Biofuel Policy Brief - October 2025

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Dear reader, October has been another eventful month for global biofuel policies. National lawmakers are the protagonists of this months’ edition, with the UN’s shipping agency failing to regulate maritime emissions and EU legislation now needing member-state implementation. The US for once plays a less prominent role due to its government shutdown. 

Key policy developments in the past month:

• Efforts to introduce a global low carbon shipping fuel mandate failed, with IMO countries deciding to delay the decision by a year
  

• EU policymakers formally stick to climate ambitions, albeit introducing more flexibility. French and and Italian RED III mandates will only apply from 2027 while Germany and the Netherlands try to achieve January 2026 implementation
  

• An almost record-long US government shutdown risks delaying finalization of 2026-2027 federal biofuel mandates, while president Trump somewhat de-escalated his trade war with China
  

• China’s top leadership shines initial light into the country's next 5-year plan, fueling speculation on a potential SAF mandate. Chinese whitelisted SAF exporter capacity triples with new export permits
  

• Brazilian and Argentinian mandate increases are faced with delays. Mexico tweaks its biofuel policy framework despite lack of demand incentives

International shipping

Shipping was almost the first sector to get a global low carbon fuel mandate this month. Following a decade of IMO negotiations, a comfortable majority of countries in April agreed on annual emission reduction obligations for shipowners around the world. The agreed base level penalties for noncompliance were higher than the biofuel-fossil fuel price gap, meaning it would lead to actual physical blending within the sector. This firmly set the initiative apart from weaker attempts at the ICAO level to reach carbon neutral growth in aviation, where qualification of cheap carbon offsets under CORSIA effectively renders it toothless. The IMO has a unique track record in successfully incentivizing fuel shifts, having already managed to decimate sulphur content in shipping fuels. Consequently, expectations ran high that a final vote on the topic this month would be the start of a major global shift towards low carbon shipping.

High expectations led to high disappointment for those in favor of decarbonizing shipping. US-led efforts (including tariff threats) to block adoption proved successful, causing enough countries to change voting intentions, and delaying the decision by a year. This prolongs regulatory uncertainty for shipping, without guarantees that the situation will be any different a year from now. From the 10 largest flag states, in the end only 3 tried to pass the legislation. The gridlock reshifts the centre of gravity for the world’s low carbon shipping fuel incentives firmly back to the EU. In Europe, shipping emissions will be fully taxed under the EU ETS by next year, while mandatory emission reduction obligations are also in force since this year due to Fuel EU Maritime. The latter regulation would have normally been reviewed to align it with the IMO obligations and avoid double compliance. Now that the IMO framework is lacking, the EU’s obligations and national implementation of them will be all the more in focus.

Europe EU policymakers this month continued their quest to balance ambitious climate commitments with new priorities like protecting domestic industries, reducing regulatory complexity and increasing military spending. The way this is increasingly done is by sticking to nominal climate targets, yet loosening the underlying pathways - ‘creative accounting’ if you will. This week’s negotiations around the 2040 emission reduction target are an example of this. The 90% GHG reduction goal, stemming from a time of strong climate policy momentum, is still the most quoted figure. However, the pathway to reach this goal is the topic of negotiation, with external carbon offset credits likely playing a more prominent role than originally envisioned, and the latest text even mentioning a biannual review process that could open the door for further watering down. Another recent example is the EU Deforestation Regulation (EUDR), where the Commission last week proposed a number of derogations and delays for e.g. small companies and low risk countries. Similar dynamics can be expected for the 2035 internal combustion engine ban, where a broader definition of emission free vehicles could be adopted. Fortunately for biofuels, none of the core EU biofuel policies (RED III, RefuelEU, FuelEU, ESR) are under direct threat of being weakened at the EU level. The focus for these shifts towards national implementation and compliance.  

Two other policy areas where the EU Commission has been active this month are the Union Database for Biofuels (UDB) and ETS II overhaul. The UDB was conceived as a central tool to ensure greater traceability and transparency in biofuel supply chains. Registration is currently voluntary, but expected to become mandatory in 2026. Discussions on the topic this month indicate that retroactive cancellation of proof of sustainability for noncompliant actors is considered. This would set it apart from common practices in e.g. Germany, sending a stronger signal to the market. The ETS II is a dedicated carbon price for the road and heating sectors, meant to apply from 2027. The EU Commission last week announced a package of reforms to the system after member states had voiced concerns around fuel price stability. The changes include higher safeguard allowances released when prices exceed a certain level, extension of the MSR into the 2030s and introduction of a new Frontloading Facility backed by the EIB.

French policymakers proposed 2026 biofuel mandates as part of the country’s tax code. For diesel, the mandate increases to 10.3% (from 9.4%) and for gasoline to 10.8% (from 10.5%). The advanced submandate for biomass-based diesel increases to 1.2% (0.7%) and for ethanol to 2% (1.8%). Furthermore, the proposal includes a higher cap on Annex IX-B biofuels as well as a slightly higher proportion of biofuels that can be double counted. It now seems that France will only implement RED III by 2027. Draft proposals for doing so indicate that the country could take a unique approach by having a double GHG-based and energy-content obligation. RED III provides both options, but so far most countries choose one or the other. Italy is also among the most delayed countries in transposing RED III. A draft decree for doing so this month did not contain specific transport measures. Instead, this would only be added after the parliament and the regions give their feedback on the current version. This is atypical to say the least, given that much of RED III is specific to transport. A few directional indications relevant to transport that were included in the draft, are a reacceptance of PFAD, a broadening from road and rail to transport, and an intention to introduce B10. As for France, the Italian targets will likely only kick off in 2027. In parallel, the Italian competition authority fined the country’s major oil companies almost EUR 1bn for allegedly setting up a biofuels price cartel. Germany is better on track towards RED III transposition, albeit that the 1 January 2026 deadline for the targets to kick off is looking less and less achievable there as well. A proposal from the relevant Ministry has been available for months, but the Federal Cabinet has delayed its consultation from 29 October to 5 November. The market expectation is that agreement on the matter has already been reached at the Federal Cabinet level, though it remains to be seen what changes are included compared to the original draft. It seems like the abolishment of double counting is a done deal, but whether maritime mandates are separate, if ambitious e-fuel targets are kept, if POME remains excluded and if strict auditing requirements remain part of the final proposal all remain to be seen. After that, the Bundesrat and Bundestag will still need to give their approval as well. Even if finalisation by January is too ambitious, a retroactive application later in the year could be possible.

The Dutch parliament approved the country’s RED III proposal, which includes the highest advanced submandates seen anywhere in Europe so far. Some notable changes from the original proposal include an extension of the targets through 2035, a higher direct hydrogen sub-target, disqualification of denatured ethanol imports, a 0.5 multiplier for animal fats category 3, and consideration of mass-balancing for bio-LNG. The bill will now move to the Senate, which can only approve or reject it, not make amendments. Approval by the senate is expected, keeping the targeted implementation by January achievable. The Dutch Emission Authority furthermore clarified that UCOME will be treated as a fossil fuel in the maritime sector. Elections in the Netherlands this week were won by the progressive-centrist D66, with far right PVV being the biggest loser. Former EU climate chief Frans Timmermans resigned following a disappointing result, although his party is likely to end up in the governing coalition. In Czechian elections this month, it is fair to say that the opposite shift took place, with billionaire populist Babis winning the parliamentary elections. A likely coalition between far-right and populist parties, will be very skeptical on climate policies.

North America

The US is the largest in many things, including the largest biofuel market in the world. What is more, the country’s current leadership has a tendency to dominate global headlines with its statements and policies. The combination of these factors makes it so that the US often takes up a significant part of this newsletter. Not this month. Since 1 October, the US government has been on shutdown for the first time in seven years, after Republican and Democrat lawmakers could not agree on the spending plan. A shutdown does not entirely halt policymaking, as Members of Congress and the President are some of the few government employees still paid and thus expected to perform their duties. That said, much of the machinery behind policymaking comes to a halt, especially affecting new rulemaking. Activities of relevant biofuel rulemaking bodies like the EPA are reduced to a bare minimum, thus potentially delaying the much anticipated decision on 2026-2027 federal biofuel mandates - which would surely lead to the agency being sued by US biofuel associations. The shutdown is in its 31st day today, meaning if it continues for 5 more days it will be the longest in US history.

Even with a government in shutdown, US trade negotiations always make headlines. Trump and Xi met yesterday for the first time since the former’s second term, deescalating the trade war by bringing down the broad US import tariff on China from 30% to 20% and with fresh Chinese commitments to buy more US soy, crude and LNG. Earlier this month, biofuel analysts were surprised to hear Trump mention used cooking oil (UCO) import tariffs as a potential retaliation to China’s refusal to buy US soy. This would have had negligible impact, seeing as US UCO imports from China have already collapsed due to its expected disqualification towards several US biofuel credits. Meanwhile US-Canada trade talks saw little signs of progress, with Trump announcing an additional 10% tariff on Canada following an anti-tariff ad played in Ontario and starring former US president Reagan. Canada is the only G7 country not to reach a trade deal with the US, although the scope of the tariffs is more limited than for some other countries due to an existing free trade agreement. Brazilian President Lula said ethanol could be part of the bargaining chips to get the US to lower its 50% flat tariff on Brazilian exports. The two countries together represent more than two-thirds of global ethanol production, but trade flows have been mainly going from Brazil to the US (2.5% tariff) rather than from the US to Brazil (18% tariff), despite Brazil actually having a trade deficit with the US. Any lowering of Brazil’s import tariff could thus have a significant impact on global ethanol market dynamics. More broadly, ethanol is proving to be an important negotiation chip for countries aiming to see lower US import tariffs, as showcased this week by Malaysia, Thailand, Vietnam and Cambodia all reducing their import tariffs for US ethanol as part of trade deals.

Asia Pacific China's Central Committee this month provided its recommendations for the country’s 15th five-year plan, serving as the guideline for the more detailed plan to be finalized early next year, covering the period 2026-2030. Biofuel analysts will be closely watching whether any SAF mandates or other SAF incentives are included in the final plan. Although this months’ recommendations offer no direct reference to such plans, a few hints that something may be in the pipeline include a quoted desire to ‘accelerate the green transition’, ‘upgrade traditional industries’, and ‘create demand that drives supply’. Although the text also mentions plans for an ‘ecological shield’, multilateralism and international cooperation take centre stage. Bio-manufacturing and hydrogen energy are included in an announced list of strategic industries for China, whereas electric vehicles are no longer. More immediately impactful for biofuels markets is China’s recent decision to whitelist additional SAF exporters. There is global overcapacity of SAF due to many Chinese projects scaling up with only little domestic demand. Although no China-EU SAF tariffs are currently in place, the EU market has been indirectly protected by the Chinese government decision to only grant SAF export certification to one company with about 0.4 Mt capacity. Now three additional companies will be added to that list, roughly tripling total export capacity.

The Indonesian energy ministry announced its intention to introduce a 1% SAF mandate from 2026, which would make it the second Asian country with such mandate in place after Singapore. Although the country has a strong track record in rolling out high biodiesel mandates, and with plenty of domestic feedstocks available, it also has a history of ministries contradicting each other, and not nearly enough domestic SAF capacity would be available to meet such a mandate whereas the core goal of Indonesian biofuel policies has always been to decrease import reliance. The statement should therefore not be interpreted as a final decision but rather a step in the direction of a potential SAF mandate. The same energy ministry this month also announced a goal to implement a mandatory B50 (50% FAME) mandate by next year, raising it from the B40 mandate that applies since this year, and fully stopping gasoil imports. Moreover, the Indonesian president this month approved an E10 (10% ethanol in gasoline) mandate. It remains to be seen whether this will be met, as earlier goals of rolling out E5-E10 were later screwed back.

Singapore’s planned 1% SAF mandate for 2026 on the other hand, is now final, making it the first country outside of Europe with such a mandate in place soon. A last milestone was reached this month when the country’s parliament passed a bill to fund the program. Singapore has a rather unique setup in that the cost of the mandate will not directly fall on fuel suppliers or airlines. Instead, the Civil Aviation Authority will now formally be allowed to collect a SAF levy on passenger tickets, which in turn will be used to buy SAF in bulk to comply with the mandate. Meanwhile, Malaysia is considering introducing an export duty for waste oil, likely including POME and UCO. Contrary to Indonesia, Malaysia currently has no such duty in place, although crude palm oil exports are taxed at 10%. Still in Southeast Asia, Vietnamese policymakers have proposed a scheme whereby ethanol producers would be able to get a tax subsidy, a move that aims to ensure enough supply is available ahead of the scheduled E10 mandate kicking off in January. Meanwhile for Australia’s production subsidies, a discussion paper released this month indicated that low carbon fuels from UCO, municipal waste and green hydrogen based low carbon fuels do not qualify. This indicates the aim of the subsidy is really to support the domestic agriculture and forestry sectors, more than biofuels as such.

Latin America

The Brazilian Ministry of Mines and Energy said the country may miss its March 2026 deadline for the planned mandate increase to B16. This is not a major surprise as the current B15 mandate was implemented with 5 months delay as well. Similar delays could be expected for future years too, with a 1 percentage point increase planned every year to reach B20 by 2030. The vast majority of the FAME used to comply with these mandates is made from soybean oil and some animal fats, though this month a 1 percentage point UCO-biofuel submandate was proposed, as well as more incentives to accelerate biogas uptake. 

In Argentina, debates to increase biofuel mandates reached a gridlock as the senate could not agree on the topic. A proposed bill aims to increase both FAME and ethanol mandates to 15% in the next coming years, from currently 7.5% and 15%. Opponents argued that these increases would raise fuel prices by 10%. Concerns around price increases always strike a nerve in Argentina, where multi-digit inflation has been the norm for several years. Recently however, inflation has been somewhat more under control following ‘chainsaw austerity’ measures by the country’s atypical president Milei. The latter this week proved victorious again in the country’s midterm elections. Lastly, the Mexican government strengthened the regulatory framework for biofuel permitting, as well as clearing the way for potential fiscal support. To date, Mexico is the only sizable economy in the Americas without any significant uptake of biofuels.