IEA: Sustainable Fuel Growth Needs Policy And Investment

An influential report from the International Energy Agency (IEA) provides a detailed analysis of the global landscape for sustainable fuels.

The assessment prepared to support COP30 suggests that the utilisation of sustainable liquid and gaseous fuels could quadruple by 2035.

This growth is contingent on the complete implementation of existing and newly announced policies alongside substantial investment and innovation.

According to the IEA's analysis under the leadership of Executive Director Fatih Birol, the IEA is advocating for sustainable fuels to become a critical component of the future global energy mix.

The report examines the necessary pathways to accelerate the production and use of biofuels, biogas and hydrogen-based fuels across key sectors like transport, heavy industry and power generation.

Sustainable fuel production and policy

Currently, sustainable fuels account for only 1.3% of the world's total energy consumption, with liquid biofuels comprising nearly 80% of this figure.

In 2024, these fuels contributed to a reduction in global oil demand by approximately 2.5 million barrels per day and decreased the reliance on imported transport fuels for some nations by 5-15%.

The report notes that "Between 2010 and 2024, global demand for sustainable liquid and gaseous fuels doubled".

However, the current trajectory points towards gradual progress rather than the rapid acceleration needed to meet climate targets.

The IEA presents an accelerated case scenario where planned policies are fully legislated, market barriers are dismantled and production capacity is expanded. Under these conditions, sustainable fuel use could nearly double to 13 exajoules by 2030 and increase to 28 exajoules by 2035.

The transport sector would continue to be the main source of demand, making up half of sustainable fuel consumption in 2035.

This would cover 10% of road transport demand, 15% of aviation and 35% of shipping needs.

The private sector also recognises the importance of government backing.

Alice Henry, Co-Founder and CEO of RegenRate, says: "We need policy on our side.

"We need rules that reward farmers for doing the right thing and certification that’s fast, fair and rooted in reality".

Cost challenges and investment needs

A major hurdle is that sustainable fuels are currently more expensive than their fossil fuel counterparts.

For instance, electrolytic hydrogen is about 3.8 times more costly and biomethanol is 3.7 times the price of conventional fuels.

Despite these higher costs, the impact on consumer prices is expected to be modest. A 15% blend of sustainable aviation fuel could raise ticket prices by 5-7% while steel produced with low-emissions hydrogen would add less than 1% to the price of an electric vehicle.

The report stresses that "policies that address only one dimension risk leaving critical gaps," calling for integrated frameworks that combine long-term demand signals and support for new technologies.

To achieve this accelerated deployment, cumulative investments from 2024 to 2035 could reach US$1.5tn. This investment would also fuel job growth, with direct employment projected to almost triple to around two million jobs by 2035.

Liquid and gaseous biofuels would account for two-thirds of this increase. Data shows investment in sustainable fuels grew by 20% between 2023 and 2024, spurred by policies in the United States and Brazil for liquid biofuels and the European Union's REPowerEU Plan for biogas.

Technology diversification and regional focus

The composition of the sustainable fuel portfolio is set to evolve. While liquid and gaseous biofuels are expected to retain a two-thirds share in 2035, low-emissions hydrogen and its derivatives are projected to grow from just 1% today to one-third of total use.

This change highlights a substantial increase in funding for hydrogen-based solutions.

"With US$1.5tn in sustainable fuel investments expected through 2035 and hydrogen-based fuels accounting for nearly half, renewable methanol is positioned as a vital solution for shipping chemicals and beyond," explains Antonio Villaluenga, Vice President of US Project Development at Carbon Recycling International.

It is important to recognise that investment strategies will differ based on geography and resource availability. The report suggests that "National shares, mixes and volumes would still vary widely depending on regional conditions".

The IEA concludes that no single fuel or feedstock can satisfy global demand alone. Instead, a unified effort is required to drive progress across multiple fronts, including expanding established markets, developing new ones and commercialising emerging technologies.