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The European biodiesel industry is undergoing a pivotal structural transition from conventional fatty acid methyl ester (FAME) to waste-based hydrotreated vegetable oil (HVO). According to data from IMARC Group, the market reached a valuation of USD 20.6 billion in 2025 and is projected to climb to USD 33.1 billion by 2034, representing a compound annual growth rate (CAGR) of 5.25% between 2026 and 2034. As the continent's primary tool for decarbonizing transport sectors that remain difficult to electrify, the industry is navigating a significant shift in both technology and feedstock.
This trajectory is underpinned by the RED III Directive (EU) 2023/2413, which mandates that EU member states achieve either a 29% share of renewable energy in transport or a 14.5% reduction in greenhouse gas intensity by 2030. These targets are supported by a 5.5% advanced biofuels sub-target, which must include at least 1% renewable fuels of non-biological origin (RFNBOs). Furthermore, demand-side regulations such as ReFuelEU Aviation now require a 2% sustainable aviation fuel (SAF) blend at EU airports starting January 1, 2025, scaling up to 70% by 2050. Similarly, FuelEU Maritime mandates a 2% greenhouse gas intensity cut beginning in 2025.
On the supply side, the industry is prioritizing refinery conversion over greenfield construction. Existing hydrocracker and hydrotreater units in Spain, Portugal, the Netherlands, Finland, and Italy are being repurposed to process waste and residue feedstocks. Supply remains concentrated in nations with robust refinery infrastructure and advanced waste-collection networks, specifically Germany, France, the Netherlands, Spain, and the Nordic countries. A key challenge for 2026 will be the competitive scramble to secure used cooking oil (UCO), animal fats, and agricultural residues at prices that remain viable under mandate-driven premiums.
Technological maturity favors HVO, as it produces a drop-in paraffinic fuel that can be blended without the vehicle or fuel-quality limits that constrain FAME. Major industry players are moving rapidly: Neste's Rotterdam refinery is currently the largest in Europe, with expansion projects adding 1.3 million tonnes of capacity. Repsol has invested EUR 250 million in its Cartagena unit for HVO and SAF production, while Galp is developing a 240,000-tonne unit in Sines. Additionally, bp has increased co-processing capacity at its Castellón refinery.
Germany continues to serve as the industry's largest market and primary pricing reference due to its dense collection network and established greenhouse gas reduction quotas. Meanwhile, the France-Netherlands-Belgium corridor acts as the physical hub for the trade, centered around the ARA (Amsterdam-Rotterdam-Antwerp) port area. As the maritime sector fully integrates into the EU Emissions Trading System (ETS) by 2026, marine fuel buyers face increasing pressure to switch to renewable diesel blends to manage both compliance and rising carbon costs.
Source: IMARC Group