Mexico and Guatemala Biofuels Market

The Mexico and Guatemala biofuels market is shaped by a combination of regulatory support, agricultural capacity, energy security concerns, and evolving sustainability goals. In Mexico, government policies promoting cleaner energy and reduced greenhouse gas emissions are encouraging the adoption of biofuels such as ethanol and biodiesel, although progress is moderated by regulatory complexities and infrastructure limitations. Meanwhile, Guatemala benefits from a strong agricultural base—particularly sugarcane production—which supports cost-effective ethanol manufacturing and export potential. Market growth in both countries is further influenced by fluctuating fossil fuel prices, increasing investment in renewable energy, and rising demand for low-carbon fuel alternatives. However, challenges such as feedstock price volatility, land use concerns, and limited domestic distribution networks continue to impact the pace of market expansion. FIGURE 4 MEXICO & GUATEMALA BIOFUELS MARKET: MARKET GROWTH FACTOR ANALYSIS (2019-2035) Source: MRFR Analysis 31

4.2.1 RISING ENVIRONMENTAL CONCERNS AND REGULATIONS Growing urgency around climate change and air quality degradation has become one of the most powerful catalysts reshaping the energy landscape across Mexico and Guatemala. Both nations have ratified the Paris Agreement and are under increasing pressure to fulfill their Nationally Determined Contributions (NDCs). In Mexico, the government published the Ley General de Cambio Climático, which targets a 50% reduction in greenhouse gas (GHG) emissions by 2050 compared to 2000 levels, and established a goal of achieving 35% clean energy generation, with recent updates pushing those ambitions further. Scientific modeling reinforces the stakes: in a scenario where, renewable energy fully meets Mexico's national energy demand by 2050, biofuels alone could prevent more than a quarter of emissions compared to a business-as-usual trajectory and cover nearly a quarter of total national energy demand. This emissions calculus has given regulators a compelling case to accelerate biofuel adoption as a near-term, scalable decarbonization tool for the transport sector. Mexico's regulatory momentum has accelerated sharply in 2025, marking a structural turning point for its biofuels sector. A series of energy reform laws — including the new Biofuels Law, the Hydrocarbons Sector Law, and the PEMEX Law — have centralized regulatory oversight and established a comprehensive framework for biofuel production, blending, and quality standards. Enacted in March 2025 and followed by implementing regulations published in October 2025, the new Biofuels Law expands the regulatory scope to include newer categories such as biogas, biomethane, and biojet fuel (bioturbosina), while introducing provisions on quality, traceability, and binding energy planning. Crucially, biofuel production projects are now required to be incorporated into Mexico's Plan for Energy Transition and Sustainable Energy Use, directly linking them to national emission reduction targets and sustainable development objectives. This institutional integration signals that biofuels are no longer a peripheral policy interest, they are formally embedded in Mexico's decarbonization architecture. On-the-ground implementation is following the regulatory push. Between October 2024 and August 2025, Mexico's Ministry of Energy (SENER) issued 42 valid permits covering production, sales, and transportation, alongside 13 formal notices to ensure ongoing oversight of the national supply chain. Government energy plans now include ethanol-gasoline blends for the first time, and a target has been set to begin using Sustainable Aviation Fuel (SAF) by 2027, with Alcohol-to-Jet technology identified as a promising production pathway. A concrete example of this trajectory is a USD 100 million biofuel facility announced by the Government of Tamaulipas, scheduled to launch in early 2026, with a first phase focused on sorghum-based ethanol and a second phase targeting SAF production. These developments reflect a maturing policy environment in which environmental compliance obligations are translating into tangible investment commitments. Guatemala, while at an earlier stage of biofuel policy formalization, is navigating its own set of environmental pressures that are creating favorable conditions for biofuel development. Ranked 166th on Yale University's Environmental Performance Index, Guatemala faces acute challenges including rapid deforestation, water pollution, soil degradation, and extreme weather events — pressures that place the country among the top ten most climate-vulnerable nations globally. These vulnerabilities have intensified political will around the energy transition. Guatemala's updated NDC, submitted in April 2022, commits to reducing projected emissions by 11.2% by 2030 using domestic resources, and up to 22.6% with international support, with specific sectoral actions covering energy, agriculture, forestry, and waste. The country's renewable energy framework is also increasingly accommodating of biomass-based power. By the end of 2024, biomass accounted for 27.71% of Guatemala's installed electricity generation capacity, contributing to an overall renewable energy share of 83.53% as reported by the national regulator. Guatemala's financial and legal environment is being progressively aligned to reward clean energy investment, with indirect but significant implications for biofuels. The Renewable Energy Incentive Law (Decree 52-2003) grants a 10-year exemption from VAT, income tax, and import tariffs for renewable energy projects — including biomass — while the government allocated approximately USD 6.5 million to its National Climate Change Fund (FONCC) in 2024, with ambitious targets for 80% renewable electricity 32 generation by 2030. At the same time, following COP28 commitments, Guatemala's new electricity generation tenders are being designed to prioritize renewable sources, reflecting growing alignment between international climate finance mechanisms and domestic energy policy. While a dedicated biofuels blending mandate akin to Brazil's or Colombia's is still absent in Guatemala, the convergence of climate vulnerability, international financing pressure, and an already robust sugarcane agroindustry creates a potent regulatory and environmental backdrop — one that is steadily building the conditions for a formal biofuel policy framework to emerge. 4.2.2 INCREASING ENERGY D EMAND The relentless rise in energy consumption across Mexico and Guatemala is serving as one of the most fundamental structural catalysts for biofuels market growth in the region. In Mexico, electricity consumption has been increasing by around 2.5% per year on average since 2013, reaching 319 TWh in 2024, while the National Electrical System Development Program (PRODESEN 2024- 2038) forecasts a 38.2% rise in electricity consumption and a 54.91% increase in on-peak demand by 2038. This steeply rising demand trajectory places eno

4.4.1 DEVELOPMENT OF ADV ANCED BIOFUEL TECHNOLOGIES The global shift from first-generation to advanced, second-generation biofuels present a compelling and timely opportunity for both Mexico and Guatemala. First-generation biofuels, such as bioethanol and biodiesel derived from food crops like corn, sugarcane, and vegetable oils, have long led the sustainable fuel market, but concerns over competition with food production, lifecycle emissions, and land use are pushing key regions to adopt more advanced alternatives. For Mexico and Guatemala — both of which possess abundant agricultural residues, sugarcane, and non-food biomass, advanced biofuel technologies such as cellulosic ethanol, hydrotreated vegetable oil (HVO), alcohol-to-jet (ATJ) conversion, gasification, and hydrothermal liquefaction represent a new frontier that can unlock higher-value, lower-carbon fuel production without compromising food security. Guatemala, notably, has already moved toward implementing a 10% ethanol blend in gasoline, and the country dedicates approximately 10% of its land to biofuel crops, underscoring a strong agricultural foundation on which advanced conversion pathways can be built. Mexico's regulatory landscape has recently undergone a major transformation, creating a direct enabler for advanced biofuel technology adoption. The Mexican Ministry of Energy (SENER) is actively overseeing the biofuels sector, having issued 42 valid permits from October 2024 to August 2025, with the country's potential production capacity estimated at 112.5 million liters of ethanol and 36,000 cubic meters of biomethane. This momentum is reinforced by landmark legislation, the Biofuels Law, enacted in March 2025, replaces the 2008 Law for the Promotion and Development of Bioenergy and establishes a comprehensive regulatory framework for production, distribution, import/export, and sale of biofuels, specifically promoting fuels derived from organic waste and crops that do not interfere with food supplies. Critically, a key bioenergy project in Mexico envisions producing sorghum-based ethanol in its first phase, with a second phase incorporating an alcohol-to-jet pathway to generate sustainable aviation fuel (SAF), also drawing on sugarcane and agricultural and forestry residues. This kind of multi-feedstock, multi-pathway project architecture is precisely the model that advanced biofuel technologies are designed to enable. The opportunity for sustainable aviation fuel (SAF) production stands out as particularly significant for both countries. Researchers at MIT identified sugarcane- and corn-based ethanol-to-jet fuel and palm oil- and soybean-based hydro-processed esters and fatty acids as the most promising near-term feedstock sources for SAF production in Latin America, feedstocks that both Mexico and Guatemala produce in meaningful quantities. Regional feedstock availability and costs make Latin America a potential major player in SAF production, and with SAF's carbon footprint potentially being as low as 20% of conventional jet fuel, the aviation decarbonization imperative creates durable demand. At the global level, IATA has confirmed that sufficient SAF feedstock exists to achieve net-zero aviation emissions by 2050, but the main bottleneck is slow technology rollout rather than feedstock availability, an insight that directly signals where investment and development efforts must be directed. For Mexico and Guatemala, positioning domestically grown feedstocks within advanced conversion facilities could allow both nations to serve not only regional aviation demand but also export-oriented SAF markets. Beyond aviation, advanced biofuel technologies open pathways across the transport and energy sectors that align with both countries' decarbonization commitments. Research indicates that in a scenario where renewable energy fully meets Mexico's energy demand by 2050, biofuels could prevent over 26% of emissions compared to a business-as-usual scenario and cover nearly 23% of total national energy demand. Technologies such as biomethane from waste streams, HVO from used cooking oil and agricultural by-products, and Fischer-Tropsch synthesis from gasified biomass are increasingly commercially viable globally. Advanced biofuels and e-fuels are emerging as a promising solution to reduce the carbon footprint of transport sectors where electrification faces significant challenges, including aviation, shipping, and heavy-duty road transport, with the key advantage being 38 their drop-in capability — meaning they can be used in existing engines and infrastructure without requiring major modifications. This drop-in compatibility is especially valuable for Mexico and Guatemala, where transitioning large vehicle fleets or airport infrastructure to entirely new energy systems would be economically prohibitive in the near term. Finally, the global investment and policy environment is actively creating conditions that Mexico and Guatemala can leverage to accelerate technology adoption. In January 2025, the U.S. Department of Energy's Bioenergy Technologies Office, together with the EPA, allocated USD 6 million to finance three projects aimed at enhancing advanced biofuel development, part of a broader North American push that benefits regional supply chains. Life cycle assessments have demonstrated a 70% reduction in GHG emissions when sugarcane ethanol displaces gasoline, and an 84% reduction when palm oil biodiesel displaces fossil diesel, results that strengthen the environmental credibility of feedstocks abundantly available in both countries. As advanced biofuel technologies mature and cost curves decline, Mexico and Guatemala are well-positioned to transition from primarily first-generation producers to regional leaders in next-generation bioenergy, provided that regulatory frameworks, technology partnerships, and targeted investment continue to align in the direction already being charted. 4.4.2 EXPANSION OF BIOFUE LS IN TRANSPO

4.3.1 COMPETING LAND USE FOR FOOD PRODUCTION One of the most persistent structural restraints on biofuel market expansion in both Mexico and Guatemala is the deep-rooted tension between allocating agricultural land for energy crops versus growing food for domestic consumption. Both countries face acute food security pressures that make redirecting arable land toward biofuel feedstocks, particularly sugarcane, corn, and palm oil — politically and socially contentious. Mexico's agrifood sector in 2024 faced significant challenges including inflation, climate- induced crop shortages, and rising input costs, creating a climate in which diverting productive farmland toward fuel crops is viewed with suspicion by policymakers and rural communities alike. Mexico's response has been to anchor agricultural subsidies firmly in food sovereignty: the Production for Well-Being program benefited more than 1.8 million producers with support totaling MX$13.9 billion in the first half of 2025, prioritizing small-scale farmers of corn, beans, coffee, and sugarcane, staple food crops that compete directly with biofuel feedstock cultivation for the same land and resources. FIGURE 6 LATIN AMERICA & CARIBBEAN AGRICULTURAL LAND Source: The World Bank Group & MRFR Analysis 35 This food-first orientation has shaped the architecture of Mexico's emerging biofuels regulatory framework in telling ways. Mexico's recently enacted Biofuels Law specifically promotes the production of fuels from organic waste and crops that do not interfere with food supplies, a clause that explicitly acknowledges the land use conflict and places guardrails on the kinds of feedstocks that can be developed. The law establishes the regulatory framework for biofuel production derived from biomass, agricultural residues, surplus sugarcane, and sorghum, with the ey ualifier being "surplus”, signaling that food production retains first claim on agricultural output. Despite these regulatory ambitions, Mexico's domestic biofuel production remains negligible: in 2024, Mexico imported 302 million liters of non-beverage ethanol, predominantly from the United States, with fuel ethanol use remaining minimal due to regulatory restrictions and the small scale of domestic production. The inability to scale domestic production is in part a reflection of the limited land base available for dedicated energy crops without undermining food systems. In Guatemala, the land use conflict is even more acute and has historically generated significant social disruption. Land dedicated to sugarcane in Guatemala grew by 46 percent between 2001 and 2012, with expansion concentrated along the Pacific coast, while palm oil plantations expanded even faster, with a 270 percent increase in land used for the crop over ten years. These expansions have come predominantly at the expense of small-holder food farmers. Monoculture crops such as sugarcane and palm, both feedstocks for biofuels, now occupy 14 percent of the country's land, while small landholders use only 12 percent, a striking inversion in a country where chronic malnutrition remains widespread. Guatemala's total land used for biofuel production corresponds to approximately 10 percent of the land used for pastures, a comparatively high share relative to other Latin American economies, indicating that the feedstock footprint is already substantial relative to the country's agricultural base. Guatemala had intended to implement a 10% ethanol blend in gasoline in 2024, but scaling domestic production to meet such a mandate without further displacing food agriculture remains a formidable challenge. The land competition problem is further compounded by water stress and governance failures that accompany feedstock expansion. As global demand for biofuel increases, palm oil and sugarcane plantations are crowding out traditional subsistence farming in Guatemala, a displacement that has spurred land and water quarrels, with many small-scale farmers forced out by rising land lease rates before plantations began draining water resources and diverting rivers for irrigation. The EU's biofuels sustainability framework, under which Guatemalan ethanol has been certified, overlooks issues of land access and compliance with the law, running the risk of exacerbating the plight of Guatemala's already marginalized rural communities. These social and governance dimensions make it difficult to attract investment in large-scale feedstock projects without triggering community opposition, legal challenges, or reputational risk for buyers in regulated markets such as Europe. Looking ahead, both governments are attempting to navigate the food-versus-fuel dilemma through policy design rather than resolving the underlying land scarcity. Mexico's 2025 biofuels regulations emphasize residues and marginal lands as preferred feedstock sources, while the country's National Development Plan for 2024–30 sets improving agricultural productivity for food self-sufficiency as a key objective, keeping food production as the dominant agricultural priority. For Guatemala, transforming even 5 percent of current pastures into arable land for biofuel raw materials could theoretically double production, and increases in raw material productivity could significantly reduce land demand, but such transitions require the kind of coordinated land tenure reform and investment in yields that neither country has yet systematically pursued. Until the structural tension between food security and biofuel ambition is resolved through yield improvements, second-generation feedstocks, or meaningful land redistribution, competing land use will remain one of the most binding constraints on the region's biofuels market growth . 36 4.3.2 LIMITED INFRASTRUCTURE One of the most persistent structural barriers holding back biofuel adoption in both Mexico and Guatemala is the profound inadequacy of physical infrastructure — spanning production facilities, blending termi