New Opportunities for Biofuels

(Paris) — 21 June 2005

Oil prices of over $50 per barrel have renewed attention on biofuels for transport and other cost-effective uses and have led to a surge of new bioenergy activity in industrialised and developing countries, according to a high level biofuels seminar at the IEA today. Co-sponsored by the United Nations Foundation and the Government of Brazil, the meeting brought together six Ministers, several Ambassadors and high level corporate officials and biofuels experts to assess the new trend.

“We have noted a remarkable number of new policies to expand biofuels production and use in developing and industrialised countries, and a great amount of new investment in both production and the development of new biofuels technologies” said Ambassador William Ramsay, Deputy Executive Director of the IEA. “This is a trend that we are carefully studying, and we are interested in supporting cost-effective outcomes.”

In many Southern countries, biofuel may be used for cooking and agricultural needs. However, use of liquid biofuels such as ethanol and biodiesel in the transport sector of all countries can help reduce dependence on petroleum. Combined, these opportunities reflect a remarkable convergence of interest between IEA and developing countries.

Many other factors are driving greater biofuels production and use, including agriculture and trade reform, improving energy access to the rural poor, local and global environmental challenges and new, more efficient conversion technologies. Many countries have the potential to undertake biofuels production, and some countries are considering an initial target to displace up to 10 percent of domestic motor fuel use. This level is considered to be a good near term goal, as it requires few changes in fuel distribution or in car engines. Ethanol alone could replace 10 percent of world gasoline use by 2025. In some countries it could displace oil imports altogether.

New technologies are on the horizon that will drive an even greater use of biofuels in the future. Biorefining technology has the potential to increase dramatically the production per hectare – by as much as four times over today’s production – and also produce chemicals, fibers, fertilizers, and electricity. Flexible-fuel vehicles that are now entering the market in Brazil, the US and other regions permit the use of any mixture of ethanol and gasoline, empowering consumers with competitive options and reducing both the demand for oil and the economic and security risks associated with it.

“There is a unique opportunity to foster South-South, as well as North-South, cooperation to expand biofuels production and use. Our interests overlap with those of developing countries,” continued Ramsay. “The IEA supports efforts to improve the international dialogue on bioenergy, and this seminar was an important step in that direction.” The participants agreed that further cooperation would benefit all, and should focus on macroeconomic studies of the interaction of fossil and bioenergy markets, development of methodologies for national cost/benefit analyses, best practices for environmentally sustainable production and technology adaptation to reflect the special needs of Southern countries.