Biofuels : Markets, Targets and Impacts

This paper reviews recent developments
in biofuel markets and their economic, social and
environmental impacts. Several countries have introduced
mandates and targets for biofuel expansion. Production,
international trade and investment have increased sharply in
the past few years. However, several existing studies have
blamed biofuels as one of the key factors behind the
2007-2008 global food crisis, although the magnitudes of
impacts in these studies vary widely depending on the
underlying assumptions and structure of the models. Existing
studies also have huge disparities in the magnitude of
long-term impacts of biofuels on food prices and supply;
studies that model only the agricultural sector show higher
impacts, whereas studies that model the entire economy show
relatively lower impacts. In terms of climate change
mitigation impacts, there exists a consensus that current
biofuels lead to greenhouse gas mitigation only when
greenhouse gas emissions related to land-use change are not
counted. If conversion of carbon rich forest land to crop
land is not avoided, the resulting greenhouse gas release
would mean that biofuels would not reduce cumulative
greenhouse gas emissions until several years had passed.
Overall, results from most of the existing literature do not
favor diversion of food for large-scale production of
biofuels, although regulated production of biofuels in
countries with surplus land and a strong biofuel industry
are not ruled out. Developments in second generation
biofuels offer some hope, yet they still compete with food
supply through land use and are currently constrained by a
number of technical and economic barriers.