The enormous global daily consumption of liquid fuels is of the order of 80 million barrels/day (e equivalent of 12.7 million m3/day). The sugar cane area required to produce the same volume of ethanol is about 700 million hectares, assuming a yield of 6.5 m3/ha/ year of ethanol. This area is equivalent to 100 times the sugar cane cultivated area in Brazil, the second largest bio-ethanol producer in the world. Biofuels definitely face an issue of scale. In 2010, fuel ethanol and biodiesel combined displaced a mere 3% of oil in the world.

Figure 1[4] below illustrates the scale issue by showing how much land it would take for the USA to grow its own fuel.

It appears that algae require the least area to meet the large scale demand of liquid fuels in the USA, whereas the area required by soybeans is larger than the USA’s 48 continental states. The area required by corn is substantial. This suggests that the current biofuels production base of the USA would not be able to meet demand, and imports would be required to meet the colossal American energy appetite.

Fig. 1. How much land would it take for the USA to grow its own fuel?

The scale challenge posed to biofuels relates to the labour, management, land, water and sunshine required to produce the biomass and the processing that originates them. These are scarce resources that are also needed to grow food, feed and fibre to ultimately meet various human demands. These are resources that have an opportunity cost from competing markets. To develop biofuels in the scale of commercial liquid fuels require massive financing, a resource that may have alternative uses as well. The mobilization of private capital under a perception of market and other uncertainties is another issue that biofuels have to resolve in order to thrive.

The production of biofuels is accompanied by local environmental issues that need addressing. For instance, in the case of sugar cane ethanol, stillage the liquid residue of distillation, has a high chemical and biological oxygen demand and requires appropriate processing before final disposal. From a global climate change perspective, designed and managed properly, a biofuels production system would add minimally to greenhouse gas emissions. But, in practice, many biofuel production systems in the world are contributing net GHG emissions.

A bone of contention in the development of the biofuels industry is the present competition for feedstocks between the food and fuel industries. In the case of biodiesel, all commercial
vegetable oils that are used in preparing food are also convertible to biodiesel. A similar situation exists with respect to fuel ethanol, especially for the starch-based feedstocks (corn and wheat). However, the hike in food prices that happened globally in 2007/8 and is happening in 2010/1 derive mostly from other causes such as droughts and other climate related phenomena, higher oil prices and market speculation.

Since the cost of biofuels is dominated by feedstocks cost, access to feedstocks in the required amounts, timing and at adequate prices is key to the success of the biofuels economy. The combination of the food versus fuel conundrum with the need to have reliable and economic access to feedstocks is shifting the industry towards non-food feedstocks and to the market penetration of second generation technologies to convert cellulosic biomass into liquid biofuels.

Concern in important consuming markets about the sustainability of biofuels producing systems is putting pressure on suppliers to abide by sustainability protocols subject to certification. The sustainability of biofuels is actually linked to freer international trade, which would tend to phase out unsustainably produced biofuels in favour of regions of the world that can meet sustainable production requirements. A valuable discussion on this matter was hosted by the Rockefeller Foundation in 2008 at its Bellagio Centre and produced a sustainable biofuels consensus. The objective was to understand the many drivers for sustainable trade, consumption and production of biofuels, and the comparative advantage of supplying regions combined with demand and technology from consuming regions [5].

However, much remains to be done to achieve free international trade of biofuels. The World Trade Organization Doha rounds have reached an impasse. Currently, biodiesel is considered an industrial product, whereas fuel ethanol is categorized as an agricultural product, which allows more protectionism. What is needed is a unified treatment of biofuels, where they are classified under environmental goods and services. But, irrespective of these drawbacks, a sign pointing to a larger role for biofuels in the future are the new biofuels technology initiatives by large oil companies, such as BP, Chevron, Exxon and Shell. The development of the international trade in biofuels is likely to distribute more evenly the production and consumption of biofuels in the world. For the time being, biofuels production is overwhelmingly concentrated in the USA, Brazil and the European Union, as shown in Fig. 2 below[6].