Biofuels: strategic choices for commodity dependent developing countries

Nov 2007

The biofuels industry got underway on a large scale in the early 1970s, within the PROALCOOL Programme in Brazil. But it is only in the last five years that biofuels have started to be taken seriously as an alternative to oil worldwide. Today we are witnessing a rapid expansion of global biofuel markets as many countries introduce ambitious policies to increase the proportion of biofuels in their energy portfolio.
Countries are introducing biofuels to achieve a range of different policy goals: to improve national or sub-national energy security, to promote rural development, to develop exports, to improve the balance of trade by reducing oil imports, and to pursue climate change mitigation policies. In some cases there might be synergies between the achievement of these different policy goals, but there may also be risks and tough trade-offs to confront for food security, society, environment and the economy.
Strategic decision-making about the adoption of biofuels requires a careful and integrated analysis of all these issues.
The aim of this document is to provide commodity-dependent developing countries (CDDCs) with a framework for strategic decisionmaking on entry into production and use of biofuels.
It provides an overview of key issues, opportunities, risks and trade-offs in the development of a biofuel sector. Chapter 2 provides a brief introduction to biofuels and presents the key global trends in the market development, production and trade in biofuels. Chapter 3 explains the four main policy goals associated with the development of a biofuels sector and introduces a decision-tree tool to guide countries their decision-making regarding the biofuel sector.
Chapter 4 gives an overview of feedstock choices. The next four chapters cover food security, environmental, social, economic and trade aspects associated with biofuel development, identifying for each the key issues and policy implications. Chapter 10 describes how value is created and captured within biofuels value chains, highlighting the implications for rural development. Finally, Chapter 11 provides key options for strategic policy on biofuels development.

By: Common Fund for Commodities

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