Price Dynamics of Renewable Diesel HVO (UCO) in Europe: A Review of Supply, Demand, and Policy Determinants

The European renewable diesel market, particularly hydrotreated vegetable oil (HVO) derived from used cooking oil (UCO), has experienced pronounced price volatility between 2022 and 2025, driven by complex interactions among supply constraints, escalating demand from multiple transport sectors, and evolving policy frameworks under the EU's "Fit for 55" package. This qualitative literature review synthesizes evidence from academic journals, policy documents, and market reports published since 2020 to examine the mechanisms underlying HVO (UCO) price dynamics in Europe. The analysis identifies five interconnected themes: cyclical price patterns reflecting policy anticipation effects; feedstock supply constraints exacerbated by traceability challenges and import dependence; cross-sectoral demand competition among road, aviation, and maritime applications; policy stacking effects from RED III, ReFuelEU Aviation, and FuelEU Maritime regulations; and multi-dimensional implications for producers, obligated parties, and sustainability governance. Findings indicate that HVO (UCO) pricing reflects a composite of feedstock scarcity premiums, conversion costs, compliance credit values, and policy expectation signals, with regulation functioning as a market-making mechanism that simultaneously creates demand pull and supply-side investment uncertainty. The study contributes conceptual clarity to understanding advanced biofuel price formation in highly regulated markets and offers policy recommendations for managing cross-sectoral mandate interactions, strengthening feedstock integrity systems, and diversifying the advanced biofuel feedstock base—including sustainable waste streams from palm oil processing such as palm oil mill effluent (POME) and palm fatty acid distillate (PFAD)—to enhance market resilience and decarbonization effectiveness.