Biofuel for transport

Apr 2004

While biofuels production costs are fairly easy to measure, the benefits are difficult to quantify. But this does not necessarily mean that the benefits are not substantial. Increasing the use of biofuels can improve energy security, reduce greenhouse gas and pollutant emissions, improve vehicle performance, enhance rural economic development and, under the right circumstances, protect ecosystems and soils. Because these benefits are difficult to quantify, the market price of biofuels does not adequately reflect them. This disadvantages biofuels relative to petroleum fuels. In IEA countries, liquid biofuels production costs currently are high – up to three times the cost of petroleum fuels. But concluding that biofuels are “expensive” ignores the substantial non-market benefits, and the fact that these benefits are increasing as new, more environment-friendly production techniques are developed. In some countries, such as Brazil, biofuels (namely ethanol) production costs are much lower than in IEA countries and are very near the cost of producing petroleum fuel. This will also likely occur in coming years in other countries, as production costs continue to decline.
One important reason why the benefit-cost picture for biofuels is likely to improve in IEA countries in the future is the development of advanced processes to produce biofuels with very low net greenhouse gas emissions. New conversion technologies are under development that make use of lignocellulosic feedstock, either from waste materials or grown as dedicated energy crops on a wide variety of land types. Most current processes rely on just the sugar, starch, or oilseed parts of few types of crops and rely on fossil energy to convert these to biofuels. As a result, these processes provide “well-to-wheels”1 greenhouse gas reductions on the order of 20% to 50% compared with petroleum fuels. But new processes under development can convert much more of the plant – including much of the “green”, cellulosic parts – to biofuels with very low, possibly zero, net greenhouse gas emissions. The first large-scale cellulose-to ethanol conversion facility is expected to be built in 2006, most likely in Canada (EESI, 2003). If the cost targets for cellulosic ethanol production techniques over the next decade are met, a new supply of relatively low-cost, high net-benefit biofuels will open, with large resource availability around the world.
In most countries embarking on biofuels initiatives, the recognition of non-market benefits is often the driving force behind efforts to increase their use.

By: International Energy Agency

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