Europe's feedstock crunch as renewable fuel demand rises

Europe’s renewable fuel ambitions are colliding with a hard reality: feedstock supply is tightening. Industry leaders warn that shortages of waste oils and fats – the backbone of biofuel production in the region – could become a defining constraint over the next decade.

The challenge is structural. Policy frameworks such as RED III (the EU’s Renewable Energy Directive), Renewable Fuel Standards and new mandates for sustainable aviation fuel (SAF) are converging on a future that will require far more feedstock than the world can plausibly supply.

A changing trade landscape

Global commodity flows are being reshaped by tariffs, export restrictions and a renewed push for self-reliance. Feedstocks are no exception. Indonesia has curbed exports of used cooking oil (UCO) and palm oil mill effluent (POME), while US policy is increasingly disincentivising foreign feedstock.

These moves may signal a broader trend: nations treating feedstocks as strategic assets rather than freely traded commodities. For Europe, this matters. With limited domestic waste pools, its renewable fuel strategy depends on imports. But access will hinge on decisions made in Washington, Jakarta and Beijing – not Brussels.

The Achilles’ heel of waste oils

Demand for renewable fuels is rising rapidly, not incrementally. Yet the supply of waste oils is plateauing.

• UCO, once a plentiful by-product, is now the most coveted feedstock. Collection rates in advanced economies are nearing saturation. Unlocking additional volumes is harder and costlier, pushing suppliers to North Africa, the Middle East and South America. Even under optimistic assumptions, recovery rates will not exceed 80 per cent – and global supply will still fall short of projected demand.
• Animal fats appear more abundant on paper but are contested by sectors such as oleochemicals, animal feed and cosmetics. European regulation further narrows what qualifies.
• Other waste lipids – including POME, tall oil derivatives and soapstock acid oils – are growing modestly but remain small pools with limited scalability.

Taken together, and putting cover crop potential aside for now, these sources can plausibly meet global demand through to around 2030. Beyond that, the rapid expansion of SAF and renewable diesel will push the system into tightness.

Imports under pressure

Europe’s reliance on imports introduces two variables:

• Price: Tight EU limits create a premium for waste feedstocks, drawing global flows toward Europe.
• Protectionism: Governments may begin to treat feedstock access as a matter of national strategy, not commerce.

In the short term, Europe may benefit as North America and Asia-Pacific lean more on crop-based feedstocks. But over time, Europe’s share of the global waste pool will shrink – even as its demand grows.

The open stack challenge

Under RED III, about 13 per cent of the mandate is left open – a space for least-cost solutions. In practice, it is where pressure will surface.

Aviation will almost certainly be served first, thanks to its higher willingness to pay and uncapped access to Part B feedstocks such as UCO. That leaves the road market balancing what remains. Electricity will play a role, but modestly this decade. Category 3 animal fats offer some upside but remain limited and under scrutiny. RFNBOs (renewable fuels of non-biological origin) and recycled carbon fuels are uncapped but costly and infrastructure-bound.

The likely outcome? Part A sub-mandates can be met, but the extra 4 per cent – once national transpositions are accounted for – is where scarcity bites.

The feedstock crunch

Europe faces a gap of around 5mn tonnes of renewable diesel needing feedstocks not yet available at scale. Even at high prices, this gap persists. That is the feedstock crunch.

Relief may lie in technologies that bypass lipid constraints – biomass-to-liquid and power-to-liquid projects promise exactly that. But timelines work against Europe. Projects take years to permit, finance and build. Most capacity will not arrive until well beyond 2030.

Cover crops could ease the strain if Part B caps were relaxed. They are early-stage but promising.

A web of trade-offs

Ultimately, Europe faces both a market challenge and a policy choice. Markets can evolve the open stack – through green hydrogen integration, RFNBO scaling or electrification. Policy can reshape it – by adjusting caps, refining targets or tightening vehicle standards.

Each path involves cost. Each raises the question: who bears that cost, and when?

This is not just a technological challenge – it is economic and political. Europe faces not a simple trilemma but a web of trade-offs between price, policy and pace.

Whether Europe can reconcile its ambitions with supply realities will depend on choices made in the next few years – and on how quickly alternative technologies can scale.

Author name: Louis Springate, Senior Analyst, Biofuels