Global Renewable Diesel Market - 2025-2033

Global renewable diesel market size reached US$ 24.67 billion in 2024 and is expected to reach US$ 48.33 billion by 2032, growing with a CAGR of 8.77% during the forecast period 2025-2032.

The renewable diesel market is experiencing significant expansion, propelled by increasing environmental consciousness and favorable government policies. Initiatives like the US Renewable Fuel Standard (RFS) and California’s Low Carbon Fuel Standard (LCFS) have markedly expedited the adoption of renewable diesel.

As of January 2023, US renewable diesel and other biofuel production capacity attained 3 billion gallons annually, exceeding biodiesel capacity for the first time, as reported by the EIA. This is a pivotal moment in the biofuel sector. In May 2024, Alberta, Canada, granted a tax incentive to Imperial Oil Ltd. for its US$ 507 million renewable diesel facility, anticipated to begin operations in 2025 with a daily output capacity of 20,000 barrels.

The attractiveness of renewable diesel is attributed to its capacity to diminish greenhouse gas emissions by as much as 78% per gallon in comparison to fossil fuel. The fuel's extensive compatibility with existing infrastructure renders it an essential component of global decarbonization initiatives.

Renewable Diesel Market Trend

The growing consumer and industry demand for cleaner, drop-in fuels is influencing market dynamics. Renewable diesel, chemically indistinguishable from fossil diesel, is produced from various waste oils and fats, including spent cooking oil, tallow, and palm oil mill effluent. Its capacity for utilization without adjustments to the engine or infrastructure augments its marketability.

Blended fuel options, exemplified by Chevron’s UltraClean Blend—a combination of 80% renewable diesel and 20% low-cloud-point biodiesel—demonstrate ingenuity in overcoming operational constraints, particularly with cold-weather performance. Simultaneously, corporations like Global have augmented renewable diesel storage and distribution in the US Northeast, indicative of regional demand surges.

Although electric vehicles are more popular, particularly in affluent nations, biofuels remain predominant in decreasing diesel and jet fuel usage. Renewable diesel is a crucial element in achieving transportation decarbonization objectives, particularly in areas with restricted electric vehicle uptake.

Global Renewable Diesel Market Dynamics

Stringent Regulations and Net-Zero Commitments Propel Adoption

Environmental laws and business net-zero pledges are propelling the renewable diesel sector. Policies such as the RFS in the US and Canada’s Clean Fuel Regulation are driving producers to adopt low-carbon alternatives. Imperial Oil's US$ 560 million investment at the Strathcona oil refinery, Canada's largest renewable diesel facility, seeks to diminish national transport emissions by 3 metric tons per year.

The increasing demand for energy security, particularly in the context of geopolitical instability and variable crude oil prices, augments the attractiveness of renewable diesel. Emerging economies like Brazil, Indonesia, and India are expediting biofuel use, bolstered by plentiful feedstocks and robust domestic policy.

Worldwide, biofuels and renewable power are projected to diminish transport oil consumption by approximately 4 million barrels of oil equivalent daily by 2028, with biofuels comprising 60% of this decrease. These dynamics highlight the increasing importance of renewable diesel in fulfilling climate and energy diversification objectives.

Capital Intensity Hinders Market Penetration

A notable restriction is its performance in low temperatures, where it may start to harden at temperatures exceeding those of No. 2 petroleum diesel, perhaps leading to blocked fuel filters. This may cause interruptions in vehicle performance unless addressed by additives or by blending with low-cloud-point biodiesel.

Moreover, renewable diesel contends with other biofuels, like biodiesel and sustainable aviation fuel, each characterized by distinct production methodologies and applicability. Elevated production expenses and dependence on a consistent feedstock supply chain further limit scalability. As regulatory frameworks improve, the growing market share of electric vehicles in developed nations may diminish the long-term need for diesel alternatives. Therefore, market participants must engage in technological innovations, cost efficiency, and varied feedstock procurement to sustain the competitiveness and significance of renewable diesel.

Segment Analysis

The global renewable diesel market is segmented based on feedstock, application and region.

Expediting Decarbonization in Power Generation via Renewable Diesel

The power generation sector is expected to have a swift increase in renewable diesel uptake, propelled by an accelerated CAGR. The shift by power producers to low-carbon alternatives corresponds with corporate sustainability objectives and engagement in carbon credit markets. The transition, along with increasing volatility in fossil fuel markets and the worldwide initiative for energy diversification, is anticipated to enhance the demand for renewable diesel in power generation.

Prominent nations such as India, the US, China, and Germany are making substantial progress towards achieving net-zero commitments in their energy sectors, creating considerable opportunity for renewable diesel to facilitate these goals. In September 2024, prominent utility firms pledged more than US$ 116 billion yearly to sustainable energy production and grid infrastructure, indicating robust investment in the area. The inauguration of the Utilities for Net Zero Alliance at COP28, endorsed by IRENA and UN Climate Champions, underscores the significance of renewable diesel in global decarbonization initiatives.

Geographical Penetration

A Robust Policy and Investment Environment Stimulates Growth in North America, driving the market

North America, especially the US and Canada, leads in the advancement of the renewable diesel sector. As of January 2023, the US had the global lead in renewable diesel and biofuel production capacity, totaling 3 billion gallons annually. This expansion is mostly propelled by regulatory obligations such as the RFS and LCFS, together with state-level programs promoting low-carbon fuels.

In Canada, significant expenditures are expediting infrastructure construction. For instance, Imperial Oil's US$ 507 million initiative in Alberta and the US$ 560 million Strathcona refinery illustrate the country's strategic effort to decarbonize its transportation industry. Moreover, collaborations like Neste's US$ 1 billion joint venture with Marathon Petroleum to transform the Martinez, California refinery exemplify North America's dedication to renewable diesel. The region's compatibility with existing infrastructure and developing distribution channels in the US Northeast positions it for continued expansion in renewable diesel uptake.

Sustainability Analysis

Renewable diesel is essential for promoting global environmental goals. The lifecycle greenhouse gas emissions are up to 78% lower than those of fossil fuel, as reported by the EPA. Renewable fuel, produced from biological waste such as used cooking oils and animal fats, decreases emissions and promotes circular economy concepts. The fuel's compatibility with existing engines and storage systems reduces the necessity for infrastructure modifications, increasing its attractiveness as a sustainable option.

By 2028, biofuels, encompassing renewable diesel, are projected to represent about 60% of the mitigated oil demand in the transportation sector—approximately 0.7 million barrels of oil equivalent daily. This is particularly vital in areas with increasing transportation demands, where electrification continues to be a long-term objective. Additionally, corporate and governmental pledges to achieve net-zero targets are bolstering investments in renewable diesel, establishing it as a fundamental component of future sustainable energy portfolios.

Competitive Landscape

The major global players in the market include Neste Corporation, Diamond Green Diesel (DGD), Valero Energy Corporation, Chevron Corporation, Phillips 66, Marathon Petroleum Corporation, World Energy, Eni S.p.A., PBF Energy Inc., Gevo, Inc.

Key Developments
• In October 2024, Repsol launched Nexa 100% Renewable Diesel at its service stations, a premium fuel suitable for all diesel engines. The unique formulation improves performance and prolongs engine longevity.
• In February 2024, Colonial Oil is collaborating with Finnish biofuels manufacturer Neste on a sustainable diesel initiative in Savannah, Georgia. The joint venture seeks to enhance the availability of renewable diesel in Savannah and the southeastern US, thereby assisting local container service firms like Terminal Investment and Gateway.

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