Higher decarbonization targets have seen biofuels regaining further interest from governments as they seek to further reduce carbon emissions from traditional fossil fuels. The resurgence in demand has also put further pressure on the feedstock supply chains that are accustomed to producing the wide array of Biofuel products. There are several different types of biofuel feedstocks ranging from corn, fats, greases, soybean oil and waste oils as companies look to further alleviate the carbon intensity in the biofuels supply chain.

The International Energy Agency (IEA) notes that biofuels can play an important role in decarbonizing transport in sectors such as aviation, shipping and trucking, where electrification proves most difficult. Demand for biofuels is expected to increase by 38 billion litres over the 2023 to 2028 period and total biofuel demand could reach 200 billion liters or 70.6 million tons. Ethanol remains the largest of the Biofuel products ahead of both renewable diesel and biodiesel.[1] In 2023, fuel ethanol accounted for 78% of total U.S. biofuel production, a level which has been broadly consistent since 2021. Renewable diesel and ethanol are expected to account for two-thirds of the forecasted growth, according to data from the Energy Information Administration (EIA), which publishes statistics on the volume of renewable diesel, biodiesel and ethanol.

Figure 1. U.S. biofuel production capacity by fuel

Greater ethanol blends into gasoline in focus

Global trading volumes in ethanol have increased rapidly with more countries adopting higher blending mandates into products like gasoline. Newer technologies such as the alcohol to jet blending for products like sustainable aviation fuel have also helped to boost demand for ethanol. In the European Union, the higher blending mandates are part of a wider package of measures to cut carbon emissions following the latest iteration of the Renewable Energy Directive (RED III), which aims to boost the share of renewable energy in the bloc’s overall energy consumption from 32% to 42.5%.

Boost to traded volumes

Rising demand has shown a positive effect on the Ethanol futures volumes with the Chicago and European contracts seeing steep gains over the past 12 months. The largest ethanol market remains in Chicago where volumes have increased 41% in the 12-month period up to and including April 2024 compared to the prior 12-month period. However, European ethanol volumes traded on the key Rotterdam hub have also increased by 15% over the same period, CME Group data shows.

Figure 2. Global Ethanol Futures and Option Volumes and Open Interest

Greenhouse gas savings are on the increase

Global consumption of ethanol is determined by several factors, including policy and ethanol’s value as a transportation fuel. Since 2009, the European market has been steadily increasing the blending mandate for gasoline with more countries selling larger volumes of the 10% ethanol content in gasoline, a doubling of the prior 5% level, which existed for many years. E10 gasoline is available in more than 15 European countries and this number is expected to grow in the coming years, which could provide a welcome boost to the volume of ethanol derivatives being traded. The trade association, ePure, says where ethanol is produced from sustainably grown crops, wastes and residues, it can have a significant reduction on transport greenhouse gas emissions (GHG).[2] Data shows that renewable ethanol from ePure members[3] reduced GHG emissions by 78% compared to fossil fuels in 2022, which is the 11th consecutive year in which EU renewable ethanol increased its GHG reduction score.[4]

In the U.S., ethanol, primarily made from corn, is the most prominent alternative transportation fuel that has been developed and deployed. The largest of these markets is E10 gasoline, which contains 10% ethanol fuel and accounts for the majority of the gasoline sold. Building upon E10, progress over the years has been made to increase the blend level to E15, which contains 15% ethanol in gasoline vehicles. E85 is a high blend of 51%-83%% ethanol that can only be consumed in flexible-fuel vehicles (FFVs), however, can use every blend level from E0 to E85. According to the Greenhouse gases, Regulated Emissions and Energy use in Technologies (GREET) model,[5] which assesses a range of life cycle energy, emissions and environmental impact challenges, in comparison to petroleum-based gasoline, ethanol reduces life cycle greenhouse gas emissions (GHG) on average by 40%.[6]

U.S. ethanol exports expand rapidly7

As consumption of fuel ethanol has grown, so too has the role of U.S. ethanol in the global market with the expansion of exports rising over a month-over-month basis. Canada, Europe and Asia are the largest export destinations from the U.S. In the case of Europe, exports of fuel ethanol in the past 12 months up to and including January 2024 have increased from an average of 434,000 barrels per month to just under 600,000 barrels per month. 

Figure 3. U.S. Fuel Ethanol Exports by Destination


Trading volumes in ethanol have steadily been rising, reflecting the growing uncertainty in the market both in Europe and the U.S. The continued concern in the outlook around supply and demand looks set to remain, prompting more market participants to turn to the financial markets to manage risk. The introduction of climate-smart agricultural practices such as the usage of corn-based ethanol into products like Sustainable Aviation Fuel are expected to be supportive for the further growth of the market. This trend towards greater risk management continues as both companies and countries seek to reduce the carbon intensity of the feedstocks that they choose for the transportation sector.


All examples in this report are hypothetical interpretations of situations and are used for explanation purposes only. The views in this report reflect solely those of the author and not necessarily those of CME Group or its affiliated institutions. This report and the information herein should not be considered investment advice or the results of actual market experience.

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