Second-generation Biofuels Market to be Worth USD 501.4 Bn by 2036 - By Feedstock / By Process / By Application | U.S. • Brazil • China • India

The global Second-generation Biofuels Market was valued at US$ 63.8 Bn in 2025 and is projected to reach US$ 501.4 Bn by 2036, registering a robust CAGR of 20.6% during the forecast period (2026-2036). The rapid expansion reflects strong regulatory backing, increasing investment in renewable energy infrastructure, and accelerating global decarbonization efforts.

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North America dominated the market in 2025 with a revenue share of 47.7%, supported by favorable renewable fuel mandates and advanced bio-refinery investments. By feedstock, lignocellulose biomass accounted for the largest share of 39% in 2025, highlighting its commercial viability and scalability.
The market is witnessing consolidation, with leading companies such as Algenol Biofuels, Clariant AG, DuPont, and Fiberight LLC playing pivotal roles in scaling advanced biofuel technologies.

Market Overview

Second-generation (2G) biofuels are produced from non-food feedstocks such as agricultural residues, forest waste, straw, wood chips, grasses, and other lignocellulosic materials. Unlike first-generation biofuels derived from food crops (corn, sugarcane, soybeans), 2G biofuels eliminate food-versus-fuel conflicts while significantly reducing greenhouse gas emissions.

Production typically involves biochemical or thermochemical processes.
Enzymatic hydrolysis breaks down complex sugars into fermentable components to produce bioethanol, while thermochemical processes convert biomass into bio-oil or synthetic fuels. These methods enable broader feedstock utilization and deliver fuels with a lower carbon footprint and higher lifecycle sustainability.

With mounting pressure to decarbonize transportation, aviation, marine, and industrial sectors, second-generation biofuels are emerging as a cornerstone of the global clean energy transition.

Key Market Growth Drivers

1. Rise in Adoption of Renewable Energy
Governments worldwide are intensifying renewable energy adoption to meet climate commitments. 2G biofuels offer higher energy output and lower lifecycle emissions compared to fossil fuels and first-generation biofuels. Increasing awareness of environmental sustainability and carbon neutrality goals is accelerating deployment.

2. Government Policies, Mandates & Incentives
Supportive policies such as blending mandates, tax credits, research grants, and infrastructure funding are significantly boosting industry expansion. Renewable Fuel Standard (RFS) programs in North America and similar frameworks in Europe and Asia are driving large-scale commercialization.

3. Energy Security Concerns
Geopolitical volatility and fossil fuel supply disruptions have heightened interest in domestically produced renewable fuels. Second-generation biofuels enhance national energy independence by utilizing local biomass resources.

4. Technological Advancements
Continuous improvements in enzyme efficiency, biorefinery integration, and thermochemical conversion processes are reducing production costs and improving output yields.

5. Aviation and Marine Decarbonization
Hard-to-electrify sectors such as aviation and shipping require high-energy-density liquid fuels. Sustainable aviation fuels (SAF) and marine biofuels derived from 2G feedstocks present viable long-term solutions.

Analysis of Key Players - Key Player Strategies

The global market is moderately consolidated, with leading players focusing on technology commercialization, strategic partnerships, and geographic
expansion.

Algenol Biofuels
Clariant AG
DuPont
Fiberight LLC.
GranBio
Ineos Group Orsted AG
POET-DS
Advanced Biofuels LLC
Reliance Industries
Zea2 LLC.

Key strategic initiatives include:

• Vertical integration of biomass supply chains
• Licensing proprietary conversion technologies
• Long-term offtake agreements with airlines and shipping companies
• Government collaboration for pilot and commercial-scale plants

Market Challenges & Opportunities

Challenges

• High capital expenditure for commercial-scale biorefineries
• Feedstock supply chain variability
• Technological complexity in enzymatic hydrolysis
• Competition from first-generation biofuels and electric mobility

Opportunities

• Expansion into sustainable aviation fuels (SAF)
• Growth in marine biofuels for decarbonizing shipping
• Carbon credit monetization mechanisms
• Integration with biorefinery co-products such as bio-based chemicals
• Emerging markets in Asia Pacific and Latin America

The aviation and marine segments offer premium pricing potential and long-term contracts, significantly enhancing revenue visibility and profitability for 2G biofuel producers.

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Recent Developments

• In 2025, In line with their commitments to advanced biofuel production, the Indian government and Numaligarh Refinery Ltd have established a Second Generation (2G) bamboo, based biorefinery in Assam. The project is utilizing plentiful bamboo biomass, which is a non-food feedstock meant to produce sustainable fuels and their derivatives. Thus it is in tune with India's net zero targets and EBP policy expansion. Supported by the government, the project is intended 'to prove the feasibility of large-scale 2G ethanol production using lignocellulosic biomass.

• In 2024, Cepsa has made its first direct supply of second-generation biofuels to the cruise industry at the Port of Barcelona using fuel with 24% sustainable content made from used cooking oils. The project claims to save about 3, 000 t of CO emissions.

• In 2024, Razen one of the big JV businesses between Shell and Cosan has just opened its commercial 2G (cellulosic) ethanol factory in Guariba, So Paulo, Brazil, to increase its production capacity and decarbonize its fuel portfolio. The new factory uses sugarcane-derived lignocellulosic residues to make ethanol, which totally matches Brazil's aggressive blending policies and decarbonization goals. The project is a manifestation of the increasing investments by the major energy producers in advanced biofuel technologies to support both - domestic fuel mandates and export demand scenarios.

Investment Landscape and ROI Outlook

The strong CAGR of 20.6% presents compelling investment opportunities. Institutional investors, energy majors, and venture capital firms are increasingly funding advanced biofuel projects due to:

• Strong regulatory support
• Rising carbon pricing mechanisms
• Long-term fuel blending mandates
• Increasing ESG-driven capital allocation

High-margin applications in aviation and marine fuels improve return potential. Strategic long-term supply contracts provide revenue stability, while carbon credit markets add supplementary income streams.

Market Segmentation

By Feedstock
• Lignocellulose Biomass (39% share in 2025)
• Field Crop Residues
• Forest Product Residues
• Others

By Type
• Biodiesel
• Bioethanol
• Others

By Process
• Biochemical Process
• Thermochemical Process
• Others

By Application
• Transportation
• Power Generation
• Others

By Region
• North America (47.7% share in 2025)
• Europe
• Asia Pacific
• Latin America
• Middle East & Africa

North America leads due to strong regulatory frameworks and biofuel blending mandates, while Asia Pacific shows high growth potential driven by India, China, and ASEAN renewable energy policies.

Why Buy This Report?

• Comprehensive analysis of market size and 10-year forecast (2026-2036)
• Detailed segmentation by feedstock, type, process, and application
• In-depth regional outlook and country-level insights
• Competitive landscape and company profiling
• Recent developments and strategic initiatives
• Porter's Five Forces and value chain analysis
• Investment and ROI assessment
• Market share analysis (2025)

This report offers strategic intelligence for investors, policymakers, energy companies, and technology providers seeking to capitalize on the fast-growing second-generation biofuels sector.

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FAQs

1. What are second-generation biofuels?
Second-generation biofuels are renewable fuels produced from non-food biomass such as agricultural residues, wood waste, and grasses.

2. What is the projected market size by 2036?
The market is projected to reach US$ 501.4 Bn by 2036.

3. Which region dominates the market?
North America led the market in 2025 with a 47.7% share.

4. What is the major growth driver?
Rising adoption of renewable energy and supportive government mandates are key growth drivers.

5. Which feedstock segment holds the largest share?
Lignocellulose biomass accounted for 39% of the global market in 2025.

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