seen with conventional biofuels, a cost reduction of between 1.5-3 times can be achieved in 10-20 years[11].

However, Biofuels for Europe highlights that achieving this relies on using the new technologies in large scale biofuels plants, which will help to bring technology improvements and reduce costs.

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What affects the cost of biofuels?

The cost for a given biofuel is not fixed, as the cost of capital, construction, labour, feedstock, by-product revenues, and infrastructure and policy varies between regions and countries.

Biofuels for Europe believes that the key to cost-competitive biofuels is to learn how to maximise the amount of energy recovered from the biomass, and minimise the cost of converting this to fuel. Investments in technology will lead to rapid cost reductions and reduce pressure on fossil fuel supplies. These will very likely lead to an overall lower cost and a more secure global energy supply.

How do biofuels compare with other transport options?

In 2050, there will be 250 million cars in Europe, and 2 billion worldwide. All technologies, including more efficient vehicles, hybrid and electric vehicles, and biofuels, are needed to meet the required GHG reduction targets. International Energy Agency modelling projects that in 2050, only 16% of energy for cars will be electricity, with nearly half from fossil fuels, and a quarter from biofuels[13].

Biofuels and cars today
Some advanced biofuels (i.e. “drop-in” biofuels) are compatible with both current engines and infrastructure e.g. fuelling stations. Brazil has converted more than 80% of cars to flex-fuel vehicles, which can take any mixture of gasoline and ethanol.



Biofuels can also be used in hybrid vehicles. Combining technologies is often overlooked in the renewable energy debate, but they will be important in helping to achieve significant GHG savings.

Electric vehicles

The costs of carbon savings from advanced biofuels are lower than those from electric vehicles[14]. Electric vehicles will be part of the car fleet but use of electric vehicles by 2030 is expected to be relatively low, with more efficient internal combustion engines—which have a major impact on reducing GHG emissions— likely to still be the dominant technology.

What are the socio-economic impacts of biofuels?

As producing bioenergy is relatively labour-intensive work, it typically generates more jobs per unit of energy than fossil fuels or other renewable energy technologies.

Estimates of the employment creation potential of bioenergy options differ substantially[15], but waste-based biofuels could create €15 billion additional revenues into the European rural economy each year with up to 300,000 jobs by 2030[16].

In Europe, if the EU25 scenario is followed, bioenergy can create employment that accounts for 15% of total employment in agriculture for some countries. On-going studies in Denmark show that roughly for every million tonnes of biomass or every 13 PJ, you get 1000-1500 new direct and indirect jobs. Yet, this is small compared to the total industrial employment.

Recent analysis also shows some trade-offs—for instance, agricultural options for liquid biofuels create more employment, but forest-based options for electricity and heat production produce more climate benefits.