Global Second Generation Biofuels Market Research Report: Forecast (2026-2032)

Global Second-Generation Biofuels Market Size: Forecast (2026- 2032)

The Global Second Generation Biofuels Market size is valued at around USD 10.92 billion in 2025 and is projected to reach USD 19.38 billion by 2032. Along with this, the market is estimated to grow at a CAGR of around 8.54% during the forecast period, i.e., 2026-32.

Global Second-Generation Biofuels Market Outlook:

The Global Second-Generation Biofuels Market is witnessing steady growth as countries intensify efforts to replace fossil fuels with cleaner and more sustainable alternatives. These advanced fuels, derived from non-food feedstocks such as lignocellulosic biomass, agricultural residues, and waste oils, are gaining traction due to their lower carbon footprint and compatibility with existing fuel infrastructure. For instance, the International Energy Agency (IEA) reported that renewable fuels contributed around 22 exajoules (EJ) to global energy demand in 2023 and are projected to increase to nearly 26 EJ by 2030, reflecting a strong policy-driven expansion across India, China, Brazil, the U.S., and Europe.

Moreover, several global producers are actively scaling up capacity to meet this rising demand. For reference, Neste Corporation currently operates over 5.5 million tons per year of renewable fuel production capacity and aims to reach 6.8 million tons by 2027, primarily using waste and residue-based inputs. Additionally, LanzaJet’s Freedom Pines Fuels facility in Georgia, U.S., has begun producing sustainable aviation fuel (SAF) from waste-derived ethanol, marking a crucial milestone in commercial-scale deployment. Similarly, the European Union’s cellulosic ethanol capacity reached about 125 million liters in 2023, indicating gradual but tangible progress. Collectively, these advancements signal that second-generation biofuels are becoming a cornerstone of the global clean energy transition.

Global Second-Generation Biofuels Market Recent Developments:

• October 2024: The U.S. Department of Energy announced conditional loan guarantees of nearly USD3 billion for two major SAF, bio-fuel projects in the U.S., reflecting large-scale finance directed at advanced biofuels.
• July 2024: AM Green announced plans to invest USD1 billion in 2G biofuels by acquiring a 50% stake in Assam Bio Refinery Pvt. Ltd (India) and purchasing Finnish biotechnology firm Chempolis Oy.
• July 2025: Natural State Renewables entered a strategic partnership with Axens to produce carbon-negative sustainable aviation fuel (SAF) from forest biomass residues.

Global Second-Generation Biofuels Market Scope:

Global Second-Generation Biofuels Market Drivers:

Government Policies Promoting Renewable Energy Adoption

Governments worldwide are implementing strong policy measures to accelerate the transition toward cleaner energy sources. In 2023, the U.S. Environmental Protection Agency (EPA) expanded the Renewable Fuel Standard (RFS) targets, mandating 0.84 billion renewable identification numbers (RINs) of cellulosic biofuel in 2023, 1.09 billion RINs in 2024, and 1.38 billion RINs in 2025, aiming to boost advanced biofuel use and reduce greenhouse gas emissions across the U.S. transportation sector. Similarly, in 2024, the European Union’s Renewable Energy Directive (RED III) came into effect, setting a target of approximately 42.5% renewable energy consumption by 2030, with a specific emphasis on second-generation and advanced biofuels.

Moreover, the emerging economies such as India and Brazil have also launched national biofuel roadmaps in 2024–2025, focusing on waste-to-fuel projects and ethanol blending programs to reduce dependence on imported petroleum. For instance, in Brazil, the “Fuel of the Future Law” enacted in 2024 allows ethanol blends in gasoline to move from 22% to 35%. These coordinated policy actions are encouraging investments in advanced bio-refineries, improving market stability, and driving the long-term growth of the global second-generation biofuels industry.

Rising Corporate Sustainability Commitments and Green Investments

The growing corporate focus on decarbonization is another major driver. For reference, in 2025, several multinational corporations, including BP, TotalEnergies, and Chevron, pledged to increase their investment portfolios in low-carbon fuels by over 30% compared to 2022 levels. Additionally, United Airlines and Lufthansa are entering long-term supply agreements for sustainable aviation fuels (SAF), ensuring stable demand for second-generation biofuels.

Moreover, in March 2025, Moeve, in collaboration with Exolum, announced a major investment of approximately USD325 million to develop new biofuel infrastructure at the Port of Huelva, Spain, which is planning to supply 500,000 tons of advanced biofuels annually by 2026, aligned with Spain’s national strategy to cut transport emissions and meet EU renewable energy targets. These commitments from major energy producers and end-users highlight a unified global effort to accelerate the transition toward cleaner energy systems. The rising volume of corporate investments in biofuel infrastructure and supply chain partnerships is expected to significantly enhance production capacity and promote widespread adoption of advanced, low-carbon fuels worldwide.

Global Second-Generation Biofuels Market Trends:

Technological Advancements & Expanding Production Capacity

Ongoing innovation in conversion technologies continues to play a vital role in market expansion. Between 2022 and 2025, several global energy companies introduced pilot and commercial-scale facilities for cellulosic ethanol and renewable diesel production. For instance, LanzaTech in partnership with TotalEnergies and Airbus (2023), made efforts to produce sustainable aviation fuel (SAF) using captured carbon emissions, while Shell launched a large-scale biofuels plant in the Netherlands in 2024 to convert agricultural residues into low-carbon fuels.

Advancements in enzyme engineering, biomass pretreatment, and fermentation efficiency have reduced production costs by up to 20–25% since 2022. Moreover, digital monitoring, automation, and smart logistics integration in refineries are improving process reliability and reducing waste. These developments collectively enhance scalability, boost global supply capacity, and strengthen the commercial viability of second-generation biofuels.

Integration of Digital and AI-Driven Process Optimization

Since 2022, biofuel producers around the world have been adopting artificial intelligence (AI), automation, and digital twin technologies to make production more efficient and sustainable. These digital tools allow continuous monitoring of biofuel plants, helping operators track energy use, temperature, and feedstock performance in real time. For instance, on June 17, 2025, Datavault AI announced that it will deploy an AI-driven high-performance computing system and digital twin modeling to optimize canola (Brassica napus) biofuel crop feedstock, refining metabolic pathways to improve fatty acid metabolism for biofuel use. By using AI-based analytics, producers can quickly adjust fermentation and conversion processes to achieve higher yields and reduce energy waste.

This leads to better fuel quality, lower production costs, and reduced carbon emissions. Companies such as Shell, Neste, and BP are already using smart digital platforms to optimize feedstock selection and improve process reliability. The growing use of digital technologies is transforming second-generation biofuel production into a more data-driven and automated industry, supporting the global transition toward cleaner and smarter energy systems.

Global Second-Generation Biofuels Market Challenges:

High Production & Infrastructure Costs

One of the major challenges facing the Global Second-Generation Biofuels Market is the high capital investment required for establishing and operating advanced biorefineries. The conversion of lignocellulosic biomass, agricultural residues, and waste materials into biofuels demands complex processing technologies such as enzymatic hydrolysis and thermochemical conversion, which involve costly equipment and specialized expertise. Setting up these facilities requires significant funding for feedstock preparation, storage, and process optimization. For instance, the capital costs for second-generation ethanol production plants range between USD2,500 and USD3,500 per ton of biofuel.

Moreover, the maintenance and scaling of these plants further increase operational expenses, especially in regions with limited biofuel infrastructure. Many small and mid-sized producers struggle to compete with established energy companies due to these financial barriers. The lack of consistent feedstock supply chains and the high cost of advanced enzymes and catalysts also limit large-scale commercialization.

Global Second-Generation Biofuels Market (2026-32) Segmentation Analysis:

The Global Second-Generation Biofuels Market Report and Forecast 2026-2032 offers a detailed analysis of the market based on the following segments:

Based on Feedstock Type

• Lignocellulosic biomass
• Agricultural residues
• Forest residues
• Municipal Solid Waste (MSW)
• Algae
• Others

Lignocellulosic biomass holds the largest share in the second-generation biofuels market due to its wide availability, low cost, and high energy potential. It includes agricultural residues, wood waste, and dedicated energy crops such as switchgrass and miscanthus. These feedstocks are abundant, renewable, and non-edible, making them ideal for sustainable biofuel production without competing with the food supply. Lignocellulosic materials contain cellulose, hemicellulose, and lignin, which can be converted into bioethanol, biodiesel, or advanced fuels using biochemical and thermochemical processes.

Governments and research institutions across North America and Europe are investing heavily in improving conversion technologies to enhance yield and reduce costs. The growing demand for cleaner fuels and stricter emission norms further supports the expansion of this segment. With continuous technological advancements and strong policy support, lignocellulosic biomass is expected to remain the dominant feedstock in second-generation biofuel production through 2032.

Based on Biofuel Type

• Cellulosic Ethanol
• Biodiesel / Renewable Diesel
• Bio-butanol
• Bio-DME
• Sustainable Aviation Fuel (SAF)
• Others

Biodiesel, also known as renewable diesel, is the leading segment in the global second-generation biofuels industry due to its versatility, efficiency, and compatibility with existing diesel engines. It is primarily produced from waste oils, animal fats, and non-food biomass, making it a cleaner alternative to traditional fossil fuels. The growing focus on reducing greenhouse gas emissions and meeting renewable energy targets has accelerated its adoption, especially in the transportation and industrial sectors. Countries across North America and Europe have implemented blending mandates and low-carbon fuel standards that strongly favor biodiesel use.

Additionally, continuous advancements in hydrotreated vegetable oil (HVO) and waste-to-fuel technologies have improved fuel quality and production efficiency. Major energy companies such as BP, Shell, and TotalEnergies are expanding renewable diesel facilities to meet rising global demand. These factors collectively reinforce biodiesel’s dominant position in the second-generation biofuels market.

Leading Manufacturers of the Global Second-Generation Biofuels Market:

·Abengoa S.A. (Spain)

Abengoa S.A. is a prominent global player in renewable energy and biofuels, specializing in second-generation ethanol production. The company focuses on converting agricultural residues and lignocellulosic biomass into sustainable fuels through advanced biochemical and thermochemical processes. Its continuous investment in R&D and proprietary enzyme technologies has strengthened its position in the renewable energy transition.

·DuPont de Nemours, Inc. (US)

DuPont is recognized for its innovative contributions to bio-based energy solutions. The company’s research in enzyme engineering and biomass conversion technologies supports the efficient production of advanced biofuels. Through strategic collaborations and strong technological capabilities, DuPont continues to drive innovation in sustainable fuel development and low-carbon energy applications.

·Novozymes A/S (Denmark)

Novozymes is a world leader in industrial biotechnology and a key supplier of enzymes for biofuel production. Its specialized enzyme solutions enhance the efficiency of biomass conversion, reduce processing costs, and improve overall fuel yields. The company’s commitment to sustainability and continuous innovation makes it a cornerstone of the second-generation biofuels ecosystem.

POET, LLC, Renewable Energy Group, Gevo Inc., Enerkem Inc., Amyris, Inc., Shell, LanzaTech, TotalEnergies, Clariant AG, Cosan, Green Plains Renewable Energy, and Others are the key players in the Global Second Generation Biofuels Industry.

Global Second-Generation Biofuels (2026-32): Regional Projection

North America leads the second-generation biofuels market due to strong government support, advanced technology, and abundant feedstock availability. The United States and Canada have well-established renewable energy policies such as the Renewable Fuel Standard (RFS) and Low-Carbon Fuel Standards (LCFS), which promote the use of advanced biofuels made from agricultural residues and waste materials. For reference, in Canada, the federal government pledged USD268 million in financial incentives and regulatory reform to bolster domestic biofuel production and refinement of biofuels-friendly policy. The region also benefits from a mature infrastructure, large-scale biorefineries, and strong research collaborations between industry and universities.

Companies like POET, Gevo, and Enerkem are expanding commercial production of cellulosic ethanol and renewable diesel, strengthening the region’s dominance. For instance, in February 2025, USA BioEnergy announced a USD2.8 billion investments to build a second-generation fuel refinery in Bon Wier, Texas (USA) that will convert woody biomass into sustainable aviation fuel (SAF). Similarly, in September 2024, Woodland Biofuels announced it will invest USD1.35 billion to establish a large-scale renewable biofuels plant (plus green hydrogen facility) at the Port of South Louisiana, USA. Additionally, North America’s vast agricultural base provides a steady supply of feedstocks such as corn stover and forestry residues. With continuous innovation, high investment inflows, and clear decarbonization targets, North America is expected to maintain its leadership in the second-generation biofuels market.

Gain a Competitive Edge with Our Global Second-Generation Biofuels Market Report

• Global Second Generation Biofuels Market Report by MarkNtel Advisors provides a detailed & thorough analysis of market size & share, growth rate, competitive landscape, and key players. This comprehensive analysis helps businesses gain a holistic understanding of the market dynamics & make informed decisions.
• This report also highlights current market trends & future projections, allowing businesses to identify emerging opportunities & potential challenges. By understanding market forecasts, companies can align their strategies & stay ahead of the competition.
• Global Second Generation Biofuels Market Report aids in assessing & mitigating risks associated with entering or operating in the market. By understanding market dynamics, regulatory frameworks, and potential challenges, businesses can develop strategies to minimize risks & optimize their operations.

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