The dual logic of renewable fuels: a market built on molecules and metadata

The renewable fuels sector has long been positioned as a cornerstone of the global energy transition, offering an immediate decarbonization lever, especially in hard-to-electrify sectors like aviation, heavy transport, and shipping. But while the molecules may flow through familiar infrastructure, the business model behind renewable fuels is anything but traditional.

A recent announcement by UPM, the Finnish bioeconomy frontrunner, brings this contrast sharply into focus. In May 2025, UPM announced it will discontinue its Rotterdam biofuels refinery project, citing capital allocation considerations and a sharpened focus on scalable growth opportunities within its biofuels strategy (UPM press release, May 2025). Behind the corporate language lies a deeper signal to the market: building a profitable and scalable renewable fuels business is structurally more complex than many traditional energy companies are used to.

Beyond energy content: the dual-dimensional nature of bio-based fuels

In traditional oil-based fuels, value is single-dimensional: it’s fundamentally tied to energy content and driven by global commodity markets. Margins are thin, differentiation is limited, and efficiency in production and distribution is paramount.

By contrast, renewable fuels operate on a dual-dimensional value model:

• The first dimension is still the energy value of the fuel, much like oil-based products.
• But the second, and increasingly dominant, dimension is the bio credit value: the carbon reduction or sustainability attribute associated with each batch of fuel, often quantified as CO2e reduction per ton and monetized through various regulatory or voluntary carbon markets.

Crucially, this second value stream is not uniform. It varies significantly by feedstock, production method, location, and compliance context. It’s also dynamic, subject to changing policy frameworks (like the EU ETS, LCFS, and RED III), credit market fluctuations, and corporate sustainability demand.

To maximize value in this dual model, renewable fuel producers must track, trace, and optimize not only physical supply chains but also carbon intensity scores, batch-level feedstock origins, and credit market movements. This requires a level of data granularity, regulatory agility, and trading sophistication that is foreign to many companies rooted in oil-era logistics and commodity trading.

Capturing the strategic opportunity of renewable fuels requires a new kind of approach

UPM’s recent decision to discontinue its Rotterdam biofuels refinery project highlights a broader market reality: succeeding in renewable fuels isn’t just about building capacity—it’s about adopting a fundamentally new operating approach. Unlike traditional fuel businesses, renewable fuels are shaped by dynamic carbon markets, policy frameworks, and feedstock variability. Unlocking their full value requires alignment across technology, regulation, and commercial strategy. Here are four key dynamics shaping this opportunity:

1. Capital investment requires policy alignment
   Building biorefineries involves significant upfront investment, while credit mechanisms and policy mandates can shift quickly. Strategic success hinges on aligning capital allocation with clear, forward-looking regulatory trajectories.
2. Feedstock complexity demands supply chain agility
   Renewable fuels rely on limited and inconsistent feedstocks, such as used cooking oil and animal fats, that require global sourcing, traceability, and rapid responsiveness to local regulations.
3. Carbon credit markets are valuable but require precision
   Bio credit prices vary widely by geography and regulation. The ability to anticipate, value, and act on these differences, sometimes within months, is key to maximizing revenue potential.
4. Traditional operating models must evolve
   Renewable fuel businesses need more than physical assets—they need digital infrastructure for traceability, credit separation, and optimization. This is no longer just refining; it’s managing data, regulation, and carbon at speed and scale.

A market maturing through growing pains

Does this mean renewable fuels are too hard to scale? Not at all. But it does mean the playbook for success looks nothing like the oil industry’s past. Winning in renewables will require new capabilities:

• Digital traceability systems to link carbon attributes with physical products in a verifiable and marketable way.
• Bio credit market access and pricing intelligence to dynamically decide whether to embed credits with fuel sales or monetize them separately.
• Data-driven optimization models to route the right feedstocks to the right production pathways and markets based on credit values, not just yield.
• Strategic ecosystem partnerships with feedstock suppliers, regulators, and credit platforms to co-create value.

Some energy players will adapt and thrive in this new model. Others may opt to retreat or refocus. But one thing is clear: the renewables business is no longer just about building biorefineries, it’s about mastering the interplay of carbon data, regulation, and transactional flexibility.

Conclusion

The shift to renewable fuels is not just a technological or environmental transformation—it’s a business model revolution. For companies willing to rewire their thinking and build the digital and market infrastructure required to navigate the dual-dimensional logic of biofuels, the rewards can be significant. But for those expecting renewable fuels to behave like oil, the journey may be shorter—and costlier—than anticipated.