This PhD study investigated the mechanism for the formation of bio-fuels during flash pyrolysis with the transformation of oxygen by biomass components. Core-shell, oxygen vacancy-rich magnetite nanocatalysts were further synthesized from coal fly ash for the ketonisation of acetic acid. The effect of impurity elements on catalyst properties, activity and reaction mechanism were also investigated. The results achieved are expected to inspire the optimization of the biomass flash pyrolysis process, leading to a remarkable improvement in yield and/or quality of initial products, and shed new insights on both value-added utilization of fly ash as well as upgrading of bio-oil.