» Biofuels »
Liquid Biofuels for Transport Prospects, risks and opportunities
Context - Serious questions are being raised about the environmental impacts of producing liquid biofuels for transport, the costs of policies to promote them and their possible unintended consequences.
Even though production of biofuels such as ethanol and biodiesel is growing rapidly, their contribution to total transport fuel consumption in the coming decades will remain limited. In contrast, the effects of increased biofuel production on global agricultural markets, the environment and on food security are already significant and are stirring controversy.
What could be the future role of biofuels for agriculture, food security and climate change?
Latest update: 30 September 2009
1. What are biofuels?
Sugar cane is one of the feedstocks for making biofuels
Credit: Rufino Uribe
Defined broadly, biofuels are
fuels derived from biomass – any
matter derived from plants or animals. Biomass has traditionally been
used as fuel for energy production in the form of wood, charcoal or
animal waste. A basic distinction is made between unprocessed primary
biofuels, such as fuelwood, and
processed secondary biofuels The latter include liquid biofuels, such as
biodiesel, which have increasingly
been used for transport in the last few years.
biodiesel are the most widely used
liquid biofuels. Ethanol can be
produced through fermentation and
distillation from any raw material containing significant amounts of
sugar (e.g sugar cane or sugar beet) or
starch (e.g maize, wheat or
Biodiesel is produced by
chemically combining vegetable oil or animal fat with an
alcohol. It can be produced for
instance from rapeseed, soybean, palm, or coconut oils.
Current liquid biofuels, referred
to as “first generation biofuels” only use sugar,
starch or oil and thus a fraction
of the energy contained in the plant material. However, most plant
matter is composed of cellulose and
lignin. For greater efficiency, “second-generation
biofuel” technologies are being
developed to make use of these components.
There are significant technical hurdles still to clear to make
production of lignocellulosic
ethanol commercially competitive,
but once these processes become economically viable, they could use
waste products from agriculture and forestry, municipal waste, as well
as new crops such as fast growing trees or grasses.
Large-scale production of
biofuels from crops requires large
land areas, so liquid biofuels can only replace
fossil fuels to a very limited
extent. Current production is equivalent to less than one percent of
world transport fuel demand.
Projections foresee an increase in the share of the world’s fertile
land used to grow plants for liquid
biofuel production from 1% in 2004
to around 4% in 2030. With this cultivated area and first generation
biofuel technologies 5% of road transport fuel demand could be met This
could double if second-generation biofuel technologies become
2. What are the economic and policy factors influencing biofuel development?
Prices for liquid biofuels and
for the crops needed to produce them are partly driven by fossil fuel
prices. Government support schemes also play a key role as most biofuels
are not generally competitive without
subsidies, even when crude oil
prices are high.
The crop and energy markets are closely linked, since agriculture both
supplies and uses energy. Agricultural crops compete with each other for
land and water and farmers will sell their produce to markets regardless
of end use, be it for biofuel
production or food use.
When the market value of a
biofuel crop is high, prices for
other agricultural crops that also need land and water will tend to rise
The main drivers of government support for
biofuels are concerns about energy
security and climate change as well
as a political will to support the farm sector.
Common policy instruments include:
- mandatory blending of a percentage of
biofuels with regular diesel or
- subsidies for
distribution and use of biofuels,
- tariffs on imported biofuels to protect domestic producers,
- tax incentives on the sale of biofuels as well as
- increased support for research and development.
Many of the above instruments have been introduced in
OECD countries at a cost of up to
one US$ per litre. They have tended to introduce new distortions to
Agricultural and forestry policies have had a strong influence on the
bioenergy industry. Agricultural
subsidies and price support affects
both production levels and prices of
feedstocks for first generation
biofuels. Agricultural policies
have also shaped world trade patterns for agricultural products
including bioenergy feedstocks.
The raw material accounts for the largest share of total
biofuel costs. Over the past few
years, prices of raw materials for biofuel production have been highest
when crude oil prices were high. Biofuel policies themselves have
contributed to increased demand for agricultural products and thus
increased prices. However, high crude oil prices and government
subsidies also enable biofuel
producers to pay higher prices while still remaining profitable.
3. How are biofuel markets and production evolving?
Food prices generally declined during the 40 years up to 2002, if
inflation is taken into account. Since then they have risen sharply,
with vegetable oil and cereal prices showing large increases.
These high prices are partly the result of rising demand from
developing countries and for
biofuel production. There have also
been poor harvests in some countries at a time when reserve stocks are
at a relatively low level.
Biofuel demand and supply are
expected to continue their rapid increase. And although the share of
liquid biofuels in overall
transport fuel supply will remain very limited, the projected increase
in production of crops for making biofuels is substantial relative to
the projected increase in total agricultural production.
Increased biofuel production
could come from using more cropland for biofuel production and from
improved yields. However, if grasslands or
forests are brought into
agricultural production for this purpose, this would have environmental
For ethanol, Brazil and the USA
are expected to remain the largest producers but strong production
growth is foreseen in China, India, Thailand and several African
countries. Biodiesel production is
dominated by the EU but a significant growth is expected in Brazil,
Indonesia and Malaysia.
The biofuels policies in place in
the EU and the USA, have distorted national and international
agricultural markets. This results in high costs for the taxpayers in
developed countries and discrimination against producers in developing
countries. As a consequence, production does not necessarily occur at
the most economically and environmentally suitable locations or with the
most efficient technologies.
Coordination of biofuel policy at
international level is needed to correct global agricultural policy
failure and improve allocation of resources.
4. What are the environmental impacts of biofuel production?
The overall performance of different
biofuels in reducing
fossil energy use and
greenhouse gas emissions varies
widely when considering the entire life cycle from production through
transport to use. The net balance depends on the type of
feedstock, the production process
and the amount of fossil energy needed.
Increased biofuels production
will be achieved through improved land productivity and through
expansion of cultivated area, using existing cropland as well as
less-productive land. However, it is more likely that biofuels will
intensify the pressure on the fertile lands where higher returns can be
When forests or grasslands are
converted to farmland, be it to produce biofuel
feedstocks or to produce other
crops displaced by feedstock
production, carbon stored in the soil is released into the atmosphere.
The effects can be so great that they negate the benefits of
biofuels, and lead to a net
increase in greenhouse gas
emissions when replacing
When crops for biofuel production
require irrigation it exerts pressure on local water resources. In
addition, water quality can be affected by soil erosion and runoff
containing fertilisers and pesticides.
Changes in land-use and intensification of agricultural production may
harm soils. The impacts depend on the way the land is farmed. Various
techniques and the use of certain plant species can reduce adverse
impacts or even improve soil quality.
Biofuel production can affect
biodiversity. For instance
habitat is lost when natural
landscapes are converted into energy-crop plantations or peatlands are
drained. In some instances, however, biofuel crops can have a positive
impact, for instance when they are used to restore degraded lands.
In order to ensure an environmentally sustainable
biofuel production, it is important
that good agricultural practices be observed, and measures to ensure
sustainability should be applied
consistently to all crops. Moreover national policies will need to
recognise the international consequences of biofuel development.
5. How will biofuel production affect food security and poverty?
Food prices have risen sharply in the past few years, especially for
cereals and vegetable oils, in part because they are used both for food
and biofuel production. In
addition, higher transport costs increased the costs of imported food.
While some countries will benefit from higher food prices, the food bill
is expected to increase for the least-developed countries which are net
Higher food prices will affect all households, but the impacts will be
greatest for poor families may that spend half their income or more on
food. The effect of a price increase will be significant for the
estimated 850 million people around the world who are
undernourished, most of whom are
net buyers of food, both in urban and rural areas.
In the longer term, biofuel
production could revitalize the agriculture sector and alleviate poverty
by raising rural incomes. But government support for improved
infrastructure, institutions and services remains essential, for
instance to improve farmers’ access to credit. Government support is
also required to protect the most vulnerable.
While production of crops for
biofuel production may offer
opportunities for farmers in developing countries, it may also lead to
greater competition for land. Those most at risk are small farmers and
especially women, who usually do not own the land that they farm. Strong
government commitment is needed to improve agricultural productivity and
assure equal opportunities and access to both land and markets.
6. How could biofuel policies be improved?
The positive contribution of
biofuels towards energy security
and greenhouse gas emission
reductions is increasingly being challenged. Their unintended impacts on
market prices and food-security have frequently been overlooked in
policy discussions. Uncertainties regarding the economic viability of
biofuels remain, because of the influence of oil and crop price
fluctuations, as well as future policy and technical developments.
Biofuels are influenced by a wide range of policies, and a coordinated
approach is needed to consider overall benefits and risks.
Biofuel policies should:
- protect those who are poor and have insecure food supplies.
- create conditions where poorer countries and small farmers can
take advantage of future market opportunities.
- ensure that biofuels are
effective in reducing
greenhouse gas emissions, while
protecting land and water resources.
- reduce and avoid distortions in
biofuel and agricultural
- be developed with appropriate international coordination.
Subsidies and mandatory blending
have created an artificially rapid growth in
biofuel production, exacerbating
some negative impacts. Existing policies have had a limited effect in
achieving energy security and
climate change mitigation and
therefore need to be reviewed.
Government incentives and support for
biofuels have been largely guided
by national or regional interests rather than a more global perspective.
There is a need for an appropriate international forum to agree on
sustainability criteria to achieve
environmental objectives without creating trade barriers.
Poor people’s food security in urban and rural areas is under
immediate threat from higher food prices partly induced by increased
biofuel production. Well designed
and targeted safety nets are needed to support their access to food.
In the longer run, higher food prices could stimulate agricultural
development, but measures will be needed to ensure that benefits reach
small farmers and marginalized people including women.
Some biofuels may reduce
greenhouse gas emissions when
replacing fossil fuels, but the net
effects on climate change depend on
where and from what raw materials they are produced. Carbon emissions
from land-use change when forest or
pasture is converted to cropland can largely negate the greenhouse gas
savings obtained by using biofuels for transport.
Expanded biofuel production may
threaten land and water resources and
biodiversity. Appropriate policy
measures are required to minimize possible negative effects.
Some countries with abundant natural resources and appropriate
infrastructure and institutions may be able to develop an economically
viable biofuel sector. However,
liquid biofuels will only be able
to make a limited contribution to the global supply of transport fuels.
“Second generation biofuels” made from
cellulose and lignin would expand
the range of opportunities.
Biofuel growth has thus far been
driven primarily by policies rather than market forces. Policies must be
reviewed to avoid negative impacts and promote
sustainable biofuel production.