Acceleration on biofuels: how waste becomes a driver of the economy

The world is entering a phase where biofuels (i.e., fuels from plant materials, agricultural waste, and food processing) are no longer a niche topic for environmental conferences or for individual companies seeking to diversify their product portfolio in favor of low-carbon solutions, but become part of the real fuel economy. According to the OECD, global consumption of liquid biofuels in 2025 exceeded 210 million tons – about 6% of global consumption of motor fuels. At the same time, the market itself is growing: according to the estimates of the analytical agency Global Market Insights, the volume of the global biofuel market exceeded $ 160.5 billion in 2025, and the company’s analysts expect it to grow at an average annual rate of 10.3% between 2026 and 2035. If we talk about the forecasts of growth in demand for motor biofuels in general, the International Energy Agency (IEA) in its report Renewables 2025 lays in the baseline scenario the demand at the level of about 240 billion liters in 2030, and in the accelerated scenario – over 310 billion liters.

The development of the biofuel industry in the world today is driven by two factors. The first is national mandates for the mandatory share of biocomponent in fuel, which are in place in an increasing number of countries. Indonesia, for example, has shifted from a B40 mandate to a B50 mandate since July 2026 - 50% of palm biodiesel in diesel, and it is the world's largest biodiesel mandate in absolute volumes. The decision was part of President Prabowo Subianto’s strategy to strengthen the country’s energy independence. The EU, in turn, through RED II and III, ReFuelEU Aviation and FuelEU Maritime regulations, sets growing targets for the share of renewable fuels in transport. These are not isolated pilot programs, but a stable regulatory trend covering countries with very different economic structures.

The second factor is mandatory international carbon regulations in aviation. CORSIA, the global scheme for offsetting and reducing greenhouse gas emissions, provides one of the compliance mechanisms – the use of certified sustainable aviation fuel (SAF). As part of its long-term goal of net zero emissions by 2050, the International Civil Aviation Organization (ICAO) explicitly states that SAF, along with other cleaner energy, is the measure that is expected to contribute the most to reducing international aviation’s CO2 emissions by 2050.

To these factors is added the volatility of the global oil market. It particularly hits countries that do not have their own significant hydrocarbon resources, and pushes them to diversify the energy balance. Countries with a developed agricultural sector naturally consider biofuels as one of the tools for such diversification. The raw material base for it is formed by agricultural and related waste, which now becomes a valuable resource.

Russia has a strong starting position in this new market configuration. This is a huge amount of biomass generation suitable for the production of biofuels, already established logistics routes and proximity to key markets for such products. The question is whether it will be possible to convert these advantages into real production before competitors do.

For Russia, biofuel is not a priority, primarily due to the low cost of hydrocarbon fuel in the domestic market. This is the same factor that forms Russia’s competitive advantage in the foreign markets of biofuels, the cost of production of which depends a lot on the prices of “traditional” fuel. But the same situation in the domestic market, on the contrary, reduces the incentive to transition. However, the situation is beginning to change. The Bioeconomy Development Strategy adopted in October envisages a gradual increase in the share of biofuels, including aviation, in the sectoral balance. In addition, domestic companies will need biofuels to comply with international carbon regulations such as CORSIA (in aviation) and MARPOL (in shipping). According to the existing unofficial forecasts of the industry, the expected demand of Russian companies for biofuels will be about 2.5 million tons by 2030 with the prospect of growth over 8 million tons by 2040.

There is currently one full-cycle biofuel production project in Russia. As part of the project, Gazprom Neft has been producing bio-vessel fuel since 2023, which significantly reduces greenhouse gas emissions during sea transportation. The partners of the project are “Tasty and dot” (fat-oil waste generator) and “Ecovey” (fat-oil waste collector and processor, biocomponent manufacturer). At the moment, 45 thousand tons of such fuel have already been produced. In addition, Gazprom Neft in 2025 produced a test batch of sustainable aviation fuel (SAF). The product based on recycled frying oil has been successfully tested on a bench jet engine.

The most popular and market-ready type of raw materials in Russia, suitable for the production of biofuels. Fat-oil waste, primarily waste vegetable oil (ORM), which meets international sustainability standards.

The global market for this raw material is already showing a structural imbalance: according to forecasts, its global deficit is expected from 2028-2029. For a country with a developed food industry and catering network, that is, a constant source of OPM generation, this is a window of opportunity that should be used now, and not when the deficit is fully realized.

At the same time, OPM is not the only and largest source of biomass in the country. According to MIPT, in general, agriculture and forestry generate about 150-200 million tons of waste per year, of which less than 30% are recycled with economic or social benefits. In Russia, about 20 million tons of food waste are generated annually, and up to 90% of this volume is sent for burial or incineration, which not only misses economic benefits, but also creates a real environmental burden. This waste is a potential resource that is still very limited in the country’s bioeconomy.

To replicate and scale the industry, Russian companies need not only confirmed demand for renewable fuels, but also guaranteed access to raw materials for the long term. Without it, investment in new capacity will not pay off.

To preserve a valuable raw material base inside Russia and give impetus to the development of own processing, will help the introduction of norms of state regulation of exports of ORM, by analogy with the successful practices of a number of countries. We can talk about a ban on the export of OPMs or the introduction of flexible export duties until the saturation of the domestic market. It is equally important to unite the efforts of all participants in the chain – from waste generators (food industry, HoReCa) to collectors, processors and manufacturers of final products. Today, the market is fragmented, and this opens the prospect of consolidation, which will help increase the price competitiveness of domestic processing and strengthen the sector, with biofuels already officially enshrined as part of the state agenda. In 2026, the national project “Technological support of bioeconomy” was launched in Russia, one of the key areas of which is the growth of production based on the processing of plant and animal waste. Its support measures, such as grants, as well as the creation of engineering development centers based on universities and scientific organizations, will help market players develop new areas of the industry.

The future of the Russian biofuel industry is determined primarily by the guarantee of raw materials safety. Before making investment decisions on the construction of processing facilities, it is important to realistically and honestly assess the availability of raw materials, the potential for involving biomass in a particular region and by specific species, taking into account the actual cost of logistics for collecting and preparing OPMs, competing uses and volumes that can actually be contracted for years to come.