By: Anit Mukherjee and Caroline Arkalji
Geopolitical uncertainty in the Middle East and Russia has refocused policymakers’ attentions on ways to shield their economies from volatile energy prices. In the run up to the COP30 climate summit in Brazil, countries are reevaluating the role of biofuels in supporting efforts to accelerate the clean energy transition, particularly in the transportation sector, which accounts for nearly one-quarter of global greenhouse gas emissions. The experiences of the United States, European Union, India, Brazil, and Indonesia show diverse approaches to advanced biofuels, something even the Trump administration in the United States has supported. In a new paper, we examine how these countries can design policies that unlock the benefits of biofuels without triggering social and environmental harms, especially with the overuse of land and water resources in agriculture. Greater cooperation among countries is needed, including by leveraging platforms such as the Global Biofuels Alliance to mitigate trade-offs between growth, energy security, and sustainability.
In the United States, federal and state-level incentives have accelerated investment in advanced biofuels, even as the current administration’s stance on clean energy remains ambiguous. The Inflation Reduction Act (IRA) allocates $9.4 million through 2031 to support biofuels production, while the Sustainable Aviation Fuel (SAF) Grand Challenge aims to achieve 11 billion liters of SAF by 2030 and a complete transition by 2050. At the state level, California’s Low Carbon Fuel Standard has created a dynamic market for carbon credits that reward lifecycle emissions reductions. Interestingly, under the Trump administration, the Environmental Protection Agency proposed higher biofuel blending mandates for 2026 and 2027, including an increase in biomass-based diesel targets. While this move aims to support domestic producers, it has created uncertainty as soy prices have dropped and some biodiesel plants have paused operations amid unclear tax credit guidance.
The European Union has adopted a more mandate-oriented approach. Under its revised Renewable Energy Directive, member states must achieve either 29% renewable energy in the final energy consumption sector for transport or a 14.5% reduction in emissions by 2030. The bloc has established specific sub-targets for advanced biofuels and hydrogen — 5.5% by 2030 — while its ReFuelEU Aviation initiative mandates a 2% SAF blend by 2025 and 6% by 2030. Europe is relying on mandates to create certainty and encourage investment in biofuel infrastructure, particularly in aviation.
India’s strategy combines political will, clear regulatory targets, and incentives for rural development. The National Biofuels Policy, updated in 2022, establishes ambitious goals: a 20% ethanol blend by 2025–2026 and 5% for biodiesel by 2030. The Ethanol Blending Program has allowed oil marketing companies to diversify their supply sources, increasing the viability of sugarcane-based ethanol while alleviating foreign exchange pressure. India is also focused on quality control, introducing nine new national standards for biofuels in 2023 to guide producers and enhance institutional coordination.
Brazil remains one of the most advanced countries in the biofuels sector, contributing nearly a quarter of the global supply in 2021. The RenovaBio program, launched in 2017, connects transport decarbonization to climate targets under the Paris Agreement. All producers adhere to RenovaBio’s strict sustainability standards, including zero deforestation, verified through independent audits with transparent data. Fuel producers obtain decarbonization credits (CBIOs) based on verified emissions reductions, which are traded on the stock exchange. This mechanism establishes a direct financial incentive to produce low-carbon fuels. Brazil also has some of the world’s highest blending mandates: 27% for ethanol and 12% for biodiesel, with plans to increase to 15% by 2026. The recently enacted Fuel of the Future program has expanded its scope to include next-generation fuels, such as biogas, biomethane, and SAF.
Indonesia, the world’s leading producer of palm oil, has aggressively advanced its biodiesel efforts to a 40% blend (B40) from 35% to reduce reliance on imported diesel fuel, with plans to reach 50% by 2028. However, progress in bioethanol development has been slow. Although the government has set a target of a 5% blend aimed at reaching 20% by 2025, domestic production remains insufficient to meet even modest goals. Nevertheless, Indonesia’s regulatory efforts are evolving. The Indonesia Sustainable Palm Oil (ISPO) certification became mandatory in 2020 for bioenergy plantations, aiming to align with global norms such as the Roundtable on Sustainable Palm Oil (RSPO) and International Sustainability and Carbon Certification (ISCC), which are voluntary and allow producers to decide whether to adopt them based on their market requirements.
Despite this momentum, critics warn of the risks associated with biofuels. Land use change, deforestation, and food insecurity remain significant concerns, especially in areas where crop-based fuels are the primary source of energy. However, policy tools are evolving in response to these developments. Brazil’s CBIOs reward emissions-efficient producers. India’s standards aim to ensure product quality and reduce uncertainty. Indonesia’s mandatory certification for palm oil producers signifies a step toward international accountability. Yet transparency and independent monitoring are still necessary to ensure that policies achieve their intended climate goals without exacerbating social and environmental harm.
As countries look toward COP30 and beyond, it is clear the contribution of biofuels to energy security will increase in importance in the years to come. Countries should prioritize developing certification systems that verify emissions savings, invest in next-generation feedstocks that minimize land competition, and utilize multilateral platforms like the Global Biofuels Alliance to share lessons and harmonize standards. For policymakers in the Global South, there is a chance to leapfrog outdated models and adopt a more sustainable and inclusive approach.
Anit Mukherjee is Senior Fellow for the Global Economics & Development program at ORF America and Caroline Arkalji is a Research Assistant for the Global Economics and Development and Energy and Climate Policy programs at ORF America.