The present chapter was mainly aimed at presenting a discussion on several objectives of biofuels policies.

Firstly, the analysis touched on multiple effects of biofuels production and use such as the need for guaranteeing energy security and supply to an increasing number of countries currently heavily dependent on fossil fuels imports and subject to the negative effects of international fluctuations in oil prices which dramatically affect the domestic economy. Several policies and regulations are now under way in various countries to favour energy supply and safety. The European Union, for example, is moving toward a renewable energy and low carbon economy by adopting a series of directives promoting energy from renewable sources (including biofuels) or voluntary initiatives such as the 20-20-20 policy to commit to GHG emission reductions. In Brazil, the support of the electricity and heat production industries favoured the adoption of biofuels activities across country which favoured the creation of thousands of small farms. The United States is also experiencing a revision of its RFS policy allowing the country to establish biofuels targets in the future.

Secondly, bioenergy production also contributes to a number of environmental issues other than carbon (and other) emission reductions such as biodiversity, soil productivity and land-use change. A deeper analysis illustrated the effects (direct and indirect) of land conversions for biofuels feedstock production. The debate mainly concentrates on the measurement of indirect effects of land-use change and accounting practices for carbon reduction.

Thirdly, the expansion of rural areas and food safety is central to the advance in biofuels production. The nexus between rural development and bioenergy focuses on three main aspects: (1) social benefits of biofuels policies such as job and income creation having positive repercussions on rural communities; (2) public sector intervention and the progression of second-generation biofuels from non-food crops; (3) food security versus land management issues. This is at the heart of current debate on food and energy price increase. The international community through financial aid and support in technological advances plays an important role in protecting undernourished population and marginal areas in developing economies.

Fourthly, the increasing support for biofuels policies over the last years has taken place under a variety of policy tools. Subsidies to the biofuels industries have been instrumental in the international success of bioenergy practices, although the presence of distortionary effects on the society advocated by economic theory counterbalance the positive effects (on the economy and environment) arising from biofuels production. Various support policies are nevertheless being adopted across countries to promote biofuels use including capital grants, tax incentives and trade tariffs.

Finally, the agriculture and forestry conversion to bioenergy crops contributes to climate change mitigation. Currently, positive benefits of climate change mitigation from agricultural biofuels practices are not recognised within international climate change agreements such as the Kyoto Protocol. This would leave developing countries, where technology level is limited, incapable of contributing to carbon reductions and generating income from bioenergy credits. The scope for creating cap-and-trade systems for bioenergy crops and afforestation and reforestation programmes is on the way (in the United States and Brazil) for two reasons: to incentivise sugar cane industry to sell carbon emissions credits and to favour the creation of value added. This would support the international diversification of carbon markets and help distributing the benefits of carbon credits from bioenergy sources in agricultural and rural areas.

With regard to future trends, several scenarios can be delineated for multiple objective policy approaches for biofuels production. Advances in technological research and development and learning processes from past and current experiences (i. e. international food and oil price increases, land management competition for food and biofuels feedstock debate) indicate that one of the main pathways toward a long-term sustainability of the human and natural environment is a bio-based economy. The European Union, United States and a number of other countries have recognised, through recent regulation, that a substantial reduction in oil and petroleum products should be adopted in order to face increasing demand for energy and mitigate climate changes at the same time.

The European Union, for example, is aiming at achieving a reduction of 20% of carbon emissions by 2020 with increasing use of renewable sources by 20%. It is an ambitious policy given the current economic crisis and unemployment pressures and restructuring of the economy in new Member States. Nonetheless, the European Union is moving toward an energy-efficient market with ample space for the implementation and diffusion of biofuels technologies and products to renovate the agricultural sector and promote bio-refineries installations. The United States, on the other hand, is currently experiencing a revision of its RFS policy. The adoption of a strategic approach at all levels of the biofuels production chain would ensure coordinated measures: across governmental departments and agencies in view of economic, environmental and social concerns; and between research and commercialisation phases to converge a multitude of stakeholders’ needs. Also, monitoring the implementation of biofuels projects would result in further advantages for the entire biofuels supply industry.

Efficiency in strategic planning is also claimed to improve the quantification of indirect effects of biofuels production and use. These may come in the form of displacement effects of fossil fuels emissions gained over new lands for bio-crop production which are not taken into account in current carbon reduction inventories. Furthermore, intergenerational issues (such as discounting rates and time management) are also relevant for valuing life-time effects of biofuels plants over different generations and natural resource use.

Efficient management of biofuels production also aims at rural development in developing countries. The Brazilian experience is a unique case where strong market integration (across the sugar cane industry, electricity supply and transport sector, for example) and transparent institutional framework have favoured the launch of biofuels production. Replication of this mechanism, including the lessons from Brazil’s learning-by-doing experiences, elsewhere becomes essential to promote agricultural growth, income generation and biodiversity protection in developing economies.

It is essential at this stage of the biofuels chain development to sustain technology advances for second — and third-generation biofuels (i. e. lignocellulosic). This would aim at reducing current land competition between food and non-food crops. Current support for research is therefore a strategic element toward worldwide reduction in food and energy prices. The European Union, the World Bank and the United States agree that enhancing continuous support to research and development for next-generation biofuels would serve as a key factor to favour the improvement of current international food crisis, energy dependence and carbon emission reductions. From a developing countries’ perspective (granted that new forms of biofuels technologies are being implemented locally through international financial support) this would also help in reducing the dependence on foreign markets in food and energy. A number of macroeconomic positive impacts would follow such as improving balance of payment accounts, boosting employment and income generation and reducing the gap in poverty conditions. However, enhancing agricultural activities and new forms of biofuels locally would not have expected positive effects if the international community does not apply reductions in trade tariffs on biofuels commodities. Efforts in this direction become essential in particular for improving the functioning of international agreements (e. g. the Doha Round) affecting agricultural markets (World Bank, 2008).

Support policies for the biofuels industry are crucial for the development of new markets for bio-commodities. Though governmental subsidies are playing an important role in supporting bio-crops production, these nonetheless generate distortionary effects when used for unproductive reasons. Government aid is therefore called for implementing alternative incentivising mechanisms to ensure adequate measures for land conversion. Long-term forms of investment grant (either from public or private sources) subject to continuous monitoring of land management practices would guarantee the efficiency of bio-based projects and avoid waste of financial resources.

Land-use practices for bioenergy production are vital to mitigate climate change. Land conversions for fuel feedstock would produce net benefits to the society (in terms of carbon emission reductions) which are not fully internalised in social well-being. Post-Kyoto negotiations should address land-use changes to compensate countries for the credits gained from carbon emission reductions. There exists a possibility to develop a carbon trading system for bioenergy commodities. Brazil is moving toward a cap-and-trade mechanism for ethanol, and voluntary agreements are under way with the United States to adopt a bilateral trade market for carbon credits from bioenergy sources and afforestation activities. This would not only guarantee the creation of value added for the domestic economy, but also serve as attraction to foreign investors to invest in agricultural activities in support of a bio-based economy.