Global Scenarios for Biofuels: Impacts and Implications*

Abstract

Rising world fuel prices, the growing demand for energy, and concerns about global warming are the key factors driving the interest in renewable energy sources and in bioenergy, in particular. Within a global context, fossil fuel consumption still dominates the world energy market (figure 1). However, the uncertainty in future supply, currently unsustainable patterns of energy consumption, and the costs of expanding proven reserves of fossil fuels have lead many energy analysts and managers around the world to seek alternatives from other more renewable resources, such as bioenergy. The rapid increase in oil prices since the late 1990s (figure 2) strengthens the rationale for seeking cheaper supply alternatives. With oil prices well above the U.S. $60-70 per barrel level, biofuels have become competitive with petroleum in many countries even with existing technologies. Major agricultural commodity prices have increased significantly since 2002, showing increased correlation with oil prices in recent years (figure 2). In addition to potentially reducing the reliance of energy-driven economies on limited fossil fuel sources, bioenergy has continued to receive increasing attention from those concerned with promoting agricultural and environmental sustainability through the reduction of carbon emissions, which is an important component of climate change mitigation. Bioenergy is also considered by some to be a potentially significant contributor toward the economic development of rural areas, and a means of reducing poverty through the creation of employment and improving the quality of lives-leading closer to the achievement of important Millennium Development Goals (FAO). Globally, bioethanol production is mostly concentrated in Brazil and the United States, which together accounted for nearly 90% of bioethanol