Sustainable Fuel Market Size & Share Analysis - Trends, Drivers, Competitive Landscape, and Forecasts (2025 - 2032)

Sustainable Fuel Market Size

Sustainable Fuel Market Trends and Growth Drivers

Growth in Usage of Green Hydrogen Is Key Trend

Green hydrogen, produced using renewable energy, is one of the most-significant trends in the sustainable fuel market, driven by the increasing demand for zero-emission and carbon-neutral fuels.

Government polies are one of the key factors propelling green hydrogen demand. Many private companies are investing in the development of hydrogen production and storage infrastructure and policies. The European Union, Japan, the U.S., and Australia have set ambitious targets for hydrogen production and usage for achieving net-zero emissions.

In support, the National Green Hydrogen Mission of India is envisioned with an investment of INR 17,490 crore for electrolyzer manufacturing and green H2 production till 2029–30. Similarly, with the support of Germany, Austria, and Italy, the United Nations Industrial Development Organization (UNIDO) launched its Global Programme for Hydrogen in Industry in 2021 to enable emerging economies lessen the difficulties in green hydrogen production and supply.

Moreover, in November 2023, the World Bank proposed the creation of 10 GW of green hydrogen production capacity worldwide via projects ranging from 100 MW to 1 GW. Hence, the global drive for energy resilience and recent advancements in electrolyzer technology and decreasing renewable energy costs make it more scalable and viable.

Global Push for Decarbonization Is Major Market Driver

Governments across the world have set ambitious carbon reduction targets and are providing subsidies and financial incentives to encourage the use of renewable energy. According to the IEA, 2023 saw a 410-million-tonne increase in worldwide GHG emissions attributable to energy generation alone, which reached a new record of 37.4 billion tonnes.

The International Energy Agency (IEA) states that in Net-Zero Emission (NZE) by 2050 Scenario, the demand for hydrogen, biofuels, and hydrogen-based fuels would need to double from current levels by 2030 and double again by 2050.

Sustainable fuels are frequently seen as eco-friendly alternatives, especially when they are obtained from renewable materials, such as energy crops and agricultural waste, instead of fossil fuels. The International Renewable Energy Agency (IRENA) states that sustainable aviation fuel (SAF) could represent a significant portion of global aviation fuel demand in the coming decades. As per the U.S. Department of Energy (DoE), apart from reducing emissions, SAF also burns cleaner in the aircraft jet engines as it contains fewer aromatic hydrocarbons.

A key initiative in this regard is the 2024 pilot project involving the jack-up vessel crew and technicians from Vestas using a blend of conventional and sustainable ATF in helicopters that will ferry them to and from the Baltic Eagle wind farm.

Similarly, the DoE, USDA, and DoT have signed an MoU and launched the SAF Grand Challenge to reduce the cost, expand production, and improve the sustainability of SAF.

Additionally, in January 2024, India’s Ministry of Petroleum and Natural Gas launched the first pilot project to use ethanol to produce SAF. This came at the heals of the first trial of SAF in India on a flight to Delhi from Pune in 2023.

High Production Costs Present Market Challenges

The higher production cost of sustainable fuels compared to traditional fuels is one of the most-significant challenges for the market growth. Green hydrogen and SAF production technologies are still in the early stages and have not fully reached an economically viable scale.

An increase in production and advancement in technology may lead to a fall in the price, but it requires high investments in equipment, production plants, and storage & supply infrastructure. The slow adoption of sustainable fuels due to the high production cost is especially visible in price-sensitive industries, such as transportation and aviation. For instance, ATF accounts for up to 40% the operational spending of airlines worldwide.

Challenges such as the low energy density of some sustainable fuels also need to be overcome. For instance, hydrogen has a lower mass density as compared to conventional fossil fuels, requiring more space and higher pressures for storage and transportation. This further increases the cost of hydrogen storage and transportation, which are ultimately offloaded to the end customer.

The limited awareness among the consumers and industry stakeholders, lack of incentives, and cost concerns are a few other reasons of the low adoption rate of sustainable fuels. These barriers make it more difficult for sustainable fuels to compete with conventional fossil fuels in terms of efficiency, cost, and availability. As per the IEA, in 2022, average prices of conventional and bio-based diesel in Europe were USD 1 and USD 1.7 per liter, respectively. Moreover, prices in the U.S. stood at USD 1.1 and USD 2 for conventional and bio-based diesel, respectively.

Sustainable Fuel Market Analysis

Fuel Type Insights

• The biofuels category holds the largest share, of around 70%, in 2024.
• This is because many countries globally aim to reduce the carbon emissions and the use of fossil fuels for transportation.
• Biofuels are a key alternative in achieving renewable energy targets.
• The category is essentially growing rapidly because of the renewable fuel mandates around the world.
• It is mandatory in the European Union that at least 10% renewable fuel be used for transportation.
• The EU’s combined target for all its member countries is for 5.5% biofuels or hydrogen for transportation by 2030.
• In April 2023, it became compulsory for all oil & gas companies in India to provide a 20% ethanol blend in gasoline.
• Similarly, diesel must be sold with at least 5% biodiesel in India by 2030.
• To enhance efficiency, next-generation biofuels are being produced from non-food crops, waste material, and algae, which makes them more sustainable
• The consumption of hydrogen will grow at the highest CAGR in the forecast period because of its critical role in decarbonizing hard-to-electricity sectors.
• Hydrogen can be used in both fuel cells and internal combustion engines, which makes is versatile for transportation, power generation, and industries.
• As per industry forecasts, global hydrogen sales could cross USD 196 million by the end of this decade.
• In a boon to the transportation sector, 2023 saw the operationalization of 37 hydrogen fuel stations in Europe, 12 in Japan, 7 in North America, and 29 in South Korea.
• In September 2024, BMW AG entered into a collaboration with Toyota Motor Corporation to launch FCEVs by 2028.
• Other OEMs that offer FCEVs or are developing the same include Hyundai Motor Company and Honda Motor Co. Ltd.

The fuel types analyzed in this report are:

• Biofuels (Largest-Category)
• Hydrogen (Fastest-Growing Category)
• Compressed Natural Gas (CNG)
• Renewable Natural Gas
• E-Fuels
• Others

State Insights

• The liquid category holds the larger market share.
• This is because of the compatibility of liquid fuels with the existing infrastructure, versatility, and ease of use.
• The gas category will grow at the higher CAGR during the forecast period. This is because the market of green hydrogen is growing rapidly, driven by government policies and global net-zero ambitions.
• Various sectors, such as transportation, energy storage, and heavy industries, are increasingly adopted hydrogen gas.

The states analyzed in this report are:

• Liquid (Larger-Category)
• Gas (Faster-Growing Category)

Type Insight

• Low-Carbon Fossils fuels hold the larger market share.
• This is because low-carbon fossil fuels (such as natural gas, which produces less CO₂ compared to coal and oil) are seen as a "bridge" energy source in the transition from traditional fossil fuels to renewable energy sources.
• Many countries still rely on fossil fuels for their energy needs, and low-carbon fossil fuels, like natural gas, are seen as a more secure and stable with it.
• Delhi continued use of CNG vehicles is the launch of the world's largest fleet of CNG-powered buses in 2023. The Delhi Transport Corporation (DTC) introduced a fleet of 1,000 CNG buses as part of its ongoing efforts to improve air quality and reduce pollution.
• Renewable Fuels category will grow at the higher CAGR during the forecast period.
• This is because of the supportive government policies and strong technological advancement. As government and industries focuses on reducing their carbon footprint, renewable fuels are seen as important to achieving long-term sustainability and zero-emission goals.

The type analyzed in this report are:

• Renewable Fuels (Fastest-Growing Category)
• Low-Carbon Fossils Fuels (Largest Category)

Technology Insight

• Steam–Methane Reforming holds the largest market share.
• This is because SMR is the most common method used to produce hydrogen, which is considered a clean energy carrier. Natural gas, primarily composed of methane, serves as the fuel source for SMR. During the process, methane is converted into hydrogen and carbon monoxide, which results in the release of CO2.
• In April 2022, Wood's revolutionary steam methane reforming (SMR) technology demonstrated the potential to cut CO2 emissions by 95% in conventional hydrogen production plants.
• Electrolysis category will grow at the highest CAGR, during the forecast period.
• This is because of its alignment with global energy transition, government policies supporting hydrogen and its scalability for producing low-emission hydrogen.
• Hydrogen production through electrolysis is increasingly seen as a foundation of achieving net-zero emissions. Electrolysis is crucial for decarbonizing sectors that is hard to electrify, such as transportation and heavy industry.

The technology analyzed in this report are:

• Electrolysis (Fastest growing category)
• Steam–Methane Reforming (Largest-Category)
• Gasification
• Pyrolysis
• Others

Source Insight

• The natural gas category holds the largest market share.
• This is because natural gas produces lower carbon dioxide (CO2) emissions than coal and oil when used for energy, making it a more environmentally friendly option over fossil fuel.
• In 2023, India’s natural gas consumption reached 60.12 BCM. Between October 2023 and February 2024, consumption increased by 17% year-on-year, totaling 28.12 BCM. The IEA forecasts that India’s natural gas consumption will grow by over 7% in 2024.
• The energy crops category will grow at the highest CAGR during the forecast period. This is because governments around the world are offering subsidies to promote the use of biofuels derived from energy crops.
• The growing energy crop cultivation would create a lot of job opportunities in agriculture, which would drive economies, especially developing countries.

The source analyzed in this report are:

• Agricultural Waste
• Energy Crops (Fastest-Growing Category)
• Algae
• Food Waste
• Natural Gas (Largest-Category)
• Others

Application Insight

• The power generation category is growing at the highest CAGR during the forecast period.
• This is because of the global shift from coal and diesel to the cleaner-burning natural gas and the even-more-sustainable biofuels. The share of gas in power production increased by 3.1% in May 2024, up from 1.6% in May 2023. On average, gas accounts for 2% of power generation.
• In 2023, natural gas accounted for 42.42% of utility-scale electricity generation in the U.S., an increase from 35% in 2018 and 24% in 2010. Moreover, in the first half of 2024, demand for natural gas from power producers rose by 5.2% compared to the same period in 2023.
• The transportation category holds the largest share of around 65% in 2024.
• This is because the transportation sector is one of the largest sources of global greenhouse gas emissions and for achieving carbon neutrality and net-zero emission this sector needs an urgent focus on reducing emission.
• In 2023, Maersk introduced its first vessel powered by green methanol, the "Mærsk Mc-Kinney Møller". This is a remarkable step in Maersk's efforts to transition from fossil fuel-based marine fuels to more sustainable alternatives.
• CNG vehicles are prevalent in various regions across the globe, with certain countries and cities taking the lead in adopting natural gas-powered transportation.
• In June 2024, CNG's share of the overall passenger vehicle market increased to 18.5%, up from 13.63% in June 2023.

The application analyzed in this report are:

• Power Generation (Fastest Growing Category)
• Transportation (Largest Category)
• Industrial
• Cooking
• Others

Regional Analysis

North America dominates the global sustainable fuel market with around 30% revenue share in 2024.

The Renewable Fuel Standard (RFS) in the United States has played a major role in boosting the biofuels market by mandating the use of renewable fuels in the transportation industry.

Innovation in bioethanol and renewable diesel production technologies has significantly improved the efficiency and economic viability of sustainable fuels. The regional sustainable fuel market is expanding, driven by key providers such as ADM (US), INFINIUM (US), and Air Products and Chemicals, Inc. (US), who are fostering the market's growth by creating opportunities for sustainable fuel projects.

APAC is the fastest growing regional market. This is because many APAC countries, majorly China and India, have strong government support for renewable energy and sustainability initiatives, including incentives, long term commitments, and subsidies to reducing emissions.

China is the largest market in the APAC region for sustainable fuels and made large number of investments in renewable energy and sustainable fuel technologies. Its commitment to achieving carbon neutrality by 2060.

India is the fastest-growing country in APAC for sustainable fuels. India has been rapidly growing up its renewable energy production and biofuel initiatives to meets its growing energy demands and climate goals.

The regions and countries analyzed for this report include:

North America (Largest Regional Market)

• U.S. (Larger Country Market)
• Canada (Faster-Growing Country Market)

Europe

• Germany (Largest Country Market)
• U.K. (Fastest-Growing Country Market)
• France
• Italy
• Spain
• Rest of Europe

Asia-Pacific (APAC) (Fastest-Growing Regional Market)

• China (Largest Country Market)
• Japan
• India (Fastest-Growing Country Market)

South Korea

• Australia
• Rest of APAC

Latin America (LATAM)

• Brazil (Largest Country Market)
• Mexico (Fastest-Growing Country Market)
• Rest of LATAM

Middle East and Africa (MEA)

• South Africa (Largest Country Market)
• U.A.E. (Fastest-Growing Country Market)
• Saudi Arabia
• Rest of MEA

Sustainable Fuel Market share

This market is fragmented with many players offering diverse products and technologies across different regions due to the increasing demand for sustainable energy, regulatory support, and the need for large-scale infrastructure. As the demand for sustainable fuels increases, new startups are taking part and introducing advance technologies and business models. New players are focusing on novel fuel production methods, such as biogas production and algae-based fuels.

Sustainable Fuel Market News

• In November 2024, Repsol inaugurated its 600th renewable fuel station and announced plans to have 1,500 service stations offering the 100% renewable Nexa Diesel.
• In October 2024, TotalEnergies SE signed a power purchase agreement with Saint-Gobain, under which TotalEnergies will supply renewable electricity to Saint-Gobain’s French facilities. It will start from January 2026 for a total volume of 875 GWh over a period of five years.
• In September 2024, TotalEnergies SE announced its entry as an investor in the “Japan Hydrogen Fund”, to develop the low-carbon hydrogen value chain.
• In June 2023, shell announced its strategy to reach near-zero methane emissions by 2030 and eliminate routine flaring in its Upstream operations by 2025, surpassing the World Bank’s Zero Routine Flaring 2030 initiative. It also plans to invest between $10 billion and $15 billion from 2023 to 2025 to advance low-carbon energy solutions, including biofuels, hydrogen, electric vehicle charging, and carbon capture and storage (CCS).