Second-Generation Biofuels Market Size

Second-Generation Biofuels Market size was valued at USD 16.88 billion in 2025 and is expected to reach USD 174.34 billion by 2035, registering around 26.3% CAGR during the forecast period i.e., between 2026-2035. In the year 2026, the industry size of second-generation biofuels is evaluated at USD 20.88 billion.

Bioethanol is considered an excellent fossil fuel alternative and caters to the overall rise in energy demand. Presently, research is focused on streamlining sustainable and affordable feedstock supply. Attention has shifted to lignocellulosic waste as a potential feedstock for bioethanol, specifically in developing countries. Over the past few decades, second-generation bioethanol manufacturing from non-food lignocellulosic biomass including organic residues has gained enormous traction owing to its abundance, low cost, and renewability. It aligns with zero waste plans and circular economy strategies, allowing the world economy to decouple from the petrochemical industry.

Total cellulosic ethanol production in Brazil was about 55 million liters in 2022, with an increase of 15 million liters when compared to the previous year. Whereas, in the EU, there are handful plants in Finland, generating 10 million liters per year (MLY) from sawdust, Italy (28 MLY using biomass), Austria (30 MLY from wood sugar), Romania (65 MLY from wheat straw), and Bulgaria (50 MLY using corn stover) as of 2022.  The total capacity in the EU reached 183 MLY in 2022 as per a December 2022 report by the NCBI.  

Technological and R&D advancements have led to the adoption of raw material preparatory treatments with organosol, alkali, sodium hydroxide, acid, ionic liquid, high-frequency heating, sharp steam, lime, and ammonia. Among these, the most promising is organosol preparation and autohydrolysis. They improve the sugar yield, minimize the volume of insoluble lignin, and increase easily fermentable cellulose content. Furthermore, sludge thermobaric hydrolysis is estimated to surge the product output by twofold.

Millet Switchgrass Biomass Composition with Autohydrolysis

Sludge Composition using Autohydrolysis

Source: The Open Agriculture Journal

Husk and straw are the primary rice wastes and have gained widespread adoption as a sustainable energy source due to their high hemicellulose and cellulose compositions. Globally, roughly 120 million tons of rice husks are generated as waste each year. One primary application of rice husk is biofuel production. As per Research Nester estimates, the biofuels market size is projected to grow to USD 369.19 billion by the end of 2037 from USD 173.09 billion in 2024, exhibiting a CAGR of around 6%. By the end of 2025, biofuels industry is assessed at USD 180.36 billion. The U.S. accounts for the highest production capacity of 55%, followed by Brazil (27%), the EU (5%), China (3%), India (3%), Canada (2%), Thailand (1%), Argentina (1%), RoW (3%) in 2021.

Second-generation or Mixed Biorefineries in the U.S., in Million Gallons Per Year

Source: USDA