Aviation Biofuels Market Size, Share & Trends Analysis Report By Type (HEFA (Hydroprocessed Esters and Fatty Acids), HVO (Hydrogenated Vegetable Oil), FT (Fischer-Tropsch), SIP (Synthetic Iso-Paraffins), ATJ (Alcohol-to-Jet)), By Applications (Military, Commercial) and By Region(North America, Europe, APAC, Middle East and Africa, LATAM) Forecasts, 2023-2031

Market Overview

The global aviation biofuels market size was valued at USD 101.23 billion in 2022. It is projected to reach USD 334.91 billion by 2031, registering a CAGR of 12.7% during the forecast period (2023-2031). 

The increased concern for the environment, government regulations, and the quest for more sustainable practices have aided the acceptance of aviation biofuels, simulating the market growth. Biofuels present an intriguing prospect within the realm of sustainable energy. In essence, biofuels are derived from renewable organic matter, predominantly sourced from plants. These biofuels are used in various areas, like transportation, heating, power generation, and cooking. Currently, there are two main types of biofuels based on their sources. The first-generation ones come from plants that are rich in sugars or starch, like sugar cane and corn. These crops can be processed to remove the sugar fermented to produce ethanol. Similarly, second-generation biofuels are derived from sources like oil plants (think algae, jatropha, halophytes, c Amelina) or even materials like municipal waste. These products fulfill the sustainability criteria and are appropriate for utilization in the aviation industry.

Market Dynamics

Global aviation biofuels market drivers:

Rising environmental awareness and sustainability issues

One of the significant advantages of biofuels is their potential to lower carbon dioxide (CO2) emissions compared to traditional fossil fuels. During growth and development, plants can uptake carbon dioxide (CO2) from the surrounding atmosphere. Biofuels are derived from plant biomass, and when burned, they produce a quantity of carbon dioxide (CO2) that is approximately equal to the amount of CO2 first absorbed by the plants during their growth. This makes biofuels nearly carbon neutral over their entire life cycle. However, there are emissions associated with the production of biofuels, including the machinery and processes needed to grow the crops, transport the raw materials, and refine the fuel. Nevertheless, even after accounting for these emissions, many biofuels are expected to substantially reduce overall CO2 emissions compared to fossil fuels, potentially up to 80%. Biofuels can further lower emissions of pollutants like sulfur dioxide and soot since they often include fewer contaminants, such as sulfur.

Another intriguing aspect of biofuels is their potential to diversify the supply chain in the airline industry. The aviation sector relies heavily on fossil fuels, which can be subject to price changes and supply issues. On the other hand, sustainable biofuels are not restricted to regions where fossil fuels can be extracted. They can be grown in various places worldwide, tailored to meet the aviation industry's needs. While we might still have major producers of biofuel feedstock who transport their goods to where they're needed, there's also room for smaller, local supply chains to develop. Therefore, biofuels are an eco-friendly alternative and a versatile and potentially game-changing solution for our energy needs, especially in aviation.

Global aviation biofuels market restraints:

Limited product availability and production costs

Although various feedstocks, including algae, spent cooking oil, and crop residues, can be utilized, it might be difficult to guarantee a steady and affordable supply of these feedstocks in large enough numbers. The availability of adequate feedstock is crucial for consistently producing aviation biofuels. Currently, the production of aviation biofuels tends to be more expensive than traditional jet fuels derived from fossil sources. These higher costs can deter some stakeholders, including airlines and biofuel producers, from adopting these more sustainable alternatives.

Reducing production costs through innovation and economies of scale is a key challenge in the industry. In addition, retrofitting existing aviation infrastructure and engines to accommodate biofuels can be costly and time-consuming. This can hinder entry for airlines and airports looking to transition to sustainable aviation fuels, as they must invest in modifying their existing equipment.

Global aviation biofuels market opportunities:

Government incentives and support

Government incentives and support play a pivotal role in boosting the aviation biofuel market by providing financial incentives, policy frameworks, and regulatory guidance encouraging the research, development, production, and adoption of sustainable aviation biofuels. These incentives are driven by the government's recognition of the urgent need to mitigate climate change and reduce carbon emissions within the aviation sector, which significantly contributes to greenhouse gas emissions.

One key aspect of government support is financial incentives, often through subsidies, tax credits, grants, or low-interest loans. These mechanisms reduce the financial burden on biofuel producers and investors, making investing in sustainable aviation biofuel projects more attractive. These subsidies assist in making biofuels more competitive with conventional jet fuels, which are generally less expensive to generate, by reducing production costs.

Moreover, governments can establish clear policy frameworks and regulations that mandate or incentivize sustainable aviation biofuels. For instance, setting blending mandates, which require a certain percentage of biofuels to be mixed with conventional jet fuels, creates a stable market demand. This encourages biofuel production and adoption within the aviation industry.

Regional Analysis

Based on region, the global aviation biofuels market analysis is conducted across North America, Europe, Asia-Pacific, the Middle East and Africa, and Latin America.

Asia-pacific dominates the global market

North America is the most significant global aviation biofuels market shareholder and is anticipated to expand significantly during the forecast period. North America has emerged as the leading market for aviation biofuels, driven by factors that underscore the region's commitment to sustainability and environmental responsibility in the aviation sector. North American countries, particularly the United States and Canada, have shown strong regulatory support for sustainable aviation fuels. The Federal Aviation Administration (FAA) in the United States has actively encouraged the use of biofuels, offering incentives and guidelines for their adoption. In addition, North America boasts a large and mature aviation market with numerous major airlines and airports. This creates a substantial demand for aviation biofuels and encourages regional production and distribution.

Additionally, the region has been at the forefront of aviation biofuel research and development, with several research institutions and industry players actively advancing biofuel technologies. The emphasis on innovation has contributed to the growth of the industry. Numerous airlines operating in North America have committed to mitigating carbon emissions, linking their efforts with global climate objectives. As a result, they have increasingly integrated aviation biofuels into their operations, further boosting the market.

Europe is anticipated to expand substantially over the forecast period. Europe ranks as the second-largest market for aviation biofuels market growth, reflecting the continent's proactive approach to sustainability and efforts to curb greenhouse gas emissions in the aviation industry. Europe has implemented stringent regulations aimed at reducing carbon emissions from aviation. This has incentivized airlines to explore sustainable aviation fuels to comply with these requirements. The European Union (EU) has introduced initiatives to support developing and deploying aviation biofuels, including research funding and incentives for sustainable aviation fuel adoption. In addition, European airlines have increasingly embraced sustainable aviation fuels, and the demand for these fuels has witnessed steady growth. This demand has encouraged investments in biofuel production facilities. Similarly, European airlines have partnered with biofuel producers and suppliers to secure a consistent supply of sustainable aviation fuels. These collaborations have been essential to the growth of the market.

Segmental Analysis

The global aviation biofuels market is segmented based on type and application.

Based on type, the global aviation biofuels market is segmented into Fischer-Tropsch (FT) Biofuels and Hydroprocessed Esters and Fatty Acids (HEFA) Biofuels.

The Fischer-Tropsch (FT) biofuels segment is the most significant shareholder and is expected to grow significantly over the forecast period. FT biofuels are synthesized from syngas, a combination of carbon monoxide and hydrogen gas. This type of biofuel is among the most common in aviation and has gained popularity due to its ability to meet stringent aviation fuel standards. FT biofuels are known for their high energy density and low sulfur content, making them suitable for aircraft engines. They are typically produced through a chemical process called the Fischer-Tropsch synthesis, which converts syngas into liquid hydrocarbons. The production of FT biofuels can be costly and energy-intensive despite their widespread acceptance.

HEFA biofuels are produced from renewable feedstocks, primarily vegetable oils and animal fats. They are considered a more sustainable option compared to FT biofuels because they utilize resources that can be replenished. HEFA biofuels are typically derived through hydroprocessing, which involves hydrogenation and isomerization of triglycerides found in feedstocks. These biofuels have gained acceptance among airlines and are often used as drop-in replacements for traditional jet fuels. However, HEFA biofuels can be more expensive to produce than conventional jet fuels due to the cost of feedstocks and processing.

Based on application, the global aviation biofuel market is divided into commercial and military.

The commercial aviation segment dominates the global market and is expected to grow substantially over the forecast period. Commercial aviation stands as the primary domain where aviation biofuels find their largest and most impactful application. The prominence of commercial aviation in driving the growth of the aviation biofuels market can be attributed to several compelling factors. One of the primary concerns in the commercial aviation industry is the increasing demand to reduce its carbon emissions and mitigate the environmental impact associated with air transportation. Since aviation significantly contributes to greenhouse gas emissions, airlines proactively seek sustainable remedies to align with emission reduction goals and adhere to increasingly stringent regulations.

Recent Developments

• March 2023- Boeing unveiled a significant collaboration with the U.S. Department of Energy (DOE) and six national laboratories, marking a crucial step in the advancement and commercialization of sustainable aviation fuels (SAF) in the United States. The primary objective of this partnership is to establish a resilient and efficient supply chain for SAF within the country. Equally important, it aligns with the aviation industry's ambitious objective of attaining net-zero carbon emissions by 2050.
• April 2023- Airbus launched a new initiative called "Airbus ZEROe" to explore the potential of hydrogen as a zero-emission fuel for aviation. The initiative will involve developing and testing three hydrogen-powered aircraft concepts, which are expected to enter service by 2035. Airbus believes that hydrogen can offer a clean and efficient solution for reducing the environmental impact of aviation.
• May 2023- Lufthansa Group and Shell signed a long-term agreement to purchase sustainable aviation biofuels from Neste, a leading producer of renewable diesel and Sustainable aviation biofuels. The agreement will enable Lufthansa Group to increase its use of SAF for its flights in Germany and Europe as part of its commitment to reduce its carbon footprint and support the growth of the Aviation biofuels market.