Today, the most commonly used biofuels are bioethanol, generated from sugar — and starch-based processes, and biodiesel, generated from animal fats or vegetable oils. As of 2005, worldwide production capacity for bioethanol fuel was about 45 million Lyear-1 [12]. Global capacity for biodiesel is much lower at about 4 millionL [13-16], although certain countries (notably Ger­many) are investing in expanded capacity for this fuel [14]. The installed capacity for both fuels is rising dramatically in the face of high oil prices; biodiesel production has risen by an average of 50% annually between 2000 and 2005, while about 15% annual growth has been observed in bioethanol production over the same period. While biodiesel is increasing in importance, it is clear that bioethanol will remain the dominant biofuel for some years to come.

The simplest way to generate bioethanol is to use yeast to ferment hex — ose sugars such as glucose, which can be obtained directly from agricultural crops such as sugarcane or sugar beet. In Brazil, the sugar-based industry currently has the capacity to produce almost half of the world’s bioethanol supply, or about 17 billion Lyear-1 [12]. Another source of the sugars re­quired for fermentation is starch, produced in corn, wheat, and other cereal crops. Starch must be broken down through acid or enzymatic hydrolysis in order to release glucose, which can then be fermented to bioethanol [6]. Both sugar and starch-based processes are employed in Europe, with France (629 millionL) and Spain (520 million L) currently leading production [12]. In North America, corn (or maize) is currently the dominant biomass source for the bioethanol industry, due in part to the high proportion of starch found in its kernels and its high yield per hectare in comparison to other cereal crops. Corn, like sugarcane or switchgrass, is a C4 plant, which can utilize an extra carbon molecule in the photosynthetic process as compared to wheat or trees, which are C3 plants. Warmer growing conditions found across the USA favor C4 plants, while cooler regions (including the Canadian prairie) are well-suited to C3 plant production. Comparatively, C4 plants have relatively high water efficiency, while C3 plants have the ability to increase photosynthetic activity in the presence of elevated CO2 levels. Thus, growing conditions in any given year will determine optimal bioethanol feedstocks for specific regions [17].

The USA has a bioethanol production capacity of over 18 billion L [18], while Canada’s bioethanol production capacity is currently about 245 million L but expected to grow to more than 1 bill L by 2008 [15]. Various other coun­tries around the world have increased bioethanol production significantly since the mid-1990s. The dominant emerging bioethanol producers include China, which is home to Jilin Fuel Alcohol, the world’s largest corn-based bioethanol plant with a current capacity in excess of 350 million L year-1. The development of biofuel capacity over the past quarter century may be seen in Fig. 1.

As bioethanol is the most dominant biofuel found today, it is useful to look at the policies that supported development of this fuel in different jurisdic­tions around the world, and to evaluate the impact that different policies may have on creating increases in production capacity.

2.1