Biofuel Stocks

Why It Matters

We need to cut emissions from heavy-duty and long-distance transport.

29% of US greenhouse gas emissions in 2019 came from the transportation sector. 58% of those emissions comes from light-duty vehicles, but thankfully electric vehicles are coming to the rescue as they become cheaper, better and more popular.

Harder to solve are the other parts of the transportation sector: medium- and heavy-duty trucks account for 24% of emissions, aircrafts 10%, ships and boats 2%. Right now, most of these modes of transportation run on diesel, which is a distillate fuel oil that's often refined from crude oil at petroleum refineries. Radically reducing carbon emissions from these types of vehicles requires switching from diesel to low-emission fuels.

Biofuels - especially biomass-based diesel fuel - that are made from plants or waste fats are among the most promising candidates for drastically cutting emissions. Biomass-based diesel - also known as advanced biofuels - is made from vegetable oils, animal fats, or recycled restaurant grease. These fuels are generally blended with petroleum diesel and can cut carbon emissions significantly.

We need to do it quickly.

According to the International Energy Agency (p. 107), biofuels accounted for only 4% of global transport energy demand in 2020. To get the world to net-zero emissions by 2050, that share needs to rise to 14%. This means the share of biofuels needs to increase by about 4.5% every year between now and 2050.

But there are some obstacles in the way of expanding biofuel production. Because manufacturing plant-derived biofuels like ethanol requires conventional crops like corn and sugarcane, these crops directly compete with arable land that can be used for food production. So the increase in ethanol production means increased prices for foods that use these crops. And it's not even clear if emissions from ethanol are that much lower than from conventional diesel if we look at the entire life-cycle of ethanol (land-use for crops, refining and processing, and burning of ethanol in vehicles).

Given these concerns, advanced biofuels that use waste oils and fats are the hope for the future, not least because they complete the circle in a circular economy.

How we choose which biofuel companies to include.

We only include companies that make advanced biofuels in the Climate Index. They help lower emissions from hard-to-electrify segments like long-distance freight and airlines.

Because of concerns about ethanol's sustainability, we chose to exclude companies whose revenue share from ethanol is bigger than advanced biofuels. And as always, we exclude penny stocks whose share prices were less than $0.50 in our last update. This list represents all of the biofuel stocks traded on the New York Stock Exchange that pass these two criteria.

If you are a Carbon Collective member, you own all of these companies through the Climate Index.