The emerging biofuels market: regulatory, trade and development implications

Jan 2006

The era of "easy" energy is over. Governments, intergovernmental organizations, corporations, NGOs and even individuals are asking themselves a number of questions that are crucial for the sustainable development prospects of all countries. How do we meet the world's energy needs? What role will renewable and alternative energies play? What is the best way to combat climate change? How do we accelerate improvements in energy conservation? How can developing countries best exploit the opportunities for diversification and new markets offered by the changing energy equation? Alternative energy sources, including biofuels, may form part of the answers to these questions. While alternative energy sources grow faster than any other energy source, they still account for a very limited share of primary energy demand, therefore they are not expected to replace fossil fuels but to play a complementary role in satisfying world energy demand.
Section 1 of this study analyses recent developments in international energy markets. Sections 2 and 3 address market, regulatory developments and tariff regimes for biofuels in a number of developed and developing countries, while section 4 deals with the technological prospects of the biofuel industry. Section 5 addresses the issue of subsidies. Subsequently, the study focuses on the opportunities that emerging biofuel markets may offer, especially to developing countries, in terms of diversifying energy sources and reducing dependence on fossil fuels, mitigating climate change effects, increasing markets for agriculture products and enhancing the participation of rural communities in economic activities. Biofuels, however, raise some basic concerns. The actual and potential challenges and opportunities, especially for developing countries, are analysed. Section 7 presents some data on trade flows for biofuels and related feedstocks. Section 8 deals with some specific WTO issues which may have direct implications for biofuels. The last section of the study illustrates UNCTAD's present and forthcoming activities under the BioFuels Initiative and the overall role that the organization is planning to play as an international hub for biofuels.

By: United Nations Conference on Trade and Development (UNCTAD)

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