Published March 2015
Biodiesel is a renewable fuel, made from vegetable oils or animal fats. These esters of natural fatty acids with glycerin (named triglycerides) undergo base-catalyzed transesterification, usually with methanol. The resulting product is a mixture of fatty acid methyl esters (FAME), corresponding to the fatty acid composition of the fats or oils used. Biodiesel fuel is adapted to the diesel engine and may be used in standard diesel engines.
Among the characteristics that make biodiesel interesting as a fuel additive are the following:
The following pie chart shows world consumption of biodiesel:
- High cetane number, on average above 50
- Ultralow sulfur content
- High lubricity
- Aid to combustion as a result of the oxygen content of FAME, reducing particulates and pollutants such as carbon monoxide
- Derivation from renewable sources
- Sustainable production
- Use as fuel without engine modifications at low levels
Growth in the consumption of biodiesel, and biofuels per se, has been driven based on the following principal objectives:
- To reduce national dependency on fossil fuels to secure energy supplies and improve trade balances.
- To develop new economies based on indigenous resources.
- To generate rural employment and to address increasing urbanization of populations.
- To provide environmental benefits through the reduction of greenhouse gas emissions and improve air quality through improved fuel mixtures.
Over recent years, there has been increasing debate over the merits of these objectives, resulting in a shift of political, economic, and social support. Since biofuels are generally more expensive than fossil fuels to produce, the industry has required a combination of incentives and mandates to develop the market to its current standing. Once the full life-cycle and indirect land-use changes have been considered, in addition to the impact on global food security and prices, discussions over the true impact of GHG reductions have shifted opinion and political positions on the future of biofuels, particularly conventional biofuels such as biodiesel and ethanol.
The market for biodiesel is defined typically by the market for existing fossil diesel. European transport fuel has traditionally been dominated by diesel, accounting for 65-70% of the total fuel mix. North America by contrast is dominated by gasoline, supplemented with around 10% ethanol, with diesel consumption contributing only around 20% of the total mix. Both regions have continued to see a steady decline in total fuel consumption since the mid-2000s.
The growth regions of Asia, Africa, and South America are more evenly split between gasoline and diesel consumption, with Brazil of course having a sizable ethanol contribution (25%). There is no major technical limitation on replacing fossil diesel with biodiesel. There is, however, a limitation on feedstock availability—vegetable oils and animal fats—and consequently on the availability of arable farm land for biodiesel production.
The market for biodiesel is dependent on political support, either through incentives such as subsidies, grants, and tax incentives and/or through mandated blending volumes. The industry developed quickly based on the former; however, the financial burden on government budgets, particularly through lost excise duty revenues, has shifted the political landscape more toward mandated volumes, placing the financial burden increasingly on fuel producers and consumers.
Biodiesel and ethanol do not technically compete with one another as biofuels; however, changing sentiment on the issue of greenhouse gas emissions and proposed changes to the fuel taxation system, e.g., in Europe, could introduce new dynamics into the product mix as fuel producers take a more holistic view of meeting total greenhouse gas emission targets. In addition, the rise of advanced biofuels such as cellulosic ethanol, biobutanol, hydrotreated vegetable oils, Fischer-Tropsch fuels, and biofuels from algae will all play a part beyond 2020 in defining the energy mix.
Since the November 2014 announcement by OPEC that production output would be maintained at 30 million barrels per day, crude oil prices have plunged to five-year lows. As a result, the outlook for biofuels will depend even more on the political climate for the industry. The regional sections of this report provide more detailed insight into the shifting legislative landscape for biodiesel.