Global Market Update: A Review of the Market And Biofuels’ Position on the World Energy Stage

Tammy Klein, Future Fuel Strategies

World Biofuel Markets Conference

March 2017

Presentation Overview

Paris Agreement & Biofuels,

Fuel Efficiency &

ZEVs

Biofuels Fuel Economy

Zero Emission Vehicles

Conclusion

Future Fuels Outlook Service Focus on Non-Conventional Fuels & Vehicles, Their Drivers & Impact on Fuel Demand

Their Drivers & Impact on

Conventional Fuels & Vehicles

Biofuels

Advanced Alternative

Fuels

Fuel Economy Zero Emission Vehicles

Connectivity

Sustainable Mobility

Idea is to look at these issues in a holistic, integrated way to draw out key trends and intelligence that are helpful in your work and business and allow you to assess strategic threats and opportunities

©Future Fuel Strategies, www.futurefuelstrategies.com. All rights reserved. Source: UN Treaty Collection, Oct. 6, 2016

Countries Ratifying the Paris Agreement Most Are Planning/Implementing LCFV Initiatives as Transport Is a Major Focus Area for GHG Reductions

Key

Ratified Paris Agreement

Ratified Paris Agreement & plans or is implementing LCFV initiatives/policies

Key

RT, FE, EV

RT & FE

RT & EV

RT Only

FE & EV

FE Only

EV Only

All Measures

Sources: Future Fuel Strategies citing data from Renewables 2016 Global Status Report, REN 21; Intended Nationally-Determined Contributions (INDCs) Offer Opportunities for Ambitious Action on Transport and Climate

Change, Partnership for Low Carbon Transport; Global Renewable Fuels Alliance RT=Renewable Transport, FE=Fuel Efficiency, EV=Electric Vehicles

INDCs & Targets and/or Policy Support for Renewable Transport, Fuel Efficiency & Electric Vehicles

BIOFUELS

Key

National Renewable Transport (RT) Obligation

Local RT Obligations

INDCs for Biofuels

National RT and INDCs for Biofuels

Sources: Future Fuel Strategies citing data from Renewables 2016 Global Status Report, REN 21; Intended Nationally-Determined Contributions (INDCs) Offer Opportunities for Ambitious Action on Transport and Climate Change, Partnership for Low Carbon Transport; Global Renewable Fuels Alliance

Global Renewable Transport Obligations & Global INDCs that Reference Biofuels

Global Biofuels Market Is Still Growing Biofuels Are the #1 Option to Reduce Transport GHGs under the Paris Agreement …

Global ethanol production is expected to expand modestly about 11% from 116 billion liters (30.6 billion gallons) in 2015 to 128.4 billion liters (33.9 billion gallons) by 2025 and 50% of it will come from Brazil

Biodiesel production is expected to increase 34% from 31 billion liters (8.2 billion gallons) in 2015 to 41.4 billion liters (10.9 billion gallons) by 2025, driven by policies in the U.S., Argentina, Brazil and Indonesia

Though biofuels remain controversial in the U.S., EU and elsewhere, it will be hard to do.

Global Liquid Fuel v. Biofuels Demand …But Most Analyses Show Biofuels Still Capture a Very Small Piece of Overall Fuel Demand through 2045…Why?

Source: IRENA, 2016

Challenges for Advanced Biofuels The Crux: Cost Competitiveness with Conventionals

According to IRENA, the production cost of advanced biofuels is likely to amount to USD 0.60-1.10 per liter by 2045.At oil prices below USD 80/bbl, advanced biofuels would have difficulty competing with fossil-based gasoline and diesel.

Source: IRENA, 2016

FUEL ECONOMY

INDCs & Targets and/or Policy Support for Fuel Efficiency Improvement

Source: Future Fuel Strategies citing Intended Nationally-Determined Contributions (INDCs) Offer Opportunities for Ambitious Action on Transport and Climate Change, Partnership for Low Carbon Transport

Key

Fuel Efficiency INDCs or Policy Support

Is Replacing Fuel Demand Realistic? Oil demand will decline for passenger cars, but increase for maritime, freight, aviation and petrochemicals

Efficiency drives down fuel demand for passenger cars; biofuels as well to a smaller extent. Biofuels needed to help decarbonize maritime, freight and aviation – those are not easy or

perhaps even practical sectors to electrify.

Source: IEA, November 2016

With These Efforts, Fuel Economy to Improve Rapidly through 2040

ExxonMobil: Average fuel economy of new cars worldwide will rise from about 30 mpg in 2015 to close to 50 mpg in 2040.

ZERO EMISSION VEHICLES

INDCs & Targets and/or Policy Support for Zero Emission Vehicles

Key

ZEV INDCs or Policy Support

Source: Future Fuel Strategies citing data from Intended Nationally-Determined Contributions (INDCs) Offer Opportunities for Ambitious Action on Transport and Climate Change, Partnership for Low Carbon Transport

EVs a Tiny Part of the Car Market However Growth Has Been Exponential in Last 5 Years and Expected to Continue

European and Asian markets have especially shown dramatic EV growth most recently, surpassing North America’s electric vehicle sales in 2015

Electric vehicle market growth through 2016 has almost entirely been in automobile markets with substantial regulatory policy and financial incentives in place

Source: ICCT/ZEV Alliance, 2016

Are EVs Really a Threat to Oil? (1/2) …Fuel Efficiency Has a Larger Impact Initially…

Question is when that threat will really materialize and how large the threat really is

The 35% global EV penetration rate predicted by BNEF may be too bullish

EV growth will be much slower in emerging markets outside of China

Are EVs Really a Threat to Oil? (2/2) …But EVs Coupled with Mobility Technology Could Change the Game by 2035…

CONCLUSIONS

Energy Demand is Going to Change Low Carbon Demand to Increase by 2040, While Oil and Coal Decrease

Demand for low carbon energy to increase, according to IEA with China and Africa largest share

Low carbon here is primarily renewables, but efficiency measures (including fuel economy), ZEV penetration and biofuels in transport important, too

Source: IEA, November 2016

Transportation Demand by Sector and Region through 2040

According to ExxonMobil, global transportation-related energy demand is projected to increase by about 25%, while total miles traveled per year by cars, sport utility vehicles (SUVs) and light trucks will increase about 60%, reaching about 14 trillion in 2040.

Huge growth in commercial sector as shown, a major opportunity for biofuels Largest increases in Asia Pacific, Africa and Latin America

Net Oil Imports Rise in China, India & Decline in the U.S. and Europe

Greatest gains are in efficiency (including fuel efficiency) Evs and NGVs make the largest impact in China, but not in the other regions IEA expects renewables to make a small contribution by 2040

Source: IEA, November 2016

Conclusions

Paris Agreement The Paris Agreement and reducing GHGs will continue to be a major driver for these

initiatives in transport.

Biofuels Demand continues to grow, but still a small portion of overall fuel demand Advanced biofuels continue to be challenge on numerous fronts, but there could be

lights at the end of the tunnel with new policies focused on facilitating their use (e.g. EU)

Fuel Efficiency A serious driver of demand decline for fuels, and this will continue Some markets still have no fuel economy standards in place and they are in huge

growth areas such as Latin America, Asia and Africa

ZEVs ZEV market growing fast, but a small portion of the overall global fleet ZEVs coupled with autonomous technology and ride sharing represent a major threat

in the long-term for fuel demand globally in the passenger car fleet

Questions?

Tammy Klein, Principal Future Fuel Strategies

+1.703.625.1072 (M); tammy@futurefuelstrategies.com http://www.futurefuelstrategies.com

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Future Fuels Outlook Service Focus on Non-Conventional Fuels & Vehicles, Their Drivers & Impact on Fuel Demand

Their Drivers & Impact on

Conventional Fuels & Vehicles

Biofuels

Advanced Alternative

Fuels

Fuel Economy Zero Emission Vehicles

Connectivity

Sustainable Mobility

Idea is to look at these issues in a holistic, integrated way to draw out key trends and intelligence that are helpful in your work and business and allow you to assess strategic threats and opportunities

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