Next Generation Biofuels Market – Global Industry Size, Share, Trends, Opportunity, and Forecast Segmented by Raw Material (Jatropha, Lignocellulose, Algae, and Other Raw Materials), Biofuel Type (Cellulosic Biofuel, Biodiesel, Biogas, Biobutanol, and Others), Technology (Biochemical and Thermochemical), By Region, Competition 2021-2031F

Forecast Period	2027-2031
Market Size (2025)	USD 15.48 Billion
CAGR (2026-2031)	22.47%
Fastest Growing Segment	Biodiesel
Largest Market	North America
Market Size (2031)	USD 52.23 Billion

Market Overview

The Global Next Generation Biofuels Market will grow from USD 15.48 Billion in 2025 to USD 52.23 Billion by 2031 at a 22.47% CAGR. Next generation biofuels are defined as liquid or gaseous transportation fuels derived from non-food biomass, including lignocellulosic feedstocks, agricultural residues, algae, and industrial waste. The global market is primarily supported by stringent government mandates aimed at decarbonizing hard-to-abate sectors such as aviation and marine transport, alongside the urgent necessity to enhance energy security by diversifying fuel sources away from imported fossil fuels. Furthermore, the growing emphasis on circular economy principles, which valorizes waste streams for energy production, serves as a critical driver for the adoption of these advanced fuels.

However, the market faces significant impediments related to the high cost of production, which is largely driven by the complexities of feedstock mobilization and the capital-intensive nature of advanced conversion technologies. This financial barrier limits the rapid scalability required to meet global demand. According to the World Bioenergy Association, in 2023, the United States led the global production of renewable diesel with a volume of 11 billion liters, highlighting the concentration of advanced manufacturing capacity in regions with robust policy support.

Key Market Drivers

The implementation of stringent environmental regulations and decarbonization mandates serves as the foundational catalyst for the Global Next Generation Biofuels Market. Governments worldwide are increasingly enforcing low-carbon fuel standards and renewable energy directives that necessitate a reduction in the carbon intensity of transportation fuels. These regulatory frameworks compel fuel suppliers to blend higher percentages of advanced biofuels, creating a guaranteed market for non-food biomass and waste-derived fuels. This policy pressure effectively de-risks investment in complex production facilities by ensuring long-term demand stability. According to the International Energy Agency, January 2024, in the 'Renewables 2023' report, global biofuel demand is forecast to expand by 38 billion liters over the 2023-2028 period, a growth trajectory heavily underpinned by these strengthening policy regimes in major economies.

Simultaneously, the escalating global demand for Sustainable Aviation Fuel (SAF) is rapidly accelerating the commercialization of advanced production pathways. As the aviation industry faces limited alternatives for decarbonization compared to the road transport sector, airlines are aggressively pursuing drop-in fuel solutions derived from renewable sources to meet net-zero commitments. This urgency has transformed SAF from a niche product into a critical component of the energy transition, driving significant capital toward facilities capable of processing agricultural residues and waste oils. According to the International Air Transport Association, June 2024, in the 'SAF Production 2024' release, SAF production is projected to triple in 2024 to reach 1.9 billion liters, reflecting the intense focus on this segment. This specific sectoral momentum contributes to the broader industry growth where, according to the Energy Institute, in 2024, global biofuels production increased by 8% during the previous year to reach a new record volume.

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Key Market Challenges

The high cost of production stands as a formidable barrier hampering the growth of the Global Next Generation Biofuels Market. This financial impediment arises from the capital-intensive requirements of advanced bioprocessing technologies and the logistical complexity of mobilizing non-food feedstocks, such as agricultural residues and industrial waste. Unlike established first-generation fuels, next-generation variants demand expensive pre-treatment and conversion systems to turn recalcitrant biomass into usable energy, significantly raising operational expenditures. These elevated costs dampen investor confidence and render the final product less competitive against fossil fuels, thereby restricting the industry's ability to scale production capacity to the levels required for widespread commercial adoption.

The impact of these financial and technical constraints is evident in the stark volume disparity between mature biofuel categories and advanced segments. According to the World Bioenergy Association, in 2024, global ethanol production reached 118 billion liters, whereas the production capacity for advanced Sustainable Aviation Fuel was projected to reach only 30,000 barrels per day. This data illustrates that while the broader bioenergy sector is expanding, the high-cost next-generation segment remains unable to scale rapidly, effectively limiting its contribution to the global energy mix despite the urgent demand for decarbonization.

Key Market Trends

Strategic partnerships between oil majors and biotechnology firms are fundamentally reshaping the supply dynamics of the Global Next Generation Biofuels Market. Established energy corporations are increasingly bypassing long R&D cycles by entering joint ventures with specialized biotech entities to secure access to advanced processing technologies, such as microalgae cultivation and enzymatic hydrolysis. This collaborative model allows legacy producers to rapidly deploy capital into de-risked infrastructure, ensuring a steady supply of low-carbon fuels like Sustainable Aviation Fuel (SAF) and renewable diesel to meet future mandates. According to Eni, July 2024, in the 'PETRONAS, Enilive and Euglena reach Final Investment Decision' press release, the partners committed to developing a new biorefinery in Malaysia with a planned capacity to process 650,000 tonnes of raw materials per year to serve the growing Asian market.

Simultaneously, the rise in marine bio-bunkering and high-blend biofuel adoption is creating a substantial new demand center distinct from the aviation sector. As shipping operators face tighter emissions regulations, they are aggressively transitioning from heavy fuel oil to drop-in biofuel blends, driving global ports to expand infrastructure for these sustainable alternatives. This trend effectively validates next-generation biofuels as a commercially viable solution for decarbonizing heavy shipping, evidenced by exponential volume growth in key logistics hubs. According to the Maritime and Port Authority of Singapore, January 2024, in the '2023 Maritime Performance' release, bunker sales of biofuel blends in the port reached 520,000 tonnes in 2023, a volume that effectively tripled compared to the previous year.

Segmental Insights

Based on recent industry analysis, the Biodiesel segment is projected to register the fastest growth within the Global Next Generation Biofuels Market. This expansion is primarily driven by the escalating demand for low-carbon transportation alternatives and the strategic shift toward utilizing non-food feedstocks, such as waste cooking oils and animal residues. Regulatory support from frameworks like the United States' Renewable Fuel Standard and the European Union’s Renewable Energy Directive mandates higher blending obligations, significantly boosting market demand. Additionally, the ability of advanced biodiesel to integrate with existing infrastructure facilitates its rapid adoption across the heavy-duty transport sector.

Regional Insights

North America maintains a dominant position in the global next generation biofuels market, driven by robust policy frameworks and high demand for low-carbon transportation solutions. The United States Environmental Protection Agency plays a critical role through the implementation of the Renewable Fuel Standard program, which mandates the integration of advanced renewable fuels into the national supply chain. Furthermore, the region benefits from established infrastructure and consistent investment in production capacities to meet decarbonization targets. This regulatory stability, combined with a strong focus on reducing emissions in the aviation and heavy transport sectors, secures the region's leadership.

Recent Developments

• In December 2025, Idemitsu Kosan Co., Ltd. achieved a breakthrough in the Global Next Generation Biofuels Market by commencing the commercial supply of bio-blended marine fuel to oceangoing vessels in Japan. Established in collaboration with Kanematsu Corporation, this initiative makes the company the first Japanese oil refiner to provide a certified supply chain for deep-sea biofuel bunkering. The fuel, a blend of conventional heavy oil and fatty acid methyl ester (FAME) derived from used cooking oil, offers a significant reduction in greenhouse gas emissions, establishing a critical infrastructure for lower-carbon maritime logistics in the Asia-Pacific region.
• In June 2024, BP announced a major strategic consolidation in the Global Next Generation Biofuels Market by agreeing to acquire the remaining 50% interest in its Brazilian joint venture, BP Bunge Bioenergia. This acquisition, valued at approximately $1.4 billion, allows the company to take full ownership of a scalable bioenergy platform with significant potential in second-generation ethanol, sustainable aviation fuel (SAF), and biogas. By integrating these assets, the energy giant aims to streamline its operations and focus its capital on high-growth low-carbon value chains, optimizing its portfolio for future market demands.
• In February 2024, TotalEnergies and Airbus solidified their commitment to the Global Next Generation Biofuels Market by signing a strategic partnership agreement. Under this collaboration, the energy major aims to supply the aerospace manufacturer with sustainable aviation fuel (SAF) for more than half of its European needs. The partners also agreed to launch a joint research and innovation program focused on developing 100% sustainable fuels tailored to current and future aircraft designs. This alliance highlights the industry's shift toward long-term supply security and technological advancement in renewable aviation energy.
• In January 2024, LanzaJet marked a significant milestone in the Global Next Generation Biofuels Market with the grand opening of Freedom Pines Fuels in Soperton, Georgia. This facility represents the world's first commercial-scale ethanol-to-sustainable aviation fuel (SAF) refinery. The plant utilizes proprietary technology to convert low-carbon ethanol from various sustainable feedstocks, such as agricultural waste, into drop-in jet fuel and renewable diesel. With a production capacity of 10 million gallons per year, this launch underscores the scalability of alcohol-to-jet technology as a critical and viable pathway for decarbonizing the global aviation sector.

Key Market Players

• Abengoa Bioenergy
• Chemtex Group
• Bankchak Petroleum
• Clariant Produkte GmbH
• DuPont Industrial Biosciences
• Fujian Zhongde Energy Co. Ltd
• INEOS Bio
• KiOR Inc.
• Sundrop Fuels Inc.

By Region

North America Europe Asia Pacific South America Middle East & Africa

Report Scope:

In this report, the Global Next Generation Biofuels Market has been segmented into the following categories, in addition to the industry trends which have also been detailed below:

• Next Generation Biofuels Market, By Region:

• North America
• United States
• Canada
• Mexico
• Europe
• France
• United Kingdom
• Italy
• Germany
• Spain
• Asia Pacific
• China
• India
• Japan
• Australia
• South Korea
• South America
• Brazil
• Argentina
• Colombia
• Middle East & Africa
• South Africa
• Saudi Arabia
• UAE