The survival of the human species is linked to the exploitation of natural resources, as there is no other known way to provide the essential heat, energy, and food. There has been a great deal of debate regarding how this exploitation can occur, since to exist, organisms need to intervene in natural systems. A superficial analysis might suggest that an irreconcilable dichotomy has been created. Such reasoning may lead to extreme attitudes where, on one side there is the irresponsi­ble use of natural resources, and on the other, the discourse suggesting that nature could be so much better off without the human presence on earth.

The state of well-being achieved by modern societies has increased the rate of unsustainable exploitation of the planet’s resources. Our technological choices are based on our understanding that nature’s capacity to provide for what we con­sider to be our needs is unlimited. It follows then that an alternative path must be designed so that those technological choices lead to a process of sustainable exploitation of natural resources. After all we are the only species on the planet that is endowed with a capacity for awareness that is sufficient not only to under­stand and evaluate our own destructive power, but also with the intelligence required to minimize it.

Therefore, it seems appropriate to move toward new productive systems, whether agricultural or industrial, where growth and development can be achieved without the opposition between capital and nature. For this to happen, we must overcome the economic, social, and political challenges that the technological solutions present.

Thus, understanding the relationships between the natural and social environ­ment seems to be the way forward in the search for a solution to the problems that challenge the planet, since it is from within this society that the answers to those challenges will emerge. However, we must avoid believing in a panacea, since there is no single “cure” that can be used to solve modern problems, as there is an intricate set of social, economic, and ecological relationships. As Hippocrates said: “Disease is the result of the airs, waters and places.”

There is insufficient space to address all these issues in a single book, so we have chosen just one path, that of energy. This choice is justified by its importance as a factor in development and its condition as one of the key elements in the inter­action between society and nature. The production and use of energy determine numerous impacts on the planet and on societies. While it may be an indicator of well-being, its effects may be adverse (Dincer 2002).

Among the adverse effects of the current methods of obtaining and using energy one can include the environmental impacts, price fluctuations, geopoliti­cal risks, and the risks of its nonavailability. Because of these effects, there has been growing interest in the search for alternatives to current patterns of produc­tion and consumption of energy throughout the world (Holdren 2006; Hanegraaf 1998). Within the energy sector worldwide, experts have addressed a number of issues, among them one can mention the research into conversion technologies as applied to different inputs in order to produce liquid and gaseous fuels, and into geographical organization for the production of food and energy.

Among the various studies of note, that by David Tilmann (2009) highlights the trilemma of the plant-derived fuel production systems. What he refers to as the trilemma is the need to simultaneously attend the requirements for food, fiber, and renewable fuels. Based on this trilemma and by analyzing initiatives from around the world, one possible conclusion is that with the current level of use of the tech­nologies and services available it will be impossible to reverse the rate of exploita­tion of the resources required to meet our energy needs according to the criteria of social, economic, and environmental sustainability, considering the rate of world population growth and its impact on the volume of resources that will be required to meet those needs.

Inspired by these issues and based on the structuring of energy matrices in dif­ferent countries, this book deals with different aspects of the production and use of liquid biofuels, derived from the production and conversion of biomass. Among the primary sources of energy, biomass has come to occupy a growing place in the energy mix worldwide. The concept of biomass can be understood as refer­ring to all living matter on earth that is capable of storing solar energy (Taylor 2008; Goyal et al. 2008). Many researchers consider biomass to be a source capa­ble of contributing to the energy needs of both developed and developing societies (Berndes et al. 2003).

Around the world, different arrangements for the production of bioenergy are being developed, with multiple integrated technologies that either benefit from the concentrated supply of inputs produced in large scale or take advantage of the small-scale production of inputs at the local level. These trends present us with the challenge to find the most efficient use for the natural inputs available.

From a demand and supply perspective, it should be noted that bioenergy is coming to be seen as a priority on the international agenda, with the use of liq­uid biofuels constituting a key strategy in the attempt to meet both the demand for environmental sustainability and the energy needs of countries. The growth in the production and use of biofuels around the world has led to increased interest and discussion on the subject, lending greater importance to related studies and research, as is the case with this book.

Without claiming to be exhaustive, this book provides a critical and plural dis­cussion of the major issues being raised in the context of research and policies and the alternatives that are being outlined regarding the insertion of bioenergy in the energy matrices of several countries. In this sense the book provides a multidisci­plinary and integrated view of the debate on the emergence and diffusion of the liquid biofuels as an energy source, bringing together different elements, such as public policy, industry organization, and the sustainability of different systems for the production of liquid biofuels and technology. The discussion on these different aspects will be illustrated by biofuel researchers and practitioners from a range countries that produce and consume biofuels.

In this book the reader will find that biofuel production, analyzed in relation to its institutional, economic, technological, and environmental aspects, is presented in two parts. The first, consisting of eight chapters, deals with the economic and environmental aspects. The second part of the book, consisting of four chapters, presents and discusses the technological issues. Importantly, almost all the chap­ters include discussions on the institutional aspects related to biofuel, especially the issue of regulation imposed by governments in order to strategically control the production and distribution of biofuels.

In compiling this book, our intention was to address the main issues and key challenges related to the production and consumption of bioenergy. When the call was issued to researchers from around the world, our main objective was to seek out different perspectives and analyses on the subject, while identifying points of convergence and divergence among several different research centers around the globe.

We hope that this book serves as a “must-read” reference for all those involved in biofuel-related research. We feel sure that it contains valuable material for the library of any biofuel researcher, practitioner, and/or educator. In selecting the contents, we have attempted to provide material that will be of interest to both those with experience in the field of biofuel and those who are setting out to dis­cover its relevance.

“Economic Issues in the Liquid Biofuels Industry” discusses the market distor­tions that occur when the production costs of the first generation of biofuels com­pared with those of fossil fuels. In doing so, the relationship between the energy market and the agricultural market is emphasized. The relationship between bio­fuels and the agriculture and energy markets is dealt with from three perspectives: energy security risk; reduction of greenhouse gas emissions; and rural develop­ment. “A Comparison Between Ethanol and Biodiesel Production: The Brazilian and European Experiences” spotlights the Brazilian ethanol and European bio­diesel scene in terms of the policies adopted and their production, supply and demand, as well as the environmental impacts of these biofuels.

“Global Market Issues in the Liquid Biofuels Industry” discusses issues such as the supply, demand, exports, imports, prices, and future perspectives of the global market for ethanol and biodiesel by focusing on Brazil and the United States. Both countries are of great importance in the global biofuel market both in terms of their respective production capacities and as consumer markets. “The Biofuel Industry Concentration in Brazil Between 2005 and 2012” deals with the growth and concentration of production capacity in the Brazilian biofuels industry.

“Calculation of Raw Material Prices and Conversion Costs for Biofuels” takes a closer look at the discussion regarding the raw materials in the first generation bio­fuels, by presenting a forecast of raw material prices, simulating the likely effects on production costs of the economies of scale obtained from scaling-up produc­tion and from technological learning. An analysis is provided of various scenarios in which different biofuels and fossil fuels are compared. Regarding raw materi­als for the production of biodiesel, two chapters present and discuss alternatives to the traditional oilseeds used in biodiesel production, though with an organizational and economic focus. “Governance of Biodiesel Production Chain: An Analysis of Palm Oil Social Arrangements” deals with the governance structure of the biodiesel production chain in Brazil from a social perspective by focusing on the relation­ship between the farmers and the palm oil industry. “An Economic Assessment of Second-Generation Liquid Fuels Production Possibilities” provides an economic assessment of the possibility of producing the second generation biofuels, more spe­cifically bioethanol production from lignocellulosic materials in the United States.

“Environmental Issues in the Liquid Biofuels Industry” completes the first part of the book and deals with the environmental issues involved in the liquid biofuels industry, presenting the different generations of biofuels and discussing them in relation to their Tailpipe Emissions, life cycle, Ecological Footprint, and Climate Threats and Technological Opportunities.

The second part of the book addresses the technological aspects of biofuel pro­duction. The chapters within it highlight the different types of technologies used in biofuel production and the use of new materials such as algae, oleaginous organ­isms, and waste polymers. Accordingly, “Application of Analytical Chemistry in the Production of Liquid Biofuels” discusses the use of chemical analysis in the production of biofuels with respect to the evaluation of the quality and chemical composition of the raw materials and all materials and by-products in the produc­tion process. Also related to the use of chemistry in the production of biofuels, “Technical Barriers to Advanced Liquid Biofuels Production via Biochemical Route” deals with the technical barriers to advanced liquid biofuel production via the biochemical route, focusing on second and third generation feedstocks.

The chapters that follow focus on the use of new raw materials for the produc­tion of biofuels as alternatives to mitigate the problems and limitations posed by the use of the raw materials of agricultural origin used in the first generation of biofuels. “New Frontiers in the Production of Biodiesel: Biodiesel Derived from Macro and Microorganisms” highlights the state of the art and the main character­istics of the oil and biodiesel provided by macroorganisms (insects) and microor­ganisms (bacteria, filamentous fungi, and yeasts). “Algae: Advanced Biofuels and Other Opportunities” looks into the use of algae as an alternative source of biofu­els, presenting a review of microalgae cultivation (species, usage, processes, and culture), while highlighting the advantages and challenges of algae-based biofuel. The last chapter is not directly concerned with biofuels, as it focuses on another possible alternative, liquid fuels from waste polymers, thus opening another possi­ble route for the production of alternative fuels to petroleum, and potentially mini­mizing the environmental impact by using industrial waste from various industries.

Acknowledgments We are very grateful for the support and contribution of so many authoritative biofuel researchers and practitioners in writing chapters for this book. We extend a special thanks to Springer’s publication team for their encouragement, help, and patience in compiling this book.

Measuring concentration is necessary to analyze the market structure in an indus­try and, thus, to identify relevant elements in this structure, such as competi­tiveness and barriers to entrance, among others. These elements interfere in the conduct and performance of these firms, as well as in the structuring of the mar­ket itself. In order to address the problem of this research, we analyzed the data using two methods that demonstrate the concentration level of companies in their markets: the partial concentration rate (CR) and the Hirschman-Herfindahl Index (HHI).

Similar to second-generation biofuels, so-called third-generation biofuels are pro­duced from non-edible specially engineered low-cost, high-energy and entirely renewable crops such as algae (Chris ti 2007). These are capable of generating more energy per acre than conventional crops and can also be grown on land and in water that is not suitable for food production. Fourth-generation biofuels use genetically modified crops (Table 2). The conversion process in this case is similar to that employed for second — and third-generation biofuels, but involves an addi­tional step where the carbon content in the fuel is oxidized by processes such as oxy-fuel combustion (Gray et al. 2007). The CO2 released is then absorbed and stored in oil and gas fields or saline aquifers (ZEP-EBTP 2012).

A distinction often used in favour of third — and fourth-generation biofuels is that they are produced from carbon neutral or negative biomass. However, as Centi et al. (2012) note, this has not yet been proved empirically, while Gasparatos et al.

(2012) point out that the technologies involved are still in their infancy. In the light of these uncertainties, this chapter focusses on first — and second-generation biofu­els, more so given that many environmental aspects of third — and fourth-generation biofuels hold true for second-generation fuels.

The logistics of Brazilian ethanol is poor. Most of the distribution for the domes­tic market is carried out by road transportation, which is not in good condition in some main key perimeters. For the overseas market, ethanol uses road transport associated to the duct mode, which connects the mills to the harbors. Although they are more efficient than road transport for long distances, the rail and water­ways are still little used for both the domestic market and to the external market (Milanez et al. 2010).

‘The costs of cutting, loading, and transporting account for 30 % of the total cost of production of sugarcane, and only the transport costs are equivalent to 12 % of that total’ (EMBRAPA 2013:1). The average cost of road freight for ethanol in Brazil was R$ 0.1557/m3/km in 2010, ranging between R$ 0.0568/m3/ km and R$ 0.9588/m3/Km (SIFRECA 2011). Therefore, efficient logistic system would result in lower production costs, providing Brazil more competitiveness both in the domestic as in the international market.

Milanez et al. (2010) argue that the logistics of the Brazilian ethanol prevents the supply in some states, especially in northern Brazil due to the lack of efficient infrastructure. Furthermore, most of the infrastructure associated with the trans­port of ethanol is in the Central-South region of the country, mainly in Sao Paulo.

Figure 3 shows the main transport corridors of sugar and ethanol in Brazil. It can be observed that the concentration of the infrastructure is in the state of Sao Paulo and adjacent areas, while the surrounding areas (including those not shown in the figure) have lower modal infrastructure, imposing additional difficulty in the product process of distribution.

The insufficient offer of more efficient transportation modes lead to road trans­port, in which ethanol is transported in fuel tank trucks similar to the way gasoline and diesel are transported. Other modes also lack expansion and modernization,

such as the rail systems, which are not usually used due to ‘the lack of tank wagons, the locomotive enhanced traction capacity, and the low capacity of the railways because of poor maintenance […]’ among other factors (Milanez et al. 2010:69). Moreover, according to the authors, the waterway mode is also not via­ble to transport this fuel since they are mostly in the Amazon Basin, which has no interconnection link to the Central-South modes.

Ducts are not feasible to transport ethanol, mainly due to the high invest­ment and low availability of infrastructure, but this reality might be changed with the completion of ducts that will connect the Midwest region to Santos-SP and Paranagua-PR harbors, crossing some of the largest consumer centers in Brazil, where they can interact with other modes, allowing the distribution to other regions (Milanez et al. 2010).

Alternative fuels are becoming increasingly attractive. The reason for this devel­opment is simple. While crude oil demand is continuously on the rise, the cor­responding increase in supply is lagging, thus driving crude oil prices. The independence of alternative fuels from finite raw materials for fossil fuels has encouraged politicians to incentivise the production of biofuels. However, current tax advantages are only temporary. So, in order for biofuels to gain market share, it is essential that production costs reach competitive levels in the future.

The Brazilian government has started several national programmes to enhance its technical, economic and environmental competitiveness of biodiesel produc­tion in relation to fossil fuel since 2002. To date, Brazil has achieved consider­able progress, especially due to its wealth in required raw materials (Ramos and Wilhelm 2005; Nass et al. 2007). However, with regard to Brazilian bioethanol, an import tariff of US$ Cent 54 per gallon (de Gorter and Just 2009), which had been established due to economic and environmental reasons, impeded market access in the USA until 2012. The fact that import tariffs are a decisive factor for market acceptance of Brazilian biofuels becomes clear when production costs are considered. In 2009, biodiesel production costs stood at approximately US$ Cent 34 per litre. Estimates then saw the potential of production costs some­where in between US$ Cent 20 per litre and US$ Cent 26 per litre (van den Wall Bake et al. 2009).

In the EU, biofuel demand and biofuel production were stimulated through pol­icies on national and international levels. However, with regard to first-generation biofuels, the EU faces one very difficult issue. EU countries are unable to pro­duce sufficient amounts of biofuel feedstock domestically in order to fulfil these policies. This forces the countries (and therefore the EU) to import biofuel crops, which, in return, results in higher agricultural trade deficits. Furthermore, this leads to an increased production of biofuel crops in countries with a comparative advantage, e. g. South and central American countries such as Brazil (Banse et al. 2011).

2 Conclusions

As mentioned earlier in the chapter, the decisive factor for a biofuel’s market suc­cess is the fuel price which can compete with that of fossil fuels. Therefore, it is necessary that biofuels can be produced at competitive costs, which was the main focus for our comparative analysis. In order to compare production costs for dif­ferent types of biofuels, we extrapolated publicly available, historical market prices for raw materials in the course of crude oil reference scenarios. We incor­porated scale and learning effects into our model in order to compare and identify economically promising biofuel technologies. In other words, our approach ena­bles the comparison of different biofuels’ production costs while considering the specific development state and economies of scale in context of realistic scenarios for the market prices for biomass.

Plausibility checks based on current data as well as consistency of the results across production technologies enhanced the accuracy of the results. At the same time, we assessed the comparability of data and performed corresponding adjust­ments, if necessary.

This chapter focused on three major goals: (1) a projection of future feedstock prices for biofuels based on the development of the price for crude oil, (2) a simu­lation of the effects of likely economies of scale from scaling-up production size and technological learning on production costs and (3) a scenario analysis compar­ing different biofuels and fossil fuel.

Our study demonstrated that modelling biofuel production costs based on three standardised production process steps is possible and enables a better understand­ing of cost competitiveness. As the most important model parameter, besides the crude oil price, the price development of the underlying biomass raw materials can be endogenously projected by their correlation with the price for crude oil.

One can conclude that in general feedstock for first-generation biofuels is expensive and that these are produced with optimised technologies. Second — generation biofuels, on the contrary, have relatively lower raw material costs while demonstrating an increasing efficiency in the conversion processes.

In the short and medium term, when production costs are compared, second — generation biodiesel from waste oil and from palm oil are the most promising alternatives to fossil fuels. For the 2015 crude oil scenario of 200 Euro/barrel, only these two types of biodiesel are likely to be produced at competitive costs.

Except for biodiesel from palm oil, all first-generation biofuels’ production costs exceed those of fossil fuels. This in return leads to a poor financial perfor­mance. If increasing feedstock costs were also to be taken into account, the gap to economic viability becomes even wider. As cost-saving potentials from production scale have already been fully exploited, any potential competitive improvements of first-generation biofuels are due to experience-driven learning effects.

On the contrary, second-generation bioethanol and second-generation biodiesel, in particular, are the more attractive alternatives to conventional fuel. Mid — to long­term economies of scale and learning curve effects will positively impact their production costs. Furthermore, these types of biofuel will be largely unaffected from the development of crude oil prices and therefore possess the ability to be produced competitively. In other words, second-generation biofuels seem to be the only real long-term option in order to replace fossil fuels.

As mentioned above, there are four main types of biomass used for liquid biofuels production: oleaginous (triglyceride source), sugary (sucrose to convert into a glu­cose source), starchy (natural polymer to convert into a glucose source), and cellu — losic (a natural polymer converted into a glucose source). Due to the varying nature of these materials and the processes for converting them to different liquid fuels, they all require different analytical profiles and techniques, each one is considered individually below.

1.1 Oleaginous Biomass

The oleaginous biomass has high contents of triglycerides or lipids, esters derived from glycerol and three fatty acids, within their seeds or grains (Fig. 1). Some free fatty acids may also be present. The chemical composition of the fatty acids within the triglycerides can vary, both with respect to the length of the alkyl chains and the degree of unsaturation depending on the biomass sources (Table 1). This composi­tion can also vary due to soil type, tillage, and climate conditions. The free fatty acids and triglycerides are converted to biodiesel by means of a transesterification reac­tion in the presence of a basic or acidic catalyst and an alcohol (Oh et al. 2012). The chemical composition of the oil along with the free fatty acid content affects both the

transesterification process and the properties of the biodiesel formed, and therefore, analysis of these properties are vital for different oleaginous biomass sources.

Triglycerides can represent 10-25 % m/m in vegetable oils (Gunstone 2004). Table 2 shows values of physicochemical properties from some agricultural species used for biodiesel production.

Some methylic and ethylic esters, observed in biodiesel after transesterification process, are as follows:

• Laurate, derived from lauric acid, C12:0, from palm oil;

• Myristate, derived from myristic acid, C16:0, from tallow;

• Palmitate, derived from palmitic acid, C16:0, cottonseed and palm oils;

• Estereate, derived from estearic acid, C18:0, from tallow;

• Linoleate, derived from linoleic acid, C18:2, C18:2, from cottonseed oil.

HO

Fig. 2 Chemical structure of sucrose, a disaccharide present in sugarcane (author). The D-glucose moiety is on the left, and the D-fructose moiety is on the right linked by a-|3-D-disac — charide bonds. Author Sflvio Vaz Jr

There are essentially two types of liquid biofuels: alcohols (ethanol and butanol) and diesel substitutes (such as biodiesel and hydro-treated vegetable oils). Figure 1 highlights the evolution of ethanol and biodiesel production around the world.

The production of these biofuels has intensified since 2000. Ethanol is more representative when one considers the produced volume. In 2012, the volume of ethanol produced was approximately four times larger than the production of biodiesel.

Table 1 shows the total production of ethanol and biodiesel both in the world and in ten leading countries. Dividing the production by countries, note the

lllllllllllll

1991 1992 1993 1994 1995 1996 199? 1992 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

■ Biodiesel ■ Ethanol

Fig. 1 The world’s production of Liquid biofuel (in millions of gallons). Source Compiled by the Earth Policy Institute from Licht ( 24 April 2012)

representativeness of the USA, which leads the production of ethanol and biodiesel. Indeed, Brazil and the USA accounted for more than 87 % of the worldwide produc­tion of ethanol in 2011. In addition, even though the world’s biodiesel production is less concentrated than is the case with ethanol, Brazil and the USA are among the largest producers.

Regarding the global market for ethanol, biodiesel, and biofuels, data about the consumption, production, imports, and exports in 2013 and projected numbers for 2020 in leading countries are presented below.

Marta Wlodarz and Bruce A. McCarl

Abstract Today, many countries are increasing the biofuel share in national energy supply, mainly to strengthen their domestic energy security and to protect against sudden oil price hikes. Some biofuels also provide greenhouse gas emis­sion offsets, becoming a part of climate change mitigation framework. Second- generation liquid biofuels (e. g., lignocellulosic ethanol, algae fuel, biomethanol) are under ongoing research effort investigating conversion technologies and eco­nomic feasibility. In this chapter, we will concentrate on the economic prospects of bioethanol production from lignocellulosic materials in the USA in terms of their cost-efficiency and profitability, and implications for global commodity markets. Moreover, we will analyze the emergence of drop-in fuels (e. g., fuels that can be used in existing infrastructure) and the relative difference this makes in the poten­tial for future market penetration.

Biochemical conversion route makes use of biological/chemical agents, like microorganisms and enzymes, to break down the complex structure of the ligno — cellulose into its base polymers and further degrading them into sugar monomers (mainly glucose and xylose) (Pandey 2009). These sugar monomers can be sub­jected to microbial fermentation to produce bioalcohols (ethanol and butanol). The feedstocks that can be deconstructed using bioagents are mainly agricultural and for­est residues; however, they may also include industrial and municipal solid wastes.

The biochemical route mainly consists of four basic components: (1) feedstock pulverization, (2) pretreatment, (3) enzymatic hydrolysis, and (4) fermentation (Fig. 3). The complete process also includes feedstock harvesting, handling, recovery, and transportation; fractionation of the polymers; lignin separation; and recovery of end products (IEA 2008). The energy yield of liquid biofuels could be in the range of 2.3-5.7 GJ/tonnes of feedstock, considering 20 GJ/dry tonne of lignocellulose. The maximum energy efficiency that can be achieved is 35 % in the laboratory conditions;

however, under industrial conditions, it is yet to be known (Sims et al. 2010). As stated in the section above, other processes could be integrated such as combustion of lignin or conversion of some carbohydrates into other products of high value.

The downstream-processing step generates substantial amount of CO2, waste­water, and solid waste-containing lignin, residual carbohydrates, proteins, and cell mass. This represents about 1/3rd of the initial raw material (dry-weight basis) and can generate substantial heat and electricity upon combustion, thereby improving the overall process efficiency. The biochemical route seems to be quite promis­ing owing to its low-temperature requirements, cogeneration of heat and electricity from lignin combustion, and lower GHG emissions. At the moment, it is difficult to realize the full potential of biochemical route due to lack of data on its perfor­mance at demonstration or commercial scale units.

Hong To, Suman Sen and Michael B. Charles

Abstract Biofuel policies around the world have, in general, been driven by concerns relating to energy security, greenhouse gas (GHG) abatement and regional develop­ment. However, in major biofuel markets, these policies have led to market distortions that have problematized the achievement of the longer-term objectives associated with biofuels. In particular, prioritization of certain economic goals, like assisting rural areas, has hindered the achievement of other outcomes, such as decoupling national energy security from fossil fuel prices and achieving the greatest possible emission abatement. A shift towards next-generation equivalents is desirable, but the currently low price of conventional fuel and the high production costs of advanced biofuels currently act as a barrier to commercialization. These barriers are most likely to be overcome as conventional fuel resources become depleted and advanced biofuel tech­nologies mature over time. Until then, government intervention will be crucial in determining the industry’s future.

1 Introduction

Today, more than 99 % of all biofuels produced are first-generation biofuels made from edible crops. Yet the long-term viability of these fuels is questionable owing to the following: (1) the use of feedstock optimized for food production, rather than for energy production, thereby resulting in direct competition with food supply; (2) ris­ing prices of certain crops and food stuffs owing to the rapid expansion of global biofuel production and, in return, increasing costs for biofuel production; and (3) the utilization of only a portion of the plant’s total biomass, which results in waste, so that land-use efficiency is low from energy supply and/or greenhouse gas (GHG)

H. To • S. Sen • M. B. Charles (*)

Southern Cross University, Gold Coast, Australia e-mail: michael. charles@scu. edu. au

A. Domingos Padula et al. (eds.), Liquid Biofuels: Emergence, Development and Prospects, Lecture Notes in Energy 27, DOI: 10.1007/978-1-4471-6482-1_1, © Springer-Verlag London 2014

mitigation perspectives.1 As a consequence, there are growing concerns about the economic, environmental and social sustainability of biofuels if they are to replace a significant proportion of the world’s petroleum use. Although biofuel production and support policies are usually expected to reduce dependence on fossil fuels, miti­gate anthropogenic climate change and support rural development, arguments for biofuel policies should also be made from an economic perspective, i. e. in the case of market failures that impede a desirable allocation of resources.

The chapter starts by describing the growth of the biofuel industry over the last decade, with emphasis on developments in the United States, Brazil and the European Union (EU), all of which are now significant biofuel markets. It then presents an assessment of the economic impacts of a growing biofuel industry, beginning with production cost issues. In particular, the chapter looks closely at the interrelationships between biofuels and agricultural and energy markets, all of which raise important implications for biofuel production scale, together with food security and biomass prices. The chapter also analyses the cost-effectiveness and competitiveness of biofuels as well as their macroeconomic impacts. To do this, we will look at effects of pro-biofuel policy on the three most commonly touted benefit areas associated with biofuels: (1) promoting energy security; (2) reducing the environmental impact of liquid fossil fuels; and (3) enhancing rural economies.