Liquid Biofuels for Transportation: Lessons of the Last Two Decades for the Next Two

Abstract

Biofuel mandates and subsidies in several countries led to a 5-fold global growth in ethanol and biodiesel from edible crops in the last two and a half decades. The impacts of this growth for the economy and environment are uncertain and vary with feedstock, production practices, time horizon for impacts, policy parameters, and assumptions inherent to lifecycle assessments and economic modeling. In this context, we offer a perspective on the path forward given that many of the reasons that motivated existing biofuel policies remain relevant. Given advances in batteries and to a lesser extent in green hydrogen, biofuels appear more effective in reducing emissions in applications such as aviation and ocean freight. However, overcoming the lingering technological and economic barriers facing advanced biofuels will require better policies. Both economic intuition and empirical evidence suggest that more targeted approaches can better accelerate innovation and commercialization from waste biomass and dedicated energy crops. Lifecycle-emissions-based performance standards (such as California’s Low Carbon Fuel Standard), incentives for emissions reductions and ecosystem services from farming, and policies that minimize regulatory uncertainties (such as relaxation or waiver of annual targets) may lead to technological breakthroughs and adoption of practices that make biofuels more sustainable.

Introduction

During the first decade of this millennium, national and subnational governments began introducing policies to promote ethanol and biodiesel as renewable alternatives to gasoline and diesel, respectively. These policies aimed to simultaneously address the burden of costly oil imports, rural economic stagnation, and greenhouse gas (GHG) emissions. − At the time, ethanol and biodiesel derived largely from food crops such as corn (or maize), sugar cane, soybeans, rapeseed (or canola), and palm oil (collectively first-generation (1G) biofuels), appeared to be the least cost, renewable, domestic alternative.

By the mid-2000s, however, concerns about the unintended consequences of such policies, mainly food price inflation and ecosystem degradation caused by agricultural expansion into noncroplands, emerged. − The embodied fossil energy in biofuels and the poor energy return on energy invested raised questions about the scalability of biofuels. In response, the so-called second-generation (2G) biofuels derived from waste and cellulosic biomass that are not suitable for direct human consumption began to receive attention. Cellulosic biomass includes agricultural residues, forestry residues, and dedicated energy crops such as switchgrass, miscanthus, and shrub willow, which can be cultivated on marginal lands with reduced water, energy, and chemical inputs relative to edible crops. ,, Although biofuels from waste oils, fats and greases from cooking and other industrial processes now account for 14% of global biofuels, , cellulosic biofuels from other feedstock are technologically immature. Algae is another feedstock with high productivity per unit land that is sometimes referred to as third-generation (3G) biofuel. The different pathways to biofuels and their technology readiness levels is shown in Figure .

1.

Biofuel conversion pathways from feedstock to different fuels, coproduct and their technology readiness level (TRL); orange arrows represent drop-in fuels; blue arrows signify blendable fuels. Higher TRL denotes more technically mature with level 9 denoting ready for commercial use or already commercial. Abbreviations: BEECSbioenergy with carbon capture and storage, FTFischer–Tropsch, FFAfree fatty acids, HEFAhydro processed esters and fatty acids, RNGrenewable natural gas, SPKstraight paraffinic kerosene (jet fuel). See SI Table 1 for review of literature in terms of feedstock, technology, TRL and coproducts for 1G/2G and advanced fuel pathways.

Looking ahead, the maturation of battery electric vehicles (BEVs) coupled with the nearing saturation of capacity to blend biofuels without modification to internal combustion engines especially in the passenger vehicle segment, which accounts for most of biofuel consumption today present challenges to increasing the share of biofuels as ethanol or biodiesel. Additionally,the declining cost of renewable electricity from solar and wind energy is enabling green hydrogen to become more competitive as a fuel for freight transport. There is also a growing literature on conversion of existing ethanol into aviation fuel or diesel substitutes. , Such developments necessitate an updated perspective on new uses that maximize the benefits of biofuels, and policies to address the barriers to realizing those benefits, which is the aim of this work.

The rest of the discussion proceeds as follows: We first provide an historical perspective on development of biofuels followed by a summary of the current understanding of their environmental and socio-economic impacts. Following this, we provide our perspective on the path forward, focusing on needed advances in feedstock production and conversion with a focus on applications for sustainable aviation fuels (SAF) and marine biofuels. We then summarize the various categories of barriers to biofuels and innovative policies to overcome them before concluding.

Brief Overview of Historical Developments and Current State of Biofuels

Ethanol and biodiesel have been in commercial use since the early 20th century. Rudolph Diesel tested his first diesel engine with peanut oil while ethanol-gasoline blends were common in the United States and Europe during the 1940s. The low cost of petroleum-based fuels during most of the 20th century meant biofuel use kept declining. However, periods of high oil prices (such as during the twin oil price shocks of 1970s) spurred public interest in biofuels, which subsided as oil prices fell. An exception was Brazil that has sustained strong policies supporting ethanol since the 1970s and is today the least cost producer of ethanol globally. By the late 1990s, rising crude oil prices, the need for replacing methyl tertiary butyl ether (MTBE) (a toxic and polluting chemical added as an oxygen enhancer that is blended with petrol to reduce engine knocking), and growing concerns over energy security rekindled interest in biofuels among oil importing nations worldwide.

In the history of biofuels, the last two decades have seen the strongest and sustained support for biofuels globally. Currently, over sixty-five countries have national biofuel regulations with annual targets for biofuel use which in many instances are also supported by financial subsidies (e.g., tax rebates for capital investment or fuel production). , Between 2002 and 2022 global biofuel production grew more than 5-fold from 34 to 178 billion liters per year (BLPY) with over 60% of current consumption occurring in high and middle-income countries. Ethanol and biodiesel account for about 67% and 26% by volume of all biofuels, respectively, while the remaining 7% is consumed as hydrotreated vegetable oil (HVO), also referred to as renewable diesel or biomass-based diesel. Currently maize (or corn) and sugar cane account for 60% and 25% of ethanol production respectively (the remainder is from molasses, wheat, cassava and sugar beets). Edible oils account for 75% of biodiesel with palm, soybean and rapeseed accounting for 30%, 25% and 20%, respectively, while used cooking oils and animal fats account for the rest. On an energy-basis, liquid biofuels represent less than 10% of global bioenergy, and less than 5% of global oil use for road transportation. To put bioenergy itself in perspective, both traditional (for household cooking and heating) and modern (electricity and biofuels) combined, accounts for about 8% of global primary energy use, and 33% of global renewable energy use (large-hydro included).

Recent years have seen the commercialization of biofuels produced from a diverse array of feedstocks and conversion technologies. In California, for example, 25 fuel types derived from 13 crops, 23 categories of biomass waste, and over 1000 unique carbon intensity (CI) values have been approved under the Low Carbon Fuel Standard (LCFS) regulation. During this period, the average environmental footprint of major biofuel types has declined substantially. In the United States, increased efficiency in corn ethanol production resulted in a 24% reduction in energy useattributable to combined heat and power, improved enzymes, and corn-oil recoverywhile ethanol yield increased by 6.5%. These improvements collectively reduced the lifecycle CI of ethanol by 23% (from 58 to 45 gCO2e/MJ) between 2005 and 2019. The California LCFS has provided strong incentives for low-CI production pathways, with average ethanol CI under the program decreasing by 20–25% since its inception. For soy biodiesel, updated life cycle assessments (LCAs) using current agricultural and conversion data, including land-use change, indicate greenhouse gas (GHG) emissions are 40–69% lower than those of petroleum diesel. In Brazil, the adoption of mechanized harvesting, elimination of preharvest burning, and implementation of high-efficiency boilers and bagasse cogeneration have reduced both field and mill emissions. The Brazilian National Biofuel Policy RenovaBio has a tradable credit system based on CI scores which has helped drive down the carbon intensity of biofuels. Contemporary LCA estimates place sugar cane ethanol at approximately 35 gCO2e/MJ, which is 60–70% lower than gasoline. ,

Despite these technological and environmental advances, biofuel production growth has slowed since 2010 compared to the previous decade. Global biofuel patent filings increased rapidly between 2001 and 2010 (peaking from 2004 to 2008) and a slowing down since 2008. This trend can be attributed to several factors, including lower oil prices, a conservative expectation regarding future demand and oil prices, and a subsequent reduction in research and development (R&D). Furthermore, concerns about indirect emissions and food impacts led to more complex regulations, increasing compliance costs and reducing incentives for high-risk, potentially transformative innovations. These dynamics may have created a self-reinforcing cycle in which slow progress fosters pessimism, further dampening investment, and innovation.

Environmental and Socio-Economic Impacts of Current Biofuels

A challenge in deriving a clear understanding of the impact of biofuels is the fact that environmental and socio-economic conditions under which production, processing and use, and the impacts that are avoided, vary both across different feedstock as well as across location and time for any given feedstock. Life cycle assessment (LCA) is a framework that was developed to evaluate the full spectrum of impacts (e.g., greenhouse gases, air pollutants, water pollution, etc.) associated directly with the production and use of biofuelsfrom resource extraction through end use. However, there also arise emissions beyond the system boundary of traditional LCA, called indirect effects or emissions (discussed later), which become increasingly relevant as the scale of biofuel production increases. We first discuss direct emissions, i.e., biofuels’ own supply chain, before discussing indirect emissions.

GHG Emissions

Any positive climate benefit of biofuels hinges on excluding CO₂ emitted during combustion, which is based on the premise that it will be exactly offset through recapture during photosynthesis. Corn ethanol and soy biodiesel typically achieve 20–60% lower life-cycle GHG emissions compared to gasoline or diesel when produced with natural gas energy and feedstock is grown on existing cropland. , Sugar cane ethanol yields 50–90% lower emissions thanks to bagasse-fired distilleries and high yields, and canola/rapeseed biodiesel delivers 50–70% reductions when grown on existing cropland. Biodiesel from waste fats, oils, and greases (FOGs) achieves >80% reductions, as it avoids land conversion. , Overall, the average global warming intensity (GWI) of 1G biofuels has been declining over time. For instance, between 2011 and 2019 the average GWI across all ethanol pathways approved under California Low Carbon Fuel Standard (LCFS) declined by 25% while global oil supply has become more carbon-intensive. ,

Air Quality Impacts

Corn ethanol tends to emit more NO _x and SO _x up to two- to 5-fold higher than gasolineand 50–180% more PM_2.5 and PM₁₀, though CO and VOC emissions are slightly lower. Recent findings suggest ethanol produced from energy crops (switchgrass and willow) raises criteria air pollutants relative to corn-based ethanol due to higher noncombustion emissions (SO _x ) during fuel conversion, which could be mitigated through investments in pollution control equipment but will raise fuel cost. Soy biodiesel reduces CO and hydrocarbons but raises NO _x by 10–15%, while sugar cane ethanol’s impacts are modest except where open-field burning increases particulates. Canola biodiesel performs better than soy, and FOG-derived biodiesel has the lowest emissions. Improved refinery fuel choices (e.g., switching from coal to gas or renewables) and precision fertilizer application can substantially lower total pollutant loads. Overall, while biofuels shift pollutant profiles from tailpipe to production stages, better management and technology can mitigate these trade-offs.

Water Use and Water Quality Impacts

Producing one gallon of corn ethanol consumes 8.7–160 gallons of freshwater, versus 1.4–8.6 gallons for gasoline. Sugar cane ethanol in Brazil, requires 2–10 gallons per gallon of fuel; soy and canola biodiesel demand 6–50 and 4–30 gallons, respectively, while FOG biodiesel uses less than one gallon. However, the implications for water scarcity depends on whether the feedstock is rain-fed or irrigated. Data show that only about 17% of corn output and 12% of soybean acreage in the US is irrigated and only 17% of acreage in Brazil’s most important cane growing region is irrigated. − Globally rapeseed/canola in Canada, Sunflower in Europe and Russia, and Oil palm in Malaysia and Indonesia are each mostly rain-fed. Sugar cane in India, is almost entirely irrigated but India uses molasses for ethanol, a byproduct of sugar production.

US biofuel production is estimated to have increased fertilizer use by 3% to 8% and emission of water quality degradants by 3% to 5%. Nutrient runoff from corn and sugar cane cultivation drives eutrophication and harmful algal blooms, particularly in the Mississippi River Basin and Gulf of Mexico. Soy and canola use less nitrogen but rely more on herbicides, and sugar cane is phosphorus-intensive. Conservation practices, including cover crops, reduced tillage, riparian buffers, can reduce nitrogen and phosphorus losses by 30–60%(EPA, 2025, Ch. 10). These measures can make water quality outcomes less dependent on feedstock and more on land stewardship.

Soil Carbon and Health

The effect of biofuel cultivation on soil carbon is site-specific and depends on prior land use and management patterns. “Observation-based experimental studies indicate that, under conventional management in corn-soybean rotations, soil carbon sequestration rates typically range from −0.34 to +0.10 Mg C ha^–1 yr^–1. − However, with improved management practices such as cover cropping, no-tillage, and proper nutrient management corn-soybean cropping systems could sequester up to 0.24–0.88 Mg C ha^–1 yr^–1.” − Sugar cane fields may recover SOC after multiple rotations when residue burning is avoided, while canola in cereal rotations can enhance soil structure and SOC modestly. Waste-based biodiesel avoids direct soil disturbance altogether. These studies collectively demonstrate a potential of corn cultivation to contribute to soil carbon sequestration, highlighting the importance of implementing sustainable agricultural practices to maximize carbon sequestration in corn and soybean-based cropping systems. However, converting grasslands or idle cropland to corn or soy cultivation typically reduces soil organic carbon (SOC) by 30–50%%. Conservation tillage, residue retention, and crop rotation can slow these losses. Incorporating temporal carbon dynamics and land-use history into LCAs will enable carbon intensity scores to better reflect long-term soil effects. , Sustainable feedstock management thus remains pivotal for soil carbon resilience.

Ecosystem Health and Biodiversity

Biofuel-driven cropland expansion has had measurable ecological consequences. Corn and soy cultivation has been associated with habitat fragmentation and reductions in pollinator and bird populations. , In tropical regions, sugar cane expansion has been associated with reduction in wetlands and pastureland and changes to aquatic biodiversity. Canola and rapeseed farming is associated with fragmentation of prairie landscapes albeit less intensively relative to corn. Waste-oil and animal-fat biodiesel avoids or minimizes land disturbances as well as most the above discussed concerns but can pose localized aquatic toxicity risk if residues enter waterways due to improper treatment before disposal. These trends consistently suggest mitigating risk of adverse ecosystem consequences from biofuel production may require integrating conservation practices such as crop diversification, habitat buffers, and reduced agrochemical inputs.

Indirect Emissions

Indirect effects in the biofuel context refers to impacts the biofuel industry in aggregate has on the global economy as a whole and the associated environmental consequences, which are beyond the scope of traditional LCAs. Indirect land-use change (ILUC) is one specific example which refers to expansion of farming into nonfarmland due to higher total demand for agricultural land due to biofuels, which could have harmful ecological effects. Economic model simulations of the US RFS mandates estimate a 0.01 to 2.45 million acres expansion within US per billion-gallon increase in biofuels while empirical estimates suggest a narrower range of 0.38–0.66 million acres per billion-gallon increase. , In terms of emissions, most place it between 20 and 39 g CO₂eq-MJ^–1. ,,, for corn ethanol under US RFS, which can be 30% to 40% of the mean own lifecycle footprint of corn ethanol. Another such effect is indirect fuel-use change (IFUC), whereby lower gasoline or oil demand leads to a fall in fuel prices and a rebound in fuel consumption which means biofuels displace less than a 1:1 reduction in oil products. While ILUC dominates current analyses, each of the different types of burdens mentioned earlier can manifest indirectly as well and they remain under-researched. Improving LCA to integrate these broader indirect effects is essential for credible, economy-wide assessment of biofuel sustainability. , The absence of clear and well-developed scientific criteria for determining the scale at which such impacts become significant, for defining the system boundary for indirect effects, and absence of a single clear methodology for estimation adds uncertainty and also makes comparisons of estimates from different studies challenging.

Food Price Impacts

1G biofuel growth contributed to food price inflation. This in turn increased food insecurity for poor, especially in developing countries. However, with multiple factors contributing isolating the impact of biofuels alone is difficult. For the few years leading up to the global recession of 2008, when food price inflation concerns became strongest, estimates of the contribution of biofuel range between 10% and 75%. ,, While most of the estimates are from simulations of theoretical models, econometric estimates of short-term effects suggest impacts in the range of 20%–30%. Furthermore, time-series analyses of various crops, biofuels, and oil products indicate that biofuels contributed to price rises only in some markets and periods, with long-term impacts estimated at 10%–15%. However, a long-run analysis reveals a clear decline in real price of agricultural commodities during the last century punctuated by brief episodes of rapid inflation that dissipated quickly. , Further research is needed to clarify the effects of biofuels on food security and commodity prices. Additionally, it is important to examine how changes in wholesale commodity prices, such as those in grains and oilseeds, influence retail, and processed food prices across regions. Data also show inflation post-COVID has been far greater compared to biofuel boom years prior to 2007. Macro-level data, which shows a consistent global uptrend in per capita calorie supply over recent decades and fast consumption growth across major agricultural commodity groups. While diverting crops to biofuel can affect food supply and raise commodity prices, the larger trend of increasing production and per capita availability remains evident. , Furthermore, the significant quantity of food waste, such as the 31% of the US food supply designated as surplus in 2023, suggests policies can be designed to produce biofuels without reducing access or security.

Impact on Rural Economy and Employment

The impact of biofuel production on rural economies and employment is multifaceted, bringing both positive and negative consequences for communities. Increases in agricultural commodity prices can enhance farm income, stimulate rural employment, and promote technology adoption and agricultural modernization. Biofuel production, particularly in developing countries with limited agricultural mechanization, generates a net increase in employment per unit of energy compared to fossil fuels, with most new jobs concentrated in the agriculture sector. In the European Union, biofuels have been associated with increased rural employment and overall energy-related jobs. However, when biofuel policies raise fuel prices, they may reduce consumption and, in turn, decrease labor demand in other sectors. , Negative impacts are also observed among subsistence farmers and rural households in developing economies. Some studies report that biofuel expansion can drive detrimental land-use changes, such as the conversion of agricultural and forested land to plantation monoculture. For instance, in Ghana, biofuel production has led to large-scale conversion of land to plantation monoculture. The establishment of monoculture plantations disproportionately affects vulnerable groups, including women and migrants, due to their limited access to diverse biomass resources for household use. The implementation of well-designed policies is essential to ensure that biofuel production supports the rural poor, maintains the ecological integrity of rural landscapes, and protects the rights of indigenous peoples and those with insecure land tenure.

Perspectives on Nurturing a More Sustainable Future Bioeconomy

The uncertain performance over the last two decades notwithstanding, there exist strong reasons to continue nurturing a more sustainable bioeconomy. First, despite slow progress, 2G biofuels still hold a lot of promise and there exist several mature and commercially viable pathways for 1G biofuels with substantial environmental benefits. Second, for applications such as aviation and ocean shipping, renewable liquid fuels appear the economically most-realistic alternative to fossil fuels today. A substantial share of global fossil fuel use in these applications can be displaced with less competition for land and other resources relative to that for displacing a similar share of fossil fuel for road transportation. For instance, the 2023-billion-ton report estimated a potential of over 1 billion tons of biomass annually in the U.S., sufficient to meet ambitious targets to produce 35 billion gallons of SAF annually by 2050. , Developing a more sustainable bioeconomy requires identifying the most promising pathways (combination of feedstock, conversion technology, and final products) and adopting policies to overcome the technological and economic barriers these pathways face today.

Improving Sustainability of Feedstock Production

Feedstock production is either the largest or second-largest contributor to the environmental and social impacts of biofuels. Feedstock-related burdens can be reduced through greater use of biomass residues and waste, cultivation of low-cost dedicated bioenergy crops, cultivation of bioenergy crops as cover crops and/or in marginal land, utilization of waste and waste CO₂, and cultivation of biomass in water as micro and macroalgae, and cultivating 1G feedstocks more sustainably.

Agricultural and forestry residues, animal wastes, and household wastes represent an under-utilized resource worldwide , which pose little risk of unintended consequences. − Conversion of used cooking oil and fats to biodiesel, renewable diesel and SAF production is expected to rise over the next decade but realizing its full potential requires investing in collection, pretreatment and quality control. Biomass use for biofuels can also help avoid emissions from biomass burning. , However, high cost of collection and transport, and variability in feedstock quality present economic challenges.

Cultivation of dedicated energy crops such as Miscanthus, switchgrass, sugar cane and sorghum variants, and woody crops like willow and poplar is less intensive in land, water, and chemicals. Yet, like with 1G biofuels allocating farmland to energy crops could entail ILUC effects which needs to be minimized. The cultivation of energy crops on marginal land is gaining traction as a strategy to avoid food-fuel competition while maximizing ecosystem services , including enhanced soil carbon sequestration. Another potential biofuel feedstock is algae. Since algae cultivation needs nutrients such as N and P, locating their production near wastewater treatment facilities can help avoid emissions associated with production of these nutrients and also mitigate eutrophication. However, microalgae growth also improves when concentrated feeds of CO₂ are introduced into the growth ponds through sparging to raise fuel yield and lower cost, which further stresses the importance of locating the pond near CO₂ point sources as well as nutrient-rich media, like wastewater. Singh et al. estimate that life cycle GHGs are lowest when the CO₂ source is highly concentrated and biogenic, as with CO₂ originating in fermentative flue gases from ethanol production. Likewise, the cost of CO₂ sourcing and delivery is lowest at industrial concentrated sources and potentially competitive with diesel fuel production cost compared to if using direct air capture. These two constraints may limit microalgae facility location and raise equipment capital costs. Thus, the constraints of locating microalgae facilities along with equipment costs for CO₂ sparging render algae cultivation costly but biotechnology research continues to seek approaches to raise the value of its products for both energy and food production goals. ,

Valuation of ecosystem services through mechanisms such as nutrient trading credits, and air quality credits can help drive adoption of better management practices to reduce the cost of energy production and support toward decarbonization of the transportation sector. Food and animal waste-based biofuel systems also have several ecosystem services benefits such as methane emission reduction, improved air and water quality benefits. Here, we have considered only the 2G bioenergy crops. Whereas the current first generation mainly contributes to economic products (such as fuel, animal feed and industrial coproducts), cultivation of feedstock for advanced biofuel crops could be managed to simultaneously also generate greater ecosystem services by improving soil carbon water quality and increasing biodiversity (See Figure ). Due to their deeper and more extensive root systems, perennial crops such as miscanthus and switchgrass can sequester greater carbon in plant and root biomass, and soil organic matter through root secretions compared to annual crops. Estimates for organic carbon sequestration in the top 30 cm of soil range between 1.6–1.8 Mg C ha^–1 yr^–1 (∼0.64–0.72 Mg C acre^–1 yr^–1) for Miscanthus, , between 0.4–1.2 Mg C ha^–1 yr^–1 (∼0.16–0.48 Mg C acre^–1 yr^–1) for switchgrass, , and 0.54–1.08 Mg C ha^–1 yr^–1 (∼0.21–0.43 Mg C acre^–1 yr^–1) for bioenergy Sorghum. , In general, SOC sequestration is considered to be a relatively stable process over the long-term, with some studies suggesting that up to 75% of the carbon sequestered in soil may remain stored for centuries to millennia. However, the stability of SOC can vary depending on the soil and site-specific conditions, rooting length of selected bioenergy crop, and adopted management practices such as reducing tillage, and covering soil with cover crops or crop residues. , Using crop residues such as corn stover and straw for biofuel production could increase soil erosion and SOC loss. However, this could be mitigated if residual lignin after biorefining is added back as a soil amendment. Thus, the efficacy of individual crops for soil carbon sequestration depends on soil and site-specific factors, such as the selected crop, soil type, climatic factors, and land management practices.

2.

Comparison of ecosystem services and environmental impacts between first-generation (1G) and advanced biofuels. Biofuels (1G and Advanced) value chains are associated with both positive and negative environmental consequences. Ecosystem servicesbenefits to humans from the biofuel value chainare categorized into provisioning, regulating, cultural, and supporting services. Environmental impacts are classified into GHG emissions, air quality impacts, water quality impacts, and changes in soil ecosystems and biodiversity. While the marginal differences in environmental impacts and ecosystem services between advanced biofuels and 1G biofuels depends on various factors associated with feedstock production, conversion, and end-usage, this figure provides a simplified overview based on existing studies. Further research is needed on the domain to provide quantitative comparisons of the environmental impacts as well as ecosystem services and their associated monetary values. The illustration categorizes outcomes into three major groups color coded circles: improvement (in green), improvement under specific scenarios (in yellow), and deterioration (in red); smaller size of the circles corresponds to smaller changes.

Advanced biofuel feedstock can support pollinator populations, which increases yields in nearby pollinator-dependent crops. ,, However, some bioenergy crop species (e.g., Miscanthus) are also considered as invasive species in some parts of the world, which may impact the native species and biodiversity of the area. − Lignocellulosic bioenergy crops can be strategically placed in the landscape to intercept the nutrient flow from food-crops landscape to water bodies. , However, there is a need for more research comparing the ecosystem services of alternative biofuel feedstock at meaningful scales to inform policy formulation and planning of bioeconomy portfolios at various regional scales.

Better quantification of ecosystem impacts can therefore help design schemes that provide farmers monetary incentives that make adopting new crops and management practices economically attractive. − One study estimates that a compensation of $40–80/ton CO_2‑equivalent for soil carbon sequestration could increase the financially viable area for cultivation of switchgrass by 140% to 414%. Examples of monetary value of other benefits of switchgrass cultivation include $35 to $40 per kg of N reduction; $2 to $50 per hectare per year for water quality improvement; $5 per ton for value of retention of sediments; $40 to $45 per hectare per year from wildlife viewing (in the Pacific/Mountain region). In addition to quantification, there remains a significant gap in effectively stacking ecosystem service benefits without double counting, establishing robust certification systems, and developing platforms to facilitate trading credits, which could ultimately help drive costs down.

We found comparatively fewer literature on quantification and monetization of air quality ecosystem service of biofuel combustion. For comparison, the PM_2.5 health costs from gasoline are $0.09 L^–1 ($0.34 gal^–1), while those from ethanol vary widely depending on the production pathway. Cellulosic ethanol derived from prairie biomass has the lowest PM_2.5 health costs at $0.04 L^–1 ($0.16 gal^–1), whereas corn ethanol produced using coal for process heat incurs much higher PM_2.5 health costs, reaching $0.24 L^–1 ($0.93 gal^–1). The PM_2.5 damages per ton of traditional jet fuel burned were $177, while implementing a 5% blend of SAF reduced PM_2.5 damages to $175 per ton of fuel burned, and a 50% blend of SAF further reduced PM_2.5 damages to $144 per ton of fuel burned. SAF offers health benefits through reductions in UFP-related air quality impacts. ,, These health cobenefits, along with carbon credits, can enhance the willingness to pay for environmental attributes and help reduce the costs of SAF, as emphasized in DOE’s Liftoff Report. NO₂ emissions, which are responsible for 91% of total landing and takeoff-attributable premature mortalities, remain unaffected by SAF implementation, emphasizing the need for additional technologies to mitigate NOx emissions.

Internalizing the value of ecosystem services provides substantial economic benefits to the biofuel production process, enhancing its competitiveness in the market. Total compensation for ecosystem services generated by switchgrass has been estimated to reduce the cost of biofuels by $1.3–2.2 per gasoline-equivalent gallon of ethanol which could make ethanol competitive with gasoline even without biofuel mandates. Among these services, nitrate reduction, which is the primary contributor, reduces ethanol production costs by $0.80 per GGE, while SOC sequestration by switchgrass further lowers costs by $0.60 per GGE. There is a need for financial incentives for management practices that generate ecosystem services, and low-cost technologies for measurement, verification and certification of benefits which is currently costly. ,

Emerging Conversion Technologies and Applications

Today, waste fats, oils and greases (FOGs) represent among the most economical and low-C feedstock sources and pathways for producing biofuel. These oligomers can be collected and minimally processed to biodiesel, and with moderate additional processing to infrastructure compatible renewable diesel, marine fuel, and aviation fuel, uses that have few alternatives to meet decarbonization goals outside of liquid fuel supply. The GWI of these pathways range from −2 to 50 g CO₂eq MJ^–1; , depending on the feedstock, conversion technology, coproducts and offset credits, and final energy product. Advanced biofuels can be more competitive as drop-in fuels for long-distance rail and trucking, aviation, and marine uses. Several reviews of marine transportation identify alternative biofuels as preferred and a potentially least-cost nonfossil alternative given the need for liquid fuel. ,, Aviation represents one of the biggest challenges due to the volumetric density and heat of combustion specifications needed, which restricts the use of 1G hydro-processed esters and fatty acids (HEFA) jet fuels to a 50% blending limit. Yet, blending SAF, which contains low or no sulfur, with conventional jet fuel reduces emissions of NO _x (5–10%), SO₂ (35–90%), and nonvolatile particulates, , which improves air quality and health for airport works and nearby communities. , Thus, blending restrictions further stress the need for SAF and several promising high performance pathways have been identified for development by 1G and 2G pathways. −

The commercial 1G “sugar” pathways produce ethanol with GWI ranging from −18 to 68 g CO₂eq MJ^–1 (Table S1) depending on the feedstock and processing technology compared to the ∼100 g CO₂eq MJ^–1 reference for fossil-derived fuels. 1G biorefineries depend on carbon credits for meeting renewable fuel policies and in some cases for being financially viable. Greater efficiency in feedstock conversion to fuel, development of value-added coproducts, use of renewable natural gas and low-carbon electricity, and investment in CCS have the potential to substantially reduce their GWI. 1G sugar/starch pathways are technological bridges to the 2G bioconversion platform that can attain deep decarbonization through inclusion of value-added coproducts (proteins, aromatics − and platform chemicals) and by integrating biomass energy with carbon capture and storage (BECCS), which can yield carbon negative fuels as low as −170 g CO₂eq MJ^–1 for ethanol derived from diverse cellulosic feedstocks. − Advanced fuels produced via thermochemical pathways based on fast pyrolysis include biochar coproducts, a stable sequestered form of biogenic carbon that acts to lower the GWI of the fuels, which results in GWIs in the range, 10 to 34 g CO₂eq MJ-1. −

In sum, both biochemical and thermochemical conversion technologies can provide low-C fuels for liquid fuel dependent transportation modes like aviation, and marine uses, yet they are at precommercial TRL and present technological, environmental and economic challenges to commercialization. In the future, micro and macro algae biofuels and very early concept technologies that convert sunlight and CO₂ (Figure and Table S1) could also mature to supply liquid fuel needs. All precommercial pathways face challenges to raise product yields, improve catalyst selectivity and develop low-C hydrogen supplies for upgrading oxygenated fuels, challenges, that have been known for more than two decades. , Finally, along with investment in R&D, policy tools, as described in this article, remain a crucial component to advancing their market entry.

Barriers to Development and Commercialization of More Sustainable Biofuels

Progress on both technological and policy fronts is needed to realize the potential of biofuels. Below is a select set of major types of barriers emerging from prior discussion. This is not intended as an exhaustive list of barriers.

Technological Barriers

Slow progress in reducing the cost of converting cellulosic biomass and other 2G feedstock into intermediate chemicals or finished fuels is the major technological barrier today. Sustained investment in research aimed at optimizing pretreatment processes, developing robust catalysts, and streamlining biorefinery operations to consistently achieve commercial-scale yields in a cost-effective manner is necessary to overcome the technological barriers. Scaling cultivation of dedicated 2G crops also presents challenges such as slow stand establishment, uncertain yields, and immature or costly technology for harvesting and handling. 1G ethanol and biodiesel present technical challenges related to vehicle/engine compatibility, cold-flow, and storage-stability that limits high levels of blending. Drop-in fuels overcome some of these issues and present others. For instance, renewable diesel presents some challenges such as fuel stability, cold-weather performance, lower volumetric energy density, and higher NOx emissions.

Economic Barriers

Producers of 2G feedstock face barriers, including uncertain markets for their products, long maturation times before harvest, yield risk, and the need for new harvesting and handling equipment which discourage switching from current crops and practices. Processing of 2G feedstock requires high initial capital and operational costs. Uncertainty in feedstock costs and finished product prices increases risk, further increasing the levelized total life-cycle cost, i.e., the minimum break-even price of fuel above which investors realize a positive return. Biomass residues and wastes incur high costs for collection, transport, and processing (e.g., moisture removal, contaminant removal in municipal wastes, and manure handling), and their inconsistent quality risks damaging costly equipment and introducing yield variability. Adoption of advanced biofuels requires the creation of a comprehensive infrastructure for the biofuel value chain and ecosystem. This includes establishing efficient systems for the sustainable production of feedstocks, their conversion, adapting existing logistical networks for distribution (such as pipelines, terminals, and blending facilities), and ensuring compatibility with vehicles and engines for the final consumption of advanced biofuels. For ethanol, the historical “blend wall” (E10/E15) has capped on-road uptake without infrastructure and labeling changes, which drop-in fuels might avoid, but will still need some new infrastructure that entails high fixed costs.

Policy Barriers

Inconsistent implementation of long-term government mandates (such as waivers on RFS cellulosic fuel mandates) and uncertainty around tax incentives and carbon pricing mechanisms also discourage investments that would lead to innovation and the adoption of new technologies. , A 2019 report by the International Renewable Energy Agency (IRENA) titled Advanced biofuels: What holds them back? also suggests regulatory uncertainty as a reason for stalled investments in Europe, as developers worry about whether and how sustainability criteria might tighten in the future. Another type of barrier arises when policies ignore heterogeneity in farm-level emissions and behavior at the farm-level. This discourages investments that reduce environmental externalities, generate positive externalities, and local and global public goods during feedstock production. Nonmonetization of such benefits represents a barrier to sustainable feedstock production.

Perception and Legitimacy Barriers

An important set of barriers pertains to the public perception of biofuels. The earliest estimates on ILUC and food price impacts painted a bleak picture, shaping a negative opinion that persists, especially among the scientific research community. Although later studies found the early estimates extreme and improbable, the perception remains among both the public and scientists that biofuels are not environmentally beneficial and disproportionately harm the poor by diverting food to fuel. There is also much less literature on the potential benefits of biofuels for rural poor who may be net food producers. Initial estimates serve a useful role by urging caution and identifying risks, but in this case, they dampened enthusiasm about biofuels, which is a barrier to overcome. Only then can biofuels attract large private investments and top talent to achieve the necessary technological breakthrough.

Innovative Policies and Strategies for Advancing Sustainable Biofuels

Despite more than two decades of support, in most regions of the world, the cost of even the first-generation (1G) let alone the second-generation (2G) biofuels remains higher than that of petroleum fuels and reliant on public support in the form of subsidies and mandates. When produced sustainably, biofuels can generate external benefits that offset their higher private cost relative to fossil fuels, There exist suchpathways within 1G that are mature and there are many more in 2G that are not yet mature but have promise. This justifies continued public support for sustainable biofuels through tax incentives and regulations. However, since existing policies have clearly failed at commercializing advanced biofuels, the future of the bioeconomy depends on more effective policies and strategies that overcome the different barriers discussed above. A select few among such policies are touched upon below.

First, policies need to be predictable, rule-based and reduce uncertainty to investors. Providing certainty in annual volumetric targets and subsidies or policy parameters such as carbon intensity ratings, maximum blending limit and sustainability criteria will reduce risk and attract larger investments across the value chain. Midcycle changes through gradual tightening of targets or reductions in subsidies may bejustified due to unforeseen developments such as agricultural crises or new scientific evidence but these need to be well thought out and communicated. This will minimize risk and attract greater investment which can amplify the impact of public investment and accelerate the pace of innovation.

Policies with demonstrated success need to be scaled up or replicated while those with a poor record need to be eliminated. Whereas the most common regulation globally is volumetric mandates (either in absolute volume or share of fuel consumption) that is not designed to differentiate biofuels of different emissions intensities, the California Low Carbon Fuel Standard (LCFS) is a performance-based standard that does so and also incentivizes a continuous reduction in carbon intensity (CI) scores by design. Flat volumetric mandates and subsidies do not carry this incentive. Evidence for this is the fact that under the LCFS has more than two thousand unique CI scores have been certified till date. As LCFS targets became more stringent with time, more pathways will lower CI scores both for 1G and 2G biofuels have been commercialized and certified. Moreover, since published LCAs do not fully capture the regional and temporal variability in impacts, LCFS-like policies carries incentives for measuring, reporting, and verifying (MRV) emissions down to the level of single farm even though these are opposed to being estimated only at a biorefinery level today. The experience of California’s LCFS appears to have spurred other jurisdictions within the US (for instance, Oregon and Washington) and also other countries including Canada, Germany, France, Sweden and the EU to adopt LCFS-like policies. However,more research is required to determine how LCFS-like policies can be designed to accelerate commercialization of cellulosic biofuels that are still immature relative to certain advanced biofuels such as those derive from waste vegetable and animal oils that are feedstock constrained. But since, fixed volumetric mandates provide clear signals regarding the required biofuel capacity to meet targets. Therefore, combining volumetric mandates with emissions intensity standards may be more effective than implementing either policy in isolation.

The adoption of “climate-smart” biofuel policies is essential for the effective development of low-carbon biofuels. Such policies address the entire lifecycle of biofuel production, from feedstock cultivation of low-carbon biofuels to refining, with the goal of minimizing carbon emissions at each stage. Encouraging these policies can motivate farmers to adopt practices that reduce emissions and enhance soil carbon sequestration, such as no-tillage, crop rotation, and cover cropping. Extending carbon intensity (CI) scores to the feedstock production stage is particularly important, as it provides a comprehensive, transparent, and performance-based metric for accurately assessing the climate impact and sustainability of biofuels. This approach creates economic incentives for low-carbon agricultural practices. Unlike conventional policies that apply generalized values for feedstock production, a climate-smart approach customizes CI scores to specific production methods. Research demonstrates that precision agriculture and climate-smart practices can reduce the lifecycle CI of corn production by up to 71%. However, measuring, reporting, and verifying (MRV) soil carbon, nitrous oxide reductions, or biodiversity outcomes at the farm level remains costly. Policies should incentivize the development and adoption of MRV tools for farm-level management practices and outcomes. Advanced technologies, such as digital twins, , and internationally recognized standards such as the International Sustainability and Carbon Certification (ISCC) can accelerate the development of these tools. Process-based ecosystem models, particularly multimodel ensembles (MMEs), offer a cost-effective alternative to long-term soil sampling by accurately simulating soil carbon and nitrous oxide emissions.

With respect to estimation of environmental impacts, the wide variety of tools applied today (e.g., LCA, partial and computable general equilibrium, etc.) notwithstanding, there still is a need for more research on impact assessment frameworks and tools. There is a need forbetter approaches and tools for attribution and monitoring and for linking policy-driven changes in land use to specific places, for remote sensing to verify changes in land cover and management, and expanding research on the environmental effects and ecosystem services of emerging biofuels. Such tools are not intended to replace existing tools, but to complement them by providing a better understanding of specific phenomena that cannot be accounted for in detail within frameworks such as models of global economic trade.

Multiple methodologies, including life cycle assessment, partial equilibrium, computable general equilibrium, and integrated assessment models, each with distinct theoretical foundations and empirical assumptions, have produced a wide range of estimates for indirect emissions. The diversity of approaches within the global academic and policy research community applying methodologies involving different assumptions and baselines to arrive at widely varying estimates of biofuels is valuable and should be encouraged, as it can yield robust understanding of the impacts and policy needs. However, to facilitate accurate and useful comparison, synthesis of estimates derived from different approaches, and interpretation of results, modelers should adhere to basic standards. These include transparent data and assumptions, open sharing of inputs (such as reference cases, calibration data, shocks, and key parameters) and code, and clear, consistent reporting of uncertainty, including sensitivity analyses and ranges. Employing a common set of scenarios and inputs to ensure comparability across models and publishing the range of results with explanations for differences, rather than a single value, should be standard practice. Policymakers should require all publicly funded research to follow these practices and to make the resulting materials publicly available. Such transparency can improve public confidence and help address perception barriers associated with biofuels.

Research on the impact of biofuels needs to distinguish and clearly communicate the following: (i) how any given biofuel could be produced more sustainably regardless of what is its average footprint might be today; (ii) how biofuels taken as a whole have been produced in the past and how the negative impacts could be mitigated. The former would would show that there exist sustainable 1G pathways that policies need to nurture. It should also be borne in mind that both improper application of or extrpolation from models and poor performance attributable to poor policies cannot be the basis for broad conclusions about any given type of biofuel as a whole (e.g., about all 1G biofuels or any given feedstock on account of estimates of ILUC or about the lack of progress in 2G which may be partially due to uncertainty in enforcement of mandates).

Finally, one cannot overstate the importance of increasing public investment in agricultural R&D for a sustainable future bioeconomy. During the 20th century public investment in agricultural innovation and extension led to a several-fold increase in global food production even as total global cropland has stabilized or declined compared to the early 1900s, marking a long-run trend of intensification and land sparing. , However, in the last two decades, the United States has reduced its public investments in agricultural R&D by two-thirds in real terms between 2002 to 2022 reaching near levels not seen since 1970s. Data for the US shows that average rate of productivity growth in the two decades prior to 2004 was higher for both corn (∼1.63% per year from 1982 to 2002 and 1.07% per year from 2002 to 2024) and soybean (∼1.45% per year from 1982 to 2002 and 1.35% per year from 2002 to 2024). Reversing this trend will raise agricultural productivity and help satisfy demand for both food and fuel more sustainably with minimal or no agricultural encroachment into nonfarmland.

The conditions that led to the wave of biofuel policies two decades ago remain relevant today. Global crude oil consumption and greenhouse gas emissions have continued to grow unabated, while high dependence on energy imports poses persistent economic and national security risks. The economic situation of small farmers and rural communities also remains a major concern for agriculture-dependent regions worldwide. In this context, the rationale for continued public support for biofuels as a renewable, low-carbon, domestically produced, and employment-generating alternative to oil remains compelling. Batteries and green hydrogen, notwithstanding their rapid progresswhile playing an important role in decarbonization, each pressent face technical challenges in certain applications such as aviation where biofuels can be more cost-effective.However, scaling cellulosic and other advanced biofuels will require policy frameworks that move beyond the volumetric mandates and flat subsidies that successfully expanded first-generation biofuels. Both economic intuition and empirical evidence suggest that more targeted approaches can better accelerate innovation and commercialization from waste biomass and dedicated energy crops. Life cycle-emissions-based performance standards (such as California’s Low Carbon Fuel Standard), incentives for emissions reductions during feedstock production and for ecosystem services, and policies that minimize regulatory uncertainties such as not relaxing or waiving annual targetsoffer more effective pathways for realizing the long-term potential of advanced biofuels.

Biography

Deepak Rajagopal is a Professor in the UCLA Institute of the Environment and Sustainability and Dept. of Urban Planning in the UCLA Luskin School of Public Affairs. His fields of research include Industrial Ecology and Life cycle assessment, applied economic analysis of energy and environmental policies. He is also a faculty Scientist in the Energy Analysis Division at the Lawrence Berkeley National Laboratory. He has a Ph.D. in Energy and Resources from UC Berkeley, MS degrees in Ag. and Resource Economics (UC Berkeley), and Mechanical Engineering (U. of Maryland, College Park) and B.Tech. in Mechanical Engineering (Indian Institute. of Technology, Madras). He has been a postdoctoral researcher at the Energy Biosciences Institute, UC Berkeley and also worked as a Structural Engineer at United Technologies Research Center, E.Hartford, Connecticut, USA.

The Supporting Information is available free of charge at https://pubs.acs.org/doi/10.1021/acs.est.5c16314.

• Table listing the conversion technology, coproducts, technology readiness level, and GWI for different biomass-derived fuels shown in Figure , along with references to sources of data (PDF)

The authors declare no competing financial interest.