Driving the shift to sustainability: Alternative fuels in the transport sector

Transport accounts for 29% of all greenhouse gas (GHG) emissions in the European Union, making it the largest emitting sector. In 2023, mobility emitted over 1 gigatons of carbon dioxide equivalent (CO2e).

Unlike other sectors, transport emissions have shown little decline in recent years. This is largely due to growing demand for mobility and the slow turnover of vehicle fleets, which remain in use for many years. Electrification, the most effective way to cut emissions, remains a challenge for certain modes of transport. For long-distance aviation and maritime shipping, battery-electric solutions are not yet viable.

Road transport is by far the largest contributor to transport-related emissions. In 2023, it accounted for 749 million metric tons (Mt) CO2e—approximately 74% of total transport emissions. Passenger cars alone were responsible for more than half of road transport emissions (see figure 2).

Decarbonizing road transport offers significant potential for emissions reduction. The most visible decarbonization solution in Europe is battery electric. In some countries like the Netherlands, the charging infrastructure can be seen in every street, and car companies highly advertise their battery electric models. Battery Electric Vehicles (BEVs) have steadily increased their share in new vehicle registrations in recent years, especially in the passenger car and bus segments (see figure 2).

However, despite their high visibility, electric vehicles still represent less than 1% of total energy consumption in the road transport sector. Biofuels, by contrast, account for around 6% of road transport’s energy use. Though much less visible, biofuels have long been blended with conventional fuels and sold at fuel stations as, for example, E10 (petrol with 10% ethanol content) or B20 (diesel with 20% biodiesel content).

Beyond the road, transport is just getting started on the path to net zero. In the medium term, biofuels are expected to play a more prominent role in reducing emissions across the aviation and maritime sectors. However, current adoption remains marginal. In inland shipping and maritime transport, biofuels account for less than 1% of total fuel consumption (see figure 4). The uptake in aviation is even more limited, with sustainable aviation fuels (SAFs) representing a negligible share of the fuel mix. Rail transport is a different story, as electricity is the optimal way to decarbonize the sector. Currently, 79% of rail operations in Europe is powered by electricity.

One of the key advantages of blending biofuels with conventional fossil fuels is that it does not require a complete redesign of vehicle powertrains or fueling infrastructure for certain blends. BEVs rely on entirely different propulsion systems and require widespread electricity charging infrastructure due to its range. Biofuels such as biodiesel and bioethanol, however, can be used in existing internal combustion engines with minimal or no technical adjustments, albeit up to certain blending limits.

This makes biofuels an attractive transitional solution, particularly in sectors where electrification is not yet feasible due to cost, range limitations, or operational complexity—such as long-haul trucking, agricultural machinery, and parts of the maritime and aviation sector.

Moreover, the ability to integrate biofuels into the current fuel distribution network allows for immediate emissions reductions without waiting for large-scale fleet turnover or infrastructure upgrades. In this way, biofuels offer a pragmatic and scalable pathway to continue to decarbonize transport in the near term, complementing longer-term shifts toward electrification and potentially hydrogen. Although biofuels are a low-barrier pathway to decarbonization, the roll-out has been quite slow. In the past two decades, the share of biofuels in total fuel consumption of the road transport sector has grown from nothing in 2002 to 6% in 2022.

In Europe, biodiesel accounts for approximately 72% of biofuel use in road transport, significantly outpacing bioethanol’s 28% share. This disparity is largely driven by the region’s longstanding reliance on diesel-powered vehicles, particularly in freight transport and older passenger car fleets. Diesel’s higher energy density makes it more suitable for long-haul and heavy-duty applications, where fuel efficiency and vehicle range are critical.

Additionally, blending practices favor biodiesel, with higher permissible blend ratios—such as B20 (20% biodiesel, 80% diesel)—compared to bioethanol, which is typically capped at E10 (10% bioethanol, 90% petrol). These higher blend limits allow for greater volumes of biodiesel to be incorporated into the fuel mix without requiring engine modifications.

Bioethanol, by contrast, is only used in petrol-powered vehicles and is more common in light-duty passenger transport. While it plays a meaningful role in reducing emissions, its lower energy content and more restrictive blending limits reduce its overall potential contribution to decarbonization. Moreover, the shift away from petrol passenger cars to BEVs in many European markets—driven by tightening emissions standards and the rise of electrification—has further constrained bioethanol’s growth potential.

Nevertheless, both biofuels remain important tools in the EU’s broader strategy to reduce road transport emissions, particularly in the near term, as the region transitions to more sustainable mobility solutions.

Renewable diesel – also known as hydrotreated vegetable oil (HVO) – is gaining traction as a low-carbon fuel option in the European transport sector. Its chemical similarity to fossil diesel allows it to be used as a drop-in fuel in existing diesel engines without blending limits or technical modifications, making it a very attractive alternative.

In 2024, approximately 3.9 Mt of HVO were consumed in the EU, compared to 3.8 Mt in 2023. Demand for HVO is expected to grow further in 2025 and thereafter, due to higher renewable energy mandates under Renewable Energy Directive III (RED III) and stricter regulation.

But the large-scale availability of HVO remains constrained. The primary bottleneck lies in limited production capacity, with several new facilities still under construction or ramping up. Feedstock availability is another limiting factor. The main feedstocks used are cooking oil (UCO) and animal fats. There’s a shortage of these inputs and they face competing demand from other biofuels. Additionally, high production costs and regulatory uncertainty also play a role. The RED III targets must be transposed into national regulation, which often results in a myriad of interpretations and outcomes, and recent anti-dumping measures on HVO imports have had impact on supply. A more stable policy environment and expanded feedstock supply chains will be critical to scaling up HVO volumes in the coming years.

The climate benefits of switching to biofuels are not guaranteed. The combustion of biofuels still releases CO2, and the extent to which this is offset by the carbon absorbed during biomass growth depends heavily on the feedstock and production pathway. First-generation biofuels, such as those derived from food crops like corn or rapeseed, can contribute to indirect land use change (ILUC). ILUC refers to the situation in which natural ecosystems are converted to agricultural land to produce food crops to compensate for the crops used to produce biofuels from existing land – resulting in increased carbon emissions.

Moreover, lifecycle emissions from cultivation, processing, and transport can erode the net GHG savings. According to the European Court of Auditors, the actual climate impact of biofuels varies widely, and in some cases, may be negligible or even negative when full lifecycle emissions are taken into account.

Potential fraud is also an issue. While biodiesel and renewable diesel are often produced from waste and residue-based feedstocks such as UCO and animal fats, the EU has also raised concerns about the traceability and environmental integrity of these inputs – particularly when sourced from outside Europe. As a result, policymakers are increasingly scrutinizing the sustainability and traceability of imported feedstocks and tightening certification requirements.

Perhaps the most raised issue is the food versus fuel debate. The expansion of biofuel production has raised significant social concerns, particularly around the use of agricultural land and crops for energy rather than food.

These concerns are especially acute during periods of global supply chain disruption or poor harvests, when competition between food and fuel markets intensifies. As a result, EU policymakers and stakeholders are increasingly emphasizing the need to prioritize waste- and residue-based feedstocks for biofuel production, and to ensure that renewable energy goals do not come at the expense of food security or rural livelihoods.

These ongoing concerns have prompted a strategic shift in EU policy. The focus is now increasingly on advanced biofuels. While these pathways offer significant climate and land-use advantages, most remain in the early stages of development and are not yet commercially viable at scale.

More importantly, EU policy is moving away from CO2-emitting vehicles entirely. The EU’s decision to phase out the sale of new vehicles with internal combustion engines (ICE) by 2035 marks a structural turning point that is expected to significantly reduce long-term demand for biofuels in road transport. While biofuels may retain a role in hard-to-electrify segments, their relevance in light-duty transport will gradually diminish. As electrification gains momentum and regulatory frameworks tighten, biofuels are increasingly being repositioned as a transitional rather than a long-term solution.

One exception has been made. Following intense negotiations (particularly with Germany), the European Commission has committed to developing a separate legal framework that would permit the registration of new ICE vehicles post-2035, provided they operate exclusively on CO2-neutral fuels, specifically Renewable Fuel of Non-Biological Origin (RFNBO).

Green hydrogen and its synthetic fuel derivatives – classified as RFNBO s – are increasingly viewed in the EU as the only viable long-term decarbonization pathway for the transport sector besides BEVs. Under the RED III, the EU has introduced binding sub-targets to accelerate the uptake of RFNBOs in transport. By 2030, at least 1% of the energy supplied to the transport sector must come from RFNBOs, with this share expected to grow significantly in the following decades.

This policy shift reflects the EU’s broader ambition to reduce its reliance on fossil fuels, enhance energy security, and meet its climate neutrality goals. Although we expect RFNBOs to be mainly used in combination with fuel cells, there could be exceptions in which RFNBOs are combusted in an ICE vehicle.

Despite their strategic importance in the EU’s long-term transport decarbonization agenda, the development of RFNBOs is progressing more slowly than anticipated. Commercial deployment remains constrained by high production costs, limited clean hydrogen availability, and limited allowed CO2 availability. In the RaboResearch publications Hydrogen in Europe, part 2: What are renewable fuels of non-biological origin? and Green hydrogen sector in limbo, we elaborate on these challenges.

The current regulatory framework for RFNBOs, as defined by Delegated Regulations (EU) 2023/1184 and 2023/1185, imposes complex compliance requirements that hinder project development and delay market entry. As a result, the sector has struggled to attract the scale of investment needed to accelerate production. Consequently, near-term RFNBO output is expected to fall short of projected demand, raising concerns about the EU’s ability to meet its renewable fuel targets under RED III.

Without significant policy adjustments that tackle the complexity of the regulation, RFNBOs are unlikely to be available in large volumes or at competitive prices before the 2030s or even 2040s. This suggests that biofuels are likely to remain a key component of the energy mix in the EU’s transportation sector for the foreseeable future.