Investment Institute

Biofuels and the energy transition: Green sprouts or biowashing?

  • 21 September 2023 (10 min read)

Key points:

  • Biofuels come from biomass, and as such contain biogenic CO₂, while fossil fuels contain fossil CO₂
  • As a result, burning biofuels does not increase the concentration of CO₂ in the atmosphere, which is why biofuels are deemed relevant to help decarbonise our economies
  • However, ‘bio’ does not equal ‘sustainable’, because sourcing biomass and turning it into biofuels can have significant harmful impacts
  • A careful and comprehensive lifecycle analysis is needed to assess the merits of any biofuel or biofuel project
  • Two areas must be especially scrutinised: Is there competition with the food chain? And is there damage to the land and to local communities?
  • We believe biofuels can be a good solution in the energy transition, but that sustainable jet fuel and biomethane have better credentials than bioethanol and biodiesel
  • We suggest sustainably-minded investors could invest in this space, but selectively and after careful due diligence
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