Against the backdrop of today’s energy crisis and global warming, biodiesel has emerged as a favorite in the fuel sector, thanks to its advantages over conventional petroleum diesel—namely, lower carbon emissions, reduced sulfur content, a higher flash point, and more complete combustion. In response, governments worldwide have introduced policies aimed at increasing the blending ratio of biodiesel in fossil fuels.
In this paper, we examine the current status and evolving trends across the biodiesel industry’s upstream and downstream segments.
Upstream of the industrial chain: Depending on their resource endowments, countries have adopted different feedstocks for biodiesel production: Europe primarily uses rapeseed oil; Brazil, Argentina, and the United States rely mainly on soybean oil; Malaysia and Indonesia favor palm oil; while China predominantly utilizes waste cooking oil (UCO) and gutter oil.
Midstream of the industrial chain: In China, companies such as Excellence New Energy, Jia’ao Environmental Protection, Haixin Energy Technology, and Shangao Environmental Energy—whose production capacity is still under construction—along with overseas processors represented by NESTE, purchase and collect relevant raw materials to produce ester‑based and hydrocarbon‑based biodiesel.
Downstream of the industrial chain: Midstream manufacturers further process base and hydrocarbon-based biodiesel into environmentally friendly plasticizers, alkyd resins, and other chemical auxiliaries, while the primary feedstock for sustainable aviation fuel (SAF) is derived from hydrocarbon-based biodiesel.
(1) Upstream Raw Materials: China’s resource recovery rate for waste oils remains relatively low.
Depending on the collection method, waste oils can generally be categorized into three types: swill oil, gutter oil, and brown oil. Swill oil is derived from food waste retained and discharged by hotels, restaurants, and food-processing facilities; after refining, it becomes a product whose primary source is kitchen waste. Following preliminary treatment, distillation, and further refining, it can be processed into industrial-grade used cooking oil (UCO), which, with its relatively high quality, is typically used as a feedstock for hydrocarbon-based biodiesel. Gutter oil, on the other hand, originates mainly from sewers, grease traps, and wastewater‑treatment systems; it is of lower quality—characterized by poor sulfur content and elevated levels of water and impurities—and is generally employed by domestic biodiesel producers as the principal feedstock for producing ester‑based biodiesel (UCOME).
According to the ISCC definition, waste fats and oils collected exclusively in grease traps are classified as “brown fats” (with a high free fatty acid content), whose quality falls between industrial-grade blended oils and gutter oil. Biofuels derived from brown fats command a premium of USD 50 per ton over those produced from gutter oil, according to Argus data.
According to the European Commission’s regulations, UCO and waste cooking oil are both classified as Part B raw materials and are subject to usage limits; however, brown grease is categorized as a Part A raw material and has no usage limit.
[1] According to Argus, in December 2022, the European Union considered removing brown grease from the list of so‑called advanced feedstocks, or Part A, and reclassifying it under Part B. This would grant brown grease the same status as used cooking oil (UCO). The revised feedstock list will be subject to a public consultation until January 2, 2023, with the formal adoption date yet to be determined.
China’s rate of resource recovery from waste oils and fats remains low. In 2021, China generated 121 million tons of food waste, with an estimated oil content of 5%, corresponding to roughly 6 million tons of waste oils and fats. According to data from the National Development and Reform Commission, the officially recorded volume of gutter oil alone has already reached 400,000 tons per year, while other forms of waste oils and fats—many of which have yet to be properly managed—also exist. Taking into account factors such as consumption patterns, resource concentration, and collection coverage, the actual amount available for collection is approximately 8 million tons.
Although abundant waste‑oil resources are available for collection, the sheer number and widespread distribution of sources—ranging from catering establishments and hotels to slaughterhouses, institutional cafeterias, and residential kitchens—make centralized collection at the national level quite challenging. According to incomplete statistics, China currently collects and utilizes approximately 3 million tonnes of waste cooking oil, with a utilization rate of less than 40%. In 2021, about 1.5 million tonnes of “gutter oil” were processed into biodiesel, while 1.14 million tonnes were converted into UCO and exported abroad, with 65%–70% of these exports destined for the European Union.
(II) Midstream Processing: The trend of upgrading and transforming from ester-based to hydrocarbon-based feedstocks has already become evident.
First-generation biodiesel is produced by esterifying vegetable and animal oils (triglycerides of fatty acids) with alcohols, under the physicochemical catalysis of acids (such as sulfuric acid), bases (such as sodium hydroxide or solid alkalis), or biological enzymes, yielding fatty acid methyl esters (FAME).
However, the first-generation biodiesel suffers from low calorific value and a high cloud point, which limit its applications and require it to be blended at a fixed ratio—typically 20%. The new process addresses these limitations by modifying the molecular structure of the carboxyl functional groups in the oil, removing oxygen-containing moieties to convert them into corresponding alkanes, and then employing isomerization to lower the cloud point and enhance the fluidity of the biodiesel.
Second-generation biodiesel is produced by hydrogenation, which removes oxygen and a portion of the carbon from lipids to yield hydrocarbons. Its composition and structure are similar to those of petroleum-based diesel, but it places higher demands on process sophistication and equipment reliability.
China’s biodiesel industry currently operates at a low capacity utilization rate. Due to factors such as population size, dietary habits, and national food‑security strategies, the biodiesel produced in China is predominantly derived from used cooking oil. However, the used‑oil market remains fragmented and disorganized, leaving many biodiesel producers unable to secure sufficient feedstock for operations. Consequently, securing larger quantities of used oil at competitive prices has become the central challenge facing Chinese biodiesel companies.
At present, China’s biodiesel production capacity is predominantly ester‑based, but a clear trend toward transitioning to hydrocarbon‑based feedstocks is already emerging. According to statistics from the China Petroleum and Chemical Industry Federation, as of 2021, the combined annual production capacity of the country’s major biodiesel producers stood at 2.27 million tonnes, with the top ten companies accounting for nearly 2 million tonnes—underscoring a pronounced Matthew effect.
If the production capacity of small and medium-sized enterprises is also taken into account, we estimate that China’s nominal biodiesel capacity currently stands at approximately 2.5 to 3 million tonnes. Among listed companies, in addition to Excellence New Energy and Jia’ao Environmental Protection, Shangao Huaneng has also planned a 100,000‑tonne‑per‑year capacity in Shandong.
Hydrocarbon-based biodiesel is more demanding to produce than ester-based biodiesel. Among domestic listed companies, only Haixin Nengke has a production capacity of 400,000 tons per year (with a capacity utilization rate of 6.43% in 2021). In addition to Haixin Nengke, Shangao Huaneng and Zhuoyue Xineng have each planned hydrocarbon-based biodiesel production lines with capacities of 400,000 tons per year and 200,000 tons per year, respectively. Among unlisted firms, Yigao Environmental Protection (250,000 tons per year), Yangzhou Jianyuan (140,000 tons per year), and Shijiazhuang Changyou (200,000 tons per year) have also made related investments.
(3) Downstream Deep-Processing Segment: The Blue-Ocean Market for Sustainable Aviation Fuel (SAF) Awaits Development
Sustainable aviation fuel (SAF) is the fastest-growing type of bio‑liquid fuel and sustainable aviation fuel in recent years. The implementation of SAF policies stems from the substantial greenhouse gas emissions generated annually by the global civil aviation industry.
According to statistics from the International Air Transport Association (IATA), global jet fuel consumption currently stands at approximately 270 million tonnes per year, corresponding to greenhouse gas emissions exceeding 900 million tonnes—accounting for 3% of total global emissions.
Because greenhouse gas emissions from aviation fuel are largely released in the stratosphere, they have a more significant impact on climate change; moreover, aviation operators have limited technical options for achieving carbon reductions. Consequently, developing sustainable aviation fuels that can deliver substantial carbon emission reductions has become a global consensus within the international civil aviation industry.
Biojet fuel shares a similar composition and structure with petroleum-based jet fuel and exhibits comparable performance, meeting the power‑train and safety requirements of aircraft. Over its entire life cycle, it can reduce carbon dioxide emissions by more than 50%, making it the most practical and viable fuel‑substitution option and pathway for greenhouse‑gas mitigation available today.
Many countries are developing large-scale aviation biofuel markets. EU member states and the U.S. government have introduced a series of policies aimed at increasing the blending ratio of sustainable aviation fuel in aircraft fuels.
In October 2021, the Chinese government issued the “Action Plan for Peaking Carbon Emissions Before 2030,” which also stated: “Maintain petroleum consumption within a reasonable range, gradually adjust the scale of gasoline consumption, vigorously promote advanced bio‑liquid fuels and sustainable aviation fuels (SAF) as alternatives to conventional fossil fuels, and improve the energy efficiency of end‑use fuel products.”
According to IATA statistics, since 2008, more than 45 airlines worldwide have operated 370,000 flights using sustainable aviation fuel (SAF). Currently, countries such as the United States, Canada, and Norway have established large-scale markets for aviation biofuels and developed a complete industrial chain encompassing “feedstock—refining—transportation—fueling—and certification.” Major energy companies, airlines, and aircraft manufacturers are actively involved in the research, development, production, or pilot use of SAF. Based on IATA’s projections, global SAF consumption is expected to reach 7 million metric tons by 2025 and 20 million metric tons by 2030, with a potential market size exceeding US$50 billion [2].
[2] Based on S&P’s price data for Singapore FOB SAF.
Hydrotreated vegetable oil (HVO) isomerization is the lowest-cost and most widely adopted technology for producing sustainable aviation fuel. Currently, seven distinct technological pathways for sustainable aviation fuel have been certified under ASTM D7566.
Among mainstream process routes, the hydrotreating–hydroisomerization (HEFA) pathway uses non-edible animal and vegetable oils as feedstock and produces sustainable aviation fuel via a two-stage hydrogenation process; it is currently the lowest-cost and most widely adopted technology.
Low conversion rates and high costs remain the primary constraints on industry development. Although HEFA derived from vegetable and animal oils has already been deployed at scale, it continues to face steep feedstock costs.
Taking waste cooking oil as an example, the HEFA process currently achieves a conversion rate of up to 60%, meaning that producing one ton of sustainable aviation fuel requires 1.67 tons of waste oil.
Compared with the conversion rate of over 90% achieved by ester-based biodiesel, the high feedstock cost of biojet fuel is a major factor constraining the industry’s development. Its drawbacks primarily stem from the hydrodeoxygenation process: although this route can yield a product with a carbon-number distribution essentially identical to that of conventional petroleum‑based jet fuel, it also leads to a reduction in the molecular weight of the feedstock and generates substantial amounts of by‑products, thereby lowering the overall feedstock conversion efficiency.
China’s independent supply of sustainable aviation fuel is steadily advancing. In August 2020, Sinopec’s Zhenhai Refining & Chemical plant completed construction of its first 100,000‑ton‑per‑year biojet fuel production unit, which in May 2022 obtained certification from the Roundtable on Sustainable Biomaterials, making it the first product in Asia to receive RSB certification.
In January 2024, Henan Junheng Bio’s sustainable aviation fuel received airworthiness certification from the Civil Aviation Administration of China, making Junheng Bio the first private enterprise in China to obtain such certification.
In addition, private enterprises are actively expanding into the sustainable aviation fuel (SAF) sector. In February 2022, Donghua Energy signed a strategic cooperation agreement with UOP, planning to adopt the Ecofining process to build two 500,000‑ton‑per‑year SAF production facilities, with the first unit expected to come on stream in 2023. Meanwhile, in September 2022, Jia’ao Environmental announced a 1‑million‑ton‑per‑year SAF project to be developed in two phases; the first phase is slated for an investment of approximately RMB 4 billion to construct a 500,000‑ton‑per‑year SAF facility, with market sources indicating commissioning as early as September 2024.
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Source: Carbon-Reduction Star
