Estimates of biofuel prices are given in Table 3.8. Although these are uncertain, several general points can be drawn from these estimates (The Royal Society, 2008):

• higher oil prices are beginning to make current biofuels commercially more attractive;

• cost reductions through economies of scale are expected for all biofuels, with lignocellulose technologies anticipated to be in the same range as food-crop technologies; and

• the post-tax prices of petrol and diesel fuels in Europe (less so in the USA) are often much higher than the pre-tax costs of biofuels; hence tax credits or other incentives, for example in the form of reductions in excise taxes on biofuels, would have a large effect on substitution.

However, these estimates do not take into account changes in prices and land values that may arise from competing demands from agriculture.

The economic prospects of biofuels will depend on improvements in yields both in the growth of the crops and in the efficiency of the conversion processes. Feedstock costs will also influence biofuel prices.