The evolution of the biofuels market over the past decade was closely linked to the policy environment. In the coming years, developing countries such as Brazil, Argentina, and Indonesia are likely to play a greater role on the biofuel markets. There are numerous reasons for this. In these countries, demand for transportation fuels is likely to continue to grow, whereas in developed countries it should either stagnate or decrease. Biofuels are mostly mixed in transport fuels, and even a stable mandate for biofuels would result in higher demand for biofuels in the coming years.
Biofuels can be defined as either transportation or burning liquid fuels produced from biomass. They can be manufactured from agricultural and forest products and the biodegradable part of industrial and municipal waste. The key factors responsible for the growth of the biofuels market include intensifying environmental and energy security concerns, as well as government legislation and regulatory restrictions on fossil fuels. The vagueness with global fuel prices along with constantly rising levels of emissions has resulted in the growing interest in alternative fuels, which will further encourage the consumption of biofuels in the coming years.
Major Biofuel producers in developing countries had developed their biofuel industries not only for domestic use, but also in developed countries with prospects for key markets. The EU and the United States used trade duties to prevent biofuels from being imported. Developing countries responded by encouraging domestic use of biofuels, notably by increasing mandates.
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According to FAO, with the current policy developments and trends in demand for diesel and gasoline, global ethanol production is expected to increase from 120 bln L in 2017 to 131 bln L by 2027, while global biodiesel production is projected to increase from 36 bln in 2017 to 39 bln by 2027. Global biodiesel and ethanol prices are expected to decline in real terms by 14% and 8% respectively over the next decade, but the evolution of the ethanol and biodiesel markets will continue to be shaped by transport fuel policies and demand.
With developments such as mandate increases and differential taxation systems or subsidies enacted in several countries, policy decisions were globally favorable to biofuels for the past few years. The consumption of biofuels was sustained by bioenergy obligatory blending and by the demand for transportation fuels due to continued low energy prices. Inconvenient price ratios of biofuels to conventional fuels has resulted in partial demand for non-mandated use of biofuels. Trade uncertainty is rising on biofuel markets.
North America holds a major share in the biofuels market in terms of revenue. Increasing awareness of the benefits of biofuels over conventional fuels, regulatory & political support and agricultural and economic support, as well as environmental conservation policies, growing environmental concerns among the population, contribute to the region's growth. North America is closely trailed by Europe. The Europe region is expected to shift from an oversupplied to a shortage biofuels market near the future. Asia-Pacific is expected to register the highest growth rate in biofuels market. The key factors such as availability of feedstock, the government’s law to support the approval of bio-based fuel alternatives and multiple uses of biofuels are responsible for such market growth in the Asia-Pacific. South America is also a key region for the biofuels market. The factors such as rising urban population, and rising middle-class consumer income are expected to provide key opportunities for the growth of the biofuels market in the region. Brazil and Argentina are the two countries in the South America with largest potential for biofuels locally and globally. Nevertheless, most countries in Latin America have started to consider biofuel production for their own domestic markets as well as exports to the global market.
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