Executive Summary
Ethanol has spent decades as a fuel additive – blended into gasoline to boost octane and reduce tailpipe emissions. As electric vehicles (EVs) erode petrol demand in many markets, the industry is asking what comes next. One credible pathway is a gradual pivot towards ethanol as a versatile chemical feedstock, feeding into ethylene, polyethylene, solvents and other intermediates. At Energy Solutions, we quantify how rapidly fuel demand may plateau, where chemical demand could grow, and what this means for existing and planned ethanol capacity.
- Under Energy Solutions' central scenario, global fuel ethanol demand peaks around the early 2030s, growing modestly from today's ~110–120 billion litres/year to 120–140 billion litres/year, before plateauing as EV adoption accelerates in light-duty transport.
- In contrast, potential ethanol demand as a chemical feedstock (primarily via ethanol-to-ethylene routes) could grow from a low single-digit share today to 20–35 billion litres/year equivalent by 2035 if green-chemicals premiums and policy signals materialise.
- Ethanol-to-ethylene (EtE) processes currently deliver ethylene at an indicative 1,300–1,900 USD/t cost range, generally above naphtha-based ethylene but competitive in regions with high fossil feedstock or carbon prices.
- Plants located in or near integrated biorefineries and chemical clusters are best positioned to pivot towards chemical offtake, benefiting from existing utilities, hydrogen, and CO2 handling infrastructure.
- For producers and investors, the key strategic move is to treat fuel and chemical markets as a portfolio – not a binary choice – using flexible offtake contracts and modular conversion capacity to hedge policy and price uncertainty.
What You'll Learn
- Current Landscape: Fuel-Dominated Ethanol Demand
- Demand Scenarios: EVs, SAF & Regional Policies
- Ethanol-to-Chemicals Pathways & Cost Benchmarks
- Portfolio Economics: Fuel vs Chemical Offtake
- Case Studies: Strategic Pivots & Co-Location
- Devil's Advocate: Overcapacity, Feedstocks & Lock-In
- Outlook to 2030/2035: Who Wins & Who Loses?
- Implementation Guide: For Producers, Traders & Lenders
- FAQ: Pricing, Contracts & Transition Risks
Current Landscape: Fuel-Dominated Ethanol Demand
Today, the overwhelming majority of ethanol is used as a fuel component – blended into gasoline at various mandates: E10 in many OECD markets, E20–E27 in Brazil and parts of Asia, and higher blends in flex-fuel vehicles. First-generation ethanol from maize, sugarcane, and other starch/sugar feedstocks dominates volumes, with second-generation (cellulose) ethanol still a small fraction.
Ethanol's value in fuel markets stems from its octane number and oxygen content, which help refiners meet emissions and knock resistance specs. However, as EVs displace internal combustion engines, the long-term demand for gasoline – and therefore blending ethanol – is capped or declining in some regions.
Indicative Global Ethanol Demand by Segment (2024)
| Segment | Demand (bn litres/year) | Share of Total (%) |
|---|---|---|
| Fuel blends (gasoline) | 100 – 110 | 85 – 90% |
| Industrial & solvents | 5 – 8 | 4 – 7% |
| Beverages & other | 6 – 9 | 6 – 9% |
Ranges reflect differences across data sources and year-to-year variability; values are indicative only.
Demand Scenarios: EVs, SAF & Regional Policies
Energy Solutions' demand modeling combines EV adoption curves, fuel-efficiency improvements, and policy trajectories to map future ethanol demand in three broad blocks: fuel, SAF feedstock (via alcohol-to-jet), and chemical feedstock.
While regional dynamics differ, a common pattern emerges:
- Fuel ethanol demand stabilises or declines in high-EV penetration markets after 2030.
- Demand remains more resilient in emerging economies with slower EV adoption and expanding vehicle fleets.
- SAF and chemical feedstock applications offer new growth vectors but require different infrastructure and offtake contracts.
Stylised Global Ethanol Demand by Use (2024–2035)
Source: Energy Solutions demand scenarios; stylised values for fuel, SAF feedstock and chemicals.
Ethanol-to-Chemicals Pathways & Cost Benchmarks
Ethanol can be dehydrated to ethylene (EtE), which in turn feeds into polyethylene, ethylene oxide, and a wide array of petrochemical value chains. EtE technologies are commercially proven – especially in Brazil – but compete against naphtha or ethane crackers.
Indicative Ethylene Production Cost Benchmarks (2026)
| Route | Feedstock | Indicative Ethylene Cost (USD/t) | GHG Intensity vs Naphtha Cracker |
|---|---|---|---|
| Naphtha Cracker | Fossil naphtha | 1,000 – 1,400 | Baseline |
| Ethanol-to-Ethylene (1st-gen) | Corn/sugarcane ethanol | 1,300 – 1,900 | 20 – 60% lower, policy-dependent |
| Ethanol-to-Ethylene (2nd-gen) | Cellulosic ethanol | 1,500 – 2,200 | 40 – 80% lower, feedstock- and LCA-dependent |
Costs exclude distribution and vary by region, feedstock price, and carbon policy.
Ethylene Cost vs GHG Intensity (Indicative)
Source: Energy Solutions cost & LCA modeling; stylised trade-off between cost and emissions.
Portfolio Economics: Fuel vs Chemical Offtake
For producers with flexible dehydration and offtake options, ethanol's future is less about abandoning fuels and more about dynamically allocating molecules between fuel and chemical markets.
In one simplified example, a producer with 400 million litres/year capacity could allocate:
- 70–80% to fuel in early years when mandates and pricing are strong.
- Gradually shift towards 40–50% fuel and 50–60% chemicals as EVs grow and green-chemicals premiums appear.
Stylised Revenue Mix: Fuel vs Chemical Feedstock
Source: Energy Solutions portfolio model; illustrative revenue composition for a flexible producer in 2030.
Case Studies: Strategic Pivots & Co-Location
The following stylised case studies illustrate how ethanol producers and chemical companies are positioning for this transition.
Case Study 1 – Brazilian Sugarcane Ethanol Producer Adding EtE Unit
Context
- Region: Brazil with deep ethanol expertise and emerging green-chemicals initiatives.
- Project: 120 kt/year ethylene unit integrated with existing sugarcane ethanol facility.
- Offtakers: Regional polyethylene producer and global brand owners seeking bio-based plastics.
Indicative Economics
- Incremental capex: 250–320 million USD.
- Ethylene production cost: 1,350–1,650 USD/t, depending on cane yields and ethanol prices.
- Premium vs fossil ethylene: 150–300 USD/t under long-term contracts.
The project leverages existing fermentation, utilities, and logistics, reducing marginal cost. Long-term polymer offtake agreements are critical to underpin financing and de-risk price volatility.
Case Study 2 – North American Corn Ethanol Plant Exploring Chemical Pivot
Context
- Region: U.S. Midwest, facing uncertain long-term gasoline demand and evolving LCFS policies.
- Strategy: Evaluate retrofits to enable partial EtE conversion, while maintaining fuel ethanol output in the near term.
- Partners: Prospective chemical offtakers and infrastructure investors.
Key Lessons (Indicative)
- Retrofitting existing plants is technically feasible but constrained by site layout and utilities.
- Access to ethylene pipeline networks or local chemical clusters is crucial; otherwise, logistics erode margins.
- Producers favour staged investments tied to offtake contracts rather than speculative full conversions.
This case shows why many fuel ethanol producers are hesitant to pivot until clearer chemical offtake structures emerge.
Devil's Advocate: Overcapacity, Feedstocks & Lock-In
While the "ethanol-to-chemicals" narrative is attractive, there are structural risks.
Overcapacity & Policy Risk
- Fuel policy volatility: Changes in blending mandates or LCFS rules can rapidly alter fuel margins, affecting the economics of any portfolio strategy.
- Chemicals overbuild: If too many producers add EtE capacity, green ethylene premiums could compress, undermining the rationale for investment.
Feedstock and Sustainability Concerns
- Crop-based constraints: Over-reliance on maize or sugarcane raises land-use and food vs fuel debates; regulators may tighten sustainability criteria.
- Cellulosic upside, but with cost: Residue-based ethanol offers stronger sustainability credentials but currently at higher cost and technology risk.
Infrastructure Lock-In
- Brownfield inertia: Existing plants may prefer incremental debottlenecking over transformative retrofits, delaying adaptation.
- Regional imbalance: Ethanol production often sits far from major petrochemical hubs, making logistics a critical bottleneck.
Outlook to 2030/2035: Who Wins & Who Loses?
By 2035, Energy Solutions expects three broad categories of ethanol assets:
- Flexible biorefinery hubs: Co-located with chemical clusters, able to switch between fuel and chemical offtake; likely to enjoy the most resilience.
- Fuel-focused plants in slower-EV regions: Continue to serve local blending mandates but face increasing competition and policy scrutiny.
- Stranded or consolidated plants: In regions where EV adoption and policy shifts rapidly erode gasoline demand without alternative offtakes.
Producers who start planning for chemical options today – even at small scale – are better positioned to avoid sudden disruptions later in the decade.
In parallel, system planners and investors often cross-reference this transition analysis with our briefs on cellulose ethanol cost competitiveness, integrated biorefinery concepts that co-produce fuels, heat and chemicals, and downstream co-product gases such as bio-LPG for off-grid and rural markets, to build a coherent view of the wider bioenergy portfolio.
Implementation Guide: For Producers, Traders & Lenders
To navigate the transition, stakeholders can follow a staged strategy.
- Map regional demand trajectories: Combine EV and fuel policy forecasts with local chemical demand to understand long-term exposure.
- Assess co-location options: Identify sites near chemical clusters, pipelines or ports that can support EtE or other chemical routes.
- Start with offtake MOUs: Engage chemical buyers early to test appetite and price tolerance for bio-based ethylene or derivatives.
- Retain optionality: Design new plants and retrofits to accommodate future process units rather than locking in fuel-only layouts.
- Integrate into biorefinery roadmaps: Align ethanol strategies with broader biomass use, including cellulosic feedstocks and integrated co-product platforms.
Methodology Note
All demand, cost and emissions figures presented are indicative and based on Energy Solutions scenarios, public data, and in-house modeling. They are not forecasts or investment recommendations. Actual outcomes will depend on technology progress, policy, and market behaviour.