The State of the Biofuels Market: Regulatory, Trade and Development Perspectives

This reports updates the initial study carried out by UNCTAD on the state of the biofuels markets, which was first published in 2006. In doing so, this 2013 update attempts to cover the main developments since 2006 in the biofuels sector, examining issues of production in key countries and regions, international trade, consumption trends, as well as evolving regulatory and political debates on this important theme.

During the 2000s there was an unprecedented increase in public and private interest for liquid biofuels, driven by a number of factors. Those included uncertainties about the price of petroleum products, the finite nature of fossil fuels, and ever growing environmental concerns, especially related to greenhouse gas emissions. It included also interest in novel ways to promote development and growth which could deliver carbon-intensive sectors of the economy. Biofuels were discussed as one of the potential tools to allow a level of decoupling between development and environmental degradation. While in 2006 the biofuel market was only starting to become truly international, by 2013 bioethanol and biodiesel have already become established commodities traded daily in all continents. Their market increased based primarily on demand from the transport sector, especially road vehicles, which use biofuels either in pure form or as blend into conventional fossil fuels (e.g. diesel or gasoline).

Another important development, which occurred since 2006, was the emergence of altern ativemarkets for liquid biofuels, beyond their core usage in road transport. Biofuels started being used in larger scale for aviation, electricity generation, cooking energy and even maritime transport. Policy focus of many countries also migrated from a limited scope of liquid biofuels towards broader notions of bioenergy (solid, liquid and gaseous energy products). In addition, concepts such as bioeconomy now embody a systemic view, in which systems must consider the usage of biomass not only for energy, but for food, feed and fiber as additional outputs. Since 2006 several developed and developing countries have established (and continue to pursue) regulatory setups for biofuels, including blending targets, sustainability norms, as well as research and deployment strategies for advanced biofuel technologies which hold gr eat promise of re ducing social and environmental risks as sociated to their production and usage.

While subsidies and incentives continue to be provided, biofuel industry as a whole seems to be more self-reliant in 2013 than it was in 2006. This is perhaps one of the factors behind a relative stabilization in demand for biofuels (and overall rate of growth in the industry) after 2010. The emergence of better science around the issue of land use change associated to production and usage of biofuels brought doubts on the strength of 1st generation biofuels as a tool to mitigate greenhouse gases (GHG) emissions. Yet, the merits of biofuels have somehow shifted towards arguments about green jobs, energy security, and overall improvement of agricultural returns, which are in dire need in many developing and least developed countries.