EU ethanol builds bridge between the farm and the pump

AT A GLANCE:

• EU RED III implementation continues, providing support for ethanol markets.
• The role of the U.S. in the ethanol markets looks assured as a major exporter to global markets.

The European ethanol market is emerging as an important bridge between volatile feedstock markets (wheat, corn and sugar beet) and the gasoline market. The use of ethanol, which is derived from crops and blended into gasoline, is reducing the volume of pure fossil-fuel based gasoline by adding a biofuel component into the finished gasoline grade.

Trading volumes in European ethanol markets have risen by around 10% over the past year amid regulatory changes promoting renewable fuels. Chicago Ethanol futures have also been strong with total volumes reaching around one million contracts in 2025, a level that is broadly steady with the prior year but an increase of over 8% compared to 2023.

The U.S. has become a significant ethanol exporter to the U.K. and Europe at large, with fuel-grade exports rising by around 24% overall over the 12-month period to October 2025, according to the latest data from the U.S. Energy Information Administration (EIA). Exports to the EU-27 (the 27 countries within the European Union following the U.K.’s departure) nearly doubled year on year, reflecting two key regulatory drivers: 

First, the EU raised its renewable energy target to at least 42.5% by 2030 as part of its Renewable Energy Directive III (RED III).

Second, many countries eliminated double counting provisions that previously allowed certain “advanced” biofuels to count twice toward green targets. As of 2026, many of these so-called multipliers have been removed, prompting more countries to seek first-generation, crop-based ethanol products, such as corn-based ethanol.

The European ethanol derivatives market has benefited from the stronger flows of U.S. ethanol exports to the EU-27 and the U.K. Exchange-traded volumes show that around 6.5 million cubic meters (5.2 million metric tons) equivalent were traded in 2025, which is an increase of around 24% year on year compared to 2024. Typically, higher import volumes are hedged in the futures market, in part to help manage the volatility in the underlying market. 

European ethanol traded volumes reached 9,000 contracts per month in the 12-month period to February 2026, up around 10% year on year. Open interest, the number of unsettled contracts, has also increased to around 16,500 contracts as of the end of February 2026, an increase of 20% over the last 12-month period, according to the latest Exchange data. 

Higher ethanol exports from the U.S. have also supported increased trading activity in Chicago Ethanol futures, which remains the largest ethanol market, where volumes exceed 85,000 contracts per month. This equates to around 4,000 contracts per day over the last 12-month period to February 2026, a level that was broadly similar in the 12 months to January 2025. 

In a December 2025 report, Argus Media noted that demand for crop-based ethanol could rise, especially as European countries turn to materials with higher greenhouse gas (GHG) savings—specifically those with a 75% GHG saving. S&P Global announced in September 2025 that the specification for European ethanol will reflect the higher GHG saving level starting July 2026. Higher GHG savings are possible with crop-based biofuels, and prices for these fuels may compete more favorably with their waste-based alternatives.

Biogasoline is made up of some ethanol blended with the finished grade of gasoline. Currently, gasoline sold in the European and U.S. markets is a blend of 10% ethanol and 90% gasoline (E10), hence the need to hedge in both markets. Globally, RBOB Gasoline remains the largest gasoline futures market, trading alongside regional benchmarks, such as Eurobob in Europe. Data shows there is a high degree of correlation between the European and U.S. benchmarks—as high as 0.99, moving almost in lockstep.

The European gasoline market first switched from E5 (a fuel blend of 5% ethanol and 95% gasoline) to E10 back in 2009, around the same time as the U.S. In the years that followed the switch, convergence between the European and U.S. gasoline markets has continued to grow. Today, the majority of countries in northwest Europe have adopted the higher ethanol blendstock, along with several eastern European countries. The higher ethanol blend means less gasoline in the mix and a larger role for ethanol in meeting fuel demand.

The closer convergence between the European E10 and RBOB U.S. gasoline blendstock has been one factor behind the higher volumes of trading in the U.S. benchmark by European firms. This is evident with the share rise in trading volumes during non-U.S. hours in recent years. The latest data from CME Group shows that around 15% of total traded volumes in RBOB futures were traded in non-U.S hours. The most recent data for year-to-date March 2026 shows that around 15,000 contracts per day are traded during non-U.S. hours, an increase of around 50% compared to 2024 levels. 

Rising U.S. ethanol exports to Europe continue to provide support for financial markets in both regions as traders look to manage higher flows. The closer relationship between EU and U.S. gasoline through the E10 markets has also seen a greater focus on more regional trading in the NYMEX RBOB futures markets, a trend which looks set to continue, providing further support to the world’s largest gasoline benchmark.

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