Biofuels and the sustainable biofuel obligation

Biofuels are any fuel produced from biological matter or 'biomass'. This can include agricultural and forestry crops and residues, organic by-products, and waste. Biofuels can help reduce emissions and contribute towards meeting Aotearoa New Zealand’s climate targets.

How biofuels are used

Biofuels are made from renewable biomass such as plants or organic waste. 

Liquid biofuels are a renewable, low-emissions fuel that can be blended with petrol and diesel to reduce greenhouse gas emissions from transport. They are also less dependent on new vehicles (for example, electric vehicles or hydrogen fuel cell vehicles) because they can be used in existing internal combustion engine (ICE) vehicles.

Currently, the use of biofuels in New Zealand is very low and there is limited domestic production.

Increasing the use of sustainable biofuels in Aotearoa New Zealand

Transport contributes about one-fifth of Aotearoa New Zealand’s gross domestic greenhouse gas emissions, and accounts for almost half of domestic carbon dioxide emissions.

Introducing a sustainable biofuels obligation is part of the Government’s wider plan to decarbonise the economy, which includes changing how we travel by increasing uptake of zero-emissions vehicles (i.e. electric vehicles). However, it will take time to develop the infrastructure and design our cities and town to achieve this and to reach a high proportion of zero-emission vehicles in the fleet.

Biofuels are a technologically and economically viable option we can use now to reduce transport emissions, while we transition to a low-emissions transport system. Biofuels also provide emissions reduction pathways for hard-to-abate areas of transport, like heavy trucking and shipping.

From 1 April 2024, biofuel blends will start to be supplied at petrol stations. This implementation date will allow time to get industry ready, and develop the necessary infrastructure.

Under the Obligation, fuel wholesalers must cut the total greenhouse gas emissions from the transport fuels they sell by a set percentage each year, by deploying biofuels as part of their fuel supply. The Obligation gives fuel wholesalers flexibility in the type of biofuels they supply, as long as the percentage reduction targets are met.

Fuel wholesalers will need to meet emissions intensity reduction targets of 2.4% for 2024 and 3.5% for 2025. Provisional targets will be set for 2026 and beyond, increasing up to 9.0% by 2035.

Year Emissions intensity percentage
2023 -
2024 2.4%
2025 3.5%
2026 4.1%
2027 4.4%
2028 4.7%
2029 5.0%
2030 5.3%
2031 5.8%
2032 6.6%
2033 7.4%
2034 8.2%
2035 9.0%

Biofuels will be assessed based on how effective they are at reducing emissions. This involves looking at the emissions produced during the land use, cultivation, production, transportation and burning of a biofuel.

Sustainable Biofuels Obligation Bill

The Sustainable Biofuels Obligation Bill was introduced to Parliament in November 2022, and had its first reading on 15 November 2022. Regulations are also being developed to support the Bill. Members of the public are able to provide feedback during the Select Committee process until 12 January 2023. 

The Bill will:

  • Set emissions reduction targets for the first 2 years of the Obligation, with provisional targets set for 2026 to 2035.
  • Establish strict sustainability criteria for which biofuels will be able to be used. This would exclude and limit the use of feedstocks associated with indirect land use change (such as those which cause deforestation) and those which could impact food production or indigenous biodiversity.
  • Allow regulations to be developed around which products may meet the sustainability criteria, and what types of waste products may be excluded.

Environmental impacts

Many biofuels are produced sustainably. This includes biofuels derived from organic wastes, residues from agriculture, horticulture, and forestry, from surplus crop yields, and from feedstocks that have been planted on marginal or low-carbon stock land. In the future, biofuels could be derived from biological matter that requires a comparatively low amount of land, such as biofuels from algae.

The Obligation has been designed with biofuels’ sustainability qualities in mind. Only biofuels that are deemed sustainable by the regulations will be eligible.  

There will be limits on the number of biofuels derived from food crops, and feedstocks that have been shown to cause an increase in emissions through indirect land use change, such as palm oil, will be banned. This is because certain processes in the production of some biofuels (including palm oil) involve deforestation which can cause harm to the environment and to local communities in certain parts of the world.  

All biofuels used to meet the Obligation will need to be certified as sustainable. The International Sustainability and Carbon Certification and Roundtable of Sustainable Biomass will be selected as the initial sustainability certification schemes.

International Sustainability and Carbon Certification(external link) (external link)— link)

Roundtable of Sustainable Biomass(external link) —


Below are links to previous consultations on sustainable biofuels:

Increasing the use of sustainable biofuels in Aotearoa New Zealand consultation – July 2021

Submissions on the use of sustainable biofuels in Aotearoa New Zealand consultation

Consultation on the Sustainable Biofuels Obligation regulations – July 2022

Submissions on the Sustainable Biofuels Obligation regulations

Cabinet Papers

Last updated: 06 December 2022