Box 6: Main sources of uncertainty for biofuel projections

The projections presented in this section give some indication of the possible future direction of world biofuel production, trade and prices. However, it is important to emphasize that the projections are subject to a number of uncertainties. Most importantly, they assume that basic agricultural commodities will continue to represent the bulk of feedstocks for ethanol and biodiesel throughout the next decade and that the technical and economic constraints that currently limit the production and marketing of biofuels based on other feedstocks will remain prohibitive. In particular, it is assumed that second-generation ethanol produced from cellulose and biomass-based diesel fuels will not become economically viable on any meaningful scale during the projection period.

However, numerous countries are engaged in research aimed at overcoming existing constraints and, although prospects for success remain uncertain, it is not impossible that the first commercial production plants for second-generation biofuels could become operational during the next decade. This would significantly change the relationship between biofuel production and agricultural markets, especially with regard to the extent that feedstocks for these fuels would come from either crop residues or energy crops grown on land not suitable for food production.

Other uncertainties relate to future developments in the markets for fossil energy and agriculture. Feedstock prices represent a large share of total biofuel production costs and have a significant impact on the economic viability of the sector. Prices for coarse grains and vegetable oils are projected to remain at relatively high levels (when expressed in United States dollars) compared with the past, despite some decline in the short run, while sugar prices should increase after 2008. Production costs for most biofuels are thus likely to remain a significant constraint over the projection period. The baseline projections assume that petroleum prices will increase slowly throughout the projection period, from US$90/barrel in 2008 to US$104/barrel by 2017. These price assumptions are a major source of uncertainty for the projections; for example, the previous OECD–FAO baseline assumed that petroleum prices would remain in the range of US$50–55 during the 2007–16 projection period (OECD–FAO, 2007), while actual petroleum prices exceeded US$129/barrel in May 2008.

Finally, it must be borne in mind that, in most countries, biofuel production remains heavily dependent on public-support policies and border protection, as discussed in Chapter 3. The debate on the potential and actual benefits that derive from supporting biofuel production and use continues. Support schemes are developing rapidly and their future course is impossible to predict. Recent policy changes that are not accounted for in the projections include the new United States Energy Act signed into law in December 2007 and the 2007 Farm Bill approved by Congress in May 2008 (see Box 4 on pp. 30–31).

Source: FAO, The State of Food and Agriculture, Biofuels: Prospects, Risks and Opportunities (2008) , Chapter 4, p.46

Liquid Biofuels for Transport Prospects, risks and opportunities

TABLE 1: Biofuel production by country, 2007

TABLE 2: Biofuel yields for different feedstocks and countries

TABLE 3: Hypothetical potential for ethanol from principal cereal and sugar crops

TABLE 4: Voluntary and mandatory bioenergy targets for transport fuels in G8+5 countries

TABLE 5: Applied tariffs on ethanol in selected countries

TABLE 6: Total support estimates for biofuels in selected OECD economies in 2006

TABLE 7: Approximate average and variable rates of support per litre of biofuel in selected OECD economies

TABLE 8: Energy demand by source and sector: reference scenario

TABLE 9: Land requirements for biofuel production

TABLE 10: Water requirements for biofuel crops

TABLE 11: Import bills of total food and major food commodities for 2007 and their percentage increase over 2006

TABLE 12: Net importers of petroleum products and major cereals, ranked by prevalence of undernourishment

TABLE 13: Share of net staple food-seller households among urban, rural and total households

Box 1: Other types of biomass for heat, power and transport

Box 2: Biotechnology applications for biofuels

Box 3: Biofuel policies in Brazil

Box 4: Biofuel policies in the United States of America

Box 5: Biofuel policies in the European Union

Box 6: Main sources of uncertainty for biofuel projections

Box 7: Biofuels and the World Trade Organization

Box 8: Biofuels and preferential trade initiatives

Box 9: The Global Bioenergy Partnership

Box 10: Biofuels and the United Nations Framework Convention on Climate Change

Box 11: Jatropha – a “miracle” crop?

Box 12: Agricultural growth and poverty reduction

Box 13: Cotton in the Sahel

Box 14: Biofuel crops and the land issue in the United Republic of Tanzania

Figure 1: World primary energy demand by source, 2005

Figure 2: Total primary energy demand by source and region, 2005

Figure 3: Trends in consumption of transport biofuels

Figure 4: Biofuels – from feedstock to end use

Figure 5: Uses of biomass for energy

Figure 6: Conversion of agricultural feedstocks into liquid biofuels

Figure 7: Estimated ranges of fossil energy balances of selected fuel types

Figure 8: Support provided at different points in the biofuel supply chain

Figure 9: Biofuel production costs in selected countries, 2004 and 2007

Figure 10: Breakeven prices for crude oil and selected feedstocks in 2005

Figure 11: Breakeven prices for maize and crude oil in the United States of America

Figure 12: Breakeven prices for maize and crude oil with and without subsidies

Figure 13: Maize and crude oil breakeven prices and observed prices, 2003–08

Figure 14: Price relationships between crude oil and other biofuel feedstocks, 2003-08

Figure 15: Food commodity price trends 1971–2007, with projections to 2017

Figure 16: Global ethanol production, trade and prices, with projections to 2017

Figure 17: Major ethanol producers, with projections to 2017

Figure 18: Global biodiesel production, trade and prices, with projections to 2017

Figure 19: Major biodiesel producers, with projections to 2017

Figure 20: Total impact of removing trade-distorting biofuel policies for ethanol, 2013–17 average

Figure 21: Total impact of removing trade-distorting biofuel policies for biodiesel, 2013–17 average

Figure 22: Life-cycle analysis for greenhouse gas balances

Figure 23: Reductions in greenhouse gas emissions of selected biofuels relative to fossil fuels

Figure 24: Potential for cropland expansion

Figure 25: Potential for yield increase for selected biofuel feedstock crops

Figure 26: Potential for irrigated area expansion

Figure 27: Agricultural trade balance of least-developed countries

Figure 28: Distribution of poor net buyers and sellers of staple foods1

Figure 29: Average welfare gain/loss from a 10 percent increase in the price of the main staple, by income (expenditure) quintile for rural and urban households