Renewable fuels hold their ground
The first quarter of this year was characterised by the Middle East conflict and the closure of the Strait of Hormuz, creating the largest supply disruption in the history of the global oil markets and leading to extreme volatility in the crude oil and oil products prices.
This particular disruption adds to multiple changes that were already facing the renewable energy industry last year, including higher raw materials costs, uncertainty surrounding regulatory support, geopolitical tensions and more. Some of these changes have dampened producers’ willingness to invest in production.
On the other hand, the recent developments also highlight the role that renewable fuels can play in contributing to the energy supply security, especially for those sectors still heavily reliant on fossil fuels, such as aviation. Sustainable aviation fuel (SAF) has been gaining momentum due to supportive regulatory frameworks increasing demand from the aviation industry in the last year.
Despite the growth potential, SAF use is still limited, likely to have represent only 0.7% of airlines’ total fuel consumption last year. IATA also projects that by the end of this year, global SAF production growth is projected to slow down and reach 2.4 Mt.
Navigating through uncertainties with innovation and increased production capacity
Despite many changes impacting the renewable fuels industry, there’s one thing that Neste firmly believes in: as the world needs to reduce climate impact and shift away from fossil fuels, there will be a growing market for renewable fuels in the long term.
Reducing greenhouse gas (GHG) emissions from hardto- abate industries such as aviation and heavy-duty road transportation in the near term is heavily dependent on drop-in solutions such as SAF and renewable diesel. While the recent market environment has been challenging, the company remains committed to further strengthening its position as the world’s leading producer of SAF and renewable diesel.
The company’s key sources of competitive advantage stem from global raw material sourcing, unique pretreatment capabilities and a global production footprint at industrial scale which gives us the flexibility to react to the changes in the market. In addition to the capability to source renewable raw materials from all around the globe, the ability to use an extensive portfolio of raw materials also allows us to respond to the needs of different markets and customers.
Neste has been constantly working to diversify its current raw material portfolio with scalable new options, including exploring novel vegetable oils produced with regenerative agricultural practices. In addition to enhancing raw materials sourcing, having refining capacity on three continents also enables global value-chain optimisation for Neste.
The company produces renewable fuels at its refineries in Finland, the Netherlands and Singapore and through a joint operation with Marathon Petroleum in Martinez, California.
Today, its annual nameplate production capacity of renewable products is approximately 5.5 million tons. When the expansion of the Rotterdam refinery is completed, this will grow to 6.8 million tons in 2027.
End-users remain committed to reducing their climate impact
Renewable fuels are an impactful and readily available solution for those in the transportation and aviation sectors looking to immediately reduce their climate footprint over the next few years. Neste has built partnerships with major industry players, underscoring the steady demand for renewable fuels from heavy-duty sectors.
A key example is the expanded SAF partnership with United Airlines in October 2025, which made the airline, the first commercial airline carrier to purchase SAF for use on flights from three new major US airports: in Texas, New Jersey and Washington DC.
The cargo industry also demonstrated increasing interest in SAF with leaders such as DHL, Amazon Air and FedEx either starting or continuing to incorporate Neste’s SAF into their operations. Commitment to renewable fuels remained equally strong in the road transportation and heavy industry sectors, where renewable diesel is a core component of their decarbonisation strategies. Global logistics companies, such as DB Schenker, continued to expand the adoption of renewable diesel across their extensive road freight networks. These developments underscore the role of renewable fuels as a crucial tool for achieving measurable climate impact reductions across various hard-to-abate sectors.
Regulatory support is still crucial to guarantee market certainty
Regulatory support in the form of mandates and incentives, remains crucial to ramp-up renewables fuel demand and production.
Recently, Neste saw positive developments in biofuel regulation both in the US and EU, largely supporting longterm renewable fuels demand. For example, in the US, 45Z was the only IRA-created credit the government extended and expanded in the One Big Beautiful Bill (OB3), clearly showing a commitment to stimulate renewable fuels.
At the end of the first quarter, the US finalised its Renewable Fuel Standards to strengthen American energy security. The record-high renewable volume obligations give a clear and strong demand signal for the biofuels industry and have a significant positive impact for Neste’s US operations.
EPA’s proposed renewable volumes obligations (RVOs) for 2026 and 2027 for biomass-based diesel are commendable and appropriately recognise the growth of the industry.
Those achievable volumes set the stage for more abundant and more cost-competitive fuel choices for American businesses. In Europe, the EU and UK SAF mandates went into force at the start of 2025, both starting with a 2% SAF supply obligation.
Whereas the ReFuelEU mandate remains flat until 2030, the UK mandate will increase linearly to 10% in 2030, practically doubling to almost 4% in 2026. In the Asia-Pacific region, this year will bring the start of Singapore’s 1% SAF target as other countries in the region continue the development of similar supporting policies.
These developments will increase the demand for SAF although the growth of SAF supply is expected to outpace the growth of SAF demand until at least 2030 when the ReFuelEU mandate increases to 6%. As far as renewable diesel developments in Europe are concerned, in the EU the implementation of the revised Renewable Energy Directive (RED III), is expected to increase renewable fuels demand. For example, at the end of 2025 the German government adopted its proposal for the implementation of the stricter requirements of RED III, similar to developments in other countries such as France and the Netherlands.
Looking ahead
While there have been significant challenges, the consistent commitment from hard-to-abate industries and positive regulatory developments reinforce the powerful and indispensable role of renewable fuels in the global transition to an economy with reduced climate impact.
Neste remains confident that renewable diesel and SAF will continue to be critical enablers in achieving significant GHG emission reductions across hard-to-abate sectors for the rest of the year and beyond.
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