Policy Brief: Biofuels for Transport: Policies and Possibilities

Bioenergy and biofuels are of growing public and private interest at a time of rapidly rising world energy demand and high oil prices. Amid concerns over climate change, they are also increasingly under the spotlight as a “cleaner” alternative to fossil fuels.

But are biofuels for transport a viable alternative to power our cars, trucks and buses? Do they deliver the expected environmental benefits? And what role should public policy play in their development?

Biofuels are liquid fuels for road vehicles and include bioethanol made from crops such as cereals and sugar cane and biodiesel originating mainly from rapeseed-, palm- and soya oil. Higher demand for these crops to supply the biofuels industry is good news for farmers who produce them, but perhaps not for intermediate and final consumers who will face higher feed costs and increased food bills. There are also questions as to whether higher demand will cause new land to be given over to biofuel crops, with a negative impact on the environment. Research is looking for ways to produce fuels from other crop sources, but the required technology is still some years away.

So although using biofuels to partly replace fossil fuels is widely assumed to deliver a number of energy security, environmental, and economic benefits, these are actually smaller than expected and unlikely to be delivered by current policies. Additional research on the economics of biofuels and related agricultural markets, on the environmental costs and benefits of biofuel production using different feedstocks, and on a wider range of energy policy alternatives – including those that might accelerate the scientific and technological development of second generation biofuels – is needed.

This Policy Brief, jointly produced by the OECD and the IEA, looks at the current situation with biofuels in road transport, and how governments can balance all these elements when crafting policies for energy and biofuels.