Outlook on global trade flows through 2050
Looking toward the future, long-term scenarios will likely be shaped by high demand growth beyond the European Union and United States, the increased interest in securing supply, regional and local feedstock constraints, greater market complexity, and the partial commoditization of markets such as renewable diesel and SAF. On one hand, feedstock shortages could lead to the adoption of more expensive or capital-intensive production pathways, such as the conversion of lignocellulosic feedstocks. Differences in sustainability criteria across regions may result in the growth of regional markets and product differentiation based on sustainability criteria. On the other hand, the rise of e-fuels combined with a scarcity of the biomass needed to support 2050 net-zero scenarios may lead production to concentrate in the global south, depending on the cost of direct air capture and requirements for nonfossil carbon sources. As an alternative, production could be more regional, with sustainability criteria differing by region. The resulting long-term outcome will likely be a mix of global commoditization and local fragmentation, creating opportunities for a range of feedstock, technology, and fuel combinations.
The development of sustainable fuels will proceed at different paces depending on category and region. However, based on trends to date, we can make a few observations about how global trade flows could play out through 2050. Currently, a significant share of production and consumption takes place within regions, shaped by various mandates, incentives, and trade rules. Some interregional trade also takes place, notably of feedstocks and fuels—for example, from Asia—Pacific hubs to Europe and North America. Producers outside the United States are increasingly looking to the European Union as a potential export market. Therefore, many of the feedstocks and fuels can be considered as partially global commodities. Although the recent IRA package in the United States is intended to meet local demand, it is starting to attract more investment to the region. This activity may be contributing to the widening gap in pricing among regions. Some demand patterns are also shifting; for example, airlines refueling with SAF have access to cheaper prices in California than in the European Union. Further, proposed book-and-claim schemes could lead to global or regional optimization of demand volumes based on local incentives. 13
Although the recent IRA package in the United States is intended to meet local demand, it is starting to attract more investment to the region. This activity may be contributing to the widening gap in pricing among regions.
13 When SAF isn’t available on a given flight or route, a book-and-claim system enables a company to pay for SAF to be supplied for another aircraft somewhere in the world. This system enables companies to claim the CO2 reduction of SAF on its climate accounting toward Scope 3 emissions while also boosting demand for SAF. For more, see Laura Hutchinson et al., “Clean energy 101: Book and claim,” RMI, May 30, 2023.
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