As countries around the world seek to limit their carbon emissions, sustainable fuels will play an important role. This category consists of a broad range of low-carbon fuels, including biofuels, e-fuels, and chemical by-products (see sidebar, “Know your sustainable fuels”). Because sustainable fuels can fill gaps in decarbonization and complement electrification, demand is expected to triple over the next 20 years, reaching approximately
600 million metric tons (Mt) by 2050 (Exhibit 1). 1 To date, completed advanced-biofuels projects and announced investment pipeline in sustainable-fuel capacity have reached $100 billion. 2 The sustainable-fuel market is still mostly nascent, characterized by complex regulations and interdependencies across sectors. Physical
Exhibit 1 The contribution of sustainable fuels to liquid-fuel demand could double by 2030.
Sustainable-fuel demand by energy carrier, million metric tons
Sustainable-fuel demand by sector, million metric tons
Ethanol
FAME1
Drop-in diesel 2 Drop-in gasoline 2
Road transport
Aviation
Maritime
Drop-in kerosene2
Other3
Methanol
602
602
4.0% p.a.4
491
491
374
374
328
328
7.2% p.a.4
275
275
195
195
128
128
2019 2025 2030 2035 2040 2045 2050
2019 2025 2030 2035 2040 2045 2050
3 4 6 9
11
17
25
Share of total liquid fuel demand, %
1 Fatty acid methyl ester. 2 Drop-in fuels include 100% blend fuels, such as hydrotreated vegetable oil (HVO), hydrotreated esters and fatty acids (HEFA), and power-to-liquid (PtL) diesel or kerosene. 3 Rail, building, chemicals, industry, and other. 4 Per annum. Source: McKinsey Sustainable Fuels Cost Model, Achieved Commitments scenario, Apr 2023
McKinsey & Company
1 Based on the Achieved Commitments scenario from the McKinsey Global Energy Perspective 2023 (forthcoming). For more on the market outlook, see Nathan Lash, Tapio Melgin, Agata Mucha-Geppert, and Ole Rolser, “Charting the global energy landscape to 2050: Sustainable fuels,” McKinsey, July 7, 2022. 2 McKinsey Sustainable Fuels capacity tracker, May 2023.
Accelerating the journey to net zero
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