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2.

EXTENDED SUMMARY

2.1

Biofuels: Current Status and Global Potential

The production and use of biofuels have entered a new era of global growth, experiencing acceleration in both the scale of the industry and the number of countries involved. Surging investment in biofuel production is being driven by a variety of factors, including the development of more efficient conversion technologies, the introduction of strong new government policies, and, primarily, the rising price of oil. Underlying the commitment of an increasing number of governments to biofuel development is the desire to find new markets for farmers and their products and to reduce emissions of greenhouse gases.

The two primary biofuels in use today are ethanol and biodiesel, both of which can be used in existing vehicles. Ethanol is currently blended with gasoline, and biodiesel is blended with petroleum-based diesel for use in conventional diesel-fueled vehicles. Ethanol accounts for about 90 percent of total biofuel production, with biodiesel making up the rest. Global fuel ethanol production more than doubled between 2000 and 2005, while production of biodiesel, starting from a much smaller base, expanded nearly fourfold. (See Figures 1 and 2, below.) By contrast, world oil production increased by only 7 percent during the same period.

Compared to petroleum refining, which is developed at a very large scale, biofuel production is lower volume and more decentralized. In the case of biodiesel in particular, where a wide range of plant and animal feedstock can be used, there has been a tendency for rather dispersed production facilities. Producers have the ability to extract the raw vegetable oil at one site and then send it to a different location for processing.

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