In developed and developing countries facing fluctuations of oil prices, the improvement of energy security and supply is increasingly becoming a fundamental reason for implementing biofuels policies. Rich and industrialised countries driving their economies on fossil fuels and oil products and derivates are experiencing shortage of finite resources with a consequent high risk of depletion and exhaustion. In addition, intensification of trade in oil commodities creates trade unbalances for those countries which are strongly dependent on imported energy commodities such as the European Union, United States, China, Japan and India.

In a number of countries, regulation is currently being adopted or under scrutiny to favour energy supply and safety. The following description will focus on the European Union, United States and Brazil. In the European Union, a new set of energy regulations are changing current and future scenarios of energy use and supply. The Commission Directive 2009/28/EC on the ‘promotion of the use of energy from renewable sources’ which abolishes the previous Biofuels Directive (Commission Directive, 2003/30/EC) and the Commission Directive 2001/77/EC on electricity from renewables. The new legislation body put in place an exclusive framework for renewable energy production within Member States. In particular, the Directive 2009/28/EC sets reference values of energy from renewables computed from estimates of gross final demand by 2020.

These reference values correspond to the achievement of the European Union ‘20-20-20’ strategy which is a fundamental voluntary policy adopted in March 2007 by the European Commission to further attain the goals of the Kyoto Protocol. The 20-20-20 policy establishes by 2020 to reach a target of 20% reduction of greenhouse gases (GHGs) by using 20% renewables. Given this ambitious scenario, Member States are required to set their shares of energy from renewables and create measures to promote the development of a competitive energy market ensuring access to electricity network from renewables. The Directive also promotes biodiversity protection of threaten species in those lands where biodiesel and bio-liquids production would have negative impacts on flora and fauna. Raw materials used in biodiesel and bio-liquids production should therefore achieve the status of ‘sustainable’, by competent bodies, before being processed.

In the longer term, the 2007 Renewable Energy Road Map (European Commission, 2007) specifies the adoption of a minimum ten per cent consumption of biofuels in the transport sector. Biofuels use in the transport sector would contribute to 14% of total market fuels (corresponding to about 43 million tonnes of equivalent oil) and the share may increase from either current bio-ethanol production in Sweden or biodiesel production in Germany and other European Union countries or other feedstock such as ethanol from straw, rapeseed oil, palm oil and second-generation biofuels mainly obtained from wood processes (De Lucia, 2010).

Over the last decades, Brazil has become one of the major biofuels producers. Although regulation on biodiesel entered into force in 2004, Brazilian production of biofuels is mainly centred on ethanol from sugar cane. Contrarily to biodiesel, ethanol is being processed since 1975 which makes Brazil the second-largest producer of transport fuels over a 30-year period. The abundance of land and proper climate conditions for sugar cane production and the possibility of transport subsidies ensuring full ethanol distribution within the country are important factors for the evolution of such industry. Several reasons have been adopted in favour of governmental support for biofuels in Brazil. These vary from purely economic-profit oriented ones to those including environmental concerns, energy security and rural development. Energy safety nonetheless was encouraged since the oil crisis during the 1970s when Brazil had to overcome national debt crisis by borrowing foreign capital. Ethanol production was then seen as a safe way to reduce import and interest costs. Simultaneously to the expansion of the ethanol industry, major employment creation occurred in the biofuels sector favouring the expansion of unskilled workers in rural areas and the formation of more than 60 000 small-sized farmers countrywide (Moreira, 2006).

The success of the Brazilian experience also lies behind a direct or indirect connection with several synergies such as those with other economic sectors. In this case, established relationships with the sugar and electricity and heat production markets are relevant. The sugar market played a primary role in driving the ethanol growth within and outside the country. On the supply side, the degree of price elasticity between sugar and ethanol (e. g. 0.20, Elobeid and Tokgoz, 2008) and the international volatility of sugar prices pushed Brazilian farmers toward ethanol production. Productivity of the ethanol sector also rose substantially to more than 100% (Moreira, 2006) during the 25 years period from 1975 to 2000. The electricity and heat production industry were also fundamental to boosting biofuels production as these served both the internal and foreign markets with using by-products from sugar cane. By the end of 2010, the amount of electricity from biomass mainly obtained from sugar mills is expected to be around 7.8 GW (Empresa de Pesquisa Energetica, 2008). The Brazilian government played nonetheless an essential role for the enhancement of the biofuels industry. In particular, it provided incentivising measures (see also Section 2.5) throughout the entire biofuels chain production (including support to technological advances in the sector) and to final end-users. Most of all, the establishment of a transparent institutional framework has guaranteed full competitiveness within markets. However, it was not until recent years, where consumer habits for fuel-switching engine cars increased rapidly, that ethanol production took off considerably. In 2006, 75% of new car models were produced with fuel-switch technology engine. New sugar mills implementations are expected to be operative by 2010 (Empresa de Pesquisa Energetica, 2008) and generate diversified energy and food output: from electricity grids, to biodiesel plants, to rotation plantations for food crops.

Under Obama’s presidency, the United States (joint world leader of biofuels production with Brazil) is currently experiencing a revision of its Renewable Fuel Standard (RFS) policy (Environmental Protection Agency, 2010) adopted under the Energy Policy Act (EPA) in 2005. Recent economic recession and other factors (i. e. the existing mismatch between biofuels distribution requirements and current infrastructures for petroleum industry) are preventing the United States reaching its congressional goals of the Energy Independence and Security Act (U. S. Senate, 2007). This requires 100 million gallon biofuels from biomass by 2010 and 36 billion gallon per year by 2022. Sustainability of supply chain is being threatened by high transaction costs in meeting the requirements between feedstock production and research and rural wealth. Likewise, although the accomplishment of expected results from currently funded projects, lack of integration at all levels of government is also causing delays achieving national biofuels targets (Environmental Protection Agency, 2010). The existence of a 15 billion gallon cap on ethanol biofuels from cellulosic by 2022 is posing further challenges to EPA’s current policies for distribution, transportation and storage of current and future ethanol production. The need for a new strategy is desirable. The new 2010 and beyond EPA programme on renewable fuels released on 10 February 2010 by the President’s Biofuels Interagency Working Group (2010) intends to adopt a strategic approach to optimise and integrate biofuels production development at all levels. This would mean not only to ensure coordinated measures for research, demonstration and commercialisation phases, but also guarantee coherence and efficiency of management across government funding, farmers and companies.

To ensure management efficacy in the biofuels industry, the creation of a small management team was proposed to help establish deliverables and corrective measures to keep projects on track, monitoring results throughout the entire biofuels supply chain and report progress works to the Biofuels Interagency Working Group. The reinforcement of the biofuels supply chain management is also established by the involvement of federal departments such as the Office of Science for research issues; the Feedstock Development and Production units at the USDA addressing environmental, economic and education concerns for biofuels chain; Department of Energy Efficiency and Renewable Energy to assist the setting up and development of pilot projects; and other departments at EPA and USDA for monitoring and regulatory procedures, sustainability issues, policy support and technical assistance. It is vital for integrating various efforts put in place from this multitude of agencies and departments and also for the success of deliverables and targets to ensure a continuum in the biofuels chain management. EPA’s strategy is also pursuing first — and second-generation biofuels development together with boosting third-generation biofuels advances through financial support actions, feasibility studies, technological improvements and new markets for corn-based ethanol production. Finally, a fundamental aspect of the EPA’s biofuels management is an integrated approach to economic, environmental and social concerns.