Resource information
The world is witnessing a sudden growth
in production of biofuels, especially those suited for
replacing oil like ethanol and biodiesel. This paper
synthesizes what the environmental, economic, and policy
literature predicts about the possible effects of these
types of biofuels. Another motivation is to identify gaps in
understanding and recommend areas for future work. The
analysis finds three key conclusions. First, the current
generation of biofuels, which is derived from food crops, is
intensive in land, water, energy, and chemical inputs.
Second, the environmental literature is dominated by a
discussion of net carbon offset and net energy gain, while
indicators relating to impact on human health, soil quality,
biodiversity, water depletion, etc., have received much less
attention. Third, there is a fast expanding economic and
policy literature that analyzes the various effects of
biofuels from both micro and macro perspectives, but there
are several gaps. A bewildering array of policies -
including energy, transportation, agricultural, trade, and
environmental policies - is influencing the evolution of
biofuels. But the policies and the level of subsidies do
not reflect the marginal impact on welfare or the
environment. In summary, all biofuels are not created equal.
They exhibit considerable spatial and temporal heterogeneity
in production. The impact of biofuels will also be
heterogeneous, creating winners and losers. The findings of
the paper suggest the importance of the role biomass plays
in rural areas of developing countries. Furthermore, the use
of biomass for producing fuel for cars can affect access to
energy and fodder and not just access to food.
