The clean fuel market is complex, given regional realities and multiple production pathways. The scale, role and viability of each pathway are determined by techno-economic characteristics and market demand. This chapter presents a summary of how these characteristics vary by pathway and the market implications. Market dynamics can be analysed through the following four lenses (see Figure 5): –Demand: this defines how a fuel is purchased, where it can be used and how it competes with alternatives, including different abatement strategies. –Readiness and scalability: these determine how quickly supply can materialize and the ultimate supply potential given sustainable feedstock and resource availability. –Competitiveness: all pathways need to demonstrate a realistic route to commercial viability, based on current or future cost potential to attract investments. –Sustainability: only fuels that deliver verifiable lifecycle emission reductions and meet non- GHG safeguards will secure policy support, market access and demand.2.1 Clean fuel market and techno- economic dynamics Clean fuel market dynamics and characteristics of different pathways FIGURE 5 Source: Bain & Company.Sustainability — GHG emissions intensity — Pollution, land use and other envir onmental impactsDemand — Cost of alter natives — Customer pur chasing dynamics Readiness & scalability — Technology and supply chain maturity — Practical supply scale potentialCompetitiveness — Fuel cost competitiveness — Abatement cost potential at scaleClean fuel market dynamics Demand The clean fuels market is already well-established, supplying around 7 EJ (1.3% of global energy consumption), mainly as bioethanol and biodiesel blends in road transport and biogas use in industry, power and heat. Of this, 80% (5.5 EJ) is used in sectors with continued reliance on fuel-based solutions such as aviation, shipping, road transport and industry.22 Current uptake is policy-led in most settings, responding to a range of economic, social and environmental objectives. In Brazil, for example, biofuels supply 30% of domestic energy demand,23 catalysed by a series of policies first launched to reduce dependence on fossil fuel imports in response to oil price shocks in the 1970s. In the US, biomethane demand has grown, particularly in the heavy-duty vehicle market,24 supported by different state-level initiatives and federal mandates, such as California’s Low Carbon Fuel Standard25 and the Environmental Protection Agency’s Renewable Fuel Standard.26 Similar combinations of trade, industrial and climate policy are emerging elsewhere catalysing clean fuel demand.In Brazil, biofuels supply 30% of domestic energy demand, catalysed by policies launched to reduce dependence on fossil fuels in response to oil price shocks in the 1970s. Fuelling the Future: How Business, Finance and Policy can Accelerate the Clean Fuels Market 13

Fuelling the Future 2026