- The Writer holds an MSc in Eurasian Political Economy & Energy from King’s College London and also an MA in European Studies from Sabancı University.

The world is on the verge of an unprecedented transformation with the enormous improvement in energy technology, especially in renewables. Security concerns, the impact of oil price shocks, and the desire to create jobs and bring development to rural areas have propelled many governments around the world to put in place powerful regulations and generous incentives to invigorate renewable investments. Among the many alternatives, biofuels have received a large new wave of investment in the last decade as a way of mitigating CO2 levels in road transportation. As liquid fuels, in the form of ethanol and biodiesel, sugar crops, animal fats and vegetable oils mostly produce biofuels.

Oil price shocks along with ongoing security concerns in the Middle East continue to intensify higher global risks, and consequently, to mitigate these risks, many governments have raised their biofuels share in their transportation portfolio. From China, India, Columbia, to Thailand and Philippines, major decisions have been made to boost the share of biofuels in their respective renewable energy mixes. However, these have not only been limited to governments but global energy companies and car companies have also shown their interest in increasing their investment shares in biofuels. Global investment firm Goldman Sach, energy companies Shell and DuPont, car companies Ford and General Motors are some of the examples that recently announced plans to dramatically increase investments in biofuels by promising to expand production and flexible fuel vehicles.

If produced on an environmentally sound, socially acceptable and cost-competitive basis, the International Energy Agency estimates that biofuels could provide approximately one-fourth of the world’s transportation fuel by 2050, contributing to a cut of over 2 gigatonnes of CO2 emissions. Currently, the U.S. and Brazil hold the lion’s share in ethanol production thanks to governmental incentives in both countries decades ago. Biofuels supply almost 40 percent of the light fuel market in Brazil, which has significantly contributed to reducing Brazil’s high fossil fuel dependence in transportation.

Currently, the first generation of biofuels meets about 3 percent of global transportation fuel demand by using around 3 percent of the world’s arable land. While ethanol makes up 80 percent of production, biodiesel accounts for the remaining 20 percent, according to the IRENA’s report in 2014. Biofuels current production volumes are entirely reliant on so-called first-generation biofuel production, which is essentially based on sugarcane, corn and other forms of biomass feedstock.

As the world energy outlook, 2014 statistics indicate, biofuel volumes increased from 300,000 barrels per day to approximately 2 million barrels per day between 2000 and 2013. As a further example of biofuels popularity, at the end of 2014, the U.S. produced over one million barrels of corn ethanol per day, which was blended into gasoline in the U.S.

Corn ethanol produced in the U.S. is estimated to make up 10 percent of the total consumption of U.S. petrol. 

It is estimated that the first-generation biofuels could potentially phase out or lose significance sooner or later due to the increased level of air pollution, land degradation, water consumption and the large price impact on food and livestock during its production. However, with recent technical developments, there is greater hope for the future of biofuels. The development of new techniques, or the so-called second-generation biofuels, known as cellulosic biofuels, helps to expand feedstock, increase efficiency and decrease production costs. These new techniques offer the potential to boost biofuel consumption in the future through their ability to manufacture biofuels from wood, leaves and plant stalks, as well as agricultural waste.

The future for second-generation biofuels is inextricably linked to the development of other low carbon technologies. The major benefit to second-generation biofuels compared to the first generation lies in their ability to deliver on climate change with a much smaller carbon footprint. Nonetheless, it is also vital to consider the challenges that lie ahead in the supply chain to increase biofuels share in the transportation sector. Insufficient distribution channels, low demand levels and lack of investment in the sector are some of the obstacles that second-generation biofuels can encounter.

As in the first-generation, second-generation also suffer from low refinery capacity making it difficult to compete with other alternatives. Although the Environmental Protection Agency estimated that second-generation feedstock would surpass a billion gallons back in 2010, overall production remained as low as 33 million gallons in the U.S. The U.S. and Brazil have been the main producers of biofuels for many years but the low production level for second-generation biofuels has ensured high production costs, which are still above US$5 per gallon.

The IEA’s price forecasting between 2010 and 2050 suggests that overall production costs for first and second-generation biofuels will drop while petroleum gasoline will increase over the same time period.  While overall production costs for biofuels back in 2010 for petroleum gasoline was $0.54, $0.70 for conventional ethanol, and $1.05 for cellulosic ethanol; the overall production costs for petroleum gasoline is expected to increase over the same decades to $0.85 by 2050. The IEA projects that by 2050, production costs for cellulosic ethanol will be $0.75.       

Biofuels have a promising future with their ability to bring a much broader group of countries into the liquid fuel business. The risks associated with high dependence on fossil fuels can also be mitigated with increased biofuel consumption since biofuels can be produced in various parts of the world. Above all, jobs created in the biofuels industry can offer great remedies for countries struggling with job creation and economic development.  With the right policy design and incentives, with favorable investment tax credits, many countries will not only have the chance to diversify their energy mix, and fight against climate change, but will also be better equipped to facilitate the transition toward a sustainable energy future.

- Opinions expressed in this piece are the author’s own and do not necessarily reflect Anadolu Agency's editorial policy