Sustainable fuels – including liquid biofuels, biogases, low-emissions hydrogen and hydrogen-based fuels – offer multiple benefits for the energy sector. They complement electrification and energy efficiency in energy transitions, and they are particularly important for sectors that continue to be reliant on fuel-based solutions such as aviation, shipping, and parts of road transport and industry. Sustainable fuels can also enhance energy security, stimulate economic development and strengthen environmental sustainability.

Greater use of sustainable fuels can bolster energy security by diversifying fuel supply and reducing fossil-fuel import dependence. Sustainable fuels can be produced from domestic resources in many countries, reducing exposure to volatile international oil and gas markets and supply risks. In 2024, liquid biofuels lowered transport fuel import dependence by 5-15 percentage points in relevant importing countries, and global oil demand was around 2.5 million barrels per day lower than it would have been without their contribution.

Sustainable fuels can be a catalyst for economic development, particularly in emerging and developing economies. Expanding their production and use can open new income streams, drive industrial growth, accelerate technology deployment and create job opportunities across the entire value chain. Such opportunities are especially important in rural and underserved communities, where projects can build local capacity and support youth employment.

With well-designed policies, sustainable fuels can achieve major lifecycle emissions reductions compared with conventional fuels. Actual reductions depend on choices made across the supply chain. Measures include the adoption of sustainable farming practices, using carbon capture utilisation and storage (CCUS), switching to renewable energy for processing, or powering electrolysers with dedicated low-emissions electricity. By 2035, most existing and emerging fuel pathways could reach very low lifecycle greenhouse gas intensity (gCO2/MJ), and in some cases even deliver net carbon removal, provided that performance-based policies that drive continuous improvements are implemented.

Liquid and gaseous renewable fuels already play a visible role in today’s global energy landscape. They are particularly relevant for transport, where they represent 4% of total energy demand. Liquid biofuels dominate current use, with emerging contributions from biogases and low-emissions hydrogen. Nearly 80% of liquid biofuel use is covered by GHG performance requirements today, although regional uptake varies widely, reflecting differences in policy support, sustainability criteria, feedstock availability and infrastructure readiness. While representing only 1.3% of total energy consumption globally, in certain countries the contribution of renewable fuels can be much higher, notably in Brazil, where their share approaches 10%.

Today, sustainable liquid and gaseous fuels are generally more expensive than the fossil fuels they replace, though cost parity can already be achieved in certain cases. Commercial fuels such as ethanol, biodiesel, renewable diesel and biogas often rely on policies to narrow the gap, for example through carbon credits that reflect their lower GHG intensity. In some markets – as with ethanol in Brazil and the United States – they can even be cheaper than fossil alternatives.

New fuel pathways are being developed that can address local feedstock constraints and harness regional resources. Emerging pathways, such as alcohol-to-jet, synthetic hydrogen-based fuels, and gasification-based biofuels, remain in the early stages of commercialisation. Costs are currently high, but they are expected to fall significantly as deployment drives economies of scale for key technologies such as electrolysers, along with greater standardisation, innovation, more competitive markets and lower financing costs. Policy frameworks need to remain flexible and technology-open to support the market entry of emerging fuels that diversify feedstocks, primary energy sources and strengthen supply resilience.

Despite higher costs, sustainable fuels are expected to have a limited impact on end-use consumer prices. Due to modest blending levels by 2035 and/or small shares of energy in final costs, the price impact on a car made with low-emissions steel, a cup of coffee made from beans produced with low-emissions fertilisers, or goods transported by a low-emissions containership is estimated to be below 1% in each instance. As for aviation, a 15% blending share of sustainable aviation fuels (SAF), would increase the ticket price of a flight by 5-7%, depending on the contribution of relatively more expensive emerging technologies. Still, even moderate price increases can weigh heavily on low-income households, making it important to protect the most price-sensitive products and consumers while pursuing diversification and emissions reductions in these industries.

If existing and announced policies are implemented, a fourfold increase in the global use of sustainable fuels by 2035 is ambitious yet achievable. Between 2010 and 2024, global demand for sustainable liquid and gaseous fuels doubled. Current trends and barriers point to continued gradual progress in this decade. Policy holds the key for more accelerated growth: full implementation of existing and announced policies and targets, plus the removal of market barriers, could lead to a near-doubling of sustainable fuel use in just six years, attracting investment in additional production capacity to meet new demand.

Going forward, based on a sectoral analysis, transport remains the main driver of demand to 2035. Demand from industry and power generation also expands rapidly after 2030, underpinned by the use of low-emissions hydrogen in the chemical, refining and steel sectors. By 2035 sustainable fuels would cover 10% of all global road transport demand, 15% of aviation demand and 35% of shipping fuel demand. National shares, mixes and volumes would still vary widely depending on regional conditions.

In the accelerated case, the portfolio of sustainable fuels shifts in line with changing demand patterns. Liquid and gaseous biofuels, which today account for almost all sustainable fuel consumption, would remain important, meeting about two-thirds of total sustainable fuel demand in 2035. By contrast, low-emissions hydrogen and hydrogen-based fuels – currently only about 1% of the total – would expand rapidly after 2030, contributing roughly half of the growth in sustainable fuel use between 2030 and 2035.

Accelerated deployment would bring significant socio-economic benefits. Cumulative investments between 2024 and 2035 could reach USD 1.5 trillion across all sustainable fuel types. Employment opportunities would increase in parallel, directly creating nearly 2 million jobs in regions where these fuels are produced. This would bring new options for economic development, particularly in emerging and developing economies.

The policy environment for sustainable liquid and gaseous fuels is highly complex. It covers a wide range of technology pathways that vary significantly in cost, technological readiness, infrastructure needs and development challenges. Progress must occur simultaneously on multiple fronts to increase diversification, boost uptake in established markets, mobilise the resource base in new markets, and foster emerging and new technologies.

Based on best practice experience, the IEA recommends six priority actions that can help accelerate sustainable fuel use by 2035. They are:

1)    Establish roadmaps, targets and support policies that are tailored to regional contexts and aligned with broader energy goals, while keeping a technology-open approach.

2)    Increase demand predictability to increase market confidence and attract investment.

3)    Cooperate in developing transparent and robust carbon accounting methodologies to enhance comparability and future interoperability, and enable performance-based policies and incentives that reward continuous progress in measurable emission reductions.

4)    Support innovation to narrow cost gaps – particularly to accelerate economies of scale and cost reductions for emerging technologies.

5)    Develop integrated supply chains and address infrastructure needs to unlock long-term economic development opportunities.

6)    Make financing more accessible – especially in emerging and developing economies – to de-risk investment and unlock the vast potential for sustainable fuels in these regions.

International cooperation and enhanced stakeholder engagement are key to accelerating sustainable fuel deployment and matching regional strengths with global demand. This report is prepared in support of Brazil’s COP30 Presidency. It also considers the ongoing work under the International Civil Aviation Organization (ICAO) and the International Maritime Organization (IMO) to advance the global uptake of sustainable fuels in aviation and shipping. International cooperation will also be important in the areas of technical support and capacity building as well as RD&D.