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World Business Counci l for

Sustainable Development

Issue BriefI Energy and Climate Focus Area

Biofuels

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Throughout history,

bioenergy has been

important for satisfying

human needs. At present,

it is primarily used for

heating and cooking in

the developing world. But

as world leaders

contemplate the post-Kyoto framework, muchattention is being given to new, modern uses of

bioenergy. Biomass substitution for fossil fuels in heat

and power systems could play an important role in

stabilizing our carbon emissions. As leaders begin to

discuss carbon emission reductions of 50% by 2050,

biofuels could take on an urgent role in emissions

mitigation in the transport sector.

In addition to climate change as a driver, increasing

concerns about the rising cost of hydrocarbon-based

transportation fuels and growing concern over energy

security are causing many countries to view biofuels as

a key element of national energy strategy. Although

less efficient than when used for heat, power or

manufactured forest products, biofuels may yet prove

to be societys choice. In any event, biofuels are

currently the alternative that is being actively

promoted in many parts of the world.

Overview

Introduction

Bioenergy Biofuels Biomass

Bioenergy is energy produced from organic matter

(biomass).

Biofuels are liquid, solid or gas fuels derived from

biomass, either from recently living organisms or from

their metabolic waste. Biomass refers to organicmaterial made from plants and animals.1 The

production of biomass and biofuels must be carried

out sustainably in order to balance the carbon cycle

and keep it intact, and to ensure that the

environmental and social impacts of their production

are acceptable.

To learn more about biomass, download our Biomass

Issue Brief at: www.wbcsd.org/web/biomass.htm

Ethanol

Bio-oil

Methanol

Bio-methane

FT diesel

Biodiesel

DME

Hydrogen

Digestion

Gasification

Hydrolysis/fermentation

Pressing/esterificationEnzymatic transesterification

Pyrolysis

Oilseed rape

Wheat

Maize

Sugarbeet

Potatoes

Miscanthus

Switchgrass

Reed canary grass

Arable/ annual Crops

Herbaceous perennials

Short rotation coppice

Pine/spruce

Woody pe rennials

Forestry residues

Straw

Organic municipal wastes

Waste fats and oils

Residues + wastes

Resources Conversion technology Fuel

Figure 1: Biofuels pathwaysSource:Adaptedfrom

E4tech.Hart,David,Ausilio

Bauen,Adam

Chase,JoHowes.Liquidbiofuelsand

hydrogenfrom

renewableresourcesintheUKto2050:atechnicalanalysis.E4tech(UK)Ltd.2003.

This issue brief focuses on the use of biofuels in the

transport sector. Although biofuels are being pursued

as a possible alternative to fossil fuels, currently most

of the biofuels available for motor fuels are more

expensive to produce per unit of energy delivered

compared to oil derived from fossil fuels. If fuel costs

are to come down, considerable development and

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Overview

government investment will be required to improve

manufacturing and distribution technology.

Biofuels include a number of different products and

manufacturing pathways (see Figure 1). The most

widely used biofuel, ethanol, is currently made

largely from sugar cane in Brazil and from corn in the

United States. Meanwhile, the largest producer of

biodiesel is Germany, where the fuel is made fromrapeseed. Each pathway, from the resource to the

conversion technology to the fuel, has its own

distinct carbon footprint.2

Our principal source of data for 2005, as well as for

2030 references, has been the International Energy

Agencys (IEA) World Energy Outlook (IEA, 2006).

Projections to 2030 are based on the IEA Alternative

Policy Scenario (APS); 2030 is the year that has been

chosen to project the cumulative impact of the

implementation of the national policies under

consideration in 2005. Currently, a number of key

countries are contemplating more aggressive targets

for the production of biofuels. The IEA is examining

much more forceful policy scenarios for discussion

during the post-Kyoto framework negotiations.

Global production of biofuels reached 20 million

tons of oil equivalent (Mtoe) in 2005, representingabout 1% of total road-transport fuel energy

consumption. Brazil and the United States together

accounted for almost 80% of global supply (see

Figure 2). Ethanol production is rising rapidly in

many parts of the world in response to higher oil

prices, and supported by government incentives and

rules on fuel blending. Similarly, biodiesel

production is highly concentrated, with the

European Union responsible for around 75% of total

biodiesel production (see Figure 3).

50,000

40,000

30,000

20,000

10,000

0

Million liters

EU

US and Canada

Brazil World

1975 1980 1985 1990 1995 2000 2005

Figure 2: World and regional ethanol fuel production

(1990-2006)

Source:Datafor1975-2003tak

enfromIEA.

BiofuelsforTransport:An

InternationalPerspective.2004.

Datafor2004-2006citedat

http://www.ethanolrfa.org/industry/statistics/#E.Originalsource:F.O.

Licht.

European Union75%

United States13%

Other12%

Figure 3: Global biodiesel production in 2006

(6.5 billion liters)

Sou

rce:CitedinWorldBank(2007).Biofuels:ThePromiseandthe

Risk

s.

AgricultureforDevelopmentPolicyBrief.Original

source:F.O.

Lich

tConsultingCompany,personalcommunication,31July2007.

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Overview

First generation

biofuels refers to fuel

derived from feedstocks

harvested for their sugar,

starch and oil content,

which can be converted

using hydrolysis/

fermentation and

Firstgeneration

Second generation

biofuels describe those

produced from ligno-

cellulosic biomass, such as

herbaceous and woody

perennials, through

hydrolysis/fermentation,

gasification or pyrolysis

technologies. There is no industrial production ofbiofuels from cellulosic biomass, but research

focusing on large-scale production is being carried

out particularly in the United States, Canada,

Germany, Sweden, China and Brazil.

Successful ligno-cellulosic technology would

technically allow the utilization of a large variety of

feedstocks, as well as agricultural or municipal waste

materials and specialized cellulosic crops, such as

grasses and fast-growing trees.

Secondgeneration

Pre-

tax

dieselprices*

Pre-

tax

gasoline

prices*

Ethanol:sugarcane

Ethanol:maize

Ethanol:sugarbeet

Ethanol:wheat

Ethanol:ligno-cellulosic

Biodiesel:animal fat

Biodiesel:vegetable oil

Biodiesel:FT synthesis

Price orproductioncost (USD perliter)

20302005

1.2

1.0

0.8

0.6

0.4

0.2

0

Figure 4: Current and projected future ethanol production costs, compared with

recent (pre-tax) gasoline prices/liter of gasoline equivalent

Sou

rce:CitedinOrganisationforEconomicCo-operationandDevelopment.

Doornbosch,RichardandRonaldSteenblik."Biofuels:IstheCureWorsethanthe

Disease?"2007.Adaptedfrom

IEA.

WorldEconomicOutlook.2006

Cellulosic feedstock could be grown with less

fertilizer and water and on poorer quality lands than

those currently used to grow crops for conventional

ethanol production. Furthermore, cellulosic crop

costs could be considerably lower when compared to

those of the cereal and seed crops currently used in

Europe and the United States.

Figure 4 illustrates current biofuel production costs,which are projected to drop with upgraded

technology and conversion processes and improved

economies of scale. Aggressive energy policies and

anticipated revenue from carbon markets are driving

investment in biofuels. Experience will lead to lower

production costs. Over the next few decades, ethanol

is expected to account for the greatest proportion of

the increase in biofuel use worldwide, as production

costs are predicted to fall faster than those of

biodiesel and other biofuels.

pressing/esterification technologies. In OECD

countries, most ethanol is produced from starchy

crops such as corn, wheat and barley. In tropical

countries like Brazil, ethanol is made primarily from

sugar cane.

*Pre-tax gasoline and diesel prices (Jan. 2000-July 2006). Based on monthly average import prices for crude oil

into the IEA region, crude oil import prices varied between $20 and $70 per barrel in this period.

Note: Cost estimates exclude from consideration subsidies to crops or to the biofuel itself.

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Overview

140

120

100

80

60

40

20

0

2004 2010 2015 2030

160Mtoe

United StatesEU

ChinaBrazilWorld

Figure 5: World biofuel consumption, alternative policy

scenario

Source:IEA.WorldEnergyOutlook.2006.

According to the IEA, fuel

demand from the road

transport sector is forecast

to increase considerably

over the next few decades,

especially in developing

regions. Biofuels are

projected to account for a

growing share of the resources used to meet thisdemand. Production is expected to increase at a rate

of 8.3% per year, reaching 73 Mtoe in 2015 and 147

Mtoe in 2030, to meet 7% of global road-transport

fuel demand (see Figure 5).3

Previously, it was believed that second generation

biofuel technologies would not be available on the

market by 2030; however, government funding

could change this. Advances in the development of

these technologies will be necessary before they can

be deployed commercially on a large scale. It is

possible that such breakthroughs could occur in the

near future leading to more rapid development of

biofuel production than previously expected.

Forecastsfor biofuelproduction

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The single largest cause

of ecosystem degradation

is land use change for

agriculture, which is

driving conversion of

grasslands and forests.

The present share of the

worlds arable land used

to grow biomass for biofuels is expected to rise from1% to 3.8% by 2030, based on the assumption that

biofuels are derived solely from conventional crops.

The issues

Landrequirementsand land use

change

If second-generation technologies based on ligno-

cellulosic biomass were widely commercialized

before 2030, arable land requirements could be

much less per unit of biofuel output since an

important fraction of the biomass needed could

come from regenerated and marginal land not

currently used for crops or pasture, as well as from

agricultural and forest residues and waste.

Food security is one of the

major concerns

surrounding the

sustainability of the

biofuel industry. Biomass

production competes withfood, fiber and timber for

land, water and fertilizers.

There is a fear that this competition could lead to

commodity shortages, as crops that would otherwise

be available for food or forest products might be

used for fuel. According to one estimate, agricultural

and livestock prices could rise from 20% to 50% by

2016 as a result.5

Moreover, biofuel production negatively affects the

exports of certain crops; for example, recent exports

of US corn and soybean, Western European rapeseed

and Brazilian sugarcane have declined. Rich, crop

importing nations with greater purchasing power

could demand these crops at higher prices, thereby

further increasing their prices. For the poor, who are

net buyers of food, this would place even greater

pressure on already-limited financial resources.

However, such increases in the demand for, and price

of, crops can provide higher returns to farmers.

Moreover, higher prices for agricultural crops are onepossible answer to the paradox of agriculture.

Under this paradox, during periods of high yield,

farmers have had to sell their output at low prices

because supply outstripped demand. Now that there

are potentially alternative uses for food crops, supply

and demand could become more balanced, resulting

in higher prices for agricultural produce.

One of the outcomes of this paradox is that farm

income subsidies have been used broadly by

Competitionfor food, fiber

and forestproducts

many governments to sustain farming as a viable

business sector.

Biofuels, as a new value-added use of agricultural

products, creates the potential for many more farmers

to improve their businesses and reduce or eliminatethe need for ongoing income subsidies. Similarly,

higher demand for biomass could reduce the amount

of food dumped internationally.

Finally, the problem of food scarcity in certain areas is

currently more an outcome of inequitable distribution

due to the existing food distribution system, an issue

which is outside the biofuels domain.

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Integrating agricultural

markets of countries where

there is potential for

providing feedstock at low

cost with fuel demands of

the high-consuming

countries will speed the

deployment of biofuel

technology. Rapid deployment will present

environmental and social sustainability challenges.

Creating and implementing a certification system based

on sustainability criteria could play an important role in

addressing these challenges and ensuring that biofuels

are produced in a responsible manner.

Different biofuel production technologies have very

different carbon footprints. For instance, cultivation ofenergy crops on depleted agricultural soils can yield

beneficial carbon sequestration effects in addition to

providing habitat and other ecosystem services. But

those same practices on undisturbed peatlands would

have negative impacts on water and habitats. They

could result in a large, one-time release of carbon from

the soil that overwhelms the positive benefit of the

displaced fossil fuel consumption.

The issues

Sustainableproduction

Thus, criteria that are quantifiable, and yet flexible

for application in various settings, could focus on

areas such as GHG emissions, crop production,

biodiversity protection, food security and labor

conditions, among others. Moreover, it would be

imperative that compliance with established

criteria be enforced and for such enforcement

to not be costly.

The strain the worlds liquid fuel demand will place

on tenure systems and the lives of the rural poor will

be difficult to manage, yet by developing a system

that represents diverse stakeholders, such strain could

be alleviated. Several groups, such as the Roundtable

on Sustainable Biofuels, are exploring robust

certification systems that can distinguish the nuances

of environmental and social sustainability. Such asystem would have to be deployed globally to enable

end users to discriminate among fuels that respect

sustainability criteria. Finally, harmonization of

standards across countries could help various

stakeholders, particularly vehicle manufactures, to

develop uniform technologies, which could be fairly

easy to disseminate.

Given that more than

three-quarters of poor

people in developing

countries live in rural

areas, agriculture and

rural development are

critical to poverty

alleviation.7 Biofuel

production has a huge potential to reduce poverty bycreating income and wealth generating activities

while also meeting local energy demands. With these

potential opportunities, however, come issues of land

ownership, labor rights and food security, among

others. Biofuel programs, for instance, can be

especially harmful to farmers who do not own their

land. Moreover, unsafe working conditions and

abuse of labor rights threaten economic and social

progress. Therefore, making the right decisions now

and creating appropriate policies is a key component

to ensuring poverty alleviation and an equitable

distribution of growth.

Ruraldevelopment

As the second generation technologies based on ligno-

cellulosic feedstock become commercially viable, this

will reduce the potentially negative effects on land and

competition for food availability. But these technologies

could still be accompanied by a risk: a potential

increased likelihood of a greater push to exploit low-

yield lands (such as rangelands and savannas) to plant

switchgrass and other hardy biofuels, and the

displacement of cereals and subsistence crops.

Furthermore, the production of significant quantities of

biofuel feedstock on marginal lands could compete

with livestock grazing, have unacceptable impacts on

ecosystems, and damage soil fertility through

sustained removal of too much biomass residue. One

potential alternative feedstock under active

development is micro-algae. Although such

production raises the issue of genetic engineering,

algae could help avoid a number of the sustainability

issues associated with land use, freshwater use,

deforestation and food production.

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1. Worldwatch Institute. Biofuels for

transport. 2007.

2. Six greenhouse gases are

covered under the Kyoto

Protocol. The term carbon

footprint is shorthand for the

sum of the gases carbon dioxide

equivalents.

3. IEA. World Energy Outlook. 2006.

4. Worldwatch Institute. Biofuels for Transport. 2007.

5. OECD-FAO. Agricultural Outlook, 2007-2016.

2007. www.oecd.org/dataoecd /6/10/38893266.pdf

(accessed 19 October 2007).

6. Worldwatch Institute. Biofuels for transport. 2007.

7. World Bank.Agriculture & Rural Development: Issue

brief. 2007. www1.worldbank.org/publicsector/

pe/pfma07/ARDBrief.pdf (accessed 10 August 2007).

Notes

Disclaimer

This report is released in the name of the WBCSD. Like other WBCSD

reports, it is the result of a collaborative effort by members of the

secretariat and executives from several member companies. A wide

range of members reviewed drafts, thereby ensuring that the document

broadly represents the majority view of the WBCSD membership. It

does not mean, however, that every member company agrees with

every word.

Photo credits Flickr, iStockphoto

Copyright WBCSD November 2007.

ISBN 978-3-940388-15-5

Printer Atar Roto Presse SA, Switzerland

Printed on paper containing 50% recycled content

and 50% from mainly certified forests (FSC and PEFC)

100% chlorine free. ISO 14001 certified mill.

The World Business Council for

Sustainable Development (WBCSD)

brings together some 200

international companies in a shared

commitment to sustainable

development through economic

growth, ecological balance and social progress. Our

members are drawn from more than 30 countries and 20

major industrial sectors. We also benefit from a global

network of about 60 national and regional business

councils and partner organizations.

Our mission is to provide business leadership as a

catalyst for change toward sustainable development,

and to support the business license to operate, innovate

and grow in a world increasingly shaped by sustainable

development issues.

Our objectives include:

Business Leadership to be a leading business advocateon sustainable development;

Policy Development to help develop policies that create

framework conditions for the business contribution to

sustainable development;

The Business Case to develop and promote the business

case for sustainable development;

Best Practice to demonstrate the business contribution

to sustainable development and share best practices

among members;

Global Outreach to contribute to a sustainable future for

developing nations and nations in transition.

www.wbcsd.org

WBCSD

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