Hydrotreated Vegetable Oil (HVO), commonly known as renewable diesel, is emerging as one of the most commercially mature low-carbon fuels capable of decarbonizing sectors where electrification remains economically or technically challenging. Heavy-duty road transport, construction equipment, mining, agriculture, rail, and marine operations continue to rely on diesel due to its high energy density and operational flexibility. With global diesel consumption exceeding 1.4-1.5 billion tonnes annually, HVO offers an immediate drop-in solution that requires no modification to existing engines, storage infrastructure, or distribution networks.
Unlike conventional biodiesel (FAME), HVO is produced by hydrotreating renewable lipid feedstocks, generating a paraffinic fuel chemically similar to fossil diesel. Depending on feedstock and production pathway, HVO can reduce lifecycle greenhouse gas emissions by 50-90%, while delivering superior oxidation stability, cold-flow properties, and engine compatibility. This positions HVO as a critical transition fuel under increasingly stringent decarbonization policies across Europe, North America, and Asia.
Global renewable diesel and HVO production capacity has expanded rapidly, reaching approximately 18-20 million tonnes per annum (MTPA) in 2025, compared with less than 3 MTPA a decade ago. Industry forecasts indicate global capacity could exceed 40-50 MTPA by 2035, supported by renewable fuel mandates, carbon pricing mechanisms, and increasing corporate net-zero commitments. The global renewable diesel market is currently valued at approximately USD 35-40 billion and is expected to more than double over the next decade.
Feedstock availability remains the industry’s defining challenge. More than 70% of global HVO production currently depends on waste-based feedstocks such as used cooking oil (UCO), animal fats, tall oil, and waste vegetable oils, while virgin vegetable oils, including soybean, rapeseed, and palm oil, continue to face increasing sustainability scrutiny. As Sustainable Aviation Fuel (SAF), renewable chemicals, and bio-based materials compete for the same feedstocks, access to certified sustainable carbon sources is rapidly becoming the industry’s most valuable competitive advantage.
The value chain is increasingly consolidating around vertically integrated players. Companies including Neste, Diamond Green Diesel (Valero-Darling Ingredients), Eni, TotalEnergies, Marathon Petroleum, Phillips 66, Repsol, Preem, and ENOC are expanding renewable refining capacity while investing upstream in waste feedstock collection, pretreatment, and supply-chain integration. Traditional refiners are converting existing hydroprocessing units into flexible biorefineries capable of producing both HVO and Sustainable Aviation Fuel, allowing optimization based on evolving market economics.
Geographically, Europe remains the largest policy-driven market under the Renewable Energy Directive (RED III), while North America continues to accelerate through the Renewable Fuel Standard, California’s Low Carbon Fuel Standard (LCFS), and the Inflation Reduction Act. Meanwhile, Southeast Asia is emerging as a critical feedstock supplier, although increasing traceability requirements and sustainability certification are reshaping global trade flows.
By 2035, HVO is expected to become a cornerstone of low-carbon transport, particularly across heavy-duty mobility, industrial equipment, marine applications, and distributed power generation. While electrification will dominate light-duty transport, renewable liquid fuels will remain indispensable for sectors requiring high energy density and operational reliability.
The long-term winners will not simply be fuel producers, but companies that secure sustainable feedstocks, integrate renewable refining with circular supply chains, and develop flexible biofuel platforms capable of serving both renewable diesel and SAF markets. In the renewable fuels economy, feedstock security – not refining capacity – is increasingly becoming the ultimate source of competitive advantage.
